The Intellectual Property Review: Cyprus
Forms of intellectual property protection
Cyprus has a strong legal framework for the protection of intellectual property, through national laws as well as international treaties that have been ratified domestically. There is specialist protection for copyright, trademarks, geographical appellations, plant varieties, design rights, patents, and unregistered rights via the tort of passing off. Several pieces of domestic legislation emanate from EU directives, thus rendering our IP legal landscape on a par with EU standards. Such protection, along with the protection offered by the international treaties, helps to position Cyprus on an equal level with other signatory parties as regards the level and type of IP protection, thereby enhancing its attractiveness as a trading and commercial centre.
The main piece of legislation for the protection of copyright is the Copyright Law, Law 59/1976,3 which has been amended numerous times over the years to update the law (e.g., there was no copyright protection over software) and to bring it in line with EU directives (e.g., 2014/26/EU).4
The Copyright Law defines 'copyright' as 'any literal, dramatic, musical or artistic work, sound recordings, films or broadcasts and the typographical arrangement of published editions'.5 The definition is broad enough to encompass computer software6 (it being considered a form of literary work) and databases.7
To invoke such protection, the work must satisfy two requirements: (1) to be in written8 form; and (2) to be an original piece of its creator.9 Both requirements are interpreted according to the meaning generally ascribed to them.
The duration of protection is determined by reference to the nature of the author (whether it is a legal or a natural person) as well as the type of work under protection. For example, copyright protection over a literary work created by a natural person, subsists for 70 years from the end of the calendar year of the author's death.10 If the author of the work is a legal person, protection would subsist for 70 years from the end of the calendar year of the time that the work was first published. By contrast, broadcasts are protected for 50 years from the date of the broadcast.
There are numerous statutory provisions regarding the infringement of copyright. Copyright disputes involving an alleged copyright infringement are dealt with by civil courts, as there are no specialised courts to handle especially intellectual property disputes. As there is no rich case law on copyright disputes, courts resort to English law when it comes to interpreting concepts such as 'originality' and 'substantial part' (e.g., see the judgment in Costas Socratous v. Gruppo Editoriale Fabbri-Bompiani and others).11
In 1998, Cyprus passed the Patent Law, Law 16(I)/1998, which has been amended subsequently at various points. This law recognises as a patentable invention one which fulfils the following three criteria: novelty, inventive step and industrial application.12 Importantly, the Cyprus Registrar (the public body with the authority to register patents) does not carry out this examination itself as it lacks the technical and scientific means and know-how to do so. Instead, these checks are carried out by the European Patent Office.
The duration of protection is 20 years.13 For every year a patent is renewed the annuity due increases in a proportional manner.
As far as infringement is concerned, the relevant law provides for specific rights for the patent owner.14 Whether or not the rights are infringed depends on the decision of the court.
Cyprus is a party to the Patent Cooperation Treaty as well as to the European Patent Convention, thereby rendering valid patents under those agreements in Cyprus.
iii Industrial designs15
Industrial designs are protected by Law 4(I)/2002, the Paris Convention and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
For an industrial design to be eligible for protection, the design must be new and present individuality in such a way that the informed user will not consider the design as similar to a design that is already known to the public.
Protection may be renewed for a period of 25 years16 upon payment of a relevant fee.
iv Plant varieties
It is widely acknowledged that Cyprus has a strong piece of legislation in place for the protection of plant varieties, Law 21(I)/2004. The requirements for protection are that the variety be new, distinctive, homogenous, stable and have a name.17
The duration of such protection is 20 years from the date of grant in case of a creator and 25 years in case of trees and vines.18 However, the validity of the grant of protection remains at the discretion of the Registrar even after its grant. Thus, the Registrar has the right to revoke protection if the variety does not remain homogenous or stable or when the holder has failed to keep the variety for the entire duration of the right of the creator.
v Geographical indications and appellation of origin
The law governing geographical indications and appellations of origin is the Law on Appellations of Origin and Geographical Indications of Agricultural Products or Foodstuffs,19 and the relevant ministry responsible for processing and examining applications under that law is the Ministry of Agriculture, Natural Resources and Environment. The Ministry is responsible for the appointment of a committee of five members whose task is to advise the Ministry on matters related to geographical indications and appellations of origin.
Trademarks are governed by the Trademarks Law, Chapter 268. This is a law that was enacted in 1960 upon the proclamation of the Republic of Cyprus. The Law has since its enforcement undergone numerous amendments, most importantly in order to align it with the European Trade Marks Directive (2008/95/EC).
For a trademark to be registrable, it has to satisfy both absolute as well as relative grounds of refusal. There is a two-step process, the first entailing an examination of the application by the Registrar of Trademarks against both absolute and relative grounds of refusal and the second being the opposition period, during which oppositions may be filed by third parties on relative grounds. The Registrar's examination involves, among others, the assessment as to whether the applicant mark may indeed 'function' as a trademark, namely, that it is capable of distinguishing goods or services of one undertaking from those of another without being identical or confusingly similar to an earlier mark or goods in such a way that the relevant public might consider the marks as coming from the same or economically linked undertakings.
The opposition period lasts for two months from publication. If no opposition is filed, the mark proceeds to registration and is valid for an initial period of seven years. After that, the mark may be renewed for 14-year periods.
In line with modernisation efforts that have been underway for the past few years, a draft bill for a new framework for trademark protection has finally been completed. The bill is expected to be put before the House of Parliament for approval within the upcoming months. The Registrar of Trademarks has recently unveiled the main pertinent provisions of the draft bill, in an effort to keep professionals and industry aware of developments and educate them of the new changes in a timely manner. The new bill has benefited from the expertise and know-how of former officials of the European Union Intellectual Property Office (EUIPO) and in many parts shares common features, especially when it comes to simplified, fast, transparent procedures. It is expected that the new law will render the trademark administration system much more efficient than the current one, operating on the basis of streamlined procedures.
The new trademark law has been designed to harmonise national law with EU Directive 2015/2436, to simplify the registration, opposition, revocation, cancellation procedures and to enrich the current substantive provisions. Some important new provisions to feature in the new law include the following:
- an electronic trademark registration system – a brand new electronic platform has been created for this purpose, customised accordingly;
- the graphical representation of a mark will no longer be a requirement for the registration of a mark;
- new types of marks will be introduced, such as sound marks, multimedia marks, and motion marks;
- the introduction of a multi-class system, as opposed to the current single class system;
- trademark protection will last for 10-year periods;
- a single fee for the entire registration process (as opposed to the current step-by-step fee payment from the moment of filing until registration);
- the representation of the mark cannot be amended following the filing of the trademark application;
- the possibility of division of the trademark application;
- the use of a classification system with 'clarity and precision';
- the simplification of the recording of assignment;
- the replacement of use of powers of attorney with 'solemn declarations';
- the protection of plant varieties;
- the increased protection of geographical appellations and designations of origin;
- the use of friendly mediation during the opposition procedure; and
- the proof of use to be used as a measure of defence (in opposition and cancellation proceedings).
In addition, the law has been designed in such manner as to create, as much as possible, a written procedure, with hearings to form the exception rather than the rule. Further, emphasis has been placed on creating stringent deadlines to which users of the system must adhere to, in an attempt to create certainty and efficiency. Any extensions would be granted only exceptionally. The usual time period given at any given step will customarily be two months, apart from the opposition period, which shall be open for three months.
Another important feature to be created by the new law is the extensive use of standardised forms and letters in communications with the Trademarks Registrar, designed to render communications clearer, more transparent and faster (owing to the efficiency resulting from the use of standardised forms).
The Cyprus trademark community is eagerly waiting for the new law to be passed as it is a quite promising and ground-breaking piece of legislation, designed to tackle long-standing problems, such as backlogs in the examination and processing of forms, ambiguities and superfluous features in the registration process, etc. It remains to be seen whether the promised goods of efficiency, transparency, certainty and simplicity shall be delivered. It is expected that the new bill will be passed at some point during spring 2020.
This section focuses on the steps involved for the securing of trademark, patent and industrial designs protection in Cyprus.
Generally, the procedure by which a mark is granted protection is divided into four main steps, described below.
If a potential applicant would like to increase the possibility of a smooth registration procedure, it is usually recommended that he or she, via a representative, submits a request for a search either in the Trademark Department's database, TM View or via e-search plus, the trademarks database of EUIPO (formerly known as the Office for Harmonisation in the Internal Market), in order to be reasonably certain that the applicant's mark would have a prima facie strong case for registrability.
The second stage is the submission of the actual application, which requires the details of the owner and a graphical representation of the applicant mark. The application is ex officio examined for both absolute as well as relative grounds of refusal, with the Trademarks Department having discretion to impose registrability requirements it may think fit, having regard to the particular merits of each application.
The third stage is publication, which marks the beginning of the opposition period. Any third party may, within two months of the date of publication, oppose the registration of the applicant mark on the basis of relative grounds of refusal. In the absence of such opposition, the application is approved and a registration certificate is issued, which marks the official grant of protection status to the mark. The date of protection is the filing date of the trademark application.
Similarly, in patents, the relevant application form requires, inter alia, a description and a summary of the invention and a clear and precise description of the claims involved. In order for an application to be regarded as having been submitted, all relevant documents must be accepted by the Registrar. Once submitted, a search report is required. This is an expert's report that confirms the patentability of the invention while verifying that a person skilled in the art would not consider the invention 'obvious'. When these requirements are satisfied, the Registrar proceeds to publication of the application along with the search report in a timely manner, within 18 months of the date of submitting the application. Nonetheless, the relevant legislation provides that a person who – by means of a written statement – requests the publication of an application that has complied with the submission requirements but has failed to satisfy publication requirements, still has an undeniable protection of the patent.
As with patents and trademarks, industrial designs also need to satisfy the particularities of the law as these are found in Article 4(1) of the relevant legislation: namely, that they are novel and have an individual character. An application regarding industrial designs must satisfy formal requirements within four months of the initial submission. The date of filing of the application is considered the date on which all relevant documents have been properly submitted to the Registrar.
Enforcement of rights
Traditionally, the courts are the proper venue before which infringement proceedings may be brought. Article 60 of the Patents Law 1998 defines the rights acquired with the grant of a patent, while Article 61 sets out the civil actions and remedies available to the right holder. If an infringement is proved in court, the court may rule for an injunction, damages, account of profits and other appropriate remedies. Should a court order be disobeyed, the infringer may be found liable in damages for up to €59,850.21 The burden of proof in such cases is on the plaintiff.
Similarly, with regard to industrial designs, rights conferred upon protection are defined in Article 18 of the 2002 Industrial Designs legislation. The difference is that breach of Article 18(1) confers criminal liability on the infringer, which is punishable with two years of imprisonment or a fine of €85,500,22 or both.
As far as trademark infringement is concerned, the appropriate venue for such proceedings is yet again the civil courts. The remedies available are the ones as in the case of patents and industrial designs, applying mutatis mutandis.
Enforcement of rights could also be a reference to the opposition proceedings during the application stage as well annulment proceedings, after the registration of a mark.
i Opposition proceedings
If an opposition to a trademark application is filed, the parties involved will be invited to present their case before the Trademark Registrar. Each party has the right to present their respective submissions either in writing, which will have to be accompanied by a sworn affidavit confirming the truthfulness of the content submitted, or to present his or her case orally. The Registrar then issues its decision, which may be appealed before the administrative court.
ii Annulment proceedings
The post-registration opposition procedure is the annulment procedure, also known as expungement. The procedure for expungement is identical to the pre-registration opposition procedure, albeit a different form has to be submitted.
To date, most expungement cases have either been suspended owing to the excessive length of the procedure or are still pending the final decision of the Registrar. The minimum length of time before a final decision is five years, which makes this process very time-consuming, relatively costly and not worth pursuing. However, this is expected to change radically upon the passing and implementation of the new trademark law outlined above.
Trends and outlook
The illustration in Section II of the new features of the draft trademark law is only indicative, as the final text to be approved by the House of Parliament remains to be seen. There is a widespread consensus that all the drastic changes to be introduced can only be an improvement to the current state of affairs, that they are long overdue and are enthusiastically anticipated. These changes will render Cyprus as a more user-friendly jurisdiction and may render it an attractive option to be used as a 'home application' in any international application filed using the Madrid system.
Last and most importantly, and as elaborated upon further below, the Organisation for Economic Co-operation and Development (OECD) results and the Base Erosion and Profit Shifting (BEPS) Action 5 initiative (BEPS 5) resulted in the Cyprus IP Box Regime being extensively scrutinised and amended on 27 October 2016.
i The IP Box Regime
In May 2012, Parliament, recognising the significant potential of intellectual property (IP) marketing, introduced what became known as the Cyprus IP Box Regime (the Regime).23
Its main provisions consisted of an 80 per cent tax exemption on profits from the exploitation of IP rights, an 80 per cent exemption on profits accruing from the disposal of IP rights and a five-year amortisation period.
The most important advantages of the Regime were threefold. First, it applied to net profits. Second, it was not restricted to patents; IP rights have been broadly defined to include trademarks as well as marketing intangibles.24 Third, the holder of such IP rights did not have to pay the research and development expenses of the right nor to have been actively involved in the management of the right.25 The acquisition of such rights via an assignment agreement sufficed for the right to fall within the scope of the Regime.
These advantages, in conjunction with the fact that the corporate tax rate in Cyprus was as low as 12.5 per cent, meant that any tax-deductible income could be subject to a tax rate of just 2.5 per cent; currently one of the lowest in Europe.26 It used to be the case that the advantages of the Regime were combined with the fact that dividends distributed by Cyprus companies to non-Cyprus residents were exempt from withholding tax27 along with the numerous double taxation treaties established over the years.28
However, after BEPS 5, the Regime came under considerable scrutiny; it was regarded as having the sole purpose of attracting investment, thereby potentially eroding tax. As a result, the Cyprus tax authorities were called to rectify the situation by adapting the provisions of the Regime to ensure that it is compliant with the OECD guidelines.
In light of the above, the Regime has undergone a transitory period whereby new entrants and current entrants with new IP rights entered the Regime. Those who were eligible and managed to enter the Regime will continue to enjoy the advantages of the Regime up to and including 30 June 2021 – this will be the last day of the Regime as it currently stands, provided that the IP rights satisfy certain requirements. The IP rights must have been acquired before 2 January 2016 or they must have been acquired directly or indirectly from related persons during the period 2 January 2016 until 30 June 2016.
According to the latest legislation introduced on 27 October 2016, 80 per cent of the qualifying profits derived from a qualifying intangible asset will be considered a deductible expense. Qualifying intangible assets include patents, computer software and other protected intangible assets protected by law. Importantly, the current regime does not apply to commercially generated rights, such as trademarks and designs. Further, the new Regime is based on the 'modified approach based on a causal link' (modified nexus approach). This means that a direct link must exist between the IP rights that generate the income and the activity that contributed to that income. Under the new legislation, certain transitional provisions have been introduced that enable business with IP assets already within the existing Regime, under certain conditions, to continue benefiting therefrom until 30 June 2021.
The new legislation provides that 80 per cent of the qualifying profits derived from a qualifying intangible asset will be considered as a deductible expense. If a loss arises when calculating the qualifying profits, the amount that can be surrendered and carried forward is restricted to 20 per cent. In the case of an intangible asset falling under both the provisions of the existing and the new Regime, the existing regime will apply until this is fully phased out. The taxpayer has the right for every tax year not to claim all or part of the deduction offered by the new Regime. The new provisions of the Law are effective as of 1 July 2016. For the new provisions of the Law to be applied effectively, the Council of Ministers has issued regulations in relation to the calculation of the taxable income and has provided definitions for terms such as 'qualifying intangible assets', 'qualifying persons' and 'qualifying profits'. A formula has been introduced to calculate what is considered to be qualifying profits. The persons who may benefit from the new Regime are Cyprus tax residents, tax-resident permanent establishments of non-tax-resident persons and foreign permanent establishments that have chosen to be subject to tax in Cyprus.
ii Cyprus as a one stop-business destination and the accommodation of IP rights
The legislative and business structure of Cyprus has always been commercially oriented. It is no secret that the island's economy is based on two main pillars: tourism and financial services. Currently, with the new explorations taking place in the Mediterranean sea for natural gas and petroleum, a new sector seems to be opening up for Cyprus.
Given the solid Cypriot legal system, the membership of Cyprus in the EU, the alignment of the legislative framework with EU IP laws, and the IP Box Regime, it is no surprise that we have been witnessing an increased demand in Cyprus-incorporated companies developing and creating IP protectable works, such as software and patented inventions. The level of protection, the stable legal and political environment of Cyprus and the attractive corporate tax of 12.5 per cent are conducive in attracting investors to Cyprus to create an IP holding entity and in rendering Cyprus a one-stop business destination.
Cyprus is a promising and constantly evolving financial centre, fortified by a common law legal system, a strong legal framework meeting international standards in the protection of intellectual property and a highly qualified professional force. The island's legislative and business structure and geographic position make it an ideal setting in which a successful business strategy may be realised and serve as a gateway to Europe.
1 Maria Ch Kyriacou is a senior associate lawyer at Christodoulos G Vassiliades & Co LLC.
2 Moral rights in Cyprus are protected pursuant to the relevant provisions contained in the Berne Convention.
3 Other relevant legislation includes the Protection of the Commercial Exploitation of Cinematographic Films, the Berne Convention, the Universal Copyright Convention, the Paris Convention, the Rome Convention and most importantly the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
4 The Law on Collective Management of Copyright and Neighbouring Rights, as well as for the Grant of Multi-Territorial Licensing of Rights in Musical Works for Online Uses, Law 65(I)/2017, has been enacted to harmonise national law with Directive 2014/26/EU.
5 Copyright Law L59/1976, Article 3(1).
6 Copyright Law L59/1976, Article 2(1)(h).
7 Copyright Law L59/1976, Article 3(1)(a)(vi).
8 Copyright Law L59/1976, Article 3(2)(b).
9 Copyright Law L59/1976, Article 3(2)(b).
10 Copyright Law, L59/1976, Article 5.
11 (1997) 1 JSC 1204.
12 Patents Law. L16(I)/1998, Article 5(1).
13 Patents Law. L16(I)/1998, Article 26(2).
14 Patents Law. L16(I)/1998, Article 27(1), (2), (4).
15 Utility models have no relevance in Cyprus.
16 Industrial Designs Law, L4(I)/2002, Article 21.
17 Plant Variety Law, L21(I)/2004, Article 5(1).
18 Plant Variety Law, L21(I)/2004, Article 17(1).
19 Law 139(I)/2006.
20 Trade names are protected under different legislation, namely the Partnerships and Business Names Law.
21 Patents Law, L16(I)/1998, Article 61 (2)(a).
22 Industrial Designs Law, L4(I)/2002, Article 25.
23 A lot of countries have chosen to introduce an IP box regime. The numerous IP box regimes currently applicable lead to doubts regarding their effectiveness and to suspicions of competitiveness between the different countries in soliciting market support. However, the Cyprus IP Box Regime is arguably one of the most attractive currently in force; See Lisa Evers, Helen Miller, Christoph Spengel, 'Intellectual Property Box Regimes: Effective Tax Rates and Tax Policy Considerations' (Discussion Paper No. 13-070, Zentrum für Europäische Wirtschaftsforschung Gmbh, Centre for European Economic Research, November 2013 http://ftp.zew.de/pub/zew-docs/dp/dp13070.pdf).
24 The Organisation for Economic Co-Operation and Development (OECD) (2010a).
26 See Lisa Evers, Helen Miller, Christoph Spengel, 'Intellectual Property Box Regimes: Effective Tax Rates and Tax Policy Considerations' (Discussion Paper No. 13-070, Zentrum für Europäische Wirtschaftsforschung Gmbh, Centre for European Economic Research, November 2013.
27 Law on International Trust, No. 69(I)/92 as amended by N.20(I)/2012.