The Intellectual Property Review: Cyprus

Forms of intellectual property protection

Cyprus has a strong legal framework for the protection of intellectual property (IP), 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. This protection, along with the protection offered by the international treaties, helps to position Cyprus on a comparable level with other signatory parties as regards the strength and type of IP protection, thereby enhancing its attractiveness as a trading and commercial centre.

i Copyright

The main piece of legislation for the protection of copyright2 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 A number of other EU directives have been recognised by the court as having direct effect and applicability,5 such as Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society and Directive 2006/116/EC of the European Parliament and of the Council of 12 December 2006 on the term of protection of copyright and certain related rights.

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'.6 The definition is broad enough to encompass computer software7 (it being considered a form of literary work) and databases.8

To invoke such protection, the work must satisfy two requirements: (1) it must be in a fixed form in one of the manners set out in the Copyright Law;9 and (2) it must be an original piece of its creator.10 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.11 If the author of the work is a legal person, protection subsists for 70 years from the end of the calendar year of the time the work was first published. 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 because there are no specialised courts specifically to handle IP 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'.12

ii Patents

In 1998, Cyprus passed the Patents Law, Law 16(I)/1998, which has been amended subsequently at various points. This Law recognises as a patentable invention one that fulfils the following three criteria: novelty; an inventive step; and industrial application.13 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.14 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.15 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 designs

Industrial designs are protected by Law 4(I)/2002, the Paris Convention and TRIPS.16

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 years17 upon payment of a relevant fee.

iv Plant varieties

It is widely acknowledged that Cyprus has strong 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 and stable and have a name.18

The duration of this protection is 20 years from the date of grant in the case of a creator and 25 years in the case of trees and vines.19 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 Appellation of Origin and Geographical Indications for Agricultural Products and Foodstuffs,20 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.

vi Trademarks

A new law on trademarks was introduced on 12 June 2020, Law 63(I)/2020, entitled 'Amending Law of 2020' (the Law), which is to be read alongside the Trade Marks Law (the basic law), Cap 268.21 The aim of the Law was to modernise the legal framework regarding trademarks to accommodate current commercial needs and practices and align national legislation with EU Directive 2015/2436. Notably, the basic law dates back to 1955, and understandably was in need of a major overhaul. Prior to the introduction of the Law, the legal framework had produced a cumbersome, bureaucratic and slow system, which had created a backlog at the trademarks registry, had hindered the proper administration of legal rights of trademark proprietors and was markedly out of line with the technological advancements of our times.

The Law provides for numerous new features designed to simplify procedures pertaining to the registration, administration and handling of a trademark, and it has introduced streamlined features designed to expedite procedures, reduce costs, enhance transparency, and render filing and administration of procedures simpler and faster.

It is important to point out that the Law has maintained the two-tier system of examination carried out by the Trade Marks Registrar ex officio, pursuant to which the latter examines a mark on the basis of both absolute grounds and relative grounds. This is the result of a policy decision aimed at assisting small and medium-sized enterprises that might not be in a position to afford watching services and would thus benefit from the Registrar's vigilance when examining an application.

Recent developments

As discussed above, the Law has introduced numerous new features, the main ones being the following.

  1. Certification marks and collective marks may now be registered.
  2. The old requirement that a mark be 'capable of graphical representation' to be registered has been eliminated and replaced with a more flexible and less rigid way of being expressed; a mark may be filed using current technological means, provided that it is filed in a manner that is clear, precise, and capable of permanent representation and of being perceived objectively. Accordingly, new types of marks may be filed, such as holograms, pattern marks, motion marks, position marks, etc.22
  3. Once an application for a mark has been filed, it is not possible to amend the representation of the mark, even if the mark has not yet been published.
  4. A multi-class system of registration has been introduced.
  5. No power of attorney must be filed; it has been replaced with the filing of a 'solemn declaration' by an attorney, who, in turn, has the responsibility to secure the power of attorney for his or her purposes.
  6. The various procedures before the Registrar shall be carried out by way of written submissions, and hearings would be conducted only by way of exception, when a case is especially complicated and provided it is justified under the circumstances.
  7. Strict time frames are applied for the conducting of procedures (the usual time frame is a two-month period, with the exception of the opposition period, which is a three-month period). Failure to comply with the applicable time frame set down in the Law would lead to the dismissal of a petition or an administrative action.
  8. The duration of a trademark registration is a 10-year period, subject to indefinite further 10-year renewal periods.
  9. The assignment procedure has been markedly simplified so that proof of the assignment may be satisfied with the filing of an assignment application signed by the registered proprietor of the mark or by his or her lawyer and by the assignee or his or her respective lawyer. This simple procedure is a far cry from the more elaborate procedure followed under the basic law, which demanded the filing of the assignment agreement duly certified, accompanied by an affidavit setting out the details of the assignment.
  10. Division of a trademark application or of a registered mark is an important tool for applicants and trademark proprietors as it enables them to ring-fence that part of the application or mark that is not threatened by any third-party rights, non-use, etc., and separate it from the part of the application or registration that is vulnerable. Notably, division is also possible in cases where the application or registration concerns a single class, and division would concern part of the goods or services covered thereunder.
  11. There is a single fee for the entire registration procedure.
  12. Registration of a protected designation of origin, protected geographical indications, traditional wine indications and plant varieties as trademarks is possible, provided that their protection is provided by EU legislation and Cyprus laws as well as by international conventions to which the Republic of Cyprus is a party.
  13. Amicable mediation during the opposition procedure may be used as a first step to the parties to bridge their differences.

The experience of using the trademark system under the new legislative framework has been a positive one up to now, given the shorter period required for the examination of cases, the more streamlined procedures and the clear and definitive timelines for each procedural step.

Obtaining protection

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 eSearch plus, the trademarks database of the European Union Intellectual Property Office (EUIPO) (formerly known as the Office for Harmonization in the Internal Market), 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 may be effected either electronically through the Registrar's website or manually using the relevant form. The Registrar examines the formalities of the application and, assuming all are in order, proceeds to carry out ex officio an examination of both the absolute and the relative grounds of refusal. In the event that the Registrar finds any such grounds, it grants the applicant two months to respond accordingly. If no grounds are found, the application proceeds to publication in the Official Gazette for opposition purposes, which is a three-month period.

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, and Article 61 sets out the civil actions and remedies available to the rights 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 €59,850.23 The burden of proof in these 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.24 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, or both.

If an opposition is filed, the parties have a two-month period to deliberate on an amicable mediation. This period may be extended up to a maximum of six months. If no solution is found, the opposition procedure commences with the opponent being given a two-month period during which to file evidence to substantiate the opposition. Evidence concerning the opponent's mark being a well-known mark in the Republic of Cyprus may be filed, if relevant, as well as evidence that the mark has a reputation in Cyprus or the EU. Crucially, this is the opponent's only chance to file any evidence as the procedure does not provide for any other opportunity to file additional evidence to support the opposition.

The applicant would then be called upon to file evidence in response, along with relevant arguments. Similarly, this is the only chance for the applicant to file any evidence it intends to rely on to fight the opposition.

It is important to point out that the applicant, as a shield, under the Law, has the right to ask the opponent to file proof of use of the earlier mark that constitutes the basis for the opposition. This is a strong weapon in the hands of an applicant to ensure that no opposition is filed frivolously or abusively. In the event that the opponent is not in a position to prove substantial use of the mark or that there is a justifiable reason for not using the mark, the opposition would be rejected without any examination of the substance of the case.

The opponent would then have the right to reply to the applicant. In the case of no filing of a response, the procedure would be completed, without this leading to an automatic acceptance of the opposition. The decision of the Registrar is based on all the evidence and pleadings filed before it up to that point.

The applicant also has the right to file a counter-reply, if it deems this useful.

A similar structure of the procedure to be followed in cases of annulment and invalidity is provided for in the law, as in the opposition procedure described above, with the exception of amicable mediation, which applies only in the case of the opposition.

Any decision of the Registrar (allowing or rejecting an opposition, annulment, or invalidity application in respect of all or part of the goods or services) constitutes an administrative act and is subject to an administrative recourse before the Administrative Court.

Trends and outlook

The introduction of the Law in June 2020 marked an important milestone in the protection and administration of trademarks and has allowed applicants and proprietors alike to face the challenging commercial environment with courage and certainty, given the leaner, stronger, faster and more efficient system put in place. The legislative procedures introduced with the Law's major overhaul in 2020, coupled with the technological means of filing, have rendered this an exciting time for users of the Cyprus trademarks system, who can look forward to a fast, transparent, streamlined service.

Last and most importantly, and as elaborated upon further below, the Organisation for Economic Co-operation and Development's (OECD) 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 IP marketing, introduced what became known as the Cyprus IP Box Regime (the Regime).25

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.26 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.27 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 – one of the lowest in Europe.28 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 tax,29 along with the numerous double taxation treaties established over the years.30

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 underwent a transitional period during which new entrants and current entrants with new IP rights could still enter the Regime. Those who were eligible and managed to enter the Regime were able to continue to enjoy the advantages of the Regime up to and including 30 June 2021 – the final day of the former Regime – provided that the IP rights satisfied certain requirements.

According to the legislation that was 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.

The new legislation provides that 80 per cent of the qualifying profits derived from a qualifying intangible asset will be considered 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 the provisions of both the former and the new Regime, the former regime applied until it was 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. Regulations issued by the Ministerial Council relating to the calculation of the taxable income apply, and terms such as 'qualifying intangible assets', 'qualifying persons' and 'qualifying profits' are defined therein. A formula applies for the calculation of 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 orientated. It is no secret that the island's economy is based on two pillars: tourism and financial services.

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 to attracting investors to Cyprus to create an IP holding entity and to rendering Cyprus a one-stop business destination.

Further, on 10 January 2022, the Department of Registrar of Companies and Intellectual Property announced that EUIPO's and the European Committee's 'Ideas Powered for Business' SME Fund grant scheme, which offers financial support to small and medium-sized enterprises through partial reimbursement of fees related to IP protection, has become available to the public again during the period 10 January 2022 to 16 December 2022.31

The grant scheme for 2022 will subsidise the following IP services:

  1. 75 per cent reimbursement of national and European trademarks registration fees;
  2. 75 per cent reimbursement of national and European industrial designs registration, publication and deferment of publication fees;
  3. 50 per cent reimbursement of outside EU trademarks basic application, designation and subsequent designation fees (EU countries' designation fees are exempted);
  4. 90 per cent reimbursement of pro-diagnostic service (IP Scan) (reimbursement for Cypriot IP Scan service will start in April 2022); and
  5. 50 per cent reimbursement of patents filing, examination, grant and publication fees.

iii Conclusion

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 IP, and a highly qualified and skilled workforce. The island's legislative and business structure and its geographical position make it an ideal setting in which a successful business strategy may be realised and serve as a gateway to Europe.

Footnotes

1 Maria Ch Kyriacou is head of the commercial, regulatory and IP law department 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 Law, 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 Ozatay v. Kakoullis, trading under the trade name 'Gallery 37' – District Court Judgment No. 566/2019, 31 January 2020.

6 Copyright Law, L59/1976, Article 3(1).

7 Copyright Law, L59/1976, Article 2(1)(h).

8 Copyright Law, L59/1976, Article 3(1)(a)(vi).

9 Copyright Law, L59/1976, Article 3(2)(b); Ozatay v. Kakoullis, trading under the trade name 'Gallery 37'– District Court Judgment No. 566/2019, 31 January 2020.

10 Copyright Law, L59/1976, Article 3(2)(b).

11 Copyright Law, L59/1976, Article 5.

12 Costas Socratous v. Gruppo Editoriale Fabbri-Bompiani and others [1997] 1 JSC 1204, Neocleous v. Agkastiniotis, District Court Judgment No. 2472/12, issued on 29 January 2021.

13 Patents Law, L16(I)/1998, Article 5(1).

14 Patents Law, L16(I)/1998, Article 26(2).

15 Patents Law, L16(I)/1998, Article 27(1), (2), (4).

16 Utility models have no relevance in Cyprus.

17 Industrial Designs Law, L4(I)/2002, Article 21.

18 Plant Variety Law, L21(I)/2004, Article 5(1).

19 Plant Variety Law, L21(I)/2004, Article 17(1).

20 Law 139(I)/2006.

21 Trade names are protected under different legislation, namely the Partnerships and Business Names Law.

22 Existing marks that contain a classification of goods or services not meeting the requirement of 'sufficient clarity and precision' shall be subject to revision upon their renewal.

23 Patents Law, L16(I)/1998, Article 61(2)(a).

24 Industrial Designs Law, L4(I)/2002, Article 25.

25 A lot of countries have chosen to introduce an IP box regime, such as Malta, Hungary, the Netherlands, Belgium, the United Kingdom and Luxembourg.

26 The Organisation for Economic Co-operation and Development (OECD) (2010a).

27 HM Revenue and Customs, 'Research and Development – Relief from Corporation Tax',
www.hmrc.gov.uk/ct/forms-rates/claims/randd.htm.

28 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).

29 Law on International Trust, No. 69(I)/92, as amended by N.20(I)/2012.

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