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.

i Copyright2

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 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, 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

ii Patents

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.

vi Trademarks20

A new law on trade marks 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. The aim of the Law was to modernise the legal framework regarding trademarks in order 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, 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, while 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 who may 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' in order 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, 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.;21
  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. Application of strict time frames 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 of 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: this possibility 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. possibility to register a protected designation of origin, protected geographical indications, traditional wine indications and plant varieties as trademarks, provided their protection is provided by EU legislation and Cyprus laws as well as by international conventions to which the Republic of Cyprus is a member; and
  13. use of amicable mediation during the opposition procedure as a first step to the parties bridging their differences.

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 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 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 during which 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, 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 €59,850.22 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 €85,500,23 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 marks an important milestone in the protection and administration of trademarks and allows 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 new legislative procedures, coupled with the technological means of filing, make 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 (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).24

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.25 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.26 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.27 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 tax28 along with the numerous double taxation treaties established over the years.29

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

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 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.

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, 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 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.

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

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

24 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).

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

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

27 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).

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

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