The Legal Framework of Licence Negotiation
Negotiating an intellectual property licence is built in two steps: first, the content of the contract must be complete and precise; then, the process of negotiation must be in good faith. Under Article 40 of the Law on Copyright, a licence contract must provide for a precise description of the work to be used — its title, volume and genre — the concrete manner of use, the term and territory of the contract, the procedure for determining the royalty or its amount for each manner of use, and the procedure and term of payment. The right to every manner of use not directly provided for in the contract remains with the author or other right holder — a rule that creates balance in negotiations: using an unspecified format requires a new negotiation.
The Legal Consequences of Gaps in the Contract
The law also contemplates what happens when an element is missing: where the concrete manner of use is not provided, the contract is deemed concluded for the use that may be considered necessary for fulfilling the parties' intention at conclusion; where no term is fixed, the author or holder may terminate the contract after 3 years from its conclusion, notifying the licensee in writing 6 months beforehand; and where no territory is defined, the contract operates only on the territory of Georgia. In addition, the rights granted may be assigned to others, wholly or partly, only where this is directly provided in the contract; and where the royalty for reproduction is fixed as a sum, the contract must set a maximum print run.
The essential terms of the contract are also named by the law: a licence agreement must provide for an exact description of the work to be used (title, volume, genre), the specific manner of use, the duration and territory of effect, the amount of the royalty or the method of its determination for each manner of use, and the manner and deadline of payment. Where the royalty for reproduction is fixed, a maximum print run must be established; and the granted rights may be passed on to other persons only where this is directly provided for by the contract.
Negotiating with a Collective Management Organization
Where rights are managed by a collective management organization, the law directly regulates the manner of negotiation: the organization and the user are obliged to conduct negotiations on granting a licence in good faith and to provide each other all information necessary for concluding the contract. The licensing conditions must rest on objective and non-discriminatory criteria, and the organization is not required to present conditions agreed with another user as a precedent. The organization examines an application within a reasonable term, requests the necessary information and sends written notice of consent or reasoned refusal; it must also give the user a means of electronic communication. The user, in turn, must keep documentation on use and supply information in the agreed format; the organization may not disclose the confidential information received.
Tariffs and Damages
In setting tariffs, the right holder must receive an appropriate royalty for the use; the organization must give the user complete information on the tariff criteria — a tariff must correspond to the economic value of the rights in civil circulation — and publish the tariff plans on its website. Where the parties do not agree, the amount of the royalty is determined by a commission created by order of the chairperson of Sakpatenti. On breach, a party that failed to perform or improperly performed an obligation under a copyright transfer, work-creation or licence contract must compensate the other party for the damage caused, including forgone income.
The fairness of tariffs is also controlled: a tariff must correspond to the economic value of the rights in civil circulation; the management organization must give the user complete information on the criteria for setting tariffs and publish the tariff plans on its website; users of one category must enjoy equal conditions, and refusal to grant a licence without sufficient ground is impermissible. Where the parties fail to agree, the amount of the royalty is determined by a commission created by order of the Chairman of Sakpatenti; and where the contract is performed improperly, the injured party is compensated for the damage suffered, including lost income.
Frequently Asked Questions
Below we answer the questions most frequently asked on this topic.
What must a licence contract contain?
A precise description of the work, the manner of use, term, territory, royalty and payment procedure — the contract takes written form; the list of these elements is precisely the agenda around which the negotiation proceeds.
What happens without a term?
The author or holder may terminate after 3 years from conclusion, notifying the licensee in writing 6 months in advance.
How does negotiation with an organization proceed?
In good faith, with full exchange of information; conditions rest on objective, non-discriminatory criteria and a refusal must be reasoned.
Who resolves a royalty dispute?
On disagreement, the amount is determined by a commission created by order of the chairperson of Sakpatenti — a compromise mechanism likewise provided by the law itself.
How We Help on Legal.ge
Licence negotiation demands complete formulation of the contract's elements and a fair determination of the royalty. On Legal.ge you can consult an advocate experienced in intellectual property who will prepare the contract, represent you in negotiations and protect your interests in tariff disputes. Submit a request on the site and get qualified assistance.