License Contracts in Turkey: Legal Framework and Key Insights
License contracts today, play a key role in nearly every aspect of commercial life. In Turkey, these contracts are governed by comprehensive legal frameworks, including the Industrial Property Law No. 6769 and the Law on Intellectual and Artistic Works No. 5846. Apprehending the legal framework put on the license contracts by these laws, the types of licenses available, the obligations of both licensors and licensees and the key points of the license agreements are essential for anyone looking to license intellectual property in Turkey.
What is A License Contract?
A licence agreement can be defined as a contract in which one party transfers the use of an intellectual or industrial property right and the other party agrees to pay a fee in return.
In Turkish legislation, the licence agreement is regulated in the Industrial Property Law No. 6769, firstly in a similar manner within the book related to each right and then under the title of common provisions, as the rights and claims of the licensee. On the other hand, Article 48 and the following articles of Law No. 5846 on Intellectual and Artistic Works regulate that only the use of the financial rights arising from the ownership of the work can be transferred and this contract is called Warrant Agreement in the law. However, this warrant agreement has also been referred to as a licence agreement in practice. For instance, a copyright warrant agreement for computer software appears as a copyright licence agreement.
In addition, as defined in the Block Exemption Communiqué on Technology Transfer Agreements numbered 2008/2; Technology transfer agreements, which refer to agreements where patents, utility models, designs, integrated circuit topography and breeder rights, applications related to these, the right on software and know-how are licensed separately or in combination, also fall within the scope of the license agreement.
Which of the Intellectual or Industrial Property Rights Can Be Licensed in Turkey?
In practice, licence agreements are often referred to by the name of the right subject to the licence. For example; trademark licence agreement, patent licence agreement, design licence agreement, work licence agreement,… On the other hand, as a rule, each intellectual or industrial right or know-how, production and business secrets may also be subject to licence agreements.
The issue of which rights cannot be a subject of a license agreement also must be stated here. Geographical indication (protected sign of origin and protected geographic indication) and traditional product names cannot be subject to a license agreement due to their nature. This is displayed in Article 148/1 of Law No. 6769: “Geographical indication and traditional product name rights cannot be subject to license, transfer, transfer, seizure and similar legal transactions and cannot be shown as collateral.” It is also expressed as: Again, in Article 148/7 of the same Law: “The transfer of the warranty trademark or joint brand or the granting of a license for the joint brand is valid in case of registration in the registry.”, the warranty brand cannot be subject to a license agreement.
Types of License Contracts
Exclusive and Non-Exclusive Licence
Licence agreements are basically of two types: exclusive licence agreements and non-exclusive licence agreements (simple licence agreements, ordinary licence agreements). In non-exclusive licence agreements, the licensor may use the right subject to the licence itself or grant other licences to third parties. In exclusive licence agreements, the licensor may not grant licences to others and may not use the right subject to the license her/himself unless s/he expressly reserves her/his right.
These aspects are expressed in Article 24 of Law No. 6769 in terms of trademark rights, Article 75 in terms of design rights and Article 125 in terms of patent rights. Pursuant to Article 145 of the aforementioned law, the provisions regarding the licence of the patent shall also apply to the utility model.
Compulsory and Contractual Licence under Patent Rights
In terms of patents, a licence may arise as a contractual licence or a compulsory licence. A patent right may be subject to a compulsory licence in cases where the invention subject to the patent is not used; there is a dependency between the subjects of the patent; the public interest requires it; the export of pharmaceutical products subject to the patent is in question due to public health problems in other countries; the breeder cannot develop a new plant variety without infringing a previous patent; the patentee engages in activities that prevent, distort or restrict competition while using the patent. As a rule, a compulsory licence is established as a non-exclusive licence. The decision to grant a compulsory licence for reasons of public interest may be made by the Presidency of the Republic, and in this case, it may also be decided that the licence will be exclusive, and the compulsory licence is established by requesting the Competition Authority if the patentee engages in activities that prevent, distort or restrict competition while using the patent, and in other cases by submitting a request to the Court.
Legal Framework for License Contract
Parties of The License Contract
The parties to the license agreement are the licensor and the licensee. The licensor often appears as the rights holder. However, in cases where the licensee has the right to grant sublicenses, it is also possible for the licensee to acquire the title of the licensor. However, as stated above, it is possible for the licensee to transfer the license right or grant a sublicense if this is explicitly stated in the contract.
The licensee may be one or more real persons or a legal entity (personal license or business license).
Elements, Rights and Obligations of the Parties to The License Contract
The license agreement appears as an atypical contract that imposes mutual obligations. While the licensor transfers the use of the right, the licensee agrees to pay a fee to the licensor in return. In this case, the elements of the license agreement consist of the right transferred and the cost.
The primary obligation of the licensor is to transfer the right to use. Ensuring the use of the right is also within the scope of this obligation. It should be stated here that it is attainable to transfer the right of use for all or part of the goods and services subject to the right. In addition, if the trademark right is licensed, the trademark owner is under the obligation to take measures to guarantee the quality of the goods to be produced or the services to be offered by the licensee.
The licensee’s main obligation is to pay the agreed price. However, the licensee cannot expand or transfer the right granted by the license without permission. Such use by the licensee may not only constitute a breach of the license contract but may also be considered as an infringement of the right subject to the license.
Duration of The License Contract
The term of the licence agreement may be freely agreed by the parties. In addition, the licence agreement shall also terminate upon the end of the licensor’s monopoly over the right subject to the agreement. It should also be noted here that if trademark, patent and design rights are the subject of a licence, in order for the licence to be registered in the Registry, the licence agreement must include a period of time according to the Regulation on the Implementation of the Industrial Property Law.
Termination of The License Contract
If a period of time is specified in the licence agreement, the licence agreement shall terminate automatically upon expiry of the period of time. Moreover, the licence agreement will also terminate if the protection period of the right subject to the licence expires, is not renewed, the right is waived, or the application is withdrawn. In various articles of the Law No. 6769, however, it is stated that if the right of the licensee is registered in the registry, renunciation can only be made with the permission of the licensee. In addition to all these, it is also possible to terminate the licence agreement if the licensee does not comply with the terms of the agreement or if justified reasons for termination arise.
Form and Registration of the License Agreement Under The Industrial Property Law No. 6769
In the case that a right regulated under the Law on Intellectual and Artistic Works, such as copyright, is subject to a licence agreement, the agreement must be concluded in writing pursuant to Article 52 of the said Law. Here, the aforementioned form is not only a condition of proof but also a condition of validity. In other words, if a licence agreement regarding the aforementioned rights is not made in writing, this agreement will be void with absolute nullity. Again, the ordinary written form is sufficient here, and the agreement does not need to be made officially at the notary public. However, we would like to state that its execution in a notary will facilitate the proof.
In the case that rights such as trademarks, patents and designs regulated under the Industrial Property Law are subject to a licence agreement, written form is a condition of validity pursuant to Article 148/4 of the aforementioned Law.
In terms of copyright, an optional registration system has been adopted in Turkish Law and licenses granted for works are not recorded in the registry. Registering the license agreement made within the scope of industrial property law with the Turkish Patent and Trademark Office (“Türk Patent”) upon request is possible. Registration of the license agreement provides many rights to the licensee such as: eliminating the goodwill of third parties; preventing the licensor from waiving or partially renewing its rights without the consent of the licensee, or giving consent for trademark applications. For the registration of the license agreement, the following documents should be submitted to the Office; the application form and the document proving that the fee has been paid, along with the application or registration number of the right subject to the agreement and, if any, the license agreement specifying the license fee and license period, and if the license agreement is in a foreign language, its Turkish translation approved by a sworn translator.
Negotiating and Drafting Licensing Agreements
First of all, it is important to clearly understand the rights subject to the license and the way of using the rights within the scope of the contract in order to prevent a dispute from arising. Considering that any intellectual industrial property right, from computer software to a trademark, from a patent to know-how, can be the subject of a license agreement, the importance of writing the contract subject in a way that leaves no room for hesitation becomes evident.
Again, it would be beneficial to clearly regulate the license fee in the contract. A fixed amount can be determined for the license fee or a method of calculating the fee proportional to the income as a royalty can be decided. If the latter is preferred, the necessary arrangements for accurate determination of income should also be included in the contract. In light of all that has been said, it is also important to arrange within the contract situations such as the licensor’s ability to examine the licensee’s income or request a report or document regarding this, or the licensee’s ability to carry out the necessary inspections in the workplace and operation.
If the license is exclusive and the licensor will use the right subject to the license himself, this must be clearly stated in the contract. If it is decided otherwise, it will be to the benefit of the licensee if non-competition regulations are included in the contract.
It would be appropriate to focus on the clauses within the contract that regulate the duration of the contract, expiration of the term, automatic renewal or termination of the contract, and termination under ordinary or extraordinary circumstances, and write them in a way that will both meet the needs and minimize disputes.
How We Can Assist You
As Viridis Legal Partners, we are here to assist you with our extensive experience in handling license contracts, to ensure that your intellectual and industrial property rights are fully protected under Turkish law. Whether you need assistance with drafting, negotiating, or registering license agreements, our expert team of English-speaking IP lawyers in İstanbul is well-versed in the sophistications of Turkish regulations, including the Industrial Property Law No. 6769 and the Law on Intellectual and Artistic Works.
We provide personalised legal solutions tailored to meet the unique needs of our international clients. From managing technology transfer agreements and compulsory licenses to handling disputes and ensuring compliance with the latest legal standards, we are committed to making the legal process as smooth and efficient as possible for you. Our dedicated team of intellectual property attorneys in Turkey is equipped to represent you in all necessary legal forums, ensuring your interests are safeguarded at every step.
For expert legal assistance, please contact us today.
- What are the different types of IP licenses available in Turkey?
In Turkey, various types of IP licenses are available, including trademark licenses, patent licenses, design licenses, copyright licenses, utility model licenses, and know-how licenses. Each type of license grants specific rights related to the respective intellectual property.
- How do I negotiate an IP licensing agreement in Turkey?
Negotiating an IP licensing agreement in Turkey involves discussing terms such as the scope of the license, duration, territorial limitations, royalty payments, exclusivity, sublicensing rights, termination clauses, and dispute resolution mechanisms. It’s essential to ensure clarity and mutual understanding of all terms to reach a satisfactory agreement.
- What legal protections are there for licensors in Turkey?
Licensors in Turkey are protected by various legal provisions, including those outlined in the Industrial Property Law No. 6769 and the Law on Intellectual and Artistic Works No. 5846. These laws establish the rights and obligations of licensors, including the right to enforce the terms of the license agreement and seek remedies in case of infringement.
- Can foreign entities license IP in Turkey?
Yes, foreign entities can license intellectual property in Turkey. Turkish law does not impose restrictions on foreign entities regarding IP licensing agreements. However, it’s essential for foreign entities to ensure compliance with Turkish legal requirements and consider any tax implications or regulatory issues that may arise.
- What are the consequences of IP licensing infringement in Turkey?
Infringement of IP licensing agreements in Turkey can lead to various consequences, including legal action, termination of the license agreement, payment of damages or royalties owed, and injunctions to prevent further infringement. The specific consequences depend on the terms outlined in the license agreement and the severity of the infringement.
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Obtaining Operating Licences for Payment Institutions in Turkey
Information systems, which have developed rapidly with the introduction of the Internet into our lives, have radically affected commercial relations and payment methods have become diverse in this context. Turkey has also received its share of these developments. In this article, let’s take a closer look at the regulations introduced by the Turkish legislation and the procedure for payment institutions to obtain an operating license in Turkey.
In Turkey, payment services are regulated by Law No. 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions (mostly referred to as the “Law on Payment Services” and will be referred to as the “Law” hereinafter) and the Regulation on Payment Services and Electronic Money Issuance and Payment Service Providers (mostly referred to as the “Regulation on Payment Services” and will be referred to as the “Regulation” hereinafter).
Within the scope of this legislation; “Bank” refers to the Central Bank of the Republic of Turkey; “Agency” refers to the Banking Regulation and Supervision Agency; and “Board” refers to the Banking Regulation and Supervision Agency.
What is the Payment Service?
The definition of payment service is set out in Article 12 of the Law. Accordingly, payment service is defined as
“a) All transactions necessary for the operation of the payment account, including services that allow depositing money into and withdrawing money from the payment account,
b) a direct debit transaction, including one-off ones, involving the transfer of funds from the payment account of the payment service user with the payment service provider, a payment transaction by means of a payment card or similar instrument and a money transfer including a standing order,
c) Issuance or acceptance of the payment instrument,
ç) Money transfer,
d) a payment transaction in which the sender gives consent to the payment transaction through an IT or electronic communication device and the payment is made to an IT or electronic communication operator acting only as an intermediary between the payment service user and the provider of goods or services,
e) Services for intermediation of invoice payments,
f) A payment order initiation service offered at the request of a payment service user in relation to a payment account with another payment service provider,
g) The service of making available on online platforms consolidated information on one or more payment accounts of the payment service user with payment service providers, provided that the consent of the payment service user has been obtained,
ğ) Other transactions and services in the field of payments that reach a level to be determined by the Bank in terms of total size or sphere of influence,”
What is the Payment Service Provider?
In the most general terms, a payment service provider can be defined as a company that enables a business to receive payments from its customers online or physically. Although the Law does not explicitly define what a payment service provider is, Article 13 of the Law defines who may be a payment service provider. Accordingly, within the scope of the Banking Law, banks, electronic money institutions, payment institutions and Post and Telegraph Organization Joint Stock Company are payment service providers.
What are the Conditions to be Fulfilled by Organizations Wishing to Operate as Payment Service Providers?
Organizations expecting to operate as Payment Service Providers must fulfill certain conditions. These conditions can be listed as follows;
“(2) The payment institution must;
a) Established as a joint stock company,
b) The shareholders holding ten percent or more of the capital and those in control shall have the qualifications required for bank founders under Law No. 5411,
c) The share certificates shall be issued against cash and all of them shall be registered,
ç) The paid-in capital in cash and free from any kind of collusion shall be at least one million Turkish Liras for payment institutions providing services listed in subparagraph (e) of the first paragraph of Article 12 of this Law, and at least two million Turkish Liras for other payment institutions,
d) Have the management, sufficient personnel and technical equipment to carry out the transactions under this Law and establish units for complaints and objections,
e) Take the necessary measures regarding the continuity of the activities to be carried out under this Law and the security and confidentiality of funds and information relating to payment service users,
f) It has a transparent and open shareholding structure and organizational chart that will not hinder the supervision of the bank,”
Institutions that meet the aforementioned conditions may operate as payment service providers by obtaining an operating license from the Bank.
What is a Payment Service Provider Operating License?
An operating license is the official approval granted by the competent regulatory authorities for a business to legally operate in a specific sector or field. In Turkey, operating permits for payment service providers and electronic money institutions are issued by the Central Bank of the Republic of Turkey (CBRT). This permit confirms that the relevant business complies with legal regulations, security standards and financial obligations. Without an operating license, providing payment services or electronic money services is against the law and may result in severe penalties.
How to Obtain Payment Service Provider Operating License?
A company that will apply for an operating license must follow the steps below:
Initiation of the Application Process:
First of all, the trade name of the company must include the phrases “payment institution” or “electronic money institution”. Before the trade name is registered with the trade registry, the template notification petition and forms annexed to the Regulation must be submitted to the Bank. The notification petition must be accompanied by the draft articles of association and the application form must be accompanied by a receipt showing that the application fee of 500,000 Turkish Liras and the related legal obligations have been paid.
Intelligence Review Phase:
After the application process is initiated, the Bank shall issue a document confirming that the application has been submitted and give it to the applicant. Within six months following the notification of the document to the applicant, an application must be made to the Bank for the intelligence review stage. The necessary petitions and documents must be prepared and submitted to the Bank. The Bank grants approval if deemed appropriate at the end of the due diligence phase.
Final Approval Stage:
An application for the final approval stage must be submitted to the Bank within 120 days at the latest after the approval of the preliminary review stage. The necessary petitions and documents for the final approval stage should be prepared and submitted to the Bank. The Bank makes the necessary evaluations at the final approval stage and finalizes the application positively or negatively.
Obtaining the Activity Permit:
Upon final approval, an operating license is obtained. The operating license becomes valid after its publication in the Official Gazette. The Bank must be notified within ten days from the date of commencement of the activity.
What Are The Documents Required for Obtaining Payment Service Provider Operating License
The Documents Required To Start the Application Process:
The Documents Required For the Intelligence Investigation Phase:
The Documents Required For Final Approval Stage:
What Are The Additional Documents for Companies Established Abroad To Acquire Operating Licence For Payment Service Providers In Turkey?
The additional documents that should be presented by the companies established abroad to the Bank in order to obtain operation warrant for payment service providers are listed as below:
How Can We Assist You?
If you are planning to operate as a payment service provider in Turkey, we are here to guide you with our experienced commercial law attorneys and complete your application process smoothly. As Viridis Legal Partners, we are at your side at every stage of your application with our experienced attorneys who are familiar with Turkish legislation. We offer legal support to overcome all legal and bureaucratic difficulties you may encounter during the application process. For both local and foreign organizations, we provide support with our expert team in compliance with the legislation, preparation of application documents and communication with institutions. Operating as a payment service provider in Turkey requires a detailed and complex process. We can provide you with the legal advice you need to obtain an operating license and move forward in the sector with confidence.
Contact us now to get detailed information and benefit from our services.
FAQs (Frequently Asked Questions)
What steps should be followed to obtain a payment services license?
To obtain a payment services license, your company’s trade name must include the phrases “payment institution” or “electronic money institution.” The application process, intelligence review, and final approval stages must be completed. All necessary documents and forms should be prepared and submitted to the Bank.
What is an electronic money institution?
Electronic money institutions are legal entities authorized to issue electronic money. These institutions allow users to store money electronically and perform payment transactions without using traditional payment methods.
What are the requirements to become a payment service provider?
To become a payment service provider, you must be established as a joint-stock company, have sufficient capital, and possess the necessary technical equipment and personnel. Additionally, measures must be taken to ensure the continuity of activities and the security of user information.
License Contracts in Turkey
Understand the essentials of license contracts in Turkey, including legal frameworks, types of licenses, and key points for drafting agreements.