Bletas & Costakis Law Firm FRANCHISING PATENTS

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1 Bletas & Costakis Law Firm FRANCHISING PATENTS

2 CONTENTS Editor-in-chief: Adonis Karatzas Editorial board: Geena Papantonopoulou Marina Tsikouri Advertising managers: Georgia Siakandari Juliana Berberi Art Director: Theodoros Mastrogiannis Creative Director: Andreas Menounos Desktop Publishing Films: Yannis Dedousis GREEK LAW DIGEST ISSN X NOMIKI BIBLIOTHIKI SA, 2012 COPYRIGHT The content of this Guide is copyright of NOMIKI BIBLIOTHIKI S.A. Copying of part or all of the content of the Guide in any form is prohibited other than that in accordance with the following permission: a) you may copy pages from the Guide for your personal use only, b) you may recopy extracts from the Guide to indi vidual third parties for their personal information, but only if there is acknowledgment to NOMIKI BIBLIOTHIKI S.A. as the copyright owner of the Guide. DISCLAIMER The content of this Guide is intended for information purposes only and should not be treated as legal advice. The publication is necessarily of a general nature; NOMIKI BIBLIOTHIKI S.A. makes no claim as to the comprehensiveness or accuracy of the Information provided; Information is not offered for the purpose of providing individualized legal advice. Professional advice should therefore be sought before any action is undertaken based on this publication. Use of this Guide does not create an attorney-client or any other relationship between the user and NOMIKI BIBLIOTHIKI S.A. or the legal professionals contributing to this publication. 23, Mavromichali Str., Athens Greece Tel.: Fax: info@nb.org Useful insights of the Greek Economic Environment...16 Judicial System...33 Basic Aspects of Civil Law...75 Business Entities Banking System - Finance - Investment Mergers & Acquisitions Financial Contracts Financial Tools Competition Industrial & Intellectual Property Rights Transportation Insurance Insolvency - Bankruptcy Tourism Technology - Media - Electronic Communications Energy Environment Real estate Food & Beverage Life sciences Consumer protection Pesronal data Lottery Games Sports Law Employment Immigration Exports / Imports/ Customs Tax Legal profession in Greece Related information

3 FINANCIAL CONTRACTS

4 FRANCHISING Legal Framework - Tax Considerations, Attorney at Law - Franchise Attorney Senior Partner of BLETAS & COSTAKIS Law Firm How can we define the term FRANCHISING? Franchising is a system of marketing goods and/or services and/or technology, which is based upon a close and ongoing collaboration between legally and financially separate and independent undertakings, the Franchisor and its individual Franchisees, where by the Franchisor grants its individual Franchisees the right, and imposes the obligation, to conduct a business in accordance with the Franchisor s concept. The right entitles and compels the individual Franchisee, in exchange for a direct or indirect financial consideration, to use the Franchisor s trade name, and/or trade mark and/or service mark, know-how, business and technical methods, procedural system, and other industrial and/or intellectual property rights, supported by continuing provision of commercial and technical assistance, within the framework and for the term of a written franchise agreement, concluded between parties for this purpose. What is exactly the Franchise Agreement? The realization of franchising is embodied in a written document that is called the Franchise Agreement or the Franchise Contract. The Franchise Agreement is a document, which includes all the terms to which the two contractual parties, the Franchisor and the Franchisee, have agreed and signed. The Agreement constitutes a legal commitment for both parties, which expresses all the contractual obligations, rights and other considerations, which are going to develop during the co-operation among the Franchisor and the Franchisee. What are the essential minimum terms of the Franchise Agreement? The essential minimum terms of the Agreement shall be the following: the rights granted to the Franchisor, the rights granted to the individual Franchisee, the license given by the Franchisor to the individual Franchisee to use the Franchise System, the goods and/or services to be provided to the individual Franchisee, the obligations of the Franchisor, the obligations of the individual Franchisee, the terms of payment by the individual Franchisee, the duration of the agreement which should be long enough to allow individual Franchisees to amortize their initial investments specific to the franchise, 282

5 the basis of any renewal of the agreement, the terms upon which the individual Franchisee may sell or transfer the franchised business and the Franchisor s possible preemption rights in this respect, provisions relevant to the right of using by the individual Franchisee of the Franchisor s distinctive signs, trade name, trade mark, service mark, store sign, logo or other distinguishing identification, since these are the rights under which the Franchisee is licensed to operate the Franchise System and which give him a competitive advantage over those who cannot use the System, the Franchisor s right to adapt the Franchise System to new or changed methods, provisions for termination of the agreement, provisions for surrendering promptly upon termination of the Franchise Agreement, any tangible or intangible property belonging to the Franchisor or other owner thereof. What are the main obligations of the Franchisor? The Franchisor shall: have operated a business concept with success, for a reasonable time and in at least one pilot unit before starting its Franchise Network, be the owner, or have legal rights to the sue, of its network s trade name, trade mark or other distinguishing identification, provide the individual Franchisee with initial training and continuing commercial and/or technical assistance during the entire life of the Franchise Agreement, grant to the individual Franchisee the right to use the Franchisor s Franchise Package, which consists of the Franchisor s intellectual property rights as well as his know-how, not to appoint another Franchisee nor operate himself a retail outlet in a given contract territory, update and further develop its products, the business outlook and the operating manual and make these improvements available to all Franchisees. What are the main obligations of the individual Franchisee? The individual Franchisee shall: devote its best endeavors to the growth of the franchise business and to the maintenance of the common identity and reputation of the Franchise Network, supply the Franchisor with verifiable operating data to facilitate the determination of performance, and the financial statements necessary for effective management guidance, and allow the Franchisor, and/or its agents, to have access to the individual Franchisee s premises and records at the Franchisor s request and at reasonable times, not disclose to third parties the know-how provided by the Franchisor, neither during nor after termination of the agreement, Bletas & Costakis Law Firm 283

6 284 operate his own shop under the Franchisor s trade name having the same outlook, pay a franchise fee and contribute to the common advertising, buy the contractual products only from the Franchisor or from other suppliers agreed by him, and sell only the contractual products and not other competitive nor supplementary products. What is the operational manual? The operational manual is certainly one of the most important means of communicating the Franchise System. It should include the necessary information for actually carrying out the Franchise System. Franchisor s know-how, which is the heart of the Franchise System, should be described in details in the operational manual. What does know-how mean? Know-how means a package of non-patented practical information, resulting from experience and testing by the Franchisor, which is secret, substantial and identified. Is there a special legal framework for Franchising in Greece? No. Greek Law does not contain any legislative or other specific provisions regarding Franchising, nor is any proposed at the present. Under Greek legal system, franchise contracts are subject to the laws and regulations of different legal fields. During the last years, the developing law of the European Community has substantially influenced Greek Law. Greece has generally complied with the Community Directives and Regulations and has moved towards uniformity of law. Now Franchising is being regulated in Greece by the new Commission Regulation (EC) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty to categories of vertical agreements and concerted practices. In addition, some provisions of several Greek Laws can be applied to Franchising, such as Law 3959/2011 On the Control of Monopolies and Oligopolies and the Protection of Competition, Law 2239/1994 On Trade Marks, Law 146/1914 Regarding the Unfair Competition, Law 1733/1987 On Transfer of Technology, Inventions, Technological Innovations and Establishment of an Atomic Energy Committee, Law 2251/1994 For the Consumer s Protection, Law 2121/1993 Intellectual Property, Presidential Decree 219/1991 Regarding Commercial Representatives in compliance with the EEC Directive 86/653 of the European Communities Councils and finally the Greek Civil Code. Nevertheless, in the absence of a well-developed body of Law governing the Franchise relationship, the Franchise Agreement should be as specific as possible in spelling out the respective rights and obligations of the parties. Is there a Code of Ethics for Franchising in Greece? Yes. In January 1999, the members of the Greek Franchise Association approved the final text of new Code of Ethics for Franchising in Greece. The text is based upon the text of the European Code of Ethics, whose provisions are compulsory for the Code of Ethics of all Franchise Associations of states-members of the European Union. The Greek Code of Ethics has been approved by the European Franchise Federation and includes, in addition to the text of European Code of Ethics, elements which fulfill needs of the Greek business market and regulate peculiar conditions which are found in the Greek Franchise Market. The application of the Code of Ethics is compulsory for the members of Greek Franchise Association.

7 Governing Law-Disputes. What are the choices of the Parties? It is likely that some foreign companies will not accept to submit disputes to the jurisdiction of the Greek Courts, because they will fear the partiality of local courts. As an alternative, it is possible to propose that the claimant may elect to sue his opponent before the courts in the jurisdiction of which he has his own domicile or place of business or before the courts in the jurisdiction of which the defendant has his domicile or Company place of business. A third alternative which may be contemplated is arbitration, since this method of dispute settlement presents many advantages in international transactions. The arbitration proceedings can of course take place in Athens and the arbitrators will apply the Greek Procedural Law. The language of the arbitration should be, if possible, a common language possessed by both parties and the arbitrators, so as to avoid translation costs. Is there a special tax framework for Franchising in Greece? No. The crucial factor is whether the Franchisor has a permanent seat in Greece or not. Should Franchisor has a permanent seat in Greece, he will be faced by the Greek Tax Authorities as a Greek Franchisor. Should Franchisor has not a permanent seat in Greece, which is the most possible scenario, we have to examine if there is an agreement for the avoidance of double taxation between Greece and the Franchisor s country. If this is the case, the provisions regarding the taxation of royalties of such an agreement will apply. In the absence of such an agreement, royalties of intellectual property rights paid to the Franchisor are taxed in Greece with 20% on the gross amount, and that amount needs to be withheld by the Franchisee as a prerequisite for the royalty payment to be transferred by the bank. After the withholding of the above mentioned percentage, the Franchisor has no other tax obligation in Greece arising from the Franchise Agreement. Furthermore, all restrictions on the movement of capital between Greek residents and residents of EU member states and also of third countries for intellectual property rights that pertain to patents, designs, trade marks etc. have been abolished. What are the methods for the Franchisor to franchise in Greece? There are different approaches that are commonly in use for the Franchisor to franchise in Greece: These are: 1. Direct Franchising The Franchisor franchises individual franchise units directly from his country into Greece without the intervention of a third party, by concluding Franchise Agreements directly with individual Greek Franchisees. 2. A branch operation or a subsidiary company The Franchisor establishes a subsidiary company or a branch office in Greece, which act as the Franchisor for the purpose of granting franchises in Greece by concluding Franchise Agreements with individual Greek Franchisees. 3. Area Development Agreement The Franchisor concludes a Development Agreement directly with a Greek Area Developer, by which the Area Developer is entitled, but he is also obliged, to open and operate his own franchise outlets in Greece. Bletas & Costakis Law Firm 285

8 4. Master Franchise Agreement The Franchisor concludes a Master Franchise Agreement with the Greek Master Franchisee, by which (agreement) the Master Franchisee is entitled, but he is also obliged, to grant sub-franchises to Greek Individual Franchisees by entering into Franchise Agreements with them, acting as Franchisor in the Greek Market. Furthermore, the Greek Master Franchisee is entitled to open and operate his own franchise outlets. 5. Joint Venture The Franchisor enters into a Joint Venture Agreement with a Greek businessman to establish a joint venture entity, usually a company, in Greece. This company acts as the Franchisor in Greece, by concluding Franchise Agreements with individual Franchisees. BLETAS & COSTAKIS LAW FIRM 4, ZALOKOSTA STREET ATHENS Tel.: ( ) , , , Fax: bletalaw@ath.forthnet.gr kostakis.d.s@dsa.gr Url: Languages Greek, English, French, Italian, German, Spanish Number of Lawyers 4 Commercial & Company Law Trade marks, Patents Industrial Property Konstantina Oikonomou Mediation Real Property Law, Estates, Wills, heirs, Family Law Christos Machairas AREAS OF PRACTICE Franchising, Competition Systems of Distribution, Arbitration Konstantina Oikonomou Privatisations Law of Landlord & Tenant Contractual Law Konstantina Oikonomou Debt collection Christos Machairas Contact 286

9 INDUSTRIAL & INTELLECTUAL PROPERTY RIGHTS

10 PATENTS Aphrodite A. Bletas, Lawyer, European Patent Attorney Senior Partner, Bletas & Costakis law firm What is a patent? A patent is a legal title granting its holder the right for a certain period of time to prevent third parties from exploiting an invention for commercial purposes without authorization. In exchange the inventor accepts full disclosure of the invention through official publication. Patent Authority In Greece patents protection is awarded to the Industrial Property Organization (OBI). Patentability In order for a patent to be granted protection it has to be new, involve an inventive step and be susceptible of industrial application. An invention is new when it is not known to the public prior to its filing date; it involves an inventive step when it is not based on the existing state of the art; and it is subject to industrial application if it can be produced and used. Application process Granting a patent includes: Filing the application form to OBI. Four months delay, from the filing date, for any corrections to be made or omissions to be completed. Examination of the submitted documents in order to confirm whether the invention is new and involving an inventive step. Another three months delay, from the date of notification of the search report, for comments by the applicant to be submitted. Payment of the relevant fee. Grant of the patent. Drafting of claims The extent and content of the protection requested is based on the technical features of the invention as described in the invention claims. Claims are based on the description of the invention and might be accompanied by the relevant drawings. This stage is very important since all the interpretation and understanding of the invention is based on it. The patent application may contain more than one claim. 344

11 Rights of patent holder A Patent confers on its owner the exclusive right to produce, use, sell, assign licenses and in general to exploit the invention in Greece for such time as it remains in effect. It is therefore a monopolistic right to exploit the invention. But the patent is more than that as it also confers to its owner: Negative rights In the sense that it does not give the owner permission to produce and use the new patented product for as long as it risks infringing someone else s patent. It only gives the owner the legal right to stop others from copying or making use of the invention. Commercial potential The commercial potential of a patent takes many forms. Exclusivity is the most obvious one, since it allows the inventor to exploit the invention without direct competition. Like any other property it can be bought, sold or conceded. It therefore might have considerable value as tradable commodity. The deterrent effect The simple application for the grant of a patent may have a substantial impact on the market and influence competition. This is known as the deterrent effect. Trading value A patent has an inner value because of the exclusivity rights it confers to its owner. This value may vary depending on the originality of the invention. Similar products or processes in the market which are outside the scope of the given patent will certainly deteriorate its inner value. However the patent still has a substantial trading value through: Direct licensing. Cross licensing (grant someone a licensing in exchange of his own licensing). Duration of protection Patents are valid for 20 years to begin from the day following the patent application filing date. How to Transfer a patent All patents and patent applications being immaterial property goods are subject to transfer through a financial transaction ( assignment, merger, takeover etc.) or as the result of an operation of law (inheritance process, bankruptcy etc.). In this way the inventors who usually are creative persons but not business oriented ones are able to sell their rights letting other people manage their industrial property assets. Opposition /Appeal After a patent has been granted, it may be opposed by third parties usually the applicant s competitors if they believe that it should not have been granted. This could Bletas & Costakis Law Firm 345

12 be on the grounds that the invention lacks novelty or does not involve an inventive step. Decisions on opposition are open to appeal. How much will a patent cost The overall cost of obtaining a patent will vary according to the individual circumstances. There are official fees to be paid to the relevant authority as part of the application process and patent attorney s fees which vary according to time spent and patent complexity. Modification of inventions At any time after the grant of the patent, the patent owner may request the revocation or the limitation of the patent. The decision to limit or to revoke the patent takes effect on the date on which it is published. Patent of addition A Patent of addition is a protection title granted for an invention which constitutes a modification to another already protected invention (main patent). The Patent of addition follows the main patent and expires at the same time. It is granted solely to the owner of the main patent. The scope of the new invention must be in connection to at least one claim in the main patent. The same criteria as for granting patents (new, inventive, industrially applicable) apply to the granting of a Patent of addition, however it is only valid from its filing date until the expiration of the main patent to which it relates. Should the main patent be invalidated by a Court decision or other process, the patent of addition may remain untouched provided (and for as long as) the fee for the main patent continues to be paid. Conversion of a Patent of addition A Patent of addition may be converted into a patent at any time provided an application is filed by its owner to this purpose. There is a priority right for this subsequent patent as from the original date of filing the Patent of addition. Utility models The Utility Model Certificate is a title of protection related to any new and capable of industrial application three-dimensional object with a predetermined shape and form, which provides a solution to a technical problem. The procedure for obtaining a Utility Model Certificate includes: 1. Filing of the application. 2. Four months delay for eventual corrections or omissions. 3. Granting of the Utility Model Certificate. Contrary to the patent the Utility Model Certificate is valid for only 7 years, provided the renewal fee is paid annually during the whole period of protection. The Utility Model Certificate may be granted for tools, implements, devices, vessels, components etc. 346

13 Converting a patent application into a UMC application There are only two cases in which a patent application may be converted into a Utility Model Certificate application: In case the inventor himself demands (in writing) the conversion of his patent application into a UMC application. This conversion is only possible prior to the final patent grant. Automatically, in case the inventor forgets to pay the due patent search report fee. In both above cases the patent application date counts for the priority rights. Industrial design An industrial design is the outward visible appearance of the whole or part of a product resulting from the specific features thereof, such as the lines, shape, color etc. The owner of a design or model receives a Certificate of registration. Procedure: There is a delay of 4 months from the date of the filing for the certificate to be issued. The duration of the certificate is of 25 years. The industrial design or model has to be new, in the sense that there exists no identical design or model known to the public; and bear an individual character, in the sense of creating a unique impression on any informed user and this in relation to the other existing designs. European patent The EPC (European Patent Convention) has established a single European procedure for the grant of patents on the basis of a single application. A uniform body of substantive patent law designed to provide easier, cheaper and stronger protection for inventions in the contracting states has been created. In each contracting state for which it is granted, a European patent gives its owner the same rights as it would confer to a national patent granted in that state. If its subject-matter is a process, protection is extended to products directly obtained by that process. Any infringement of a European patent is dealt with by national law. The standard term of a European patent is twenty years as from the date of filing, provided that the annual renewal fees are duly paid. PCT Greece is also a signatory to the Paris Convention which governs International Patents protection. Actually the signatories of the Convention adopted the concept of priority rights to give the inventor enough time to prepare himself to protect his invention in more than one country. The beneficiary of a patent filed in any of the signatory States has a priority right towards all others to fill a demand for a patent for the same invention in any other signatory State. In this way, the inventor may obtain a series of patents which protect his invention in different eligible States. Conditions for having a priority right recognized In order for an inventor to be granted an international priority right one must: 1. file a patent application in a signatory State to the Convention. Bletas & Costakis Law Firm 347

14 2. file a patent application for the same invention in any other signatory State within a deadline of 12 months from the first filing date. 3. disclose the country and date of first filing (priority date) at the moment of filing the 2nd application. 4. The priority certificate should be filed (the original and any translation required etc.) within a deadline of 16 months from the priority date. Claiming priority in Greece If a patent is filed regularly in any of the Paris Convention signatory States, then the owner has a 12 months priority right for filing the same patent in Greece. As above, when filing the patent he has to disclose the country and priority date of the 1st filing. He then has another 16 months from the priority date to submit the relevant documents, mainly a duly translated copy of the priority certificate issued by the competent authority of the country where the first filing was made. BLETAS & COSTAKIS LAW FIRM 4, ZALOKOSTA STREET ATHENS Tel.: ( ) , , , Fax: bletalaw@ath.forthnet.gr kostakis.d.s@dsa.gr Url: Languages Greek, English, French, Italian, German, Spanish Number of Lawyers: 4 Commercial & Company Law Trade marks, Patents Industrial Property Konstantina Oikonomou Mediation Real Property Law, Estates, Wills, heirs, Family Law Christos Machairas AREAS OF PRACTICE Franchising, Competition Systems of Distribution, Arbitration Konstantina Oikonomou Privatisations Law of Landlord & Tenant Contractual Law Konstantina Oikonomou Debt collection Christos Machairas Contact 348

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