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Legal briefing notes

What is a commercial concession agreement and why is it needed?

commercial concession agreement is an agreement under which it is possible to transfer the right of using the tradename and experience (franchise) of an existing business to another entrepreneur. Under such an agreement, the right holder transfers to the user the rights of using the trademark, commercial designation, knowhow, business reputation and commercial experience, setting the scope for the use of these objects (Article 1027 of the Civil Code of the Russian Federation). For example, in the transfer of rights under a commercial concession agreement it can be established that the right holder does not compete with the user in the territory defined by the agreement. As another limitation can be the establishment by the right holder of restrictions on the quantity of production manufactured by the user.

The significance of a commercial concession agreement should not be underestimated because the entire scope of the rights and obligations of the right holder and user, information exchange mechanisms and dispute resolution can be established in it, which will facilitate the further settlement of potential disagreements. Often the parties misunderstand the nature of a commercial concession without establishing reciprocal obligations in the agreement. This leads to judicial proceedings and users ask to return the money they paid on the ground that they did not receive the expected profit. Usually, with cases like this, the courts take sides of the right holder (decision of the Intellectual Property Rights Court from May 17, 2019, N C01-300/2019 in the case N A56-57032/2018).

How to draw up an agreement and who should register it?

Only commercial organizations and individual entrepreneurs can enter into a commercial concession agreement. A mandatory condition of such partnership in any commercial concession agreement is the transfer of trademark rights. The agreement also lists all the rights that the right holder transfers to the user if it is needed the term of its validity should be agreed as well as the procedure for payment remuneration for the transfer of rights, which can be established both in the form of fixed payments and deductions from the proceeds or other indicators of the user (Article 1030 of the Civil Code of the Russian Federation).

As a general rule, the registration of a commercial concession agreement is implemented by the right holder. This responsibility is vested in him in the second paragraph of clause 2 of article 1031 of the Civil Code of the Russian Federation. Meanwhile, the parties to the commercial concession agreement have the right to establish a different procedure, and then the user will submit the request for registration.

What are the features of the registration process of the agreement and why you can get a refusal?

It is typical for a commercial concession agreement that it is not the agreement itself is registered in the Russian Federal Service for Intellectual Property, but rather the extension of the right to use the right holder's rights. The registration takes place on an application and it is not necessary to apply the entire agreement, it is enough to indicate the conditions of this agreement. This allows not disclosing trade secret to the parties. Without registration, assigning the right to use is considered invalid (clause 2, article 1028 of the Civil Code of the Russian Federation).

The grounds for a refusal to register the granting rights under a commercial concession agreement are defined by the Russian Federal Service for Intellectual Property, among them are:

  • lack of information about assigning the right to use a trademark under a commercial concession agreement;
  • violation of the condition on the list of persons when the parties are not commercial organizations and/or entrepreneurs;
  • the right holder is not entitled to a trademark at the time of the filing an application for registration;
  • if in the agreement there is a condition on gratuitousness that is contrary to a direct indication of the obligation of such an agreement to be compensated;

(Order of the Russian Federal Service for Intellectual Property from December 29, 2009 No. 186 “On approval of the Recommendations on the verification of agreements on the exclusive right to the results of intellectual activity or means of personalization”).

Therefore, as we can see, the procedure for registering the transfer of the right under a commercial concession agreement has a certain number of risks and each of them may be excluded with competent legal accompaniment of this process.

Advantages of working with us

Working with the specialists of the Tsentralny okrug Law firm gives lots of opportunities:

  • Consultations of specialists and free rapid assessment of the specifics of the business and the situation of the client;
  • Full accompaniment of registration of a commercial concession agreement from negotiating the terms of the agreement to receiving completed documents;
  • Money-back guarantee in case of the results will not be achieved;
  • Efficient and responsible case management (18 completed projects during the last year).

Due to our vast experience in the area of commercial concession agreement the specialists of the Tsentralny Okrug Law Firm can ensure the protection of your interests and achieve registration in the Russian Federal Service for Intellectual Property. We will help to give the terms of your agreement a legal form and eliminate any omissions between the parties.

Author is Dmitry Biryukov

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