Q&A: key IP issues affecting licensing agreements in Sweden

Intellectual property issues

Paris Convention

Is your jurisdiction party to the Paris Convention for the Protection of Industrial Property? The Patent Cooperation Treaty (PCT)? The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?

Yes, all of the above. 

Contesting validity

Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?

No-challenge clauses are usually effective under Swedish contractual law unless, for instance, the licensing arrangement relates to issues governed by block exemptions or otherwise in conflict with competition law. In cases where non-challenge clauses are included, a typical consequence of the licensee’s breach thereof would be that the licensor is permitted to terminate the licence agreement. 

Invalidity or expiry

What is the effect of the invalidity or expiry of registration of an intellectual property right on a related licence agreement in your jurisdiction? If the licence remains in effect, can royalties continue to be levied? If the licence does not remain in effect, can the licensee freely compete?

In relation to registered intellectual property rights (IPRs), such as patents, trademarks and design protection rights, the licensee’s obligation to pay royalties are generally affected – wholly or partly – when the registration is declared invalid (or otherwise lapsed). A licensee will generally also be permitted to terminate the agreement (in most cases, ex nunc) unless the licensee under the agreement receives other rights – such as trade secrets – in addition to the expired or invalidated IPR. After the expiration of the licence agreement, and assuming that the licensee has not undertaken to refrain from competing activities, the licensee is normally free to compete. 

Requirements specific to foreigners

Is an original registration or evidence of use in the jurisdiction of origin, or any other requirements unique to foreigners, necessary prior to the registration of intellectual property in your jurisdiction?

Generally, registrability in Sweden will be assessed on its own merits based on Swedish law by the Swedish registration authority. In cases where priority is sought, references must naturally be made to the right or rights in question.   

Unregistered rights

Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?

Yes.

Security interests

Are there particular requirements in your jurisdiction to take a security interest in intellectual property?

In relation to security interest in intellectual property (IP), only security interests in the form of a pledge in patents and trademarks are specifically regulated in Swedish law. Such a pledge requires that a written agreement regarding the pledge is registered with the registration authority. It is not entirely clear under Swedish case law whether it is possible law to grant a security interest in other types of IP with legal effect towards third parties.

Proceedings against third parties

Can a foreign owner or licensor of intellectual property institute proceedings against a third party for infringement in your jurisdiction without joining the licensee from your jurisdiction as a party to the proceedings? Can an intellectual property licensee in your jurisdiction institute proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor? Can the licensee be contractually prohibited from doing so?

Under the Swedish Patent Act, the Trademark Act, the Design Protection Act and the  Copyright Act, the owner of the IP in question, as well as the licensee, have rights independent of each other to initiate proceedings against infringers. The right for the licensee to initiate proceedings applies regardless of whether the licensee has been granted an exclusive, sole or non-exclusive licence.

However, where a licensee wants to initiate proceedings against an alleged infringer by itself, the licensee must first inform the owner of the IP of this; the failure to render such information will preclude the licensee from bringing the claim before the court.

The licensee and the licensor may regulate in the licence agreement how infringements shall be treated and, in doing so, it is fully acceptable to, inter partes, limit or prohibit the licensee’s right to initiate proceedings against an infringer.

Sub-licensing

Can a trademark or service mark licensee in your jurisdiction sub-license use of the mark to a third party? If so, does the right to sub-license exist statutorily or must it be granted contractually? If it exists statutorily, can the licensee validly waive its right to sub-license?

From the Swedish Trademark Act, it follows that unless otherwise agreed between the owner of the trademark and the licensee, the licensee may not transfer its right to a third party. Thus, where a licensee wants to be able to grant sub-licences, this matter must be addressed in the licence agreement.

Jointly owned intellectual property

If intellectual property in your jurisdiction is jointly owned, is each co-owner free to deal with that intellectual property as it wishes without the consent of the other co-owners? Are co-owners of intellectual property rights able to change this position in a contract?

The issue of the civil consequences of co-owned IP is rather tricky and unfortunately not entirely clear under Swedish law. There is a rather dated general Act on Co-owned Property, which, in the strictest sense, has been argued to not be applicable in relation to IP yet, in certain regards, potentially of relevance through analogy. Generally, it is held that each IPR-owner can independently bring an infringement action, support of which can be sought through section 6 of the Copyright Act (where such right is specifically stated in relation to co-owners of copyrights). 

It could be stated that, to some extent, each owner can take certain dispositions with respect to its owned share of the IP; for instance, to assign it to another party. However, dispositions regarding the right as a whole would generally require the consent of all the rightsholders. Regarding patents, for instance, it has been expressed in case law that a patent application can only be recalled jointly by the relevant owners. A case-by-case assessment is thus called for taking into account the disposition at hand, the nature of the underlying IP and other relevant circumstances at hand. It is, therefore, advisable that the parties through a contract clearly regulate their respective rights and obligations regarding the IPR in question.    

First to file

Is your jurisdiction a ‘first to file’ or ‘first to invent’ jurisdiction? Can a foreign licensor license the use of an invention subject to a patent application but in respect of which the patent has not been issued in your jurisdiction?

Sweden is a ‘first to file’ jurisdiction. It is possible for a foreign licensor to license the use of an invention subject to a patent application. Damages for the patentee in cases of infringement during the period of provisional protection is, however, limited to reasonable damages provided the application proceeds to grant. 

Scope of patent protection

Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?

Under the Swedish Patents Act, a discovery, scientific theory or mathematical method, an aesthetic creation, a scheme, rule or method for performing mental acts, for playing games or for doing business, or a program for computers (software), or a presentation of information are never considered inventions. Furthermore, patents shall not be granted for plant or animal varieties, or essentially biological processes for the production of plants or animals. Thus, the main rule is that software, business processes or methods or living organisms will not be patentable in Sweden. Notwithstanding this, decisions by the registration authorities and case law (in particular, European Patent Office case law) show that computer programs that have a technical effect can be protected by a patent.

Trade secrets and know-how

Is there specific legislation in your jurisdiction that governs trade secrets or know-how? If so, is there a legal definition of trade secrets or know-how? In either case, how are trade secrets and know-how treated by the courts?

As of July 2018, Sweden has a new Trade Secrets Act, which implemented the EU Trade Secrets Directive. Under the Act, a trade secret is defined as such information concerning the business or industrial relations of a person conducting business or industrial activities or a research entity, which that person has taken reasonable measures to keep secret and the divulgation of which would be likely to cause competitive damage. The new Trade Secrets Act has broadened the scope of its application in courts through the widened allowance for injunctions, which are now also allowed on an imminent basis where there is a risk for an attack on trade secrets. Furthermore, to secure injunctions, bad faith is no longer required as long as the objective grounds for an attack can be shown (the question of damages, however, still bring the issue of bad faith into play). 

Does the law allow a licensor to restrict disclosure or use of trade secrets and know-how by the licensee or third parties in your jurisdiction, both during and after the term of the licence agreement? Is there any distinction to be made with respect to improvements to which the licensee may have contributed?

Trade Secrets – as long as they qualify as such under the Trade Secrets Act – can be protected from unauthorised attacks for an indefinite period. Accordingly, as long as the information is regarded as the licensor’s trade secret, the licensor may restrict the licensee’s unauthorised disclosure or use thereof, both during and after the term of a licence agreement. 

Know-how developed independently by the licensee could constitute its own trade secrets depending on the circumstances at hand and assuming it does not rely on the trade secrets of the licensor. Naturally, nothing prevents the parties from agreeing on contractual regulations restricting also such use.  

Copyright

What constitutes copyright in your jurisdiction and how can it be protected?

Under the Swedish Copyright Act, two different types of works – works of literary and artistic character – are protected (eg, fictional or descriptive representations in writing or speech, computer programs, and musical, dramatic, cinematographic, photographic or other works of fine arts). Furthermore, the Copyright Act also protects certain neighbouring rights (eg, rights pertaining to performing artists, producers of recordings of sounds and of images, the use of sound recordings for public performances and producers of catalogues). Any literary or artistic work is protected immediately upon creation (ie, no registration is required or even possible) provided that it has been created by a human being and that it amounts to a set of elements, expressed in any manner or form, of an independently achieved original character. The requirement of ‘originality’ is met when the work has gained a certain degree of creativity as compared with what already exists and what may come to exist in the future. 

By Cirio, Sweden, a Transatlantic Law International Affiliated Firm. 

For further information or for any assistance please contact sweden@transatlanticlaw.com

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