Trademarks: an asset of high value

In an age dominated by intangible assets, intellectual property has gained significant value in recent years

By Ramona Livera and Demetris Gregoriou

THE new Trade Marks Law 2020 was enacted in Cyprus on June 12, 2020 in accordance with Regulation (EU) 2017/1001.  It is noteworthy for introducing the highly anticipated possibility of ‘pledging’ a trademark as security for a debt. Trademarks are movable property with great financial value and often a company’s most valuable asset. In an age dominated by intangible assets, intellectual property has gained significant value in recent years and, as such, the common practice is to have the borrower pledge the intellectual property in order to protect the interests of the lenders.

Therefore, if the only asset a debtor has is intellectual property, the creditor will now have the opportunity to obtain a security interest in that intellectual property, having a priority claim ahead of other creditors of that debtor.

Pursuant to section 20 of the Trade Marks Law (the ‘Law’), a trademark as a proprietary object, may be given as a security or may be the object of a pledge, a right in rem or levy of execution, independently of the undertaking, or may be subject to insolvency proceedings. Such rights may arise in relation to an application for the registration of a trademark.

The Law further provides that where a security, pledge, right in rem or levy of execution exists over a Cyprus trademark or if it is subject to insolvency proceedings, both parties must notify the Cyprus Registrar Trademarks which shall record the encumbrance in the register. The appointed lawyer who files the application on behalf of the parties for the entry of a security, pledge, right in rem or a levy of execution over a trademark or where a trademark is subject to insolvency proceedings, signs a declaration whereby he/she declares responsibly and officially certifies that he/she legally represents the applicant parties and that the filing of the application and the information in the statement are true. Therefore, it is important that the appointed lawyer ensures that he/she is duly authorized by both parties to file such an  application. This can be achieved by obtaining a Power of Attorney which is signed by both parties and their signatures must be certified by a Public Notary.

In the case of a procedure for levy of execution, in respect of a Cyprus trademark, the Cyprus courts shall have exclusive jurisdiction

Furthermore, under Rule 31 of the Trade Marks Rules 2020, which are read in conjunction with the new Trade Marks Law, the application for the entry in the register of a right in rem, a pledge, a levy of execution or where a trademark may be involved in insolvency proceedings must include such supporting documents which indicate, adequately and clearly the above rights. Therefore, the onus is on the applicant to provide adequate and clear supporting documents to the Registrar. In the event of failure to provide adequate and clear supporting documents the Registrar shall inform the applicant of the identified deficiencies and request the applicant to rectify these within 2 months.

Where the supporting documents are drafted in another language other than the Greek language, these must be translated into Greek and certified by a sworn translator. They must also be accompanied by an Affidavit of Translation attaching, as exhibits, the respective supporting documents in their original language. Moreover, before the application with the supporting documents is filed with the Registrar of Trademarks, the supporting documents must be presented before the Cyprus Commissioner of Stamp Duty for the imposition of the appropriate stamp duty in accordance with the Stamp Duty Law.

The entries in the register of a right in rem, levy of execution, pledge or where the trademark is subject to insolvency proceedings, are available to be viewed by the public in the register of the Registrar of Trademarks.

Where an EU trademark is concerned, the same procedure and rules as analysed above, in relation to national trademarks, apply at the EU level. Rights in rem, a levy of execution or an EU trademark involved in insolvency proceedings must be notified and entered into the Register of the European Union Intellectual Property Office.

In conclusion, the possibility of ‘pledging’ a trademark as security for a debt, which has been introduced by virtue of the new Trade Marks Law 2020 in Cyprus, grants a creditor who has a security, pledge, right in rem or levy of execution over a Cyprus trademark, or if the trademark is subject to insolvency proceedings, the ability to prevent a defaulting debtor from transferring his/her trademark.  It allows the secured creditor to acquire ownership of the trademark of the defaulting debtor and to dispose of it as he/she wishes as the case may be, depending on the type of security interest the creditor has over the trademark of the debtor.

Ramona Livera and Demetris Gregoriou are lawyers at Elias Neocleous & Co LLC