Lieze Czech – July 29th, 2021 – Belgian law provides for a tax friendly treatment of copyright income, provided certain conditions are met. Do you create literary and artistic works, and do you transfer or license your copyrights in exchange for a renumeration? Then you might benefit from this favorable tax regime.

This article explains what copyrights are, how this favorable tax regime works, which situations it covers and why getting an advance tax ruling with the Belgian tax authorities is advisable.

What is protected by copyright?

A copyright protects literary and artistic works in a very broad sense and can subsist in any work in which the basic legal conditions (i.e. tangible form and originality) are united.

This includes all kind of creations, such as literary, musical and dramatic works but also choreographic works, architectural works, software, web-design and layout, material design, photographs, audiovisual works, etc.

Hereby, the work is actually protected in an automatic way and without any formality. As an author, you don’t need to take any additional measures to benefit from the copyright protection of your work. Copyright is granted automatically as soon as the conditions of protection are fulfilled.

Which sector can be covered by this regime?

This tax friendly copyright regime is set out in Article 17, §1, 5° of the Belgian Income Tax Code 1992 and is relevant for employees, freelancers, and business owners.

In practice, following sectors can easily benefit from this special tax regime: authors, artists, dancers, journalists, architects, musicians, designers, photographers, software developers, actors, marketeers etc.

What are the requirements for this regime?

This copyright tax regime only applies if (1) there is a transfer or license of copyrights and (2) the author receives monetary compensation in return. According to Article 17, §1, 5° of the BITC 1992, this income is taxable as “moveable income”.

In this respect, we recommend our clients to describe the transfer or license of copyrights in a written contract, together with the copyright royalties that will be paid.

What is the relevant tax rate for copyright royalties?

This means that in Belgium the tax rate for copyright payouts is only 15%, instead of the regular progressive tax rate of up to 50%. This tax rate can drop even further to 7,5% for the lowest scale because of lump sum expense deductions.

For income year 2021, the maximum amount for distributions in royalties is €62.550. This amount is subdivided into different levels with separate deductible fixed costs.

Below you will find a schematic overview of the fiscal thresholds for copyright renumerations for the income year 2021:

Copyright royalties Expense deductions Taxable Tax rate
€0 -€ 16.680 50% € 8.340 7,5%
€16.680 – €33.360 25 % € 12.510 11.25 %
€33.360 – €62.550 0% € 29.190 15%
> €62.550 Taxed as such under the usual progressive rates (between 25% and 50%)

 

Once above the amount of € 62.550, the income will be regarded as “professional income” and will be taxed as such under the usual progressive rates.

The tax due must be withheld at source and paid directly to the Belgian tax authorities within 15 days of the payment.

A realistic valuation of copyright royalties…

The Belgian tax authorities generally do not accept that your entire income consists of a copyright income. That said, the renumeration for the transfer or license of copyrights must be realistic. This valuation often depends on several factors such as the type of work and is demonstrated by previous rulings of the Belgian Ruling Commission.

How can companies make use of this favorable regime?

  • Draw up a copyright agreement

In order to make use of this favorable tax regime, there must be an effective transfer or license from one party to another. Hereby it is important to provide a clear distinction between the “normal” salary of the person concerned and the remuneration for this transfer or licensing.

  • Request a prior ruling from the Belgian tax authorities

Even though a company can decide for itself whether or not to make use of this tax regime. We recommend nevertheless to request a prior ruling from the tax authorities. This is in particular because the tax authorities adopt a strict approach and impose additional requirements in practice. This is certainly the case when it comes to the valuation of copyright royalties.

By getting a ruling from the tax authorities, your company obtains legal certainty and is sure during a period of 5 years that the Belgian tax authorities won’t come back to levy additional taxes .

What can we do for you?

Our team can assist your company with the application of the favourable tax regime income resulting from the transfer or licensing of copyrights under the employment or cooperation agreement.

This includes giving general advice, drawing up a copyright agreement or adapting the existing agreements where necessary and filing a request for an advance tax ruling with the Belgian Office for Advance Tax Rulings.

Melike Orhay – July 2021 – When a principal gives instruction for a job that implies an invention or creation, he shall wish to claim the corresponding intellectual property rights; especially if the inventor is a payroll employee, paid for the specific task. However, under Belgian law, the intellectual property rights (including the rights to exploit, sell or commercialize the creation) shall not automatically belong to the principal-employer. Certain (preferably anticipatory) steps shall need to be taken.

(labour) contract with transfer of rights

The most favourable option for the principal is to agree upon an explicit transfer of the intellectual property rights involved from the employee to the employer. “Explicit” implies in writing, for example in the labour contract itself, within the boundaries of Belgian patent law.

The written clause should describe the scope, modalities (term and territory, for example) and conditions (such as an additional remuneration) of the transfer.

Transfer clauses with general wordings may be considered to violate the principle of freedom of labour and freedom of trade and industry.  In case of doubt or conflict, (labour) courts adopt a rather restrictive interpretation to the benefit of the employee.

(labour) contract without transfer of rights

Very often, however, nothing is provided in the written labour contract in this respect.

This can be the case because the project or invention was not foreseen yet when parties started working together. At a certain moment, as part of the job description and specific tasks it entails, the employee can give rise to an invention.

It is also possible that the invention was an incidental occurrence, result of both employer and employee occasionally joining forces, but not specifically within the scope of the employee’s job functions, neither specifically foreseen.

In this case, a double distinction regarding the inventions should be made to determine who – employer or employee – acquires the intellectual property rights of the invention.

First option: the service invention

A service invention is made by the employee in performance of his employment contract and as part of his job description and tasks. In this case, the employer acquires the intellectual property rights of the invention, since the invention is considered a result of the labour of the employee for which he receives a wage, paid by the employer. Important to note is that this only concerns the so called economic intellectual property rights, i.e. the right to exploit and commercialize the invention. In any case, the inventor – the employee – stays entitled to the moral intellectual property rights, i.e. the recognition of his authorship.

Second option: the dependent invention

A dependent invention is an occasional invention, created outside the scope of the official job duties of the employee, (so not in performance of the labour contract), but with the use of the employer’s resources. For example, in the employer’s workspace, with his machinery, materials or know-how. So, with a specific significant contribution of the employer.

The position of the majority is that all intellectual property rights (i.e., the economic and moral ones) belong to the employee, because there is no link with the labour contract as such. Some would argue that the employer is entitled to a compensation, for his (material or intellectual) contribution. However, the courts will determine to whom the property rights for the invention actually belong, depending on the concrete circumstances.

So specifically for the dependent inventions, it becomes very relevant to foresee an explicit contractual arrangement regarding the intellectual property rights, even after the signing of the labour contract or after the invention has already been created.

This secures the employers’ inventions, market strategies and commercial projects and reduces the risk of possible future legal disputes considerably.

Lieze Czech – July 29th, 2021 – When starting a business, there is one step that many entrepreneurs overlook: The registration of their trademark. A registered trademark protects you in a lawsuit, provides constructive notice of your property and, perhaps the most important, creates a brand which your customers respond to.

What is a trademark?

A trademark can be a word, logo or even a combination of both, which you use to distinguish your products and services from those of competing companies.

What function does a trademark fulfil?

Trademark obligation brings transparency to economic transactions and allows consumers to make better choices.

It enables companies to distinguish their products and services from those of competitors. By indicating a trademark, consumers and companies know exactly which company supplies certain products or services.

This soon creates a quality function of the trademark. Consumers often assume that products of the same trademark also meet the same quality standards.

A trademark also has an advertising function by drawing attention to the product with the trademark name and offering market participants the opportunity to mention the trademarked product.

Finally, a registered trademark can create an important value for your company. It is a sign of professionalism and can be helpful if you want to sell your company or trademark in the future.

The requirement of prior registration

Unlike certain intellectual property rights, trademark law does not arise automatically and should be distinguished from a “trade name” (see below). If you want to exercise rights on a trademark, prior registration is required. The trademark owner will therefore first have to submit a trademark application.

As soon as a trademark is registered, the trademark owner obtains a set of exclusive rights. One of these is that the trademark owner has a right of prohibition and can oppose to every use of an identical or similar sign by others. This is important to prevent others from confusing your (potential) customers.

Protection under trade name law vs. a trademark

In certain cases, non-registered trademarks may also benefit from some form of protection. However, this protection is limited and the exact scope thereof depends on the local law of the place of use of the trade name.

In any case, a trade name is only protected locally. This means that a trade name will only receive protection where it is more or less well-known.

Trademark law, on the other hand, grants exclusive rights within the territory for which the trademark has been registered. This can be worldwide, within the Benelux or throughout Europe. Through trademark registration, the trademark owner’s rights can reach much further. An immediate advantage thereof, is that you have a better view of the market and can develop a trademark strategy.

Secondly, a trade name can only offer protection to the name with which the company trades.

This means that the logo, the products and services with which you, as an entrepreneur, wish to distinguish yourself from others, do not fall under this protection.

As a company, you have invested a great deal of time, money and energy in a unique trademark/trade name and you obviously want to prevent competing companies from simply using it. It is therefore advisable to register your trademark through a trademark registration.

To conclude: 5 issues you should consider when registering a trademark

  1. Be sure to select a distinctive term for your trademark. The more unique, the easier it is to protect and enforce your rights in it.  Terms that describe the product or service or that are already used in association with similar products or services, cannot be registered.
  2. Before you apply for registration, ask a trademark counsel to conduct appropriate searches in every jurisdiction of interest. Searches are the best tool for assessing risks associated with adoption, use and registration of a trademark.
  3. Remember that you can apply for registration even if you haven’t used a trademark yet. It is possible to file your application on the basis of an intention to use the trademark.
  4. It is important to think ahead. Are you planning on expanding internationally someday? Even if you do not have immediate plans to sell in a certain country, it is advisable to already file a registration in the places where you might be active in the future.
  5. Finally, you should know that a registered trademark doesn’t entitle you to a corresponding domain name. Domain names require a separate registration process according to the “first come, first served” principle. To avoid potentional disputes, we advise our clients to registrate a domain name at the same time with the trademark registration.
 

Do you need help with the registration of your trademark or have you noticed an infringement of your trademark? Lieze Czech (lieze.czech@vangompeladvocaten.be or +32 (0)11 281 280) is at your disposal.

Lieze Czech – July 29th, 2021 – It frequently occurs that a company or trademark owner discovers that a third party has registered ‘their’ domain name that is the one corresponding to their trademark (or a very similar one).  This is often accompanied by a proposal from the third party to sell the domain name for a very high price to the actual owner. This practice is called cybersquatting.

This article explains what you can do to prevent cybersquatting, and which steps you can undertake when it has occurred.

What is cybersquatting?

Cybersquatting is the act of registering, trafficking in or using a domain name in bad faith. Although domain names are cheap, they are sold on a first-come, first-served basis. Cybersquatters aim to profit from owning a URL that others will find desirable.

Cybersquatters usually focus on well-known brands but can also be competitors with the intention of preventing the trademark owner from growing on the Internet. The competitor redirects the domain name to its own website in order to take advantage of the brand’s image and attract the owner’s customers by creating confusion.

How to prevent?

Cybersquatting is legally punishable in Belgium (cf. Art.XII.22 Belgian Code of Economic Law).

However, it is better to prevent it by registering your domain name in advance and adopting an effective naming strategy. Here are some tips: 

  • Pre-register domain names

Cybersquatters often work by buying recently searched domain names, which they can sell later on at a profit. Therefore it is important to work quickly and efficiently. As soon as you finalize your company’s name, we advise you to register a proper domain name.

  • Register your trademarks

Protect your trademark as early as possible and preferably before you actually start using it. If you can show that you are the registered (trademark) owner, it will be easier to challenge any domain name containing the name of your trademark (or a similar variation). Once you have registered your trademark, you will also be notified of anyone who seeks to register a similar name in the future.

  • Build a portfolio of defensive domain-name registrations

Consider purchasing variations of your domain name. This includes common misspellings, other typographic errors and different extensions. This is considered to be the easiest and cheapest way of protecting your company and/or tradename.

  • Make your name public only after you have taken the above precautions

If this is not possible anymore, we advise you to still arrange for trademark protection and an extensive domain name registration.

  • Keep the company’s domain registration information current

Ensure regular control and monitoring of your trademark and domain names and act fast against infringers.

In the event of a domain name dispute

In Belgium there are different options to recover a domain name that is registered by someone else. Before you jump into action, it is important that you understand the law, your rights, and available remedies.

One of the first things to do is find out who the owner of the domain name is. This is possible through a site like WHOIS, if the information isn’t protected. This makes direct contact possible between both parties. It could be that the domain name owner would like to sell it to you. This is certainly worth considering if the asking price is reasonable.

If an amicable agreement cannot be reached, other options exist. The first option is the “alternative dispute resolution” (“ADR”) service provided by CEPINA (for .be domain names) or the “uniform domain name dispute resolution policy” (“UDRP”) provided by ICANN (for .com, .net and .org domain names). Note that the procedure under the last one only applies to conflicts between a cybersquatter and a trademark owner.

The second option is through the Belgian Courts under Art.XII.22 Belgian Code of Economic Law (for .be domain names and for other domain names if registered by persons with a residence or an establishment in Belgium). In that case, the complainant has to prove three things: (1) the domain name is identical or confusingly similar to a trademark, trade name, company name, personal name, etc.; (2) the domain name holder has no rights or legitimate interests in the domain name; and (3) the domain name was registered with the intention to cause harm to a third party or to obtain an unjustified benefit from the registration.

For .nl, .uk or other national domain names, you can go to the various national domain name registrars. However, the procedures and the cases in which you can invoke them vary widely.

The foregoing demonstrates the importance of a good domain name strategy and trademark registration. The time and cost of pursuing third parties for infringement action can quickly increase, as can the loss in income and reputation from letting such sites to continue trading unchallenged.

Our team will be happy to help you with

  • Registering your domain name or trademark;
  • Negotiating the transfer of a domain name;
  • Conducting procedures in court or arbitration regarding domain names;

Feel free to contact us at info@vangompeladvocaten.be or at +32 11 281 280.

Anton Van Spaendonck – July 28th 2021 – When a company wants to protect its inventions, filing for a patent is seems the obvious choice. A patent can be filed for if the invention is new, industrially applicable and the result of an innovativeness. The patent protection then guarantees the right to use the invention commercially in a certain jurisdiction for a certain period of time.

Patents and inventions

However, a patent application involves formalities. These formalities may have a (serious) impact on the chances of successfully commercialising or implementing your invention. Your patent application will be published after a period of 18 months by the Belgian Office for Intellectual Property. Your competitors will thus be informed of the new formula or manufacturing process. Moreover, a patent has a limited validity period of 20 years, and you will have to pay certain taxes.

Moreover, not all “inventions” are necessarily susceptible for a patent. Of course, this does not mean that these inventions are not of commercial importance. People often wish to keep such inventions secret and/or protect the knowledge behind them.

It therefore happens that inventions are often not protected by means of a patent, namely because of the (non-advantageous) formalities or absence of the prerequisites for a patent. Nevertheless, there are a number of other means of protecting knowledge, creativity, or mental labour with the aim of preventing a company from losing its market advantage:

  1. The full disclosure of your invention, also called the defensive publication;
  2. During the period in which you wish to keep your invention secret, you can register it via the i-DEPOT envelope, to avoid later disputes about the invention or its date. However, this does not grant you any intellectual rights to your invention;
  3. Make use of a non-compete clause and/or confidentiality obligations, for example by signing a non-disclosure agreement (see below).

Non-disclosure agreements

Non-disclosure agreements (also called “NDAs”) are agreements by which a contracting party, the information recipient, undertakes to keep certain clearly described confidential information absolutely secret and/or to use it only for specific purposes (and no other (!)). An invention and all related information, knowledge and documents can also be included in such confidential information.

With an NDA, your invention is therefore also protected (admittedly on a more limited scale) without your invention being published or disclosed (as in the case of a patent filing).

Moreover, an NDA can be for a long period of time and does not require payment of any taxes. It therefore creates an atmosphere of mutual trust, professionalism, and modalities by which the confidential information can be used.

The major disadvantage, of course, is that a mere NDA does not protect you in any way with any intellectual property rights. Moreover, another company may come up with the same invention on its own and acquire a monopoly on it through intellectual property rights. When choosing secrecy over a patent, one should therefore estimate the chance that another player will be able to obtain the same invention on his own.

The value of confidential information therefore lies in the fact that this information also remains confidential. A well-drafted NDA therefore plays an important role.

Essential elements in an NDA

An NDA should contain certain clauses and commitments to provide sufficient protection for the information provider. A detailled assessment should always be made, identifying the specific needs of the parties.

In any event, the NDA must describe:

  1. What the confidential information includes;
  2. Duration of the confidentiality obligation;
  3. The nature of the relationship between the parties (e.g., employer-employee, client-contractor)
  4. The permitted use of the information (e.g., for the purpose of producing a prototype, drafting the required technical plans and/or elaborating a marketing pitch prior to production);
  5. Compensation or settlement in the event of a breach of the NDA.

Non-compete clause

Moreover, an NDA can include a non-compete clause in favour of the information provider. Thus, the information recipient can be prohibited from using the confidential information for a competitive activity.

In this way, it can be ensured that not only the disclosure of the exchanged confidential information, but also the use thereof is further restricted and additionally sanctioned.

This can be particularly useful when certain service providers and/or employees are involved in the invention and/or the process. For example, the technical engineer in charge of the technical aspects, the subcontractor in charge of the production of a prototype, the marketing agency engaged in the pre-production branding process.

Conclusion

If you have to choose between a patent or contractual protection for your inventions, a clear assessment must be made of the advantages and disadvantages of both possibilities. If contractual protection is preferred in a concrete situation, it will always be necessary to thoroughly examine the precise scope and extent of the desired protection and the modalities to be linked to it.

Given the commercial importance of inventions and the underlying projects, it is best to determine in good time what your strategy will be in this respect.

Incidentally, it is not excluded that you combine a patent application with contractual protection of your invention (via an NDA). The fact that your invention and related know-how have now been disclosed does not mean that third parties can simply disclose the underlying marketing strategy.

Feel free to contact us at info@vangompeladvocaten.be or at +32 11 281 280.