A common situation in commercial practice is when a copyright holder first grants a license to a work and then seeks to transfer the rights to the work, to the extent they previously granted the license, to another entity. To assess whether such a situation will result in the license expiring or being maintained, the key question is the legal nature of the license granted. Three solutions are proposed: a license can be considered an authorizing act, an obligating act (or an authorizing-obligating act), and a dispositive act. Accepting one of the first two positions would result in the license expiring. Only in the case of a dispositive act would the license remain in effect.
A dispositive act refers to an act that results in a change in the entitled entity or the content of the right. Disposal is accomplished by transferring, relinquishing, or encumbering the right. In the case of a license, this could potentially result in encumbrance of the right.
However, it is difficult to agree with this view given the nature of the encumbrance. In a typical encumbrance situation, i.e., when limited property rights are established, a constitutive separation of a right occurs, i.e., an acquisition that creates a new subjective right. As pointed out, however, this construction applies to indivisible rights "i.e., when a certain scope of the right is constitutively separated for the benefit of a person other than the entitled party to the right that becomes the subject of the encumbrance."* This concept therefore does not fit copyright law, which involves a right consisting of many partial rights (fields of exploitation).
Other arguments can also be made that a license is not transferable. In particular, it should be pointed out that it would blur the distinction between copyright transfer agreements and license agreements, and that there are no statutory provisions indicating such a nature of a license.
An authorizing act would manifest itself in authorizing another person to engage in certain conduct that, in the absence of authorization, would have no legal basis. This concept, while interesting, does not solve the main problem posed by uncertainty regarding the nature of the license. An authorizing act could therefore still be classified as an act of obligation, as well as a dispositive act.
The dominant view is that a license agreement constitutes a binding agreement. The licensee may legally use the work, and the licensor is obligated to "endure" such use.** Referring to the literal interpretation of the provisions of the Copyright and Related Rights Act, it should be noted that Article 17 grants the creator the right to "use" and "dispose of" the work. Assuming the legislator acted rationally, these two terms should mean different things. Article 41 of the Copyright Act refers to a license as an "agreement for the use of the work," which indicates that this agreement refers to one of the creator's rights, namely the use of the work.
An interesting example is comparing copyright provisions to the provisions of the Industrial Property Law. According to Article 78 of that Act, "In the event of the transfer of a patent encumbered with a license, the license agreement is effective against the legal successor." Therefore, since the legislator included such a provision in another intellectual property act, it can be concluded that if they wanted to achieve a similar effect in the case of a work license, they would have enacted a corresponding provision in the Act on Copyright and Related Rights.
In summary, we should therefore agree with the position that a license is binding or authorizing and binding in nature, which will result in its expiration if the rights are transferred to another entity. A solution that can increase the authorized party's certainty is to conclude a lease agreement instead of granting a license. However, this view is highly controversial, among other reasons, due to the frequently raised argument that a lease can only apply to copies of the work itself, not the rights to the work. It is also worth mentioning the view presented in the legal literature that a licensee could invoke the relative ineffectiveness of a transfer agreement. Under such a concept, an agreement transferring economic copyrights would make it impossible to satisfy the licensee's claim.***
*T. Targosz, K. Włodarska – Dziurzyńska, "Agreements transferring copyrights", Warsaw 2010
**E. Ferenc-Szydełko (ed.), "Act on Copyright and Related Rights. Commentary." 4th ed., Warsaw 2021
***A. Michalak (ed.), Act on Copyright and Related Rights. Commentary, Warsaw 2019
This alert is for informational purposes only and does not constitute legal advice.
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