Bulgarian patent litigation: the non-exclusive licensee claimant

Patentees adopt a wide range of policies and legal actions to reduce costs and mitigate the risks of actions being brought against them related to entering new markets. A common practice is granting non-exclusive patent licences to subsidiaries, companies within the same corporate group or unrelated third-party partners. This offers patentees a number of benefits, including cost sharing of the market entry, revenue generation from previously unexplored markets, and compliance with local administrative regulations and competition laws. The use of non-exclusive licences permits strategic partnerships and the expansion of large and complex corporate structures across the EU, maintaining control within the group while spreading the risks across multiple local entities.

The prevalence of non-exclusive licensing in Bulgaria

In Bulgaria, the number of products that are patented inventions marketed by holders of non-exclusive licences surpasses those offered directly by national patent holders. Many of these products are in fact patented inventions licensed by EU entities that hold a European patent. However, instead of entering the local market themselves, they engage third parties as non-exclusive licensees, either within their group or unrelated to them. The primary drivers of this phenomenon are the benefits of cost and risk mitigation.

Limitations for non-exclusive licensees in patent enforcement

Despite the many practical benefits for the patent holder, challenges arise regarding the enforcement of patent rights by non-exclusive licence holders within Bulgaria. The main legislative act regulating the granting of patent protection as well as licensing and enforcement in Bulgaria is the Patents and Registration of Utility Models Act (PRUMA). The PRUMA provides for three specific types of claims against the infringement of patent rights: (i) to establish the fact of infringement; (ii) to claim compensation for the damages and the loss of profit; and (iii) to cease the infringement of the patent rights by the infringer (Art. 28 PRUMA). While according to Art. 28, Para. 3 of the PRUMA the patentee and the holder of an exclusive licence have the explicit right to bring these claims (i.e. have active procedural standing), non-exclusive licence holders are unable to enforce the patent rights without the patentee's involvement.

Procedural standing and legal constraints

Active procedural standing is an absolute procedural prerequisite for the existence of the right to bring a claim under the Bulgarian Civil Procedure Code (CPC). A legitimate party, i.e. the holder of the exclusive right to bring a claim, is the holder of the alleged rights that are infringed and are to be protected (Art. 124, Para. 1 CPC). Where a claim is brought by a person lacking active procedural standing, the claim is to be dismissed by the court.

The PRUMA explicitly and restrictively defines the holders of the right to bring a claim against patent infringements as the patentee and the exclusive licensee (Art. 27, Para. 3). Furthermore, the exclusive licensee holds the right of claim only if not otherwise agreed. Outside of contractually granted licences, the holder of a licence by right and the holder of a compulsory licence can bring a claim against patent rights infringements according to Art. 27, Para. 4 of the PRUMA.

The role of non-exclusive licensees in patent proceedings

Apart from the provision of rights to bring a claim granted to a limited number of persons (patentee, exclusive licensee and holders of licences by right and compulsory licences), Art. 27, Para. 5 of the PRUMA enables all licensees (including non-exclusive licensees) to participate in patent infringement proceedings initiated by the patentee. This separate paragraph of Art. 27 of the PRUMA provides only the explicitly defined right to "participate" in the proceeding. The right to participate in court proceedings is a separately regulated procedural right to which assisting parties are entitled. They do not exercise their own right to bring an action but join the proceedings between the parties in their own interest and to assist one of the main parties.

Exclusive and non-exclusive licensees alike have the right to participate in the proceedings. However, this right only arises for proceedings initiated by the patent holder. Art. 27, Para. 5 of the PRUMA does not grant and cannot be interpreted as granting an independent right to bring a claim to the holder of a non-exclusive licence. Consequently, the holders of non-exclusive (simple) licences are dependent on the patentee for protection and cannot pursue patent infringement claims on their own. Their rights are not absolute but are instead non-exclusive contractual rights. The same viewpoint has previously been adopted in the case law of the Bulgarian courts, although it remains very limited and fragmented regarding patent infringement litigation. Pursuant to Art. 27, Para. 3 of the PRUMA, only the patentee and the exclusive licence holder may bring a claim for the infringement of patent rights, unless agreed otherwise. Outside these set cases, the claimant does not have active procedural standing. When a patent proprietor grants a non-exclusive licence, allowing the licensee to use the invention while retaining the right to grant usage to others, the non-exclusive licensee is not entitled to initiate an action for patent infringement.

Strategic approaches to mitigating legal risks

Granting non-exclusive licences can be a strategic move for foreign companies looking to enter the Bulgarian market while sharing costs and mitigating risks. However, as highlighted above, non-exclusive licence holders face significant limitations in enforcing patent rights under Bulgarian law. To mitigate these risks, companies may consider implementing proactive regular monitoring, preparing in advance to enter in infringement proceedings in Bulgaria themselves, granting exclusive licences to certain strategic partners and engaging local legal experts to help implement these or other appropriate steps. By acting to implement these strategies and taking a balanced approach, companies can better protect their patent rights while leveraging the benefits of non-exclusive licensing agreements.

author: Hristo Hadzhiiliev