Cyprus is gaining momentum as the preferred location for entrepreneurs and fintech businesses.
For those who have been following Cyprus’ effort to establish itself as a fintech and innovation jurisdiction, this comes as no surprise.
There is more than meets the eye to this trend, with a substantial part of it being attributed to (i) the in-depth understanding of intellectual property rights by tax and legal professionals, (ii) the changes to the legislation and applicable regulations on intellectual property, particularly trademarks, brought about by EU directive and (iii) the modernisation of the procedures of the Cypriot Intellectual Property Office.
Cypriot intellectual property legislation: nothing out of the ordinary
Cyprus is a member of the commonwealth countries as from 1961, a member of the European Union as from 2004 and a party to all major treaties concerning intellectual property rights.
Its legislation is substantially influenced by the treaties it has ratified, English common law and EU legislation.
Its simple and predictable legal regime provides a sense of ease and familiarity to persons choosing to register or develop their intellectual property in Cyprus and mitigates any stress caused by having to resolve disputes in less predictable jurisdictions. A newly created Commercial Court with specialised senior judges and the possibility of holding the procedure entirely in English, is expected to provide even more certainty and efficiency in the resolution of disputes concerning copyrights and patents.
Intellectual property rights in Cyprus
Cyprus recognises all intellectual property rights, other than utility models.
Another important source of value, although not typically included under the strict scope of intellectual property rights are trade secrets, business names and domain names.
It is particularly interesting that the eligibility to ‘.cy’ gTLDs has been extended to all persons irrespective of whether they permanently reside in Cyprus or not.
Branding and trademark registration
Branding is a broad term that includes trademarks.
The branding process includes the process for the creation of a trademark, typically, with the assistance of a graphic designer or dedicated tools and applications.
An important milestone of the branding process is the registration of a trademark.
The registration of a trademark requires thorough consideration of the countries in which the trademark will be protected. Relevant considerations include the location of intended operations, franchising and licensing, IP protection strategy and budget.
Registration costs may be considerable (particularly when multiple jurisdictions and classes of goods/services are envisaged), but they remain a one-off expense. The real challenge when it comes to trademarks is the cost for maintaining active trademark registrations, including defending or filing oppositions or cancellation proceedings and renewal costs.
The cost of registering and maintaining a trademark in Cyprus is comparatively low. The official cost for registering a trademark in one class of goods/services is less than €150 and for each additional class less than €100. The procedure of the trademark registration, if uncontested, takes up to one year, including the issuance of the registration certificate. The registration remains active for an initial period of ten years and may be renewed indefinitely for periods of ten years. The official cost for renewing a trademark in one class of goods/services is less than €100 and each additional class is around €60.
Other important advantages include:
- The option of filing an international trademark application under the Madrid Agreement and Protocol with Cyprus being the home application.
- The ability of claiming as priority date the date of filing of the trademark in another country under the Paris Convention.
- The potential of using a Cypriot trademark to oppose the registration of a European Union trademark.
The European Union trademark is a good alternative to the registration of a Cypriot trademark. If the applicant intends to operate in the EU (or in more than one country of the EU), opting for a European Union trademark could be a meaningful choice. For those who would like to limit the extent of their risk exposure, registering a Cypriot trademark could be a good choice, at least during the first years of the business’ existence, provided they operate in or from Cyprus.
What about copyrights?
Most entrepreneurs rely on copyright protection, not least because most products comprise platforms, applications and other software-based products.
In Cyprus like in most other countries, there is the presumption of copyright provided that the work is the creator’s own work (meaning that the work has not been substantially copied from the work of another).
Contrary to other countries, Cyprus does not offer time stamping services and there is no official copyright public records portal.
Time stamping may be effected in a more traditional manner, by issuing an affidavit declaring that the work annexed in the affidavit constitutes the creator’s own work. This would in effect work as evidence that the work was in existence on that day.
Other than the above, contractual and practical protections such as electronically saving the work during the creation stages are the most optimal ways to achieving copyright protection.
For the creators and owners of the work, contractual provisions protecting their rights in all upstream and downstream contracts is extremely important, while for assignees, IP due diligence should never be considered redundant.
In all cases, having a non-disclosure agreement in place is always advisable.
Transactions in intellectual property
Transactions involving intellectual property rights have increased considerably over the years. This is due to a number of reasons including (i) entrepreneurs incorporating their own companies and contributing their intellectual property rights to the company, (ii) angel investors funding innovative ventures, (iii) the increase in research and development and (iv) tax advantages offered in Cyprus, an indicative example being the IP Box regime.
Despite the existence of legislation, such transactions remain heavily reliant on the terms of the contract and the obligations each party undertakes to perform.
Particular care should be given to the identification of the subject matter and any pending or imminent litigation exposure. Due diligence, not only on an IP level but also on a corporate level, in cases of complex structures, can be used to identify and assess the extent of such exposure and the impact such exposure may have on the agreed price.
Further, each party must be aware of their post-completion obligations and undertakings. In cases where trademark or patent portfolios are assigned, the intellectual property offices of the different jurisdictions need to be notified and their records updated. Depending on the jurisdictions involved, this can be an expensive and time-consuming exercise.
Conclusion
Cyprus’ increasing momentum in the fintech and innovation industry is a reflection of the advantages of using Cyprus as a hub for accessing Europe and the MENA region.
The geographical advantages are one of many. Other advantages include the simple and predictable legal regime, easy access to tax and legal services, easy access to mentors and idea accelerators, relatively inexpensive protection of intellectual property rights in comparison to other jurisdictions, the possibility to extend protection of intellectual property rights such as trademarks in Europe and internationally and tax motives for research and development.
The good quality of life remains an important bonus for entrepreneurs and fintech businesses choosing to establish their base or relocate their offices in Cyprus.