Actualidad Spain

The reform of the intellectual property law fosters transparency and good governance

Royal Decree-Law 2/2018 modifying the consolidated text of the Intellectual Property Law

This Royal Decree-law was published last April in order to transpose regulations 2014/26 EU and 2017/1564, from the European Parliament and the Council to the Spanish legal framework, through the modification of the consolidated text of the Law of Intellectual Property.

The new regulations on intellectual property are intended to strengthen transparency and governance of intellectual property management entities and introduce new obligations regarding information.

Internal Control Body

One of the main changes introduced by this regulation is the establishment of an internal control body, to guarantee the accountability of governing and representation bodies in management entities.

The composition of this body will be regulated through bylaws and the general assembly will approve the appointment and termination of its members, examine its performance and determine its remuneration.

The internal control body must comprise three or more members, appointed for a four-year term, which can be renewed only once. The various categories of members must be represented in a balanced and fair manner and none of its members can have a  de facto or legal affiliation to natural or legal persons that are part of or are represented in the entity’s governing or representational bodies.*

The reform allows independent individuals (who are not members of the entity) to sit on this body so long as they have the necessary technical knowledge to perform their duties.  They will not be able to have a direct or indirect de facto affiliation to the entity or any of its members.

The body is empowered to oversee the activities and performance of the governing and representation bodies  as well as the decisions and policies approved by the general assembly.

The internal control body will be entitled to call the members of the governing and representation bodies as well as management and technical personnel of the entity to attend its meetings, where they may speak but not vote.

These members will also have to report to the internal control body on the management of the entity at least every quarter. They will provide all information the control body needs to perform its duties on matters that could be relevant for the entity´s situation, and the controlling body can ask them for information that is necessary to carry out its mission.

This control body will report on its activities to the annual general assembly . Also, the reform entitles it to call an extraordinary assembly, if deemed necessary to the interests of the entity.

Specific Requirements for Entities that Invoice Larger Amounts

The reform includes specific requirements for Management Entities that have invoiced an amount equal to or above 100 million euros in the last financial year. The most relevant are:

  • They are obliged to appoint one or more independent third parties as members of the internal controlling body
  • They must be overseen by the control body with regards to a: i) Applying the rules for distribution of the royalties collected; ii) processing disciplinary resolutions brought against members of the entity; iii) processing and resolution of claims and grievances, and iv) implementing the annual budget of collection and distribution of royalties and of income and costs of the entity.

It also establishes that the control bodies of this entity must meet at least every six months and minute every meeting that takes place, specifying as a minimum the quorum, the agenda, place and time, main points that were discussed, the content of the resolutions adopted and individual votes.

The internal control body must be attended by an auditor, who will be different from whoever audits the annual accounts and will be appointed by the general assembly.

Declaration of conflicts of interest

Before taking office, and subsequently once a year, the members of governing and representation bodies, must sign a conflict of interest declaration and submit it to the assembly for its analysis and consideration.

Natural persons representing legal persons on the body will also have to sign a joint declaration together with that of the company represented.

This declaration must contain information on the following:

  • Their interests in the management entity.
  • The remuneration received from the management body in the previous financial year.
  • The amount received in the previous financial year as a holder of rights.
  • Any real or potential conflict among personal interests and the entity's interests, or between the obligations regarding the entity and any other natural person.

Information and Transparency

The reform also introduces certain demands for transparency and information to the management entities. It states that every year, copyright holders must be informed about the management of their rights and have their requests for information answered in writing with due detail.

It also describes the information that needs to be published by the management entities on their easily accessible webpages, which must be kept updated: bylaws, annual accounts and management information, auditing information, annual report on transparency, the composition of the governing and representation bodies, their current general rates, list of management entities with which agreements for representation have been signed, among others.

Likewise, the governing and representation bodies will be responsible for preparing an annual report on transparency within the three months following the closing of the previous financial year. The reform stipulates that the following information be attached: financial statements, activities of the financial year, legal and administrative structure of the entity, financial information on the costs of the rights-management costs and other services, information on relationships with other entities, etc.

This report will be reviewed by the entity’s auditors and approved by the general assembly within the six months following the last financial year.

* A direct or indirect de facto or legal affiliation shall mean a personal family relationship through blood ties or up to and including a second-degree affinity, or a labour or business relationship maintained over the last 5 years prior to the designation.