BRINGING OF INTELLECTUAL PROPERTY RIGHTS AS CAPITAL IN KIND TO JOINT STOCK COMPANY
ABSTRACT
As a result of the increase in the value of patents, trademarks, designs, utility models, integrated topography or works of ideas and art that are the product of an intellectual effort in the eyes of society, an economic value for these works/ rights has also emerged. Each product/ right mentioned, although they are non-material products/ rights, has a value in cash if they can be assessed economically. That being the case, the necessity of integrating these intellectual property rights into commercial life has also been raised.
In this context, it has been regulated that intellectual property rights can be brought to joint stock companies as capital or even accepted under the title of the concept of capital in kind within the scope of Turkish Commercial Code No. 61021(“TCC”). Indeed, it is not possible to accept all kinds of intellectual property rights as capital. But, according to this regulation, the commitment of many rights that are considered intellectual property rights as capital is possible.
In this article; regulation of the TCC regarding intellectual and industrial property rights will be analyzed and bringing them as capital to join stock companies will be discussed.
I. INTRODUCTION
“Protection of capital”2 and “limited liability of partners” are basic principles in joint stock companies. These principles are more important from a corporate law perspective. Existence of capital at the stage of establishment of joint stock companies is significant for the determination of liability of partners within the scope of this capital they have committed to3. The capital can be cash, or it may be committed in kind. The values that can be brought capital in kind within the scope of the TCC are movable/ immovable property, commercial business/s and rights. It is necessary to give several examples because the concept of “rights” is quite broad. Intellectual property rights, contractual and in-kind rights, which are stipulated in the law can be illustrated as an example of it. In this article; regulation of the TCC regarding intellectual and industrial property rights will be analyzed and bringing them as capital to join stock companies will be discussed.
II. INTELLECTUAL PROPERTYRIGHTS THAT CAN BE BROUGHT AS CAPITAL IN KIND
A. Concept of Capital in Kind and Conditions
Although there is no current definition of the concept of capital in kind in the TCC, it is possible to define it as “values except cash capital”4. In this context, movable, immovable property and all kinds of products/ rights with economic value can be brought as capital in kind. The values/rights which can be brought as capital in kind to commercial companies are regulated in Article 127 of the TCC as below:
a) Money, receivables, negotiable instruments and shares belonging to capital companies
b) Intellectual Property Rights
c) Movables and all kind of immovables
d) The rights of use and benefit of movables and immovables
e) Personal labor
f) Commercial reputation
g) Commercial enterprises
h) Values such as transferable electronic media, fields, names and signs that are rightly used,
i) Mining licenses and such other rights with economic value
j) All kinds of values that can be transferred and evaluated in cash
This regulation covers not only joint stock companies, but all commercial companies. For this reason, we would like to say that the values mentioned in paragraphs e and f is not applicable for joint stock companies5. As can be understood from the regulation in paragraph j, this count in the article is not limited, in other words, it cannot be considered as numerus clauses6. In parallel with that, a broad concept of “intellectual property” is used, rather than identifying each type of IP rights, meaning, all intellectual rights which have an economic value can be brought as capital.
There are certain characteristics sought for every kind of right/value that can be brought as capital in kind. Although the limited number principle has not been preferred within the scope of Article 127 of the TCC, important arrangements have been made regarding the values to be brought as capital in kind. In this context, there should be conditions for the in-kind capital to be a material asset, to be transferable and to have a cash value7.
The condition “to be a material asset” means to be a material good and/or rights of capital in kind. Although this condition is not referred to in the articles of law, considering that personal labor and business reputation cannot be brought as capital to capital companies it can be interpreted that the condition “to be a material asset” must be met. “Hence, it is not possible to commit works that can be fulfilled with physical or intellectual labor, that which the act of performing is in the nature of personal achievement”8.
A right to be transferred to joint stock companies as capital may be brought by transfer itself, or it may be committed in the form of establishing a limited right9. We would like to say that while the subject of capital in kind can be committed as acts of making/ giving, it is not possible to commit negative acts such as not doing/ giving.
The condition “to be transferable” means the shareholder bringing the capital can transfer the right to the company, since it will be reserved for the joint stock company, constituting a legal entity. It leads to the conclusion that the rights/ values brought as capital in kind can be first transferred to the company, then from the company to third parties10. For example, if the transfer of a contractual right is blocked, then this right cannot be brought as capital in kind to a joint stock company. As a matter of fact, Article 127/1-j clearly regulates that all kinds of “transferable” values can be brought as capital11.
The condition of “being evaluated in cash” means that all values brought as capital to the company must have cash/ monetary value, due to the fact that the capital of joint stock companies is required to be considered as cash. Pursuant to Article 339/2 of the TCC, “rights granted as capital other than money; and value of these” should be included in the partnership agreement. This shows that every element brought as capital should be stated in cash value. Again, Article 127/1-j clearly regulated that the values which can be brought as capital in kind must meet the condition of “being evaluated in cash”.
The important point in the condition of being evaluated in cash is that the determination/ evaluation of the cash equivalent of the capital in kind should be done by an expert. However, we would like to express here that the transaction in question is a “valuation” transaction, a broader transaction than determining the price. For example, the price to be paid to the seller in exchange for the goods to be purchased is the price of the goods, while if the goods in question are brought to the joint stock company as capital, not only the price, but also expenses related to the goods are added and the value determined is recorded as capital12.
The mentioned valuation procedure is regulated in Article 343 of the TCC. Although it was stated in the article of the law that the valuation will be carried out by an expert who will be appointed by the commercial court of first instance, no regulation can be found regarding the competent court. Therefore, it is accepted in the doctrine that Article 384 of the Civil Procedure Code No. 610013 (“Civil Code”) applies14. According to the said provision; “Unless there is a provision to the contrary in the law, the competent court for non-contentious judicial affairs is the court where the person or one of the interested parties is settled”. Again, it is stated that this valuation request can also be made by the “interested parties” as set out in the article of the mentioned law15.
In the valuation report to be prepared; issues such as the determination being carried out fairly and appropriately, the validity, collectability, full value of the receivables to be brought as capital, etc. are explained clearly. The founders and shareholders may object to the value determined in this report. But, the report confirmed by the court is certain and it is not possible to appeal or take action against this decision16.
B. Intellectual Property Rights That Can Be Brought as Capital in Kind
Intellectual property rights can be defined as intellectual products resultant of a special effort by the owner of the work17. This can be accepted as the broadest definition of the concept of intellectual property. As a main heading, “intellectual property rights” includes various rights such as industrial property rights and copyrights. Although there are discussions in the doctrine in the sense of the aforementioned opinion, in the definition made by the World Intellectual Property Organization (“WIPO”), the conceptof “intellectual property” is considered the main heading/ title. According to the issues contained in this concept, it is divided into “industrial property” and “copyrights”, which are the rights of the owner of the work18.
As a matter of fact, the concept of intellectual property is also used as a main title in our law. Considering the basis of Article 342 of the TCC regarding intellectual property rights that can be brought as capital in kind, the following statements are available: “The term ‘intellectual property rights’ should be understood broadly to include intellectual and artistic works, related rights, trademarks, designs, patents, geographical indications, unregistered rights and information, plant development, plant breeders’ right, topographies of semiconductors”19. Industrial property rights, which are considered to be subheadings, are regulated in the Industrial Property Law No. 6769 (“IPL”)20, and copyrights on a work are regulated in the Ideas and Works of Art Law No. 5846 (“IWAL”)21. Industrial property rights regulated within the scope of IPL are in the form of trademark, patent, design, geographical indication, utility models, integrated topography, breeder’s rights etc. The legislator has regulated in detail the conditions for accepting a product as a “work”, as well as the rights of the person who created the work in the IWAL.
The introduction of intellectual property rights as capital in kind is regulated in Article 127 of the TCC. Apart from this, the legislator has included the regulation on bringing intellectual property rights to joint stock companies as capital in Article 342. This article states:
“Elements of assets, including intellectual property rights and virtual environments, which may be assessed and transferred in cash, which do not have limited real rights, liens and measures on them, may be placed as capital in kind.”
It is clear that intellectual property rights within the context of the said article can be brought as capital if they have the characteristics of cash evaluability, transferability, not being limited by real rights, liens and measures. At this point, we believe that it would be useful to evaluate the sub-headings of intellectual property rights, industrial property rights and the copyrights especially in terms of transferability, separately.
Transferability
Ownership of industrial property rights (patent, utility model, brand, design, integrated topography, etc.) organized within the scope of IPL is acquired by registering it before the Turkish Patent and Trademark Office. Registration of industrial property rights is of a constituent nature in terms of the acquisition of rights. It is possible to find out the ownership of the right through the records contained in the said registry. The transfer of the right also takes place through this registry. For example, if the trademark owner wants to bring his trademark as a capital in kind, change of the ownership will also have to be registered before the Turkish Patent and Trademark Office. However, at this point, we would like to mention one exception. Due to the fact that it is not possible to transfer the plant developments issued in IPL, its commitment as capital to joint stock companies will not be valid22. The transfer of industrial property products/ rights other than plant developments is possible in the absence of any limited rights, liens and measures in kind in the registry records.
In intellectual and artistic works, the owner of the work has the right to transfer its economic rights regulated between Articles 22- 25 of the IWAL to third parties. All of these rights can be transferred at the same time, or the owner of the work may choose to transfer some of these rights. However, despite some exceptions; it is necessary to state that there is not a registration of status in a registry contrary to industrial property rights. According to the regulation contained in the law, in order to transfer economic rights, the parties must agree in writing on which rights they have transferred in accordance with which conditions. The fact that registration is available in terms of rights to works of art and ideas that have not been subjected to a mandatory registration system23 is not of a constituent nature. This registration is considered declarative and a means of proof of real ownership of rights. Finally, since it is not possible to process works that have not been created and/ or probable in accordance with the regulation contained in Article 48/3 of the IWAL, it will also not be possible to commit them as capital in kind24.
Being Evaluated in Cash and Material Act:
In accordance with the provisions of Article 342 of the TCC and the provisions of thelaw on capital in kind, which we have mentioned above, both industrial property rights and rights arising from ideas and works of art must be evaluated in cash and have the nature of material performance: “For example, know-how in the form of business performance cannot be committed as capital in kind”25.
Not Being Limited by Real Rights, Liens and Measures:
As it is clearly stated in the TTC, if these rights are established on intellectual property rights, this intellectual property right, as in other types of capital in-kind, cannot be committed to the joint stock company as capital.
Intellectual property rights, including all kinds of trademarks, patents, designs, utility models, copyrights that are not limited by real rights, liens and measures within the explained context, may be brought to joint stock companies as capital.
At this point, we would also like to mention the issue of whether an existing license right should be brought in as capital in kind. It is possible for the shareholder to bring the existing license right as capital. In the license agreement where the license right is regulated, if it is regulated that the licensee can transfer this right to third parties, there is no obstacle to bringing the right as a capital as it is already regulated. At the same time, it isstated that the fact that the license right is simple and/ or exclusive does not have an effect/ importance on bringing it as a capital26. Therefore, we should determine whether the license right brought as capital includes transferability and sub-licensing provisions for the validity of the contract between licensor and licensee.
III. COMMITMENT AND PERFORMANCE OF INTELLECTUAL PROPERTY RIGHTS AS CAPITAL IN KIND
The introduction of intellectual property rights as capital in kind consists of two transactions: the commitment of the relevant right and the legal transaction for the performance of this commitment. The intellectual property right to be committed as capital during the establishment of the joint stock company and the value attached to it should be included in the articles of association contract of the company in accordance with the provisions of Article 339 of the TCC and the following regulations. This issue is important because it is among the mandatory elements of the articles of association contract. According to the clear regulation contained in the law, it is not enough to specify only the intellectual property right.
Pursuant to the regulation contained in Article 128 of the TCC, if the intellectual property rights to be brought to the company ascapital have private registries, they must be annotated in these registries that the value determined by the expert about the relevant right is set as the same capital. It was considered that the commentary could remove the goodwill of the third party, and it was concluded that it has an important impact on the protection of capital27. In the basis of the article, it is stated that the mentioned intellectual property right cannot be committed as capital in kind if no comment is given on the commitment, because this provision is mandatory28. The issue of whether an annotation has been issued is covered by the authority of the registrar, who will decide on the announcement of the company. For this reason, if it is determined that this requirement does not exist, the company’s announcement will not be decided.
Due to the fact that industrial property rights are subject to registration, it is clear that registration should be made to the special registry in terms of industrial property rights such as trademarks, patents, designs, utility models etc. However, since copyrights arising from the work are not subject to a registry, it is important how the aforementioned article will be implemented in terms of these rights. Some of the intellectual and artistic works are subject to compulsory registration, as stated above. In terms of these rights, we can state that the registry meets the special registry requirement in the text of the law and that the registration must be made. For the copyrights which are not subject to special registration, it will be possible to apply the provision of Article 128/8 of the TCC, which states: “In order to protect the rights committed by the partners to be invested as capital, precautionary measures may be requested by the founders against the partners”. With the precautionary measure, the performance of the property right committed as capital will be guaranteed. However, we would like to emphasize that the case on the merits should be filed within two weeks within the framework of the principles of the Civil Code. The aforementioned period has been regulated in Article 128/8 of the TCC as: “For lawsuits to be filed upon the measure, the period stipulated in the Code of Civil Procedure starts to run only from the date of registration and announcement of the company.” and has been subject to the registration and announcement of the company.
As for the ownership of intellectual property rights, Article 128/4 of the TCC is as follows:
“In the event that an economic value other than money or a movable asset is borrowed as capital, the company can directly dispose of these as an owner from the moment it acquires legal personality”. Therefore, due to the capital commitment, the joint stock company obtains the title of ownership on the intellectual property rights, even though it has not become the legal entity of the joint stock company with the transfer process.
Following the company’s acquisition of legal personality, the transfer of industrial property rights to the company must be carried out by the partner who has also committed to the Turkish Patent and Trademark Office. Upon submission of the transfer agreement to the Turkish Patent and Trademark Office, the owner of the industrial property right will be registered as a joint stock company in the registry records. As for the ownership of the rights from the work, the transfer of financial rights between the legal entity company and the owner of the work will be transferred by counting which rights are transferred to the company one by one. With this written agreement, the rights arising from the work will also be under the responsibility of the joint stock company.
IV. CONCLUSION
Even if the industrial property rights and the copyrights of the author under the “intellectual property rights” title are intangible assets, these can be brought to joint stock companies as capital in kind within the scope of the TCC. Although Article 127 of the TCC is a general provision for all commercial companies, Article 342 of the TCC also includes the conditions of intellectual property rights to be brought as capital to joint stock companies. In this context, all kinds of intellectual property rights that can be evaluated in cash, are transferable, have the quality of material performance and are not limited by real rights/ liens/ measures can be committed as capital in kind.
If the intellectual property right is committed to the joint stock company as capital, the intellectual property right, the value of the right, how many shares it will correspond to, and the terms of the transfer should be included in the articles of association of the joint stock company. Due to the fact that the value of the intellectual property right in question is not specific, it should be requested that a competent expert prepare an evaluation report by contacting the competent commercial court of first instance. If the expert report is approved by the court, the execution of the capital can be carried out based on the value in the said report. In terms of the registered rights during the performance, the transfer and performance process can be easily carried out. However, in terms of rights that are not subject to registration, the protection of the right may be realized by requesting an injunction and a subsequent case to be substituted.
BIBLIOGRAPHY
EMEK TORAMAN ÇOLGAR, Borçlanma Yasağı, On İki Levha Yayınları, İstanbul, Ağustos 2019. FATİH ARICI, Alacak Hakkının Anonim Ortaklığa Sermaye Olarak Taahhüdü, Beta Yayınları, İstanbul 2003. HASAN PULAŞLI, Şirketler Hukuku, Karahan Kitapevi, Adana 2011. https://www.muglabarosu.org.tr/Upload/files/pdf/ TTK%20Madde%20Gerek%C3%A7eleri.pdf (Access Date: 01.06.2022). https://www.telifhaklari.gov.tr/Zorunlu-Kayit-Tescil-Basvurulari-Zorunlu-Kayit-Tescil-Basvurulari (Access Date: 01.06.2022). M. HALİL ÇONKAR, Anonim Şirketlerde Ayni Sermaye, On İki Levha Yayınları, İstanbul 2017. MEHMET ASLAN, Fikri Mülkiyet Haklarının Anonim Şirketlere Ayni Sermaye Olarak Getirilmesi, Seçkin Yayıncılık, Ankara 2013. MUSTAFA KEMAL OĞUZMAN/ TURGUT ÖZ , Borçlar Hukuku Genel Hükümler, V. 1, İstanbul 2018. SAMİ KARAHAN/ CAHİT SULUK/ TAHİR SARAÇ/ TEMEL NAL, Fikri Mülkiyet Hukukunun Esasları, Seçkin Yayınları, Ankara 2012. SENİHA DAL, 6102 Sayılı Türk Ticaret Kanunu (TTK) M. 342’ye Göre Fikri Mülkiyet Haklarının Anonim Şirkete Ayni Sermaye Olarak Konulması, Marmara Üniversitesi Hukuk Araştırmaları Dergisi, İstanbul, V. 18, Iss. 2, 2012. T. C. Başbakanlık Devlet Planlama Teşkilatı Müsteşarlığı, Fikri Haklar Özel İhtisas Komisyonu Raporu, DPT, Ankara 2000, (https://www.sbb.gov.tr/wp-content/uploads/2018/11/08_ FikriHaklar.pdf ) (Access Date: 01.06.2022).
FOOTNOTE
1 Dated 13.01.2011, Official Gazette Number 6102.
2 The principle of capital protection applies to all capital companies within the framework of the supervisory provision contained in Article 12 of the TCC. At the same time, this principle exists as a necessity within the framework of the provision of Article 447 of the TCC. For example, decisions of the board of directors that are considered contrary to the principle of capital protection are falsely regulated in Article 391 of the TCC. See about the topic Emek Toraman Çolgar, Borçlanma Yasağı, İstanbul, Ağustos 2019, On İki Levha Yayınları, p. 87.
3 Toraman Çolgar, p. 7.
4 M. Halil Çonkar, Anonim Şirketlerde Ayni Sermaye, On İki Levha Yayınları, İstanbul 2017, p. 36.
5 Pursuant to Article 342 of the TCC, “.... acts of service, personal labor, commercial reputation........” cannot be included as capital in joint stock companies.
6 Fatih Arıcı, Alacak Hakkının Anonim Ortaklığa Sermaye Olarak Taahhüdü, Beta Yayınları, İstanbul 2003, p. 12.
7 Mehmet Aslan, Fikri Mülkiyet Haklarının Anonim Şirketlere Ayni Sermaye Olarak Getirilmesi, Seçkin Yayıncılık, Ankara 2013, p. 74.
8 Seniha Dal, 6102 Sayılı Türk Ticaret Kanunu (TTK) M. 342’ye Göre Fikri Mülkiyet Haklarının Anonim Şirkete Ayni Sermaye Olarak Konulması, Marmara Üniversitesi Hukuk Araştırmaları Dergisi, V. 18, Iss. 2, 2012, p. 25.
9 Mustafa Kemal Oğuzman/ Turgut Öz, Borçlar Hukuku Genel Hükümler, V. 1, Vedat Kitapçılık, İstanbul 2018, p. 6.
10 Arıcı, p. 22.
11 Dal, p. 375.
12 Çonkar, p. 319.
13 12.01.2022, 6100 numbered Official Gazzete.
14 Çonkar, p. 323.
15 Çonkar, p. 324.
16 Çonkar, p. 324.
17 Arıkan, p. 78.
18 T. C. Başbakanlık Devlet Planlama Teşkilatı Müsteşarlığı, Fikri Haklar Özel İhtisas Komisyonu Raporu, DPT, Ankara 2000, (https://www.sbb.gov.tr/ wp-content/uploads/2018/11/08_Fikri- Haklar.pdf) (Erişim Tarihi: 01.06.2022) p. 5.; Sami Karahan/ Cahit Suluk/ Tahir Saraç/ Temel Nal, Fikri Mülkiyet Hukukunun Esasları, Seçkin Yayınları, Ankara 2012, p. 1-2.
19 https://www.muglabarosu.org.tr/ Upload/files/pdf/TTK%20Madde%20 Gerek%C3%A7eleri.pdf.
20 22.12.2016 dated, 6769 numbered Official Gazzete.
21 13.12.1951 dated, 7981 numbered Official Gazzete.
22 Aslan, p. 100.
23 For detailed information about the mandatory registration system, see: https://www.telifhaklari.gov.tr/Zorunlu- Kayit-Tescil-Basvurulari-Zorunlu-Kayit- Tescil-Basvurulari (Last Access Date: 01.06.2022).
24 Dal, p. 382.
25 Dal, p. 384.
26 Çonkar, p. 134.
27 Yavuz Akbulak, Anonim Şirketlere Ayni Sermaye Konulması, Makaleler, Issue: 200, 2016, p. 198.
28 Aslan, p. 113.
