January 13, 2016
Handling claims of employee’s inventions in Turkish insolvency
The Law No. 6769 on the Protection of Industrial Property Rights (“Industrial Property Law”) was accepted in the Grand National Assembly on December 22, 2016 and came into effect with the publishment in the Official Gazette on January 10, 2016. Industrial Property Law covers and regulates the applications, registration and transactions after the registration in respect to trademark, geographical indication, design, patent, utility model and traditional product and civil and criminal sanctions on infringement of these rights and brings it all together under the same roof. Before the Industrial Property Law, industrial property rights were regulated under separate decrees: Decree No. 556 on Protection of Trademarks; Decree No. 551 on Protection of Patents; Decree No. 554 on Protection of Industrial Design; and Decree No. 555 on Geographic Indications. In this update, we give a brief on Article 120 of the Industrial Property Law below in scope of Turkish bankruptcy legislation.
Article 120 of the Industrial Property Law regulates pre-emption right of employees on their service inventions, registration and ranking of their claims in bankruptcy liquidations. The legislator mostly preserves the previous provision; Article 38 of Decree No.551, in Industrial Property Law.
According to the first paragraph of Article 120, where a debtor employer is declared bankrupt and bankruptcy liquidation is commenced, the employee shall have a preemptive right to his own service inventions to which the employer debtor has made an unlimited claim, provided the appointed bankruptcy administration of the bankruptcy estate disposes of them independently of the enterprise. In cases which bankruptcy administration makes a decision on selling the enterprise in whole, stated pre-emption right of the employee will not be born. Nonetheless in such cases, the employee can register its compensation claim to the bankruptcy estate.
According to the second paragraph of Article 121, registered claims stated in the first paragraph shall be deemed as privileged claims under Article 206 of Enforcement and Bankruptcy Law (“EBL”) numbered 2004. Therefore registered claims of inventor employees shall be ranked in third rank with public receivables before ordinary claims stated as fourth rank in Article 206 of EBL and distribution of any proceeds shall be distributed pro rata in respect to claim amounts among the same ranked claims.
The major difference between the new provision and the previous one is that the Article 120 of Industrial Property Law also allows the employee to demand transforming the service invention into free invention in lieu of his claim before the bankruptcy administration.
In general terms claim registrations are subject to EBL. However parties should also consider specific provisions in respect to each claims’ nature. Therefore with specific regard to claims of employees on their inventions should be duly assessed and handled in accordance with the specific provision, Article 120 of newly published Industrial Property Law.
 According to Article 186 of EBL whether it is privileged or not, claims must be registered before the related bankruptcy office. Any unregistered claims will not be considered by bankruptcy administration and will not be satisfied from distribution of the proceeds.
 Bankruptcy administration is composed of three members which are selected by creditors in the first creditors meeting and appointed by competent execution court. Bankruptcy administration is appointed for managing the liquidation process of the bankrupt debtor and distributing the proceeds among registered creditors in compliance with the ranking regulated under EBL.