India: Ownership And Forms Of Transfer Of Patents Rights In India- A Primer

Last Updated: 14 July 2017
Article by Saipriya Balasubramanian

Most Read Contributor in India, August 2017

Introduction

Once a patent for an invention is granted, it is important to consider (1) if the patentee/proprietor of the patent is going to manufacture, market, sell and/or distribute the invention, (2) whether the patentee/proprietor of the patent is going to sell all rights in his/her invention to someone else for a sum of money, or (3) if the patentee/proprietor of the patent will license someone else to produce and bring the patented product to market under specified terms by the Patentee that must be met for the licensee. This article discusses how one may effect, use or monetize the patented invention.

A patent is considered as a transferrable property that can be transferred from the original patentee to any other person by assignment or by operation of law. A patent can be licensed or assigned only by the owner of the patent. In case of co-owners or joint-owners, a co-owner can assign or license the patent only upon consent of the other owner(s).

Requirements for creation of any interest in a patent:

Section 68 of the Indian Patents Act 1970 provides for the mortgage of, license or creation of any interest in the patent.

"Assignments, etc., not to be valid unless in writing and duly executed.1 —An assignment of a patent or of a share in a patent, a mortgage, license or the creation of any other interest in a patent shall not be valid unless the same were in writing and the agreement between the parties concerned is reduced to the form of a document embodying all the terms and conditions governing their rights and obligations and duly executed"

Requirements2:

  1. The assignment, mortgage or license should be reduced to writing in a document embodying all the terms and conditions governing the rights and obligations between the parties;
  2. An application for registration of such document should be filed in the prescribed manner in Form-16 within the time prescribed under section 68. The document when registered will have effect from the date of execution.

Forms/Nature of Transfer of Patent Rights:

Grant of a Patent confers to a patentee the right to prevent others from making, using, exercising or selling the invention without his permission. The following are the ways in which a patentee can deal with the patent:

  1. Assignment
  2. Licenses
  3. Transmission of patent by operation of law

1. Assignment

The term 'assignment' is not defined in the Indian Patents Act. Assignment is an act by which the patentee assigns whole or part of his patent rights to the assignee who acquires the right to prevent others from making, using, exercising or vending the invention. There are three kinds of assignments

  • Legal Assignment
  • Equitable Assignment
  • Mortgage

Legal Assignment: An assignment (or an agreement to assign) of an existing patent is a legal assignment, where the assignee may enter his name as the patent owner. A patent which is created by deed can only be assigned by a deed. A legal assignee entitled as the proprietor of the patent acquires all rights thereof.

Equitable Assignments: Any agreement including a letter in which the patentee agrees to give a certain defined share of the patent to another person is an equitable assignment of the patent. However an assignee in such a case cannot have his name entered in the register as the proprietor of patent. But the assignee may have notice of his interest in the patent entered in the register.

Mortgages: A mortgage is an agreement in which the patent rights are wholly or partly transferred to assignee in return for a sum of money. Once the assignor repays the sum to the assignee, the patent rights are restored to assignor/patentee. The person in whose favor a mortgage is made is not entitled to have his name entered in the register as the proprietor, but he can get his name entered in the register as mortgagee.

2. Licenses:

The Patents Act allows a patentee to grant a License by the way of agreement under section 70 of the Act. A patentee by the way of granting a license may permit a licensee to make, use, or exercise the invention. A license granted is not valid unless it is in writing. The license is contract signed by the licensor and the licensee in writing and the terms agreed upon by them including the payment of royalties at a rate mentioned for all articles made under the patent. Licenses are of the following types,

  • Voluntary License
  • Statutory License(such as compulsory License)
  • Exclusive/Limited License
  • Express/Implied License

Voluntary licenses:

It is the license given to any other person to make, use and sell the patented article as agreed upon the terms of license in writing. Since it is a voluntary license, the Controller and the Central government do not have any role to play. The terms and conditions of such agreement are mutually agreed upon by the licensor and licensee. In case of any disagreement, the licensor can cancel the licensing agreement.

Statutory licenses:

Statutory licenses are granted by central government by empowering a third party to make/use the patented article without the consent of the patent holder in view of public interest. Classic example of such statutory licenses is compulsory licenses. Compulsory licenses are generally defined as "authorizations permitting a third party to make, use, or sell a patented invention without the patent owner's consent3.

Compulsory Licenses(CLs)

Though CLs works against the interest of the patent holder, it is granted under certain provided conditions under the Patents Act. Under section 84 of the Indian Patents Act 1970, any person can make an application for grant of a compulsory license for a patent after three years, from the date of grant of that patent, on any of the following grounds:

(a) The reasonable requirements of the public with respect to the patented invention have not been satisfied; (b) The patented invention is not available to the public at a reasonably affordable price. (c) The patented invention has not worked in the territory of India.

Under Section 92 A of the Act, CLs can also be granted for exporting pharmaceutical product(s) to any country incapable of manufacturing pharmaceutical products for the benefit of the people in that country, further when working of the patent required another related patent under Section 88 of the Act or on notification by the Central Government, the controller can grant a license to an interested person. The Central or State Government can use the invention or its process for its own purpose either with or without royalty.

Exclusive Licenses and Limited Licenses:

Depending upon the degree and extent of rights conferred on the licensee, a license may be Exclusive or Limited License. An exclusive license excludes all other persons including the patentee from the right to use the invention. Any one or more rights of the patented invention can be conferred from the bundle of rights owned by the patentee. The rights may be divided and assigned, restrained entirely or in part. In a limited license, the limitation may arise as to persons, time, place, manufacture, use or sale.

Express and Implied Licenses:

An express license is one in which the permission to use the patent is given in express terms. Such a license is not valid unless it is in writing in a document embodying the terms and conditions. In case of implied license though the permission is not given in express terms, it is implied from the circumstances. For example: where a person buys a patented article, either within jurisdiction or abroad either directly from the patentee or his licensees, there is an implied license in any way and to resell it.

3. Transmission of Patent by Operation of law

When a patentee dies, his interest in the patent passes to his legal representative; in case of dissolution or winding up of a company or bankruptcy transmission of patent by operation of law occurs.

Conclusion:

An assignment is the transfer of all the proprietary rights by the patentee to the assignee while the license is the right granted to work the invention by withholding the proprietary rights with the patentee4. An assignee can in turn reassign his rights to third parties while the licensee cannot change the title or cannot reassign his rights to the third person. An assignee is assigned with all the rights that the patent owner can enjoy while the licensee cannot enjoy such rights. Also an assignee has the right to sue the infringer while the licensee is not empowered with the rights to sue any party for the infringement of the patent in his name. Having known the difference between assignment and license from the aforesaid, the patentee can decide the best possible way of commercializing his/her invention.

Footnotes

1. https://indiankanoon.org/doc/1027357/

2. Patent Law, Fourth edition , P.Narayanan, Eastern Law House, Pg: No:268

3. F.M. SCHERER & JAYASHREE WATAL, POST-TRIPS OPTIONS FOR ACCESS TO PATENTED MEDICINES IN DEVELOPING COUNTRIES 13 (Comm'n on Macroeconomics & Health, Working Paper No. WG4:1, 2001), available athttp://www.cmhealth.org/docs/-wg4_paper1.pdf (last visited Dec. 16, 2013).

4. IPR, Biosafety and Bioethics, Deepa Goel, Shomini Parashar, Pg Nos 88-89

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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