Contributed by Rakesh Prabhu and Ramya Kumar
One of the most important challenges for businesses today is to remain profitable in a global economy. Increasingly, globalization dictates that companies must consider international markets and how best to leverage off the opportunities that emerging markets offer. With new opportunities come age old risks of how best to protect IPR whilst making the most of the existing brand reputation and good will.
India, like several other emerging economies has been notorious for its perceived lack of adequate Indian laws and apathy of enforcement agencies in ensuring that IPR gets the protection it deserves. Indian courts however recognize foreign trademarks and trade names and acknowledge the importance of protecting such IPR. A Supreme Court judgment in 1996 [N.R. Dongre and Others v. Whirlpool Corporation and Another (1996) 5 SCC 714] clearly established that international companies that have an international trademark and enjoy a cross border reputation outside of India, can protect their IPR in India without the need of having an actual presence in India.
Protecting intellectual property rights (IPR) in India a few decades ago was a major hitch preventing companies from seriously considering the Indian market for business. However with liberalization, IPR protection has emerged as a key concern for regulators and government and due attention is being awarded to this issue in India. Over the years, India has gained prominence in knowledge driven sectors like information technology (IT) and pharmaceuticals, which by their very nature seek IPR protection.
This article briefly sets out the parameters that must be met when considering assigning or licensing of IPR in India.
THE TRADEMARKS ACT 1999
An assignment of a trademark must be in writing and with the consent of the Registrar under the Trademarks Act, 1999 (hereinafter referred to as "Trademark Act"). A registered/unregistered proprietor can assign a trademark with or without goodwill. An assignment is usually required to be made for a consideration. The application, which is in a prescribed format, can be submitted by either the Assignee or together with the Assignor, before the Registrar of Trademarks for registering the title of a person who becomes entitled by assignment to a registered trademark. The Assignee, after the assignment is complete, must apply to the Registrar of Trademarks to register his/her title and the Registrar enters the name and details of the Assignee in the Register on proof of title, to his satisfaction. However, under certain circumstances an assignment cannot be enforced, namely (a) if an assignment will create multiple exclusive rights in more than one person; (b) if an assignment will create multiple exclusive rights in different parts of India.
A License needs to be in writing and the Trademark Act allows the licensee to either be a registered or unregistered user. The licensee of a trademark will enjoy the same rights as that enjoyed by a registered trademark proprietor. Thus the benefit of use of the mark by an unregistered user also accrues to the registered proprietor. The Trademark Act also recognizes non-registered licensed use provided that the proprietor has licensed the right in a written agreement and all conditions of that agreement are met by the user. The registered user can institute infringement proceedings in certain circumstances, while the unregistered permitted user does not have this power under the Trademark Act. The parties to a License agreement are also free to choose the territorial scope of the agreement as well as the term of the contract.
THE PATENTS ACT 1970
A patentee may assign the whole or any part of the patent rights to the whole of India or any part thereof. There are three kinds of assignments: legal assignment, equitable assignment and mortgages. 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 certain share given to another person is called an equitable assignment and a mortgage is when the patent rights are wholly or partly transferred to obtain money.
A valid assignment under the Patents Act requires the assignment to be in writing, to be contained in a document that embodies all terms and conditions and must be submitted within six months from the commencement of the Act or the execution of the document whichever is later.
The Patents Act allows a patentee to grant a License under section 70. The types of licenses recognised in India are express, statutory, implied, exclusive and non-exclusive. Although the Patents Act grants the patentee a right to license his patented invention, a limitation on this is in the nature of compulsory licensing1 under special circumstances.
Compulsory License2 found a place in the Patents Act to prevent the abuse of patent as a monopoly and to make way for commercial exploitation of an invention by an interested person. Under this section, any person can make an application for grant of a compulsory licence 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.
The purpose of granting a compulsory license is that the patented inventions are worked on a commercial scale in the territory of India without undue delay and to the fullest extent that is reasonably practicable. Further, that the interests of any person for the time being working or developing an invention in the territory of India under the protection of a patent are not unfairly prejudiced.
In certain circumstances, factors such as nature of the invention, time which has elapsed since the sealing of the patent and the measures already taken by the patent or licensee to make full use of the invention, ability of the applicant to work the invention to the public advantage, capacity of the applicant to undertake the risk in providing capital and working the invention, if the application were granted are also taken into consideration by the Controller while deciding an Application filed under section 84 of the Patents Act.
THE COPYRIGHT ACT 1957
A right to assign work under the Copyright Act 1957 (hereinafter referred to as 'Copyright Act') arises naturally when the work comes into existence. However, certain rights are specific to certain types of subject matter/work. Further an author/owner is entitled to multiple rights broadly categorised as Economic3 and Moral4 rights. The owner of a copyright may grant an interest in the copyright by a License.
The Act prescribes that a prospective owner of a copyright in future work may assign the copyright, to any person, either wholly or partially, although the assignment shall take effect only when the work comes into existence.
The requirements for an assignment to be enforced are:
(a) It must be in writing.
(b) It should be signed by the Assignor.
(c) The copyrighted work must be identified and must specify the rights assigned.
(d) It should have the terms regarding revision, royalty and termination.
(e) It should specify the amount of royalty payable, if any, to the author or his legal heirs.
(f) In the event the Assignee does not exercise the rights assigned to him within a period of one year, the assignment in respect of such rights is deemed to have lapsed unless otherwise specified in the Agreement.
(g) If the period of assignment is not stated, it is deemed to be five years from the date of assignment, and if no geographical limits are specified, it shall be presumed to extend within India.
The owner of a copyright in any existing work or the prospective owner of the copyright in any future work, may grant any interest in the right, by License in writing, signed by him or by his duly authorized agent. The requirements specified above for an assignment will apply for a License. The Copyright Board is empowered to grant compulsory licenses under certain circumstances on suitable terms and conditions in respect of 'Indian work'. The circumstances necessary for grant of such a License are as follows:
(a) the work must have been published or performed in public.
(b) the author must have refused to republish or allow the republication of the work or must have refused to allow the performance in public, that by reason of such refusal the work is withheld from the public;
(c) the author must have refused to allow communication to the public by broadcast, of such work or in the case of a sound recording the work recorded in such sound recording, on terms which the complainant considers reasonable.
The Copyright Act states that in the case of unpublished Indian work, where the author was a citizen of India or is dead, unknown or cannot be traced, under such circumstances, any person may apply to the Copyright Board for a License to publish the work or translation thereof in any language according to the procedure laid down in the Act.
It is imperative that when considering assignment or license arrangements, companies ensure that their arrangements do not infringe Indian exchange control regulations. Often companies engaging in an assignment arrangement overlook the fact that Indian Reserve Bank rules must be followed when issuing shares as consideration to an Assignor who is a non-resident. Issues relating to ownership of IPR must also be carefully considered especially where employees may be creating IPR outside the scope, time and available resources of the company that they work for. Employment agreements need to be clear as to the scope of the engagement.
1 Section 84 of the Patents Act 1970
2 Defined by WIPO as "when a judicial or administrative authority is allowed by law to grant a license without the permission from the holder, on various grounds of general interest".
3 Economic rights are those whose exploitation may bring economic benefit to the author of the copyright.
4 Moral rights of the author are those which the author possesses because of the fact that the author is the creator of the concerned work.
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.