Licensing of Patents in India
Patent licenses in India are granted by signing patent licensing agreements. There are different types of patent licenses, depending on the parties' needs. The Patents Act of 1970 deals with patents and their licenses in India. It is always advised to consult an experienced patent attorney before signing patent license deals.
A patent is an exclusive right granted for an invention.1 It entitles the patent owner to prevent others from commercially exploiting the patented invention. Commercial exploitation refers to commercial manufacturing, using, distributing, importing or selling the patented invention by anyone except the patent holder. Generally, any person to whom the patent holder grants a license can exploit the patent in any way permitted by the patent owner. The person who grants the license is called a 'licensor' and the one in whose favour it is granted is the 'licensee'. A patent can be licensed for any period of time, specific purpose and particular territory, however the licensing period cannot exceed the term of the Patent as is granted by the Government. It depends on the interests of the parties. The Patents Act of 1970 deals with patents and patent licenses in India. In this blog, we shall discuss the concept of patent licensing in India.
Kinds of patent licenses
1. Exclusive patent license
When a patent owner grants an exclusive patent license to a licensee, it means the ownership of the patent is transferred to the licensee. It confers an exclusive right on the licensee to exploit the patent. Section 2(f) of the Patents Act defines an 'exclusive license' as "a license from the patentee which confers on the licensee, on the licensee and persons authorised by him, to the exclusion of all other persons (including the patentee), any right in respect of the patented invention, and the exclusive licensee shall be construed accordingly2." Under such a license, the title of the patent remains with the licensor, but the ownership is transferred to the licensee. The license is exclusive because it prohibits him from sub-licensing the license to any third party.
2. Non-exclusive patent license
Under a non-exclusive patent license, the patent owner can license the patent to anyone in addition to the licensee. A patent owner can grant a non-exclusive patent license to multiple parties simultaneously. Under such a license, the title of the patent remains with the licensor, but the licensee can exploit the licensed rights in the patent.
A sub-license entitles a licensee to grant a license to third parties. Depending on the agreement between the patent owner and the licensee, he can grant a sub-license to any number of parties with or without the prior approval of the patent owner.
4. Voluntary license
A voluntary license is one which the patent owner grants on his own accord to anyone he wishes. Such a license does not depend on any legal compulsion or obligation. Though this concept applies to most patent inventions, it is more seen in the pharmaceutical industry.
5. Compulsory license
Under certain circumstances, the Government may grant patent licenses to third parties without the approval of the patent owner. Such a license is called a compulsory license. It is usually granted in public interest.
Sections 84 and 92 of the Patent Act deal with compulsory licensing in India. Under Section 84, a person interested in acquiring a patent license can apply to the Controller General of Patents, Designs and Trade Marks ('Controller'). The application will be considered based on the following grounds-
- Accessibility: Reasonable public requirements with the patent invention are not satisfied;
- Affordability: The patented invention is priced at a price reasonably unaffordable by the public, or
- No domestic functionality: It is not working in Indian territory.
The applicant may also already be a patent license holder. The application can be filed only after three years from the issue of the patent.
Under Section 92 of the Act, the Government can also notify the public about the grant of compulsory license of any patent in case of any national emergency or extreme urgency. The rationale behind this section is that patents are granted to increase creativity. The very purpose of increasing creativity is to help people lead a better life. However, if a patent does not help Indians, then there is no point in granting the patent.
The concept of compulsory licensing originated in India after the judgement in the case of Bayer Corporation v. Natco Pharma Ltd.(2019)3. In this case, a drug used for treating patients with stage 4 kidney and liver cancer was patented by Bayer Corporation, an international pharmaceutical company. It was also marketed and patented in India as 'Nexavar'. An Indian generic pharmaceutical company named Natco Pharma Ltd. was denied a voluntary patent license by Bayer Corp. So, Natco approached the Controller for a compulsory license under Section 84 of the Patent Act. They contended that the drug failed to fulfil the reasonable requirements of the Indian public. Bayer sold only 593 boxes in India in 2011, which fulfilled only 2% of the total requirement. Natco also pointed out that the drug was priced at $5,608 per month, which is not affordable for most people in India. So, the court granted compulsory licenses to Natco with certain conditions relating to royalties, free drug supply to the needy, etc.
6. Carrot license
A carrot license allows the patent owner to only provide the technical know-how to the licensee. It does not allow the licensee to manufacture, use, sell, or commercially exploit the patent in a materialistic manner.4 This type of license is useful for the parties who wish to develop a technology by using or taking inspiration from any already existing patented technology.
How to license patents in India
Patents can be licensed by signing a Patent License Agreement. The Agreement captures all the terms and conditions of the license agreed upon by the parties. As per Section 68 of the Patents Act, no license is legally valid unless it is reduced to a written document containing all the terms and conditions that govern their rights and obligations. The agreement should also be duly executed. Also, in the case of PVR Pictures Ltd. v. Studio 18 (2009)5, it was held that a term sheet agreement does not qualify as a license agreement.
Some of the essential aspects that every license agreement should capture are:
- Clear definition of the license invention
- Scope of the license
- Exclusivity or non-exclusivity
- Territory of the license
- Term and termination of the license, etc.
Post signing the agreement, the licensee must apply to the Controller to register his title. The registration is done under Section 69 of the Patents Act, by submitting the patent license agreement and other documents as evidence. If the Controller is satisfied with the proof of the title, he will register him as a proprietor or co-proprietor of the patent.
Patent licensing is a complicated process that heavily demands the assistance of a qualified legal counsel. He/ she can help you understand the patent laws, negotiate better royalty deals, draft and review the patent agreement, and seamlessly get your agreement registered. So, it is always advised to consult a patent attorney before entering into a patent license deal.
- Opportunities to finance innovation with IP* (wipo.int)
- Patent Licensing - Patent - India (mondaq.com)
- The Dos And Don'ts Of Licensing Intellectual Property In India - Trademark - India (mondaq.com)
- The Patents Act, 1970, as amended by Act No. 15 of 2005 (ipindia.gov.in)
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.