This article has been written by Ms. Samriddhi Vishen, a 2nd year LL.B. student of Shri Jai Narain Misra PG College (KKC), Lucknow.
In India, an applicant is granted a patent for his/her invention by the Government of India. They are given in order to safeguard inventions and to promote more of them in the future. They help to ensure certain rights with regard to the invention to its owner, including, the right to forbid others from utilizing, creating, producing, and marketing the same product or service in the market, and being a form of property, it is transferable and the rights entrusted to the patent owner can be transferred to another. Thus, this article attempts to examine the provisions related to such a transfer and related laws.
Reasons for transfer
Patent Rights may be transferred for a number of reasons: the patent holder may no longer be involved in a particular field of technology, wish to recoup some of its R&D expenditure through patent sales, exchange patents or patent portfolios with other entities, be insolvent or facing bankruptcy, which would require it to sell assets, or there can be other purposes. Buyers may purchase patents for a variety of reasons, such as financial gain from owning patents, defensive purposes or the need to ensure access to the patented technology, among others.
Mode of Transfer of Patent Rights
The following are the ways in which a patent is transferable:
- By Act of Parties: Assignment and License
- By operation of law
It is to be noted that only the patent’s owner is authorized to grant Licenses or assign patents. When there are jointowners or co-owners, one of the owners cannot assign or License the patent without permission of the other(s).
1. By Act of Parties:
- Assignment- The Indian Patents Act does not define the word “assignment.” A patent owner may transfer all or a portion of his patent rights to an assignee, who then receives the exclusive right to bar anyone from creating, utilizing, exercising, or commercializing the invention.
Registration of assignments- A person may submit an application in writing in Form 16 to the Controller General of Patents, Designs, and Trademarks (CGPDTM) for the registration of his title if they acquire a patent, a stake in a patent, or an entitlement as a mortgagee through an assignment. The CGPDTM must record the details of the trademark assignment in the register upon receipt of proof of title or to his satisfaction when such an application is submitted.
The following documents are needed in India for registration of a patent assignment:
- Application for recording of patent assignment in Form-16
- Two copies of Assignment Deed along with the application
- Documents evidencing assignment of a patent or affecting the proprietorship
Types of Patent Assignment- Assignments can be classified as either legal, equitable, or mortgage-related.
Legal Assignment: Where the assignee may enter his name as the patent owner, an agreement to assign or an assignment of an existing patent is a legal assignment. Only through a deed can a patent be assigned if it was established by deed. All rights to a patent are acquired by a legal assignee who is qualified to act as its proprietor thereof.
Equitable Assignment: An equitable assignment of the patent is any agreement, including a letter, in which the patentee consents to transfer a specific, identified portion of the patent to another party. However, in this situation, an assignee cannot have his name included as the patent owner. However, the assignee may request his interest in the patent to be entered in the register.
Mortgage: A mortgage is an agreement that transfers all or a portion of the patent rights to the assignee in exchange for cash. The patent rights are returned to the assignor/patentee after the assignor pays the assigned amount. The person in whose favour a mortgage is granted does not have the right to be listed in the register as the proprietor; however, he may have his name listed there as the mortgagee.
- License: A patentee may grant a License by virtue of an agreement in accordance with section 70 of the Patents Act. Patent licencing must adhere to the clauses mentioned in Section 84-92 of the Act. A licensee (license holder) may be allowed to create, use, or exercise an invention by a patentee through the issuance of a License. A License is a written contract between the licensee and the licensor (owner of patent granting license) that details the terms agreed upon, including the payment of royalties at a specified rate for all products made under the patent. Some of the clauses under a patent licensing agreement include Identification of the Parties, recital clause, license clause, definition clause, payment clause, termination clause etc.
Steps to File a Patent License:
1. Locate Manufacturers- To find out possible licensees.
2. Sign a Confidentiality Agreement- To safeguard your rights to your intellectual property, request that potential licensees sign a confidentiality agreement.
3. Negotiation- Negotiate the terms and conditions of the patent License with the licensee. This step involves discussion on a number of terms and conditions like-
- the scope of the License, such as the nation or region to which the License extends;
- the royalties, which can be paid as a percentage or fee, fixed or variable;
- the duration of the License, including any terms for renewal or early termination;
- and any restrictions, such as a minimum annual royalty or a minimum number of products sold.
- standards for product or quality control, compliance with legislation, any charges in addition to royalties (for instance, signing fees), the ability of the licensee to sublicense the rights, etc. are some other factors that may be taken into account.
4. Complete a Patent License Agreement- An official contract known as a patent license agreement gives the licensee certain rights to make use of or sell your patented invention. The license’s terms and conditions are described there. This document needs to be signed by both the licensor(s) and the licensee(s).
Types of Patent License: The following are the types of Licenses:
Voluntary License: It is the license granted to anyone else to create, use, and market the patented product in accordance with the agreed terms in writing. The Controller and the Central government have no role to play because it is voluntary. 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 License: In the public interest, the central government may grant statutory licenses to allow a third party to produce or use a patented good without the patent holder’s consent. Compulsory licenses are a well-known example of such statutory licenses. The general definition of a compulsory license is “authorizations permitting a third party to make, use, or sell a patented invention without the patent owner’s consent.”
Exclusive License and Limited License:
A license can be either an Exclusive License or a Limited License, depending on the extent and degree of the rights granted to the licensee. All other parties, including the patent holder, are prohibited from using the invention under an exclusive license. From the collection of rights held by the patentee, any one or more rights pertaining to the patented invention may be granted. The rights may be shared and transferred, completely or partially restricted. In a limited license, the restrictions may arise as to the people, the time, the place, the manufacture, the usage, or the sale.
Express License and Implied License: A License that expressly grants rights to use the patent is known as an express License. Such a License cannot be deemed valid unless the terms and conditions are set down in writing. In the event of an implicit License, even though the consent is not given explicitly, it is clear from the context. For instance, there is an implicit License to use and resale a patented article when a person purchases it directly from the patentee or his licensees, whether they are located domestically or abroad.
2. By Operation of law: When a patentee’s interest in the patent transfers to his or her legal representative upon death; in the event of a company’s dissolution, winding up, or bankruptcy, transfer of patent rights by operation of law occurs.
Essentials of a Valid Assignment and License
- The Patent Assignment and License must be reduced to writing in a document that outlines all the criteria that govern the parties’ rights and obligations.
- The written agreement must be duly registered with the Controller General of Patents, Designs, and Trademarks
(CGPDTM) in accordance with the provisions of the Indian Patent Act, 1970.
Case Laws
- PVR Pictures Ltd. v. Studio 18- The Delhi High Court ruled in the case of PVR Pictures Ltd. v. Studio 18 [2009 SCC OnLine Del 1878: (2009) 41 PTC 70] that a term sheet agreement does not constitute a license agreement.
- National Research Development Corpn. Vs ABS Plastics Limited- In the aforementioned case, the Honorable Delhi High Court ruled that granting a License or assigning a patent right to a third party is only valid if it is done in writing between the parties involved and is documented and submitted in the appropriate manner with the Controller of Patents. The court here held that the license was invalid and hence unenforceable because it was not registered at the patent office.
- Bayer Corporation vs Union Of India- The key issue in this case was whether Bayer should have granted Natco a voluntary and compulsory License together with the implementation of the bolar provisions in regard to the patent linkages in the Indian context. According to the court, Natco had met every condition outlined in Section 84(1) clauses (a), (b), and (c) of the Act, and as a result, the Controller General of Patents had every authority to give Natco a compulsory License.
The Court found out that the application filed by Natco outlining the areas in which the petitioner fell short was accurate. The court found that Bayer, the patent holder, had failed to demonstrate that the medicine in question is not worked in the territory of India and it failed to satisfy the reasonable requirement test for public use of the drug. The court further stated that Section 83(f) of the Act was intended to prevent patent holders from abusing their rights in connection with foreign trade.
Conclusion
Thus, it is crucial to make sure that all conditions are satisfied when preparing, executing and recording the transfer of Patent Rights in India. When failing to do so, it could result in the loss of rights and potential exposure to liability.
References:
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