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India: Transfer Of Intellectual Property - A Primer

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Intellectual property (" IP ") refers to the creations of the mind such as inventions, literary and artistic works, designs, logos, brand names and like. IP laws protect creators by preventing the unauthorized use of these creations by third parties. The legal protection afforded to creators encourages them to innovate and empowers them to commercialize the IP, apart from conferring a statutory monopoly. For many businesses, IP protects more than just a name, idea or product – it acts as a valuable asset adding immensely to fiscal growth and the ability to compete in the market. Corporations and entities, whether big or small, have focussed on maintaining a robust IP portfolio, and have monetized and commercialized such IP in profitable ways.

There are several ways in which IP can be monetized. 1 The IP owner can utilize these rights herself, or these rights can be transferred or licensed to other parties in exchange for a fee, royalties or other kinds of payments. A document governing the transfer of these rights would describe the scope of the rights transferred, the nature of the transfer and would contain a detailed payment structure or revenue-sharing model. In this paper, we look at the various modes in which copyright, trademark, patent and design, all of which are governed by separate legislations in India, may be transferred or licensed.

Assignment v. License

An assignment refers to the transfer of interest in the IP. Typically, since IP consists of a bundle of rights, such transfer may –

  • be done in whole or in part,
  • be restricted by a specific time period,
  • be restricted to a specific territory, and/or
  • include one or more of the various rights that are exercisable in relation to the IP.

Essentially, an assignment transfers the title in the IP for the period of the assignment. Once rights are validly assigned, the assignee can deal with the IP as the exclusive owner thereof, and can therefore reassign the rights, or exploit the assigned rights in any manner. The portion that is assigned cannot be used and exercised by the assignor because the assignee now holds the title to the IP.

On the other hand, a license is not a transfer of title but refers to the limited grant of a right whose exercise by the licensee, in the absence of the license, would have been unlawful. It does not refer to the transfer of title in the IP but is merely an authorization on the part of the IP rights owner, permitting the licensee to do something that only the IP owner is entitled to do. A license can be exclusive or non-exclusive, i.e., (a) under a non-exclusive license, similar licences can be granted to other parties, in addition to the licensee, by the rights holder, and (b) an exclusive license grants rights to the exclusive licensee to the exclusion of everyone else including the licensor herself.

From a practical standpoint, the difference between an exclusive license and an assignment is extremely limited in that in an exclusive license the licensor continues to retain the titular interest in the IP.

Transfer of Intellectual Property

Under Indian law, there are specific statutory provisions governing certain aspects of transferring or licensing trademarks, copyrights, patents and other kinds of IP. These statutory provisions have been discussed below.

1. Copyright

Copyright refers to a bundle of rights held by the author or the owner, as the case may be, in original literary, musical, dramatic or artistic works, photographs, and includes the rights held by the producer in a cinematograph film or sound recording for a specific term. 2 Copyright is a creation of a statute and is therefore limited to the rights created and granted under the statute. 3 Therefore, there is no natural/common law right in a work other than what is granted under the Copyright Act, 1957 (" Copyright Act "). The Copyright Act contains provisions that grant authors' rights, and provisions that describe the lawful manner in which works may be used by the public. 4

1.1. Copyright vests with the author/owner of the work upon the creation of the work – these terms may be understood as follows –

1.1.1. Work – Section 2(y) of the Copyright Act defines "work" to include literary, dramatic, artistic and musical works. It also includes cinematograph films and sound recordings.

1.1.2. Author v. Owner – According to Section 2(d) of the Copyright Act, author in relation to a copyright is the person who creates the work. For instance, the writer is the author of a literary work. Typically, the title of the work is with the author and therefore, the author is the first owner of a work.

When the author transfers her rights to a third-party, such third-party becomes the owner of the work upon transfer. Once a work is assigned, the assignee is treated as the owner of the work or such portion of the work that is assigned.

As per Section 17 of the Copyright Act, there are exceptions to this rule where, in certain circumstances, like in the case of employment, or contracts of service, or works made for valuable consideration at the instance of another person, the author is not the first owner of the work. 5 For instance, let us consider a work made by an employee of a newspaper for the purpose of publication in the newspaper. In so far as the publication of such work is concerned, the newspaper publication will be the first owner of the work and not the artist-author.

1.1.3. Joint authorship – Under Section 2(z) of the Copyright Act, this refers to a work produced by the collaboration of two or more authors in which the contribution of one author is not distinct from the contribution of the other author or authors. Joint authors own the work jointly.

1.1.4. Fixation – Copyright in a work arises upon the creation of the work. In copyright parlance, creation refers to when the work is fixed on a tangible medium. 6 For instance, when A, a playwright fixes the script of a play in writing, A becomes the owner of the copyright in the dramatic work.

1.1.5. Registration – Since the copyright comes into existence upon fixation, it is not compulsory to register a copyright in India. However, under Section 48 of the Copyright Act, when registered, the registration acts as prima facie proof of the copyright.

The Copyright Act recognizes the owner's rights to either assign or license a work to a third-party. The provisions in relation to assignment and license are discussed below.

1.2.  Assignment

Assignment is essentially a transfer of the copyright or a transfer of the interest in the work from the assignor to the assignee. Sections 18, 19 and 19A of the Copyright Act govern assignments of copyright. Under Section 18 of the Copyright Act, an assignment may be made in full or in part. For instance, the author of a literary work such as a book, can choose to assign only the right to make a film adaptation of the book and retain all the other rights in the literary work. 7 It must be noted that joint authors/owners should assign the work jointly.

1.2.1. Consideration – The author/owner of a work, upon assigning a work, may receive a lumpsum payment or royalty as consideration from the third-party to whom such right is granted. As opposed to a lumpsum, royalty refers to an on-going payment made to the assignor based on the use of the work. For instance, royalties may be payable by the publisher of a book to the author for every copy sold. Such payment can be on-going or limited by a period of time.

1.2.2. Unassignable Royalty – The proviso to Section 18(1) of the Copyright Act grants special rights to authors of literary and musical works that form part of a cinematograph film or sound recording. Authors of such literary and musical works cannot assign or waive their right to receive royalty. The royalties are required to be shared on an equal basis with the assignee. The concept of unassignable royalty was introduced by the 2012 amendment to the Copyright Act to protect the interests of the authors of literary and musical works who were often subject to rampant exploitation by producers of films and sound recordings.

Thus, any assignment to the contrary is void. However, under the Copyright Act, such assignment is valid if it is in favour of the legal heirs of the author of the literary or musical work, or such assignment is made to a copyright society to aid in the process of collection and distribution of royalty.

1.3. Manner of Assignment

1.3.1. In writing – An assignment is valid and enforceable only when it is in writing and is duly signed by the assignor or any person authorized to do so.

1.3.2. Future work – Assignment can be made in a future work, i.e., a work that has not come into existence as on the date of the assignment. Any interest, by way of an assignment, created in a future work comes into existence upon the creation of the work. 8

1.3.3. Scope of assignment – It is essential for an assignment agreement to clearly specify the work that is being assigned, the rights in respect of the work that are being assigned, the duration of the assignment and the territory within which such rights are exercisable.

1.3.4. Payment terms – The assignment agreement must clearly lay down the payment terms as agreed between the parties. Such consideration may be a lumpsum payment, a series of payments, as a share in the revenue, or in the form of royalty payments.

1.3.5. Term – The assignment agreement must specify whether the assignment is perpetual or limited by time. Under the Copyright Act, if the agreement does not specify a term, by operation of law, the term of such assignment is five years. 9

1.3.6. Territory – If the territorial extent of the assignment is not specified, it will be exercisable within the territory of India.

1.4.  Reversion of rights

It is pertinent to remember that Section 19(4) of the Copyright Act entails a right of reversion in favour of the assignor. If the rights assigned under a duly executed agreement are not exercised by the assignee within a year from the date of the assignment (or the effective date in case of future works) such assignment will revert to the assignor. These rights will no longer remain the assignee's rights to exercise.

Once the rights revert in this manner, the assignment must be re-executed in a separate agreement. For practical ease, it is prudent to include a clause in the agreement whereby parties agree that Section 19(4) of the Copyright Act will not apply to their agreement. However, it might be in the interest of the assignor to allow the operation of Section 19(4) since that would deter an assignee from squatting on the rights in a work without publicly using it.

1.5.  Disputes Relating to Assignment

In the event that an assignee fails to exercise the assigned rights sufficiently, and where such failure cannot be attributed to the assignor, a complaint may be made to the Intellectual Property Appellate Board (" IPAB "). The IPAB may inquire into the complaint and revoke such assignment if it finds sufficient cause. Other contractual remedies are also available to the parties.

1.6.  License

The owner of an existing work or the prospective owner of a future work may grant a license to any party by creating a limited interest in the exploitation of the copyright wherein such rights may be limited by time, territory, non-exclusivity and/or scope. For example, the owner of a sound recording can license the right to broadcast the sound recording to a radio station. Specifically, this is a license to broadcast a copyrighted work.

1.6.1. In writing – As per Section 30 of the Copyright Act, licenses must be in writing, and in the case of future works will take effect only when the work comes into existence.

1.6.2. Sections 19 and 19A – The provisions of Sections 19 and 19A of the Copyright Act mutatis mutandis , apply in relation to a license of copyright. Therefore, all the statutory requirements that bind assignments, as discussed in paragraphs 1.3 to 1.5 above, will also apply to licenses under the Copyright Act.

1.6.3. Compulsory and Statutory license 10 – In addition to licenses granted by the authors voluntarily, there are situations wherein an application may be made to the IPAB seeking a license in certain classes of works (discussed below). This is because copyright is a creation of a statute and the monopoly that is granted therein is not absolute. Therefore, in cases where (a) certain works are withheld from public, or (b) the author of an unpublished work is dead, unknown or cannot be traced, an application may be made to the IPAB in such cases seeking a compulsory license.

Similarly, applications may be made for licenses to produce cover versions, accessible versions of works for disabled people, for broadcasting of works, for publishing translations, etc. These licenses can be granted only by the IPAB and not by a civil court. Practically, these statutory licenses can be resorted to when it becomes impossible to obtain a license from the owner directly for whatever reason.

2. Trademark

Trademark, as per the Trade Marks Act, 1999 (" Trade Marks Act "), comprises a sign, symbol, word, name or logo that helps identify a product or a service as belonging to a particular source and distinguishes it from a product or service belonging to some other trader. For instance, the brand 'Coca Cola' signifies a particular source thereby distinguishing it from other similar products.

A trademark may be registered or unregistered. Both registered and unregistered trademarks may be assigned or licensed. Assignments and licenses of trademarks are governed by the provisions of the Trade Marks Act.

2.1.  Registered v. Unregistered Trademark

The owner, also known as proprietor, of a trademark may apply to the Registrar of Trademarks (" Registrar ") for a trademark to be registered. Under the Trade Marks Act, such trademark must be distinctive, and non-descriptive of the kind, quality or origin of the mark, and must also not be deceptively similar to an existing mark. A trademark may be registered in one or more of the 45 (forty-five) classes of goods or services. 11

Under the Trade Marks Act, the Registrar maintains a Register of Trademarks, which contains details of all registered trademarks along with the name and other particulars of the registered proprietor and the mark. Registration is prima facie proof of the ownership of the trademark. The violation of a registered mark by use of a deceptively similar mark with a view to cause confusion among the consuming public amounts to infringement. 12

A trademark may also be unregistered and will still be an asset to any business. The value associated with a mark is known as goodwill, and simply put, is the reputation that the mark has in the market owing to its extensive use in relation to a particular product or service. When an unregistered mark is violated by a person misrepresenting his goods or services as that of another, the common law tort of passing-off can be applied to protect the unregistered mark. 13

2.2. Assignment

Section 2(b) of the Trade Marks Act defines assignment as an assignment in writing by the act of parties concerned. Sections 37 and 38 of the Trade Marks Act govern assignment of trademarks. When a trademark is assigned, the assignee acquires the right to use the trademark and steps into the shoes of the erstwhile proprietor or owner.

2.2.1. Registered trademark – The registered proprietor of a trademark has the power to assign the trademark in writing for consideration. Such an assignment will entitle the assignee to use the mark in respect of the goods and services to which the registration applies.

i) Extent of assignment – A registered trademark may be assigned only to a limited extent, i.e., it may be assigned in respect of only a portion of the goods or services for which it is registered. The assignment agreement must also clearly specify the territorial extent of the assignment. Once a trademark is assigned for exclusive use in a specific territory, the assignee is considered to be using the trademark "in its own right" and not that of another entity's although such trademark may be used by other entities in other territories. 14

ii) Registration of the assignment – Upon an application made by the assignee, the Registrar will record the assignment after ascertaining that there are no pending disputes pertaining to the assignment. Section 45 prescribes the procedure for recording an assignment with the Registrar.

iii) Registration of assignment does not confer title – The procedure under Section 45 however does not confer title. The assignee derives title from the assignment agreement. It has been held that where an assignee has made an application under Section 45, and the court is satisfied that a valid assignment exists, any suit filed by the assignee under the Trade Marks Act, including for infringement, is maintainable. 15 However, it remains the discretion of the court to receive an assignment agreement into evidence when such assignment is not duly recorded in the Register of Trademarks.

2.2.2. Assigning an unregistered trademark – Under Section 39 of the Trademark Act, even a trademark that is not registered can be assigned.

2.2.3.  Goodwill

i) Goodwill- Goodwill, in the famous words of Lord Macnaghten, 16

"is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in customers. It is the one thing which distinguishes an old established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates."

ii) Assignment may be with or without goodwill – Traditionally, the value of a trademark lies in its goodwill, however, subject to certain conditions, a trademark may be transferred with or without goodwill. 17 Goodwill is an asset by itself, and the assignment of a trademark does not by itself transfer the goodwill earned by the business.

iii) Situations where goodwill is separable from the mark – Let us look at a practical scenario where it might be possible to separate the goodwill from the trademark. Consider A transfers the trademark "Goodness" to B. A has earned considerable reputation in the dairy business. However, A having a registration for "Goodness" in multiple classes, assigns the mark to B in respect of chocolates for which A admittedly has no reputation. A retains the goodwill and merely transfers the brand "Goodness" to B.

In The Commissioner of Income Tax and Ors. v. Associated Electronics and Electrical Industries (Bangalore) Pvt. Ltd. , 18 it was held that a trademark can be deemed to be sold along with goodwill only when it is sold in the same business in which it has acquired goodwill. Therefore, let us consider the same example as above. The mark "Goodness" can be deemed to be sold along with goodwill only if it is sold to be used in the dairy business where it has acquired reputation. This is because it is the reputation which is of value and gains favour among the customers.

iv) Assignment without the transfer of goodwill – Where an unregistered trademark has been assigned without goodwill, the assignee is required to apply to the Registrar within six months from such assignment seeking advertisement, and such assignment cannot take effect unless the assignee has applied to the Registrar in the prescribed manner and the procedure under the Act is followed. 19

2.2.4. Associated trademarks – Associated trademarks are defined in the Trade Marks Act as those that can only be registered as associated marks under the Trade Marks Act. Section 2(3) provides that goods and services are associated with each other if it is likely that those goods/services might be sold, provided or otherwise traded in by the same business. For instance, if the trademark "ABC" is registered in relation to milk and the same mark is also applied to be registered for other dairy products, the marks may be registered as "associated" in order to avoid confusion as to the source.

Section 16 makes it clear that where two or more trademarks of the same proprietor are identical or resemble each other, and apply to similar goods/services, such trademarks must be registered as associated marks in order to avoid confusing the consuming public as to the source. Under Section 44 of the Trade Marks Act, associated marks are assignable as a whole and not separately.

2.2.5. Restrictions on assignment of trademarks – Sections 40 and 41 of the Trademarks Act restrict assignments or transmissions in certain circumstances, such as where the assignment or transmission causes confusion or deceives the consumer of the actual source of the good/service to which such trademark is affixed. However, such assignment is permitted in certain instances with prior approval of the Registrar.

2.3. Licensing

Under the Trade Marks Act, a proprietor may license her trademark and allow a third-party to use the mark, and even register such a licensee as a "registered user".

2.3.1. Permitted Use and Registered Use – "Permitted use" in relation to a trademark is defined under Section 2(1)(r) of the Trademarks Act as the use of a trademark either by a registered user or by any person other than the registered proprietor or user, in relation to goods or services –

i) with which he is connected in the course of trade;

ii) in respect of which the mark remains registered;

iii) for which he is registered as the user or has written consent from the registered proprietor;

iv) while complying with any conditions subject to which the use is permitted.

A person other than the registered proprietor may be registered as a registered user of a trademark. 20 Practically, this is a license granted by the proprietor to use the trademark. Use of the trademark by the permitted/registered user is deemed to be continuous use on behalf of the owner/proprietor.

2.3.2. Use of the trademark limited by the terms of the license – When the right to use a trademark is licensed, it can only be exercised as per the terms of the license. A license outside the contours of the "registered use" provisions, is governed by common law and is valid provided it does not cause confusion in the market and does not dilute the distinctiveness of the mark.

2.3.3. Registered user cannot transfer the mark – It is pertinent to note that the registered user of a trademark does not have the right to assign or further transfer the trademark or any rights in relation to the use thereof.

A patent is an exclusive right in an invention. The Patents Act, 1970 (" Patents Act ") requires a patent to be registered to be valid, and the law permits the grant of a patent when the invention is novel, inventive and useful. Therefore, registration is mandatory, and it is this process that bequeaths a right upon the patentee. The Register of Patents in India maintained by the Controller General of Patents (" Controller ") contains all the information pertaining to the patent and its ownership.

A patent confers upon the patentee, the rights to prevent third parties from making, selling, using, or otherwise dealing in the subject matter of the patent. Usually, the inventor of a patent can make an application and acquire a patent, unless the inventor has been hired to invent or is an employee whose rights in the patent vest with the employer under an agreement.

A patent, once granted, can be used and commercialized by the patentee herself or the patentee may assign or license the rights in the patent to a third-party.

3.1. Assignment

Assignment is not defined in the Patents Act, but, as is the case generally, it refers to the complete transfer of title in the invention. When a patent is jointly owned by more than one person, all co-owners must jointly assign the patent. The assignee under the assignment deed becomes the owner of the patent and takes the place of the assignor for all legal and practical purposes.

The law also permits the creation of equitable assignments in favour of the assignee where the patentee bequeaths a portion of the patent to the assignee. 21 In such a case, while the assignee may not take the place of the patentee, the Patents Act provides that the assignee's notice of interest may be recorded in the Register of Patents. 22

Patent rights may also be transferred in the form of a mortgage wherein the rights are transferred to the mortgagee, for a specific sum of money. 23 Once such payment is returned by the mortgagee, rights in the patent will, under the terms of the mortgage, return to the patentee. This type of arrangement is contemplated in the Patents Act but not in any other IP legislation.

3.2. Manner of Assignment

3.2.1. In writing – Under Section 68 of the Patents Act, an assignment is valid and enforceable only when it is in writing and is duly signed by the assignor or any person authorized to do so. The written agreement must contain all the terms, conditions, rights and obligations of the parties thereto.

3.2.2. Scope of assignment – It is essential for an assignment agreement to clearly specify the invention that is being assigned, and demarcate the term and territory pertaining to the transfer.

3.2.3. Payment terms – The assignment agreement must also clearly lay down the payment terms as agreed between the parties whether such consideration is payable as a lumpsum payment, a series of payments, as a share in the revenue, or in the form of royalty payments.

3.3.  Assignment prior to the grant of a patent

The titular interest in an invention may also be transferred prior to the grant of a patent. In such a case, since the assignee is the owner of the invention, any pending patent application can now continue in the name of the assignee. Under Section 20, an application can be made to the Controller for this purpose.

3.4. License

A license agreement, as in the case of other types of IP, is entered between the patentee and a licensee allowing the licensee to make, sell, exercise or use the invention that is the subject matter of a patent. Such license can either be exclusive or non-exclusive.

3.4.1. Exclusive License – The Patent Act, under Section 2(1)(f), defines an exclusive license as a license which confers on the licensee, or persons authorized by him, to the exclusion of all other persons (including the patentee), any right in respect of the patented invention.

3.4.2. Types of licenses – Under the Patents Act, licenses can be statutory, voluntary or compulsory. A voluntary license is where the patentee comes to an agreement with any third-party allowing the use of an invention subject to the terms and conditions prescribed under the license. For compulsory licenses, any person may make an application to the Controller under Section 84, Patents Act, and to obtain the license it must be shown that the reasonable requirements in relation to the invention have not been satisfied or that the invention is not available to the public at a reasonably affordable price. For example, India has witnessed the grant of many compulsory licenses for the manufacture and sale of pharmaceutical products with a view to make generic versions of drugs easily available at affordable prices. Other statutory licenses may also be granted by the appropriate authority upon making an application, and when public interest demands the grant of such a license.

3.4.3. Requirements – The requirements discussed in paragraphs 3.2.1 to 3.2.3 must be followed for licenses as well.

3.5.  Registration of rights acquired by assignment or license

Under Section 69 of the Patents Act, any person entitled to rights or any interest in relation to a patent, either by way of an assignment, license, or mortgage must apply to the Controller, in the prescribed form, for the purpose of registering her title or any other interest in relation to the invention embodied in the patent. Such application must be made within 6 (six) months from the execution of the assignment or license agreement. After registration, the assignment will have effect from the date on which the deed was duly executed. If a license is not registered but the parties have acted upon the covenants in the document, then in view of the proviso to Section 70 of the Patents Act, equity will grant the licensee such rights as he would be entitled to if the license was registered. This equitable relief has been included in the provision with a view to protect the contractual rights of parties prior to their registration with the statutory authority in the prescribed manner.

A design is defined under the Designs Act, 2000 (" Designs Act ") as referring to the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any finished article making the article aesthetically appealable to the consumer. 24 A new and original design, when registered, confers upon the owner the exclusive right to apply the design to any article in respect of which such registration is obtained.

4.1. Assignment and License

The Designs Act does not contain specific provisions governing assignments and licenses. However, under Section 30 (3) an assignment or license is required to be in writing. Further, it is advisable to have an agreement which clearly specifies the terms and conditions agreed between the parties. It is good practice to generally follow the requirements discussed in paragraphs 3.2.1 to 3.2.3 for design transfers as well. The requirements ensure that any assignment or license is comprehensive and contains all relevant clauses to protect the interests of both parties.

4.2.  Registration of rights acquired by assignment or license

When a registered design is transferred to another person by assignment or a license, such transfer may be recorded in the Register of Designs as per Section 30, Designs Act, 2000. The recordal of the license or assignment, is advisable since it is clear proof of title within the cognizance of the statutory authority.

  Footnotes

1. For more on this topic, see, Leo Paul Johnson, "Intellectual Property Monetization", 6 IJIPL 186 (2013); Lawrence Liang, "Copyright, Culture Production and Open-Content Licensing", 1 Ind. J. L. & Tech. 97 (2005).

2. To understand the statutory contours of copyright in India, see, Sections 13 and 14, Copyright Act, 1957.

3. Section 16, Copyright Act, 1957 ("No Copyright except as provided in this Act– No person shall be entitled to copyright or any similar right in any work, whether published or unpublished, otherwise than under and in accordance with the provisions of this Act or of any other law for the time being in force, but nothing in this section shall be construed as abrogating any right or jurisdiction to restrain a breach of trust or confidence.").

4. For a jurisprudential overview of balance in copyright, see, Abraham Drassinower, "A Rights?Based View of the Idea/Expression Dichotomy in Copyright Law", 16 Canadian Journal of Law and Jurisprudence 3 (2003).

5. See, V.T. Thomas and Ors v. Malayala Manorama Co. Ltd., AIR 1989 Ker 49, where a former employee was held to retain the copyrights in his work because they were not created during the course of employment.

6. Article 2(2) of the Berne Convention prescribes that "works in general or any specified categories of works shall not be protected unless they have been fixed in some material form". National laws prescribe their own rules pertaining to fixation.

7. George Jacob and Ors. v. Nandakumar Moodadi and Ors., 2014 SCCOnline Ker 3106. In this case a photograph was permitted to be used only in a CD-Rom and no other manner. However, the defendant published the photograph in a magazine. The Kerala High Court held that an assignment is not absolute and is limited entirely by the terms of the agreement and the scope of the rights assigned therein.

8. B4U Network (Europe) Ltd v. Performing Rights Society Ltd., 2013 EWCA Civ. 1236.

9. See, Pine Labs Pvt. Ltd v. Gemalto Terminalis India (P) Ltd., 2011 48 PTC 248 (Del.); M/s. Agi Music Sdn Bhd v. Ilaiyaraja and Anr., 2019 SCCOnline Mad 1960.

10. See, Sections 31 to 32A, Copyright Act, 1957.

11. Section 7, Trade Marks Act, 1999. See, NICE Classification of goods and services, which provides the internationally accepted classes, available at http://euipo.europa.eu/ec2/ (for terms and phrases acceptable in India search the database specifically for terms accepted in CGPDTM).

12. Section 29, Trade Marks Act, 1999. For a critical overview of Section 29, see, Dev Gangjee, "Lots in a Name: Would Diluted Trademarks Still Sell as Sweetly?", 15 SBR 5 (2003).

13. For grounds to be considered in a case for passing-off, see, Cadila Healthcare Ltd. v. Cadila Pharmaceutical Ltd., AIR 2001 SC 1952.

14. CCE v. Otto Bilz (India) Pvt. Ltd., (2016) 13 SCC 559.

15. Skol Breweries Ltd. v. Som Distilleries and Breweries Ltd., (2010) 42 PTC 389 (Bom). See, Cadila Healthcare Ltd. v. Speciality Meditech Pvt. Ltd., AIR 2010 NOC1065 (Guj.) (The plaintiff was disentitled from filing a suit in the absence of an application to register an assignment made in its favour); Hindustan Unilever Ltd. v. Bombay Soda Factory, AIR 1964 Kant. 173 (Merely because the trademark in question did not stand registered in the name of the plaintiffs on the date of the suit the plaintiff could not have been non-suited).

16. Commissioner of Inland Revenue v. Muller & Cos Margarine Ltd., (1901) A.C. 217.

17. Ramdev Food Products (P) Ltd. v. Arvindbhai Rambhai Patel, (2006) 8 SCC 726 at para 59.

18. (2016) 6 ITR OL 471 (Kar.).

19. Cott Beverage Inc. v. Silvassa Bottling Co., (2004) 29 PTC 679 (Bom.).

20. For procedure pertaining to registration of a registered user, see, Section 49, Trade Marks Act, 1999.

21. Coflexip Stena Offshore Limited's Patent, (1997) R.P.C. 179.

22. Section 69, Patents Act, 1970.

23. Sections 68 and 69 of the Patents Act contemplate the transfer of a patent in the form of a mortgage akin to mortgage of immovable property.

24. For a general overview of design rights, see, Sections 2(d), 6 and 11, Designs Act, 2000.

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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transfer of intellectual property rights fema

Vial and syringe.

The Pandemic Treaty and Intellectual Property Sharing: Making Vaccine Knowledge a Public Good 

By Ellen ‘t Hoen

The COVID-19 pandemic has laid bare the lack of regulation for the sharing of intellectual property (IP) and technology needed for an effective and equitable response to the crisis.

The Pandemic Treaty (or other legal instrument) scheduled for discussion at the World Health Assembly in the fall of 2021 should focus on establishing the norm that the IP and knowledge needed to develop and produce essential pandemic health technologies become global public goods. It should also ensure predictable and sufficient financing for the development of such public goods.

During the COVID-19 pandemic, the world of science delivered knowledge needed to produce safe and effective vaccines within an unprecedented short time frame, thanks to substantial funding from the U.S., U.K., and German governments in particular.

While scientists globally engaged in collaboration and contributed transparently to the knowledge needed to produce COVID-19 vaccines, there was no mechanism in place to ensure that the resulting manufacturing technologies would be globally accessible.

Once that knowledge was transferred to the private sector, these private pharmaceutical companies became the holders of the knowledge, related intellectual property, and regulatory dossiers that are needed to bring the products to market. This happened even though COVID-19 vaccine development benefitted from vast amounts of public financing. This financing was not conditioned on the sharing of intellectual property and know-how.

The companies that now hold that manufacturing knowledge refuse to share it outside their trusted circle of contract manufacturers. Together with the hoarding of vaccines by high-income countries , this has led to grave global inequities in access to COVID-19 vaccines. For example, only enough vaccine has been distributed in Africa to give 2% of the population a single dose , as compared to 70% of adults in Europe being fully vaccinated with both doses . Dr. Tedros, head of the World Health Organization (WHO), has called the inequity in access to COVID-19 vaccines, where wealthy nations reach high levels of vaccinations and poor countries close to none, “vaccine apartheid” and has warned that this inequity is undermining the global recovery .

In the early days of the pandemic, the European Union that funded vaccine research committed to ensuring those vaccines would be global public goods. The President of the European Commission (EC), Ursula von der Leyen, publicly stated on 24 April 2020 at a joint press briefing with the WHO to announce a global fundraising initiative, that COVID-19 vaccines would be “our universal, common good.” Further, the promotion of COVID-19 vaccines as a global public good was determined a “negotiating directive” and was included in the agreement between the Commission and the EU Member States that established the Commission’s mandate to enter into advanced purchase agreements (APAs) with pharmaceutical companies for COVID-19 vaccines on behalf of the member states.

However, the commitment to develop and promote COVID-19 vaccines as global public goods remained aspirational. The final APAs with the companies appear not contain any provisions that would have encouraged the sharing of IP or manufacturing know-how, nor provisions to promote access for low- and middle-income countries to these vaccines in sufficient quantity and at low prices.

Fairly early on in the pandemic, a number of initiatives were taken aimed at voluntary sharing of intellectual property, including know-how and transfer of technology. In May 2020, the WHO established the COVID-19 Technology Access Pool (C-TAP) . C-TAP was set up to offer a platform for developers of COVID-19 therapeutics, diagnostics, vaccines, and other health products to share their IP, knowledge, and data with quality-assured manufacturers through public health-driven voluntary, non-exclusive, and transparent licenses. In June 2021 the WHO announced plans for mRNA technology transfer hubs in Africa modelled after the influenza vaccines technology transfer hubs the WHO had launched in 2007. The Medicines Patent Pool expanded its mandate to be able to work on COVID-19 and is working with C-TAP and the mRNA hubs. Multinational pharmaceutical companies have declined collaboration with C-TAP and with the WHO mRNA hubs on COVID-19 vaccines. Recently the German drug developer BioNTech has announced collaboration with WHO on supporting mRNA vaccine manufacturing capacity in Rwanda and Senegal, but these efforts do not include COVID-19 vaccine technology .

So far, none of these initiatives have resulted in licensing of intellectual property and technology transfer agreements that would enable expanded vaccine production.

Separate from the voluntary IP and know-how sharing initiatives, on 2nd October 2020, South Africa and India proposed a waiver of certain obligations under the TRIPS Agreement for the duration of the pandemic at the World Trade Organization (WTO).  The proposal for the COVID pandemic TRIPS waiver was co-sponsored by over 60 delegations . The initiative would focus on encouraging technology transfer and building of manufacturing capacity globally by allowing any company with existing or potential manufacturing know-how to produce COVID-19 related technologies without concerns about possible IP infringement and related legal consequences. According to a not-yet-published status report by the Chair of the TRIPS Council of 20 July 2021 (JOB/IP/47/Rev.1), despite various formal and informal meetings of the WTO TRIPS Council on the subject, no progress on the TRIPS waiver proposal could be reported.

The COVID-19 pandemic demonstrates that it is difficult to regulate the open sharing of IP/know-how and technology while a global health emergency is unfolding. It would therefore be desirable to have a global legal framework in place that provides for the sharing of such technology and manufacturing know-how, which is triggered by the occurrence of a pandemic. The World Health Assembly special session this November presents an opportunity to start the process to create such a legal framework.

This framework should oblige States Parties to:

  • Incentivize the voluntary sharing of IP / know-how (e.g., via buy-outs);
  • Compel the mandatory sharing of IP / know-how (e.g., via funding conditionalities);
  • Support (including financing) global pandemic IP / know-how sharing, including regulatory data and technology transfer platforms analogous to C-TAP and the MPP;
  • Support, including financing, the development and scale-up of production capacity to ensure sufficiency in all regions of the world;
  • Support the adequate supply of necessary inputs (e.g., raw materials) for that production;
  • Ensure an optimal distribution of pandemic health technologies for public health needs in all regions of the world; and

Support, including financing, the development of new pandemic health technologies, under the condition that the IP/know-how developed with public funding is shared openly.

The practical implementation of this framework will likely require the involvement of a range of actors and agencies beyond the WHO, including the WTO and international financing mechanisms. Nevertheless, a multilateral recognition of the need to ensure the sharing of pandemic health technologies and the IP associated with it could prevent a situation in which the inequitable access to lifesaving technologies is a serious impediment to addressing pandemics.

Ellen ‘t Hoen , LLM, PhD is a lawyer and an independent consultant in medicines policy and law.

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Flipping of Structures – Legal Framework

Home       Articles       Flipping of Structures – Legal Framework

May 15, 2021

As Companies grow and have global footprints, we have seen founders wanting to flip the structures and have parent companies in countries like the United State of America, Singapore, Maturities, etc. Flipping of the structure generally means establishing the holding company outside India. Generally, flipping of structures is done for easier access to global investors, listing in overseas jurisdictions, etc.

There are multiple options to flip the structure such as share transfer, swap of shares, outbound mergers, etc. One shall keep in perspective the income tax act, foreign exchange management act, Companies Act implications before penning down an efficient structure. In this article, I have discussed few key considerations:

A. Foreign Exchange Management Act, 1999:

Under the Foreign Exchange Management Act, 1999, the flip of structures will call for careful analysis of round-tripping issues. While round-tripping is not expressly defined, the restriction has inherently been there under the regulations on overseas direct investment by Indian residents. Further, in case of any transfer of shares or swap of shares, the Foreign Exchange Management Act, 1999 calls for certain fair valuations and reporting to the Reserve Bank of India (“ RBI “). Further, RBI has allowed companies to set up Indian subsidiaries with prior approval by the RBI through an offshore company in which the Indian entity is a shareholder.

B. Income Tax Implications:

In case of any restructuring involving the transfer of shares through plain vanilla transfer or swap of shares, income tax under the head capital gain may become payable subject to certain conditions. This is one of the important considerations while structuring any flip. it is also necessary to consider the commercial substance test under the  General Anti-Avoidance Rules . Further, Place of Effective Management (“ POEM ”) is also an important test / consideration while structuring any flip.

C. Intellectual Property (IPs):

In some cases, the founders prefer to transfer the IPs to overseas companies from IP protection, control, and valuation standpoint. Transfer of IP to an overseas company is permitted under FEMA subject to certain conditions which inter-alia includes the requirement to transfer the IP at fair market value. Transfer pricing regulations should be kept in mind while structuring the flip.

D. Companies Act Considerations:

The valuation under the Companies Act, 2013 needs to be taken care of while implementing flip. Further, certain corporate actions such as board and shareholder approval need to be factored in the to-do list at the implementation phase.

E. Conclusion :

The flip of a structure is not a one-size-fits-all approach and need not necessarily be a move in the right direction for all companies. The business model of certain companies and their growth strategies may necessitate a flip in structure and the benefits may outweigh the complexities and the costs of such flip. Each case needs to be reviewed properly keeping in perspective the objective of flip.

Author : Prashant Jain, Co-Founder & Partner

Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at  [email protected] .

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WORLD TRADE ORGANIZATION

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  • obligations and exceptions

Obligations and exceptions

Under TRIPS, what are member governments’ obligations on pharmaceutical patents?

Patenting : WTO members have to provide patent protection for any invention, whether a product (such as a medicine) or a process (such as a method of producing the chemical ingredients for a medicine), while allowing certain exceptions. Article 27.1 . Patent protection has to last at least 20 years from the date the patent application was filed. Article 33

Non-discrimination : Members cannot discriminate between different fields of technology in their patent regimes. Nor can they discriminate between the place of invention and whether products are imported or locally produced . Article 27.1

Three criteria : To qualify for a patent, an invention has to be new (“novelty”), it must be an “inventive step” (i.e. it must not be obvious) and it must have “industrial applicability” (it must be useful). Article 27.1

Disclosure : Details of the invention have to be described in the application and therefore have to be made public. Member governments have to require the patent  applicant to disclose details of the invention and they may also require the applicant to reveal the best method for carrying it out. Article 29.1

Exceptions 

ELIGIBILITY FOR PATENTING back to top

Governments can refuse to grant patents for three reasons that may relate to public health:

  • inventions whose commercial exploitation needs to be prevented to protect human, animal or plant life or health — Article 27.2
  • diagnostic, therapeutic and surgical methods for treating humans or animals — Article 27.3a
  • certain plant and animal inventions — Article 27.3b .

Under the TRIPS Agreement, governments can make limited exceptions to patent rights, provided certain conditions are met. For example, the exceptions must not “unreasonably” conflict with the “normal” exploitation of the patent. Article 30 .

Continue >

Many countries use this provision to advance science and technology. They allow researchers to use a patented invention for research, in order to understand the invention more fully.

In addition, some countries allow manufacturers of generic drugs to use the patented invention to obtain marketing approval — for example from public health authorities — without the patent owner’s permission and before the patent protection expires. The generic producers can then market their versions as soon as the patent expires. This provision is sometimes called the “regulatory exception” or “Bolar” provision. Article 30

This has been upheld as conforming with the TRIPS Agreement in a WTO dispute ruling. In its report adopted on 7 April 2000, a WTO dispute settlement panel said Canadian law conforms with the TRIPS Agreement in allowing manufacturers to do this. (The case was titled “Canada — Patent Protection for Pharmaceutical Products”)

ANTI-COMPETITIVE PRACTICE, ETC back to top

The TRIPS Agreement says governments can also act to prevent patent owners and other holders of intellectual property rights from abusing intellectual property rights, “unreasonably” restraining trade, or hampering the international transfer of technology. Articles 8 and 40

Compulsory licensing is when a government allows someone else to produce the patented product or process without the consent of the patent owner. In current public discussion, this is usually associated with pharmaceuticals, but it could also apply to patents in any field.

The agreement allows compulsory licensing as part of the agreement’s overall attempt to strike a balance between promoting access to existing drugs and promoting research and development into new drugs. But the term “compulsory licensing” does not appear in the TRIPS Agreement. Instead, the phrase “other use without authorization of the right holder” appears in the title of Article 31 . Compulsory licensing is only part of this since “other use” includes use by governments for their own purposes.

Compulsory licensing and government use of a patent without the authorization of its owner can only be done under a number of conditions aimed at protecting the legitimate interests of the patent holder.

For example: Normally, the person or company applying for a licence must have first attempted, unsuccessfully, to obtain a voluntary licence from the right holder on reasonable commercial terms — Article 31b . If a compulsory licence is issued, adequate remuneration must still be paid to the patent holder — Article 31h .

However, for “national emergencies”, “other circumstances of extreme urgency” or “public non-commercial use” (or “government use”) or anti-competitive practices, there is no need to try for a voluntary licence — Article 31b .

Compulsory licensing must meet certain additional requirements. In particular, it cannot be given exclusively to licensees (e.g. the patent-holder can continue to produce), and usually it must be granted mainly to supply the domestic market.

WHAT ARE THE GROUNDS FOR USING COMPULSORY LICENSING? back to top

The TRIPS Agreement does not specifically list the reasons that might be used to justify compulsory licensing. In Article 31 , it does mention national emergencies, other circumstances of extreme urgency and anti-competitive practices — but only as grounds when some of the normal requirements for compulsory licensing do not apply, such as the need to try for a voluntary licence first. Doha declaration 5(b) and (c) .

Parallel or grey-market imports are not imports of counterfeit products or illegal copies. These are products marketed by the patent owner (or trademark- or copyright-owner, etc) or with the patent owner’s permission in one country and imported into another country without the approval of the patent owner.

For example, suppose company A has a drug patented in the Republic of Belladonna and the Kingdom of Calamine, which it sells at a lower price in Calamine. If a second company buys the drug in Calamine and imports it into Belladonna at a price that is lower than company A’s price, that would be a parallel or grey import.

The legal principle here is “exhaustion”, the idea that once company A has sold a batch of its product (in this case, in Calamine), its patent rights are exhausted on that batch and it no longer has any rights over what happens to that batch.

The TRIPS Agreement simply says that none of its provisions, except those dealing with non-discrimination (“national treatment” and “most-favoured-nation treatment”), can be used to address the issue of exhaustion of intellectual property rights in a WTO dispute. In other words, even if a country allows parallel imports in a way that another country might think violates the TRIPS Agreement, this cannot be raised as a dispute in the WTO unless fundamental principles of non-discrimination are involved. The Doha Declaration clarifies that this means that members can choose how to deal with exhaustion in a way that best fits their domestic policy objectives. Article 6 and Doha declaration 5(d) .

Some governments were unsure of how these TRIPS flexibilities would be interpreted, and how far their right to use them would be respected. The African Group (all the African members of the WTO) were among the members pushing for clarification.

A large part of this was settled at the Doha Ministerial Conference in November 2001. In the main Doha Ministerial Declaration of 14 November 2001, WTO member governments stressed that it is important to implement and interpret the TRIPS Agreement in a way that supports public health — by promoting both access to existing medicines and the creation of new medicines.

They therefore adopted a separate declaration on TRIPS and Public Health. They agreed that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. They underscored countries’ ability to use the flexibilities that are built into the TRIPS Agreement, including compulsory licensing and parallel importing. And they agreed to extend exemptions on pharmaceutical patent protection for least-developed countries until 2016.

On one remaining question, they assigned further work to the TRIPS Council — to sort out how to provide extra flexibility, so that countries unable to produce pharmaceuticals domestically can obtain supplies of copies of patented drugs from other countries. (This is sometimes called the “Paragraph 6” issue, because it comes under that paragraph in the separate Doha declaration on TRIPS and public health.)

Article 31(f) of the TRIPS Agreement says products made under compulsory licensing must be “predominantly for the supply of the domestic market”. This applies to countries that can manufacture drugs — it limits the amount they can export when the drug is made under compulsory licence. And it has an impact on countries unable to make medicines and therefore wanting to import generics. They would find it difficult to find countries that can supply them with drugs made under compulsory licensing.

The legal problem for exporting countries was resolved on 30 August 2003 when WTO members agreed on legal changes to make it easier for countries to import cheaper generics made under compulsory licensing if they are unable to manufacture the medicines themselves. When members agreed on the decision, the General Council chairperson also read out a statement setting out members’ shared understandings on how the decision would be interpreted and implemented. This was designed to assure governments that the decision will not be abused.

The decision actually contains three waivers:

  • Exporting countries’ obligations under Article 31(f) are waived — any member country can export generic pharmaceutical products made under compulsory licences to meet the needs of importing countries.
  • Importing countries’ obligations on remuneration to the patent holder under compulsory licensing are waived to avoid double payment. Remuneration is only required on the export side.
  • Exporting constraints are waived for developing and least-developed countries so that they can export within a regional trade agreement, when at least half of the members were categorized as least-developed countries at the time of the decision. That way, developing countries can make use of economies of scale.

Carefully negotiated conditions apply to pharmaceutical products imported under the system. These conditions aim to ensure that beneficiary countries can import the generics without undermining patent systems, particularly in rich countries. They include measures to prevent the medicines from being diverted to the wrong markets. And they require governments using the system to keep all other members informed each time they use the system, although WTO approval is not required. At the same time phrases such as “reasonable measures within their means” and “proportionate to their administrative capacities” are included to prevent the conditions becoming burdensome and impractical for the importing countries.

All WTO member countries are eligible to import under this decision, but 23 developed countries  have announced voluntarily that they will not use the system to import: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and the US.

After they joined the EU in 2004, another 10 countries have been added to the list: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia.

And 11 more said they would only use the system to import in national emergencies or other circumstances of extreme urgency: Hong Kong China, Israel, Korea, Kuwait, Macao China, Mexico, Qatar, Singapore, Chinese Taipei, Turkey, United Arab Emirates.

After that, several potential exporting countries changed their laws and regulations in order to implement the waivers and to allow production exclusively for export under compulsory licence. At the time of writing (September 2006) Norway, Canada, India and the EU have formally informed the TRIPS Council that they have done so. The 2003 waivers are interim; the ultimate goal is to amend the TRIPS Agreement itself, and a decision to do this was reached in December 2005, accompanied again by a chairperson’s statement. The amendment — a direct translation of the waivers — enters into force when two thirds of members accept it.

(b)    Each Member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.

(c)    Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

(d)    The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4.

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  • Published: 07 October 2022

What the COVID-19 pandemic revealed about intellectual property

  • E. Richard Gold   ORCID: orcid.org/0000-0002-3789-9238 1  

Nature Biotechnology volume  40 ,  pages 1428–1430 ( 2022 ) Cite this article

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  • Developing world
  • Intellectual-property rights

The COVID-19 pandemic dispelled some myths underlying intellectual property policy and revealed how stakeholders can develop policies to accelerate development and ensure access using existing tools and experimenting with open science.

The COVID-19 pandemic challenged key assumptions underlying intellectual property (IP) policy, finding them wanting. During the pandemic, intellectual property (IP) was not a significant driver of innovation 1 , 2 ; instead, it contributed to limiting and then delaying global access to vaccines and drugs 3 , 4 , 5 . Although companies played a critical role in vaccine and antiviral development, they financed their work through the prospect of large procurement contracts rather than the prospect of IP. Procurement, together with early stage funding, came largely from government.

Two myths surrounding IP delayed achieving the goal of rapidly delivering vaccines and antivirals equitably around the globe. The first is that without IP — specifically patents — there would have been no vaccines or drugs. The second is that IP in all its forms presents no significant barrier to global distribution of vaccines and antivirals. Neither myth accords with the evidence.

The myth of the necessity of patents during pandemics

The first myth is common: “If patent protection had not been available, [basic molecular] technologies, without which the vaccines could not have been made available in such a short time, might not have been developed in the first place” 6 .

An investigation into the development of the vaccines tells a different story 2 . The work on mRNA vaccine technology dates back many decades and was almost entirely publicly funded 7 , 8 . Even some of the critical elements of the Pfizer–BioNTech and Moderna vaccines, such as the lipid nanoparticle container 5 , were also publicly funded 7 . Both BioNTech and Moderna developed their own proprietary platforms — requiring considerable ingenuity, effort and cost — relying on both patents, trade secrets and regulatory exclusivity.

Pfizer’s development of Paxlovid was conducted in-house. During the 2003 severe acute respiratory syndrome (SARS) outbreak, Pfizer developed an intravenous protease inhibitor to combat that coronavirus. Pfizer was able to do so as it had recently acquired Agouron Pharmaceuticals, a firm that had been working on a similar protease in rhinovirus 9 . Before Pfizer was able to test the molecule — PF-00835231 — in humans, the SARS outbreak ended and Pfizer shelved it 10 . For COVID-19, Pfizer dusted off PF-00835231 and did a significant amount of creative chemistry to change some of the features that prevented the drug from being taken orally. The resulting new molecule — PF-07321332 — constituted half of what became Paxlovid, the other half being ritonavir, which prevents the new molecule from being broken down 10 . Pfizer had applied for patents related to PF-00835231 but never pursued them 11 , 12 , 13 , 14 . The company was able to develop Paxlovid on its prior work and corporate know-how rather than on any patent 15 .

While Pfizer, Moderna and other companies filed patents over their vaccines and antivirals, these provided a relatively minor incentive given other, more powerful, incentives. These incentives included both upfront grants to the companies and procurement contracts. According to its financial filings, Moderna received US$1.7 billion from the US government 16 while BioNTech received €375 million from the German government 17 and an additional €100 million from the European Commission to develop their vaccines 18 . The real pull for development came, however, from the mammoth procurement contracts issued by governments, entered well before any patents were issued 19 . While procurement contracts paid out only if the research was successful, the same is true for patents. As a result, Pfizer gained revenues of US$36.7 billion in 2021 from vaccine sales and expects another US$32 billion in 2022 for its vaccine and US$22 billion from Paxlovid; Moderna had revenues of US$17.7 billion in 2021 and is expecting sales of US$19 billion in 2022 (ref. 20 ).

The Oxford–AstraZeneca vaccine was designed to be sold at cost. Oxford researchers had been investigating a vaccine against another coronavirus responsible for Middle East Respiratory Syndrome (MERS) when COVID-19 hit 21 . They shifted their efforts to SARS-CoV-2 in early 2020, funded almost entirely by government and philanthropy 22 and quickly developed a vaccine. They patented the vaccine and licensed it to AstraZeneca on the understanding that it would be broadly licensed and sold at cost during the pandemic 23 . The vaccine is available in more countries than any other 24 .

Corbevax is an unpatented vaccine that has been transferred to companies in lower-income countries. Developed at Texas Children’s Hospital and Baylor College of Medicine without government or industry support, the vaccine cost only US$7 million to develop 25 , 26 and some studies suggest it is approximately as effective as mRNA vaccines 27 , 28 . The developers of the vaccine transfer know-how to companies interested in manufacturing it, with those manufacturers responsible for seeking regulatory approval. Given the low cost, lack of complex cold chains and existing facilities in many developing countries, those manufacturers are located in those countries 29 . As a result, the vaccine is only licensed in developing countries.

Ultimately, it was not IP that played a significant role in vaccine development but rather government and philanthropic direct funding and, more significantly, procurement contracts. Patents appear to take on a more significant role once the first vaccines and antivirals have made it to market. For example, companies are vying to develop new lipid nanoparticles that better deliver mRNA to cells, have reduced side effects, and can be stored at higher temperatures 30 .

The myth of access during a pandemic

While the first myth exaggerates the positive role that patents played in developing vaccines and antivirals, the second claims that the IP — a combination of patents, know-how and regulatory exclusivity — does not impair global access to vaccines and antivirals 31 . An extreme view by a prominent IP scholar went so far as to say that: “There is no evidence that patents are undermining the creation and distribution of COVID-19 treatments. Indeed, the evidence all points to the opposite conclusion” 32 .

Both the milder and extreme statements are wrong. Different vaccine and drug companies exercised their patents and trade secrets to control knowledge flows and threaten independent organizations — such as the World Health Organization’s South African hub — from developing them, thus delaying access.

Moderna’s CEO, Stéphane Bancel, understood that patents were not a major factor in maintaining the company’s exclusivity in the market 33 . Thus, Moderna pledged to not enforce its patents related to its COVID vaccine in, or for sale in, low- and lower-middle-income countries 34 . Instead, Moderna relies on its secret know-how, refusing to share knowledge on how to construct an mRNA vaccine, even with the World Health Organization’s South African hub, delaying development of an mRNA vaccine by the hub 35 .

Further, the vaccine manufacturers are not the only companies holding IP. The developers of the lipid nanoparticle delivery system for mRNA vaccines hold a number of patents that are not widely licensed 7 . The existence of these patents — and the litigious nature of their holders — undermine the value of Moderna’s non-enforcement pledge.

Pfizer holds onto its patents more tightly and, similar to Moderna, does not share know-how. An investigation found that a foundation representing Pfizer’s partner, BioNTech, has threatened a World Health Organization vaccine hub in Africa with patent infringement 36 .

Pfizer controls its vaccine-related patents through limited licensing arrangements 37 . One important exception is Pfizer’s decision to license its Paxlovid patents through the Medicines Patent Pool to manufacture and sell Paxlovid in or for low- and lower-middle-income countries (and a limited number of upper-middle-income countries) 38 , 39 . Outside of the selected countries, Pfizer is limiting supplies of generic alternatives, as in Latin America 40 . This license leaves many vulnerable upper-middle-income countries without the ability to manufacture and distribute Paxlovid 41 , a particular problem given the drug’s low availability around the world 42 . Instead, Pfizer engages in charitable pricing of its vaccines and drugs in middle- and low-income countries 43 , 44 . The largest slice of its vaccine deliveries is through Covax, which has resulted in slow and insufficient global access 45 , 46 , 47 .

As Peter Singer of the World Health Organization noted: “Charity is good, but we can’t rely on charity alone” 48 . While offering lower prices two years into the pandemic was a step forward, charity does not address the essential problem of access: a steady and affordable supply of vaccines and antivirals. The first two years of the pandemic illustrated the limitations of this approach: prioritization of supply to high-income countries, vaccine nationalism and supply-chain issues, especially given the severe cold-chain requirements of mRNA vaccines. Instead, the World Health Organization and international experts call for manufacturing facilities either domestically or nearby to ensure access 48 , 49 , 50 .

Certainly, efforts by Pfizer 51 and Moderna 52 to build manufacturing facilities in Africa are a step forward. But these facilities will take time to build, whereas both the Oxford–AstraZeneca and Corbevax vaccines have already led to manufacturing in lower-income countries around the world. Based on existing technology platforms, they enhance local capacity and supply chains 26 and thus offer a mechanism to ensure longer-term vaccine equity 5 .

Beyond restraining access to the patents and know-how needed to manufacture vaccines and antivirals, Pfizer is resisting low- and middle-income country efforts to adapt Paxlovid to local health needs. For example, the Drugs for Neglected Diseases initiative reported that Pfizer blocked research on the feasibility of widening the treatment window for Paxlovid from five days to at least seven days to take into the account limitations in local health systems 53 . The company is also blocking combination trials aimed at delaying resistance to Paxlovid 54 , a critical issue in the medium to long term.

Once one puts aside the above myths that inform IP policy debates, one can more clearly see a path forward to both innovation and global equity in pandemic times. Here, I outline three positive steps that governments can take.

The first is that — as extraordinary as the development and testing of Paxlovid was — the world might have had antivirals much sooner had we globally adopted a different approach to drug development, one that is proactive rather than reactive. It was a stroke of luck that Pfizer had the PF-00835231 ready for development. One should not count on that luck being repeated next time.

Rather than rely on IP — patents and trade secrets — to supply us with antivirals after a pandemic hits, together, governments, researchers and companies can develop drugs in advance. We already know the viruses that will likely cause the next pandemic and we understand which targets are the most promising: polymerases and proteases 55 . Through open-science public–private partnerships — leveraging investments by governments, universities, the private sector and philanthropy — we already have the tools to proactively develop antivirals and take them up to Phase 1 trials in anticipation of the next health crisis. While no single company would have an incentive — given the risks — to develop antivirals in advance of a pandemic, the savings to governments of doing so are enormous and so the investment is worthwhile 1 .

The second step is to realize that the almost exclusive reliance on the pull of IP on the private sector in order to bring vaccines and drugs forward is mistaken. More and better funded public efforts — such as Oxford–AstraZeneca and Corbevax — would broaden the paths to the successful development of vaccines and antivirals beyond those brought forward by firms relying mainly on IP.

The third step is for governments to insist that companies follow existing policies that require broad licensing of IP to speed development. For example, the Organisation for Economic Co-operation and Development (OECD) Council adopted Recommendations on the Licensing of Genetic Inventions in 2006 (ref. 56 ) that promote broad licensing of foundational genetic technologies, including those involved with the mRNA vaccines: the mRNA sequences, the lipid nanoparticles and related processes. Companies failed to follow these recommendations and governments failed to push for compliance. If patent holders of the lipid nanoparticles had broadly licensed their technology 4 in accordance with the OECD recommendations, Afrigen Biologics would have been able to accelerate development of its mRNA vaccine for the World Health Organization hub 57 .

Conclusions

During the pandemic, IP played a supporting, not a primary, role in developing vaccines and drugs. Myths concerning the role of IP get in the way of a holistic assessment of what IP can and cannot do, delaying or preventing the type of policy experimentation — such as open-science drug development — that promises to deliver more targeted vaccines and drugs to the world more quickly.

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Understanding Technology Transfer Regulations In India

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By -  King Stubb & Kasiva on  March 14, 2023

Toretain or strengthen a business, and competitive position in the market, new technology invention or adoption has become quintessential. Companies in industries like the extraction or commercialization of raw materials may rely on new technologies to increase the efficiency of their raw material extraction through the improvement of their production processes or the acquisition of new machinery and equipment. Companies also leverage modern technology to enhance management structure, control, and communication, or to effectively market their products. Technological Innovation is an essential component of every company's competitive strategy.

Technology Transfer refers to the transfer of a technology, knowledge, know-how, or facility from one person, business, or organization to another. It enables partners to share their expertise to expand into new markets, commercialise a new good or service, or enhance an already existing good or process, and to sell their goods/services swiftly.

The transfer of the exclusive rights to a patented technology or the permission to use a specific technology or know-how occurs through the establishment of legal relationships between the "transferor," who is the owner of the exclusive rights or the supplier of the know-how, and the "transferee," who purchases them.

Table of Contents

Technology Transfers and their agreements are important as –

1. They strengthen commercial ties

2. TT Agreements make a legally-binding, contractual agreement that is enforced by both parties.

3. Handle intellectual property, including ownership, licencing, and royalties (such as patents, copyrights, trademarks, and industrial designs).

4. Help in accessing technology

5. Provide adaptable protection for one or more categories of intellectual property rights.

6. Resolve disputes over contracts by referring to the relevant terms included in the Technology Transfer agreement and provisions of Technology Transfer Regulations valid in India,

7. Enable the non-licensing transfer of technology pertaining to methods, know-how, and trade secrets.

8. Identify the goal of technology transfer - creation of new goods, expansion into new markets, legal and tax implications, and litigation rights.

Technology Transfer Regulations In India

The Technology Transfer Regulations in India are as follows: -

  • It is the only comprehensive legislation in India that governs contracts. There are rules that are tailored to suit the nature of agreement.
  • Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules 2000 (“Rules”) states that the Ministry of Commerce and Industry of the Government of India must first approve any withdrawals of foreign currency for remittances made in connection with technical collaboration agreements where the royalty payment exceeds 5% on domestic sales and 8% on exports and the lump-sum payment exceeds USD 2 million [1] . Item no. 8 of the Rules and the entry pertaining to it were determined to be excluded after the Government of India evaluated the current policy regarding the liberalisation of foreign technology agreements. Thus, AD Category-I banks may authorise foreign currency withdrawals by individuals for the purpose of paying royalties and lump sums under technical partnership agreements without the consent of the Ministry of Commerce and Industry.
  • The Patents Act, 1970, the Trademarks Act, 1999, and the Copyright Act, 1957 all govern and protect the intellectual property rights in India . They specify the procedures for transferring IPRs and form a part of Technology Transfer Regulations in India.
  • According to the Patents Act, any interest in a patent, including an assignment or licence, must be through a written document that contains all the terms and conditions governing the parties' rights and obligations. This document must be registered with the Controller of the Patents.
  • A registered trademark may be transferred/assigned under the Act with or without the goodwill of the business. To prove ownership of the registered mark, the assignment must be registered.
  • The Copyright Act states that an author may grant his rights to third parties for commercial exploitation in exchange for a one-time payment. Copyright assignments must be in writing and signed by the assignor. The deed of assignment shall include the identity of the work, the rights granted, the term, and the territorial scope of such an assignment, as well as the amount of any royalties due to the author.
  • The National Intellectual Property Rights Policy aims to strengthen the country's IPR framework by raising public awareness of the economic, social, and cultural benefits of IPRs among all societal segments, promoting IPR generation and commercialization, modernising and strengthening service oriented IPR administration, and strengthening the enforcement and adjudicatory mechanisms for dealing with IPR violations.
  • The National Intellectual Property Rights Policy outlines seven objectives that are further defined with steps that must be implemented by the designated nodal Ministry/Department. The objectives include the following steps that are taken in relation to Technology Transfer Regulations in India: -
  • Undertake studies to assess the contribution of IP content in different industries on the economy, employment, exports and technology transfer.
  • Examine the issues of technology transfer, know-how and licensing relating to SEPs on fair and reasonable terms and provide asuitable legal framework to address these issues, as may be required.
  • Promote licensing and technology transfer for IPRs; devising suitable contractual and licensing guidelines to enable commercialization of IPRs; promote patent pooling and cross-licensing to create IPR based products and services. [2]
  • The Act establishes the Competition Commission of India which, is tasked with outlawing anticompetitive agreements that have the potential to cause appreciable adverse effects on competition in markets and prohibits abuse of dominance by enterprises. According to Section 3(5)(a) to (f) of the Act, a technology owner is fully entitled to prevent any violation of his rights and to apply reasonable restrictions that are only required to safeguard those rights.

Technology Transfer Agreements (“TTA") would be deemed anti-competitive if they result in the abuse of a market position by imposing unreasonable terms or if they go beyond what is necessary to maintain such intellectual property rights. The following technology transfer agreements may be deemed anti-competitive and thus null and void:

  • Patent Pooling, in which two or more businesses join and cross licence the relevant technology to prevent others from purchasing it.
  • Tie in Arrangements that require the acquirer to purchase both the patented product and the other product from the patentee.
  • Forbidding the licensee from using technology from a competing enterprise.
  • Restricting the licensee's ability to dispute the legality of intellectual property rights.
  • Fixing the price at which the licensee will sell the licenced goods, etc.

Guidelines for Transfer of Technology in Pharmaceutical Sector

Technology transfer involves a planned, organised strategy with data documentation that covers all stages of development, manufacturing, and quality control, as well as educated, competent individuals operating within a quality system. Sending units (SU), receiving units, and the unit overseeing the processare often included in a system.

Technology transfer is essential to the process of discovering novel drugs and developing new pharmaceuticals. Data gathering, data evaluation, regulatory impact, with a focus on any modification approvals, analytical validation, pilot or full-scale process batch, and stability set down are important steps of the process.

transfer of intellectual property rights fema

Technology Transfer’s Significance to the Pharmaceutical Industry:

  •  To define data needed to transfer technology from research and development to actual manufacturing by organising the numerous data gathered during research.
  •  To clarify the information required to transfer current product technology between multiple production facilities.
  •  To demonstrateparticular steps and issues with the types of technology transfer in order to promote efficient technology transfer.
  • Process For Technology Transfer:

There are two ways to share knowledge and information about technology: formally, through technology transfer agreements, and informally, through the transmission of expertise.

Transferring intellectual property from one organisation to another is done through a Technology Transfer Agreement (“TTA"). TTA is used to refer to a wide range of contracts that are meant to cover the procedure of transferring ownership or the right to use a certain technology from one party to another.

The approval process for foreign technological collaboration is as per FEMA requirements, through automatic route and on approval from RBI.

The Project Approval Board evaluates the merits of any other applications for foreign technology agreements that do not fulfil the requirements for automatic approval (PAB).

Applications for such ideas should be sent to the Department of Industrial Policy Promotion , Ministry of Industry, Udyog Bhawan in Form FC/IL (SIA), according to the secretariat for industrial assistance. No fees are to be paid. It takes 4 weeks to get approval after submitting an application.

The following rules would apply to foreign financial/technical collaborators who have previously engaged in business or have ties to India:

  • Those who have or had any prior joint ventures, technology transfer agreements, or trademark agreements in the same or related fields in India would not be eligible for FDI and/or technological collaboration through an automatic method.
  •  Investors in technology for the aforementioned category of suppliers will need to seek FIPB/PAB approval for joint ventures or technology transfer agreements (including trademarks), outlining the specific reasons why they feel it is necessary to establish a new joint venture or entera new technology transfer.
  • The burden of evidence to the satisfaction of the FIPB/PAB that the new proposal will not in any way harm the interests of the current joint venture, technology/trademark partner, or other stakeholders falls squarely on such investors/technology suppliers. The FIPB/PAB shall have the exclusive power to accept the application with or without conditions or to reject it outright while properly documenting its justifications.
  • Challenges Faced In Technology Transfer:
  • R&D is risky & costly
  • Uncertainty in the outcome and long gestation period
  • Strict adherence to the time schedule
  • Lack of experience in introducing first-of-its-kind productsglobally
  • Unethical competition and infringement
  • High patent costs.
  • Opportunities In Technology Transfer:
  • Creates a forum for the exchange of ideas
  • Safeguards intellectual property.
  • Encourages economic growth by utilising breakthrough technology for commercial purposes.
  • Obtains goals through sharing and/or combining resources that neither side could achieve alone.

India has invested a large amount of public money in creating top-notch research institutes and providing them with enough funding. It is crucial that the technology created by these institutions be commercialised and that society or the government receives the advantages. Thus, a strong technology transfer policy is essential.

To overcome the difficulties of a fast-paced technology transfer, a thorough process map with a clear sequence of activities may be used to launch technology transfer and production. For which, businesses employ a control-tower strategy.The best practise for such transfer, the development of the knowledge-management infrastructure, and the use of digital and advanced analytics tools for transfers by assembling a team of top specialists and holding a hackathon based on current process maps. By doing this, we can respond promptly to any technological difficulty, enabling speedier transfers, faster delivery of essential medications, and ultimately aiding in the preservation of lives and livelihoods.

What are the key regulations governing technology transfer in India? 

Indian Contract Act, 1972, Competition Act, 2002, Foreign Exchange Management Act, Copyright Act, 1957, Trademark Act, 1999 and Patent Act, 1970.

What are the challenges faced in technology transfer in India? 

1. R&D is risky & costly 2. Uncertainty in outcome and long gestation period 3. Strict adherence to time schedule 4. Lack of experience in introducing first of its kind products globally. 5. Unethical competition 6. High patent costs 8. Infringement

What is a technology transfer agreement?

Transferring intellectual property from one organisation to another is done through a Technology Transfer Agreement (TTA). It is used to refer to a wide range of contracts that are meant to cover the procedure of transferring ownership or the right to use a certain technology from one party to another. TTA’s are essential tools for making sure that new innovations are produced via collaboration between various academic and commercial organisations in the life science industry and that current ones are utilised effectively.

[1] Item 8 of Schedule II to the Foreign Exchange Management (Current Account Transactions) Rules, 2000.

[2] https://www.meity.gov.in/writereaddata/files/National_IPR_Policy.pdf

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Flipping the structure for Indian start-ups -- Timing it right is critical

For representational purpose.

India is one of the fastest-growing startup destinations and is touted to be the second-largest startup ecosystem in the world. With greater focus from the government, better incubation support and improved access to funding, the number of startups being formed is on the rise.

As startups grow and begin to have a global footprint, one sees a steady increase in founders wanting to externalize/flip their structure (i.e) have their holding company in countries like Singapore, US, UK, Netherlands, etc. Externalization/ flipping of the structure essentially means flipping the holding company of the startup outside India.

transfer of intellectual property rights fema

Typically, the reasons for externalization are easier access to funding, stable regulations, the familiarity of the structure for Private Equity investors, and a conducive platform for public listing in overseas jurisdictions.

While multiple options are available to externalize a structure ranging from plain vanilla share transfers, share swaps to outbound mergers/ other internal restructuring exercises with multiple steps, the key lies in timing the externalization right post factoring some red flags.

Some of the key considerations are discussed here:

1) Round tripping and other restrictions under the Foreign Exchange Management Act, 1999 (FEMA)

Round tripping refers to the flow of funds from India to overseas which in turn is invested back into India. The issue of round-tripping in an externalized structure arises when some of the founders remain Indian residents.

While round-tripping is not expressly defined, the restriction has inherently been there under the regulations on overseas direct investment by Indian residents. The RBI updated its FAQs in 2019 and specifically clarified that it does not permit an Indian resident to set up an Indian subsidiary through its overseas company or acquire an overseas company that already has direct/indirect investment in India under the automatic route – a specific approval is required from the RBI in those cases.

In summary, if the founders of the startup are based outside India, the issue of round-tripping may not arise. On the contrary, if some of the founders are based in India, then the restrictions on round-tripping, the possibility of getting an approval from the RBI, alternative options like ESOPs/ phantom stocks would need consideration.

2) Intellectual Property (IP)

Startups in their early stages would have developed their IPs in India which is undoubtedly the most precious asset. A protective IP environment is quintessential for the entire startup ecosystem which is immense for value creation and growth of business. Various legislations are prevalent to protect and leverage the intellectual property created by startups, which are in the nature of: (a) Patents, (b) Copyrights, (c) Trademarks, (d) Designs, and (e) Trade Secrets. India has complied with its obligations under the Agreement on Trade-Related Intellectual Property Rights (“TRIPS”) to align itself with global IPR jurisdictions. The Budget 2020 referred to improved protection for Intellectual Property Rights through a dedicated policy. The Indian income-tax law also has a Patent Box Regime providing incentivized tax rate on royalty income earned from patents developed in India.

In some cases, the founders prefer to transfer the IPs to overseas companies from an IP protection, control and valuation standpoint. Transfer of IP to an overseas company is permitted under FEMA subject to certain conditions which inter-alia includes the requirement to transfer the IP at fair market value – nonadherence to the fair market value would be viewed as shifting value outside India triggering RBI scrutiny. The valuation of IP especially in startups is very dynamic and could significantly vary in a bootstrapped stage vs a seed funding stage vs a mature stage. Further, the gains on transfer of IP would also be subject to income-tax in India and would need to be at fair market value from a transfer pricing standpoint.

Given the same, the need for transfer of the IP to an overseas jurisdiction, the timing of the transfer and the basis of valuation of such IP assumes significance.

3) Tax costs on transfer of shares

In case of any restructuring involving transfer of shares/ assets, income-tax may become payable subject to certain conditions. Income-tax in such scenarios would typically be based on the fair market value of the assets being transferred.

Hence, in cases where the externalization is planned after multiple rounds of funding or closer to an exit, there could be significant accretion to the fair market value of such start-ups triggering substantial tax costs. On the other hand, flipping the structure at the initial stages would be tax optimal but would result in numerous regulatory/ compliance hassles. Hence, timing the flip at the right time becomes a critical decision point.

4) Regulations on place of effective management

Under the Indian income-tax laws, an overseas company could be regarded as an Indian resident and its global profits could be subject to income-tax in India if the place of effective management (POEM) of such company is in India – this is subject to satisfaction of certain revenue thresholds. Hence, if some of the key founders of the startup remain Indian residents, then the need to flip the structure requires a closer look having regard to the POEM regulations.

In summary, externalization of a structure is not a one-size-fits-all approach and need not necessarily be a move in the right direction for all start-ups. The business model of certain start-ups and their growth strategies may necessitate a flip in structure and the benefits may outweigh the complexities and the costs of such externalization. On the other side, the ethos of certain businesses, their positioning in the market, their access to funding and personal aspirations of the founders may not require an externalization. Also, the recent developments directed towards permitting Indian companies to list in foreign stock exchanges is a welcome measure and would provide better access to global capital without the need of having an overseas entity. At the end of the day, a business structure would need to necessarily facilitate growth of the business and can never be an impediment. It is therefore important to have a bespoke structure that would be the right fit for each organization.

Co-authored by Pawan Jhabakh, Legal Counsel, India and Palaniappan. A, Chartered Accountant, India.

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Drafting Intellectual Property Rights Transfer Agreements - Part II

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Home | Knowledge Center | Thought Papers Drafting Intellectual Property Rights Transfer Agreements - Part II

06th Aug, 2020

  • Corporate and M&A

In the first part of this series on intellectual property (“ IP ”) transfers available here , we discussed the legal provisions governing assignment and license of IP. In this second part, we will discuss the various transfer related clauses in IP assignment and license agreements and the manner in which these clauses must be drafted.

As discussed in the first paper of this series, IP can either be assigned or licensed by the owner, allowing the commercial use of the asset in various forms. Apart from this, various other commercial arrangements also lead to the creation of IP. For instance, IP can be created under an employment agreement, a collaboration among multiple persons, a commissioning agreement or a consulting agreement. These are just a few examples. In all the above circumstances, it is important to have an effective contract that clearly establishes the rights held by the parties concerned. In this paper we cover two issues. First, we will look at certain crucial clauses that are an integral part of IP transfer agreements, and broadly discuss the structure and framing of these clauses. Second, we will look at some specific types of agreements dealing with IP creation and transfer, and also cover some of the key commercial and legal aspects of these agreements.

Generally, in agreements concerning the use and/or transfer of IP, the following clauses are important:

1. Assignment:

In any IP assignment, there is a clause specifically assigning/transferring the title in the IP from the assignor to the assignee. This clause must clearly state the extent of the rights that are being granted to the assignee. Assignments must contain express language such as “hereby assigns”, which indicates that the assignor is assigning rights in an existing or a future work in the present. [1]

Example: “Rights granted– X hereby grants, conveys and assigns to Y all the rights in the [Work], including without limitation the following exclusive rights throughout the Territory (as defined in clause [•]) for the Term (as defined in clause [•]) –

- insert a list of all rights in relation to the [Work] that are being assigned -"

Points to remember:

1.1. Work/invention/mark/property: It is advisable for the agreement to have a specific definition for the work or the invention or other IP that is being assigned. In this way, the assignment clause can be short and precise without having to define the work/invention that is being assigned.

1.2. Indicative list of rights: The assignment clause must contain an indicative list of rights, i.e., a list of ways in which the assignee may use the work/invention. These words are normally borrowed from the statute but drafted in a manner that is consistent with the intent of the parties. For instance, in the case of a cinematograph film, one of the rights assigned would be the right to make, sell, distribute copies of the film and communicate the film to the public.

2. License:

In an agreement where IP is licensed, there is no transfer of title. Therefore, the agreement must contain a clause demarcating the specific rights of use granted to the licensee. It is advisable to use clear terms such as “hereby grants a license”.

Example: “Grant of License– The Licensor hereby grants to the Licensee a non-exclusive, non-transferable, non-sub-licensable, non-delegable and conditional license to use in the manner agreed hereinbelow, the Trademark, solely in relation to the business operations of the Licensee, within the Territory and for the Term:

- insert a list of all rights in relation to the trademark that are being licensed -"

2.1. Intellectual Property: The IP, whether it is a work/invention or trademark, that is being licensed must be specifically defined in a separate clause. As stated in 1.1 above, it makes for easier and cleaner drafting of the license clause.

2.2. Exclusive/non-exclusive: This is the most important part of the license grant which must clearly indicate whether the license is exclusive or non-exclusive.

2.3. Sublicense/further transfers: If the intention of the parties is that the license remains with the licensee alone, the clause must specify that the licensee does not have the authority to sub-license or further transfer the rights granted under the license.

2.4. Indicative list of rights: Given that a license can be far more limited than an assignment in its scope, it is advisable to include a list of specific uses that are permissible under the license. Further, the licensor may also clarify that the licensee is not permitted to do anything other than what is stated in the license.

2.5. The ownership of any IP must be mentioned, and the licensor must have the right to immediately know when there is a possibility that the IP may have been infringed by a third-party.

3. Term and termination:

The assignment or license agreement must contain separate clauses defining the term and instances when the agreement can be terminated.

a. “The rights assigned herein shall be irrevocable and shall be vested in the assignee for perpetuity including without limitation, for the full term of copyright protection everywhere in the world and any and all renewals, extensions and revivals thereof.”

b. “This License shall come into effect on the Effective Date and shall remain valid and binding on the Parties until such time that it is terminated in accordance with clause [•] of this Agreement.”

c. “This License shall come into effect on the Effective Date and shall remain valid for a period of 5 (five) years from the effective date unless it is terminated in accordance with clause [•] of this Agreement.”

Termination:

“This Agreement may be terminated: a) by mutual agreement of the Parties; or b) on a material breach of any provision of this Agreement by the other Party, provided however that in case of a breach capable of remedy, only if the breach is not remedied by the other Party within the Notice Period. Upon termination: a) either Party shall forthwith hand over to the other Party all documents, material and any other property belonging to the other Party that may be in the possession of the Party or any of its employees or agents; b) each Party shall immediately pay all pending fees or other amounts due to the other Party under this Agreement.”

3.1. Term: The term of the assignment or license can be anything that the parties choose. However, the outer limit of the grant is determined by the term specified in the statute for the IP. For instance, the term of a patent is 25 (twenty- five) years from the date of the application beyond which period the invention enters the public domain.

3.2. Termination: This clause must be drafted with care and caution bearing in mind the agreement between the parties. Further, if the agreement involves promises that can only be performed by a specific individual, termination by such party must not be permitted. In any event, if the assignment is irrevocable in nature, termination must not be permitted unless there is a material breach and terminating party must be required to serve adequate notice. Once the agreement is terminated, the IP will revert to the assignor or the licensor, as the case may be. Any IP that still remains with the transferee must be returned to the transferor or destroyed (when appropriate) upon termination.

4. Territory:

The territory for which the IP is assigned is crucial to be specified in the agreement. The same IP can be assigned or licensed to two or more separate entities for use and exploitation in different territories. If this is not clearly specified in the agreement, the territory might be deemed to be India as a whole. This would render any subsequent assignment or license impossible to carry out.

Example: “The assignment/license granted herein shall be exercisable within the territory of India (“Territory”).”

5. Consideration:

The agreement must contain a clause on consideration or fees/payment to be made for transfer of the IP. This clause must define the manner in which payments will be made by the assignee or licensee. There are several ways in which payment terms can be structured; some of the most common modes are discussed below:

5.1.  Lumpsum payments: IP rights can be granted in exchange for a lumpsum payment where the grantee can pay a specific sum of money in the manner prescribed under the agreement. This amount can be paid either as a single payment or in instalments.

a. “In consideration of Licensor granting a license to use the Intellectual Property in terms of this Agreement, the Licensee shall pay a monthly fee of Rs. [•] ([•]) to the Licensor (“License Fee”).

The Licensee shall pay the License Fee to the Licensor by way of wire transfer, no later than [7 (seven) days] prior to the commencement of each month.”

b. “As consideration for all the rights granted and assigned in the Intellectual Property by the Assignor, the Assignee agrees to pay a sum of Rs. [•] ([•]) to the Assignor in the following manner:

i. Rs. [•] ([•]) via -insert mode of payment-  on the Execution Date;

ii. The remaining sum of Rs. [•] ([•]) via -insert mode of payment-  no later than -insert date- ”

5.1.1. In the event the parties agree on payment in instalments, the agreement must clearly specify the schedule.

5.1.2. The mode of payments which are acceptable to both parties must be specified.

5.1.3. The agreement must also provide for consequences of delay in payment, if any.

5.1.4. The payments clause must specify the taxes, if any, that are deductible.

5.2. Royalty: In consideration for the rights granted, the assignor or licensor may also require that royalty be paid. Typically, royalty payments will be a portion of the sales revenue earned by the use/exploitation of the IP rights granted.

a. “In consideration of the rights granted in clause [•], the Licensee shall pay to Licensor a royalty (the “Royalty”) equal to [•]% of Net Sales occurring during the Royalty Term. The royalty under this clause shall be payable no later than 5 (five) business days after the last day of every quarter.”

b. “Royalty will accrue upon distribution of any copy of [software] delivered or sold in the manner specified in clause [•]. Rs. [•]/[•]% of the sale price of any copy of [software] shall be payable as royalty on each copy sold. All accrued Royalty shall be paid to the Licensor within [•] days after the end of each fiscal quarter, which ends on the last day of each of March, June, September and December. Payments shall be accompanied by a report stating the number of units of [software] sold/distributed in the relevant quarter, and the calculation of the royalty payment.

5.2.1. While royalty is typically represented as a percentage portion of the net sales revenue, it can be structured in any manner as the parties deem fit.

5.2.2. Royalty must be payable for the royalty term, which can either be for the whole term of the agreement or only a part of the term.

5.2.3. The schedule for payment must be specific and must always be accompanied by proper accounts for the relevant period showing the manner in which royalty payments have been calculated.

5.2.4. The agreement must also provide for consequences of delay in payment, if any.

5.2.5. The payments clause must specify the taxes, if any, that are deductible.

5.2.6. The method and frequency of invoicing must also be included.

6. Representations, warranties and covenants:

Apart from the representations and warranties that are usually included in agreements, including in relation to capacity and execution, there are certain specific warranties that should be included in IP related agreements.

6.1. The person granting the rights must represent that he has the sole and absolute ownership of the IP and is therefore entitled to grant rights either by way of assignment or license.

6.2. The person granting the rights must also represent that the IP in which the rights are being granted does not infringe any third party’s IP rights.

7. Indemnity

The person granting the rights must ordinarily indemnify the other party from any legal proceedings or costs arising as a result of defective title in the IP or any third-party claims of infringement. The person granting the rights, especially in a license, must be indemnified against all illegal and improper uses of the IP including indemnification against any legal proceedings that may arise as a result of such actions of the grantee.

8. Further assignments:

Depending on the rights being granted and the discussions between parties, the rights that are being transferred may be further assigned by the parties. Note however, there must be a clear bar on further assignment of rights and obligations especially when the promises made by the parties concerned are personal in nature.

9. Standard form clauses:

Other than the specific terms detailed above, all the standard form clauses that find their place in other agreements must also be included in IP assignments and licenses.

In this part we will discuss certain specific types of agreements and clauses in relation to copyrights, patents and trademarks.

1. Copyright:

1.1.  Film-related agreements: The producer of a film is the author of a film. [2] The producer enters into several agreements including with writers, composers of music, etc. in order to create various works which will be included in the film. An effective contract between the producer and other authors such as the music composer, writer, etc. would help avoid any disputes as to the ownership of the film and the use of other content in the making of the film. The producer also enters into agreements with financiers to finance the making of the film, and with distributors and digital partners. Some aspects of these agreements have been discussed below:

1.1.1. Agreement with composer of music: It is industry practice for the producer of a film to engage the music composer to compose the music and the background score for the film. Under the Copyright Act, 1957 (“ Copyright Act ”), the composer is the author of the musical work. It is often the case that until the release of the film the producer retains the copyrights in all the musical works by entering into a contract of service with the music composer. [3]

The producer, as the owner of the copyright in the musical works under a contract of service, can either retain all the copyrights or assign the rights to a music label. Usually, when the producer assigns the rights in the musical works to a music label, the producer, who is the owner of the film, retains the right to use the sound recording as a part of the film, and the music label would then hold the rights in the sound recordings and the underlying musical works, and can commercialize such music through sales or further licenses. The basic goal here is for the producer to leverage the rights in the music in a profitable manner.

While this is generally the industry practice, it is legally possible for a composer to retain the rights in his works. Such an agreement would encompass a limited license from the composer allowing the use of the musical works in the film by the producer.

1.1.2. Agreement with lyricist: Similar to the composer, the lyricist is also engaged by the producer to write the lyrics for various songs that are usually part of Indian films. Copyrights in lyrics, which are literary works as per the Copyright Act, will be retained by the producer or transferred by him to the music label. The lyricist is also eligible to receive unassignable royalty from the use of the lyrics.

i. To protect the interests of the producer, the agreement with the composer and lyricist must contain a clause that clearly states that all the IP in the musical and literary works will belong to the producer.

ii. In appropriate circumstances, it is also prudent to include a clause giving creative control over the final product to the producer.

iii. As discussed in Section 1.2.2 of the first paper in this series, composers and lyricists continue to retain unassignable royalty rights in the musical works.

iv. These agreements must contain a clause with specific timelines within which the composer must deliver the musical works.

1.1.3. Agreement with writers: The producer of a film usually engages more than one writer to write the story, script, screenplay, dialogues, etc. These works amount to literary works under the Copyright Act. It has been held by the Madras High Court in Thiagarajan Kumararaja v. Capital Film Works, [4] that the producer of a film has the rights to dub the film into any number of languages and this right is part of her copyright under Section 14(d) of the Copyright Act. On the other hand, it has also been held that the producer can remake the film in any number of languages only if she owns the script because remaking a film would require changes being made to the underlying script. Therefore, where a producer proposes to remake the film in various languages, apart from permission to use the script for the making of the film itself, the producer needs to entirely retain the copyrights in the script in order to be able to remake the film. [5]

i. If it is the intention of the producer to make remakes or sequels of the film, it is advisable for her to ensure that she owns the script. Whether the agreement is a contract of service or otherwise, it is prudent to have an IP clause specifically stating that the producer seeks to own the script.

ii. On the other hand, if the writer owns the script, any remake can only be made with a license from the writer.

iii. The contract must specify the degree of creative control each party has over the script or story.

iv. If the producer seeks to own the script in its entirety, she must also ensure this includes the characters and other distinctive elements of the script. [6]

v. This agreement must contain a clause with specific timelines within which the writers must deliver the scripts.

1.1.4. Agreements engaging principal director, actors and other individuals: Under Indian law, a director of a film does not have any copyrights in any aspect of the film. Therefore, producers in India can enter into a regular contract of service with the director. There will be certain circumstances where the director is also the scriptwriter, in which cases there can be a common agreement which includes the terms in 1.1.3 above and the contain clauses covering her directorial responsibilities. The director will be remunerated for her services.

Additionally, there are agreements that the producer enters with actors and other artists. These agreements will define the roles and responsibilities of the actor and her remuneration. The actor or other artists typically do not own any of the copyrights in the content or the character.

1.1.5. Credits clauses under 1.1.1 to 1.1.4: The parties to these agreements must also approve the manner in which each of these persons is credited in the film.

Example: “The Parties agree that the Composer shall be credited in the film as “Music by ______” by the Producer. The Composer shall have no copyrights in the sound recordings or the Musical Works in the film by way of such credits.”

1.1.6. Financing agreement/film investment agreement: The producer can enter into agreements with various persons for raising funds to make a film. These agreements can be structured in many ways and might in certain cases result in transfer of ownership of IP. Some types of investment agreements are discussed below:

i. Film investment agreement: The producer and the third-party investor can agree to co-produce the film. In these cases, the parties must arrive at a revenue sharing arrangement. The co-producer will also have a share in the IP that is consequential to the extent of investment.

ii. Rights agreement: The producer can, in exchange for money, grant the financier some right in the IP. For instance, if the producer seeks an investment of Rupees Fifty Lakhs, he can grant the dubbing rights, or overseas distribution rights in exchange for the same. Such agreements work just like assignments or exclusive licenses but are a useful way in which producers can raise funds.

1.1.7. Theatrical distribution agreement: Producers must also enter into various distribution agreements with several distributors for distributing the film in theatres in various territories. Essentially, what the distributor receives under these agreements is a limited license or assignment to communicate the film to the public through theatrical distribution. The term of these agreements is limited to the period during which the film would be distributed in theatres.

Example: “In consideration of the mutual promises, payments and other terms contained herein, Producer hereby exclusively [assigns/licenses] to the Distributor the right to communicate the Film to the public only via theatrical distribution in the Territory for the Term.”

1.1.8.  Production of television/web-series/other shows/online content: For the production of any other content, all the agreements described in 1.1.1 to 1.1.8 will be used. However, the manner in which the IP is shared and owned may differ depending upon the facts and circumstances of each case. For example, let us say XYZ Pvt. Ltd. is producing a stand-up comedy special with a prominent comedian Mr. P. The parties can agree that the content will be written, performed and, therefore, owned by Mr. P, and where XYZ Pvt. Ltd. only takes a commission and a share of the revenue.

1.2. Album production:

1.2.1. Agreements with music composers and lyricists: These agreements are similar to the agreements described in 1.1.1 and 1.1.2 above. The producer of the sound recording may engage composers and lyricists and seek to retain the copyrights in the underlying works along with the sound recording he produces and owns.

1.2.2. Agreement with the singers/other artists: The singers and other artists are usually engaged under a contract of service to sing in a studio, which performance is recorded, edited and produced into a sound recording at the instance of the producer. The singer does not own the copyright in the musical work, literary work or the sound recording itself.

1.3.  Digital distribution of copyrighted works: Songs, films or any other copyrighted content can be distributed and communicated to the public through a variety of digital platforms. Today, most popular among these are OTT platforms such as Netflix, Prime Video, etc. Typically, these entities enter into either an exclusive license with the owner of the content for a particular term and for a specific territory. Since these entities are able to geo-block the content, they avail territory specific licenses for various titles. Therefore, a TV series that is available in the United States of America on X OTT service, may instead be available on Y OTT service in India. These entities do not seek a complete transfer of title typically but restrict themselves to a license for a specified term.

i. The agreements must contain a schedule detaining the timeline for delivery of prints and materials to the platform along with the technical specifications for such materials.

ii. Clauses must specify the manner of use of any trademarks and other artwork belonging to either party.

iii. The consideration or license fee can pe paid in a single lumpsum payment or be divided into instalments.

1.4. Book publishing agreements: These agreements are entered between the authors of books and publishers. Under the Copyright Act, the author of a literary work has the right to make copies of her work and sell them. However, such rights are normally transferred to publishing houses that have the means to mass produce the book and aid in the distribution of the work. This may also include various formats in physical or digital form. The rights granted could also include the right to translate the books into various languages. Typically, the author retains the right to make film/television adaptations of the book.

Example: “The Author grants the Publisher the exclusive right during the Term to reproduce, print, publish, distribute, translate, display and transmit the Work, in whole and in part, in the Territory, in such languages and formats as agreed to between the Parties. It is clarified that no film, motion picture, television, radio, dramatic or other adaptation rights are granted to the Publisher and the Author can exploit such rights.”

i. Publishing agreements must contain detailed clauses on when the author will deliver the work to the publisher.

ii. The acceptance of the work for publication is usually left to the discretion of the publisher.

iii. The author gives the publisher the sole and exclusive right to publish and distribute the work. The author, however, may retain other rights such as the right to translate the work, the right to make adaptations, the right to make films, etc.

iv. The author is usually paid a certain advance amount on the date of signing of the agreement. Additionally, royalties may be paid to the author for the sale of each copy of the work payable as a percentage portion of the net sales revenue earned by the publisher.

v. The onus of receiving any prior approvals for copyrighted works to be included in the book usually lies with the author.

1.4.1. Option Purchase agreements: Such agreements are typically entered into between the author of the book and a producer. The agreement grants an option to a purchaser to avail an assignment or a license at a future date to make film/television/digital adaptations of the book. For example, A, the author of a book, can enter into an option-purchase agreement with B who wants to make a film-adaptation of the book. The option purchase agreement will give B a specific timeframe for some groundwork such as testing the viability of the project, raising funds, etc. At the end of the option period, B can exercise the option and have the adaption rights assigned or licensed to her. The author is usually offered an option-fee for the period during which the grantee-purchaser holds on to the option. Once the option is exercised, the parties can enter into an assignment or a license agreement as the case may be.

1.4.2. Adaptation agreement: If the film is based on a story or book written by a third-party upon which the producer seeks to rely, then the producer may avail an adaptation license from the author of the literary work.

1.5.  Software license: In India, software is a subject matter of copyright law. The person writing and creating the program holds a copyright over it. The software can therefore be licensed by the owner for use by another entity. Software licenses are normally granted by companies to their users usually based on a subscription fee model.

Example: “Entity hereby grants the customer a non-exclusive, non-sublicensable, non-assignable, world-wide license to use the Service solely for the internal business operations of the customer in accordance with the terms of use specified herein.”

1.5.1. Platform licenses for user-generated content: If the software is such that it allows the creation, storage and dissemination of user-generated content, the entity licensing the software must also take a license from each user to store and disseminate the user-generated content. For instance, with applications such as YouTube or TikTok, such a license would be required from the user. The clause must clarify that the user agrees to a non-exclusive, non-sublicensable, non-assignable, royalty-free license to be granted to the entity for the use of the content while the user continues to retain all the copyrights in the content.

1.5.2. Software as a service: Typically, in these agreements, there is an entity that has developed a software and provides services that aid in the productive use of such software. The entity enters into an agreement with the customer granting a customer a license to use the software for its business operations while the entity retains the IP in the software.

Example: “The Company agrees to license and grant access and right to use the Application to the Subscriber and provide to the Subscriber all other services necessary for the productive use of the Application, including, initial setup and installation, user identification, user account and password change management, data import/export, remote technical support, maintenance, training, backup and recovery, and change management ("Services") as further set forth in Schedule [•] of this Agreement.”

i. These agreements must contain a clause preventing any reverse engineering of the software and controlling security breaches. This would also include clauses pertaining to data security and data protection.

ii. The data that belongs to the customer will continue to belong to her while the licensor/service provider will continue to own the software.

1.5.3.  Software development agreement: In certain cases, one may choose to engage the services of a third-party software developer to develop a software or product under a contract of service. For instance, A may have a concept or idea but may not have the expertise to engineer the product. A can engage the services of B, third-party developer, to develop the product. B will be remunerated for his services. But A, whose resources (typically monetary resources as A would bear the operational costs) were expended on developing the product, will be the owner of the IP in the product.

Example: “The Service Provider agrees that all original works that are made by the Service Provider (solely or jointly with others) using the Company’s resources, or any other assistance that may be provided by the Company, pursuant to this Agreement, are protectable by copyright as “works made under a contract of service” under the Copyright Act, 1957.

The Service Provider hereby agrees to transfer and assign all intellectual property rights that may be developed or created by it pursuant to this Agreement without any claim over any such work, and waives any other right that the Service Provider may have in law.”

1.5.4.  Application programming interface (“API”) integration agreement: APIs are tools that permit interaction between various software intermediaries. In API integration agreements, (i) a party licenses its API (either on an exclusive basis or on a non-exclusive basis) to another party for integration of its API into the software (in the form of an app or website), or (ii) two parties propose to integrate their software to create a new product.

i. In these agreements, there must be a two-way obligation to keep the licensee’s tool/programme and the licensor’s API fully functional and usable at all times.

ii. These agreements would also contain clauses on data security, data protection and covenants on the basis that security breaches will be controlled and monitored.

iii. It must be specified that the integration agreement will not result in any transfer of IP and each party will continue to hold their IP rights. However, a limited right to use the tool and the API will be licensed to the other party for the duration of the agreement. In case a new product is created both parties hold rights in the IP jointly.

2. Trademark:

Trademarks can be assigned or licensed irrespective of whether they are registered or unregistered trademarks. Generally, all assignments and licenses of trademarks must be in conformity with the principles and rules under the Trademarks Act, 1999.

Apart from what is covered in Part I of this article, the following must be noted while drafting clauses on assignments and licenses of trademarks.

Assignment:

i. The grant clause in an assignment agreement must clearly specify whether the mark is being assigned together with the goodwill of the business or not.

ii. Assignment agreements must contain a clause/schedule describing all the trademarks that are being assigned, and details pertaining to their registration.

iii. The assignor must agree to execute all necessary documents in order to record the assignment with the Registrar of trademarks under Section 45 of the Trademarks Act.

i. Prevention of naked licensing: While licensing a trademark, the terms of use need to be specific and clear. If a license permits the unbridled use of a trademark without any quality assurance measures in place, such a license amounts to ‘naked licensing’. The clause must also state that the mark can only be used in relation to the goods and services specified in the agreement. Quality control is essential to protect the interests of both the licensor and the end-user of the product.

ii. There must be a separate clause defining the uses of the mark by the licensee that are permitted and uses that are strictly disallowed and not within the ambit of the license.

iii. The agreement must also include a clause stating that no rights in and to the trademarks are being transferred or assigned by virtue of the license.

iv. The more control the licensor would like to exercise over the use of the mark, the stronger must be the quality, use and termination clauses of the agreement.

v. It must be specified that the licensee shall not have the right to further assign or license the mark to any third-party.

Apart from these issues, transfer of trademarks through assignment and license might involve larger commercial arrangements that impact the creation, use and transfer of trademarks. Some of these are discussed below:

2.1.  Transfer of trademark under a franchise agreement: Franchisors typically have proprietary methods of doing business and own trademarks which consumers come to solely associate with the business of the franchisor. Internationally renowned brands such as McDonalds or Krispy Kreme follow this business model where their businesses have proprietary elements which they license to local businesses all over the world. The businesses which acquire a license of this kind under a franchise agreement will have the right to set up a local unit of the franchisors business and run it as per the terms of the franchise agreement.

2.1.1. Use of the franchisor’s trademark: The main condition as to the use of the franchisor’s trademark is that the franchisee will be permitted to use the franchisor’s trademark in accordance with the terms specified in the franchise agreement. Please note that the agreement must clarify that this is a limited use license granted to the licensee and does not result in transfer of ownership. Further, in relation to the franchisor’s business, the franchisee shall not have the right to any mark other than the ones that it is authorized to use under the franchise agreement.

Example: “The Franchisee agrees that the Franchisor is the sole and exclusive owner of the TRADEMARKS and has the absolute right to control the Franchisee’s use of the TRADEMARKS. For removal of doubts, the Franchisee agrees and affirms that it has not acquired any right, title or interest in the TRADEMARKS and that its limited right to use the TRADEMARKS is governed by the terms of this agreement. Further, the Franchisee agrees that it shall not register, in its name or in the name of any associated entity or person, any trademark, logo or domain name that is identical or similar to the TRADEMARKS.”

i. The franchisee must not be permitted to take any action against any infringer without the prior consent of the franchisor. It is best for the franchisor to initiate any legal action as the sole and absolute owner of the mark.

ii. If the agreement is terminated, any action taken by the franchisee in respect of the trademarks must revert to the benefit of the franchisor and the franchisee must stop associating itself with the trademarks of the franchisor.

iii. There must be a clause allowing the franchisor to terminate the agreement if the trademark is used in a manner that would bring disrepute to the business of the franchisor.

iv. There must be clauses controlling the use of the trademark by the franchisee in advertising and marketing literature.

1.2.  Marketing Agreement: A marketing agreement allows a third-party a limited right to display the trademarks of the licensor while marketing, advertising and selling products that belong to the licensor.

i. This agreement has to specify that the licensor continues to own the trademark and this agreement does not result in any transfer of ownership.

ii. Such a license must specify the manner in which the trademark is permitted to be used. Any contravention of such use restriction would amount to a material breach of the agreement.

Patents can be assigned or licensed for specific purposes meaning that patent rights can be granted to make, sell or import the subject matter of a patent.

Some specific agreements pertaining to patentable subject matter are discussed below:

3.1.  Technology transfer agreement: Technology transfer agreements (“ TTA ”) involve the licensor transferring its IP and know-how to the transferee for a specific period of time and for a specific purpose. A large part of arrangements of this nature would depend on the specific facts and circumstances of each case. Not everything that is transferable under a TTA will be IP. One part of the transfer may relate to the licensing of IP such as patents or software for specific purposes, while the other would include information and know-how. Clauses in relation to the sharing of information and other know-how are strictly contractual and are secured by having strong confidentiality clauses in the agreement.

i. The agreement must define the IP or the technical know-how to be transferred clearly. The definition must be tightly worded so as to cover only what is necessary, failing which, the licensee will secure access to more than what was intended by the parties.

ii. The territory within which these rights can be exercised must be specific, and the term must also be specified. The term must be agreed upon based on prevailing norms of the Reserve Bank of India and other regulations in this regard. The termination clause must specify the consequences of early termination, reversion of the IP to the licensor, and, to the extent possible, destruction of any confidential material or information within the possession of the licensor.

iii. Consideration including royalty payments must be structured properly.

iv. As far as the know-how is concerned, the confidentiality clause matters the most. The confidential information must be clearly identified as such. If the information is highly technical, this clause must be drafted in an industry specific manner. The consequences for any breach must be clearly identified.

v. The tax liability under TTAs varies based on whether the parties are Indian or would include foreign collaborators. The tax liability clause must identify the manner in which all taxes must be paid.

vi. TTAs involve heavy obligations on both parties. The licensor must ensure that the technology is used properly and for that ensure that the licensee, at all times, has the technical capabilities that are required to achieve it. This may include training, testing, quality control and other measures. The licensee will have the responsibility to use the technology to the fullest, make all payments on time and to maintain confidentiality throughout the duration of the agreement.

vii. Use of other IP, i.e., brand names or other literature, must be carved out through separate clauses defining all permissible uses.

4. Employment agreement:

Employment agreements must typically contain a blanket clause allowing the use and transfer of all IP created by the employee, during the course of employment, by and to the employer, especially where the employee is a senior member of the team. The clause also grants exclusive rights in all such IP to the employer.

Example: “The Employee agrees that all and any work executed and performed in the course of employment, whether or not conducted on the premises of the Company but related to the business of the Company, is being done on behalf of the Company. In this regard any discoveries, inventions, work created, data produced, concepts, ideas, creations and discoveries belong to the Company. The Employee hereby agrees to transfer and assign all intellectual property rights that may be developed or created by her without any claim over any such work, and waives any other right that she may have in law.

The Employee further agrees to execute, upon the request of the Company all necessary papers and otherwise provide proper assistance to enable the Company to obtain for itself (and to vest legal title in the Company), patents, copyrights, or other legal protection for such inventions, discoveries, innovations, improvements, original works of authorship, trade secrets and technical or business information in any and all countries.”

In this article, which is the second of the two-part series on transfer of IP, we have discussed the manner in which various clauses in an IP transfer agreement must be drafted. There are several ways in which these agreements can be structured, but it is important to keep in mind the intention of the parties and the extent of rights that are to be granted. Similarly, rights must be granted in such a manner that would allow the full and proper use of the IP. Note that the example clauses given in this article are only indicative, and in any agreement, these clauses must be drafted to suit the relevant purpose and context.

This paper has been written by Suchita Ambadipudi (Partner) and Sheetal Srikanth (Associate).

[1] In Waterman v. MacKenzie et.al , 138 US 252, the Supreme Court of the United States held that to determine whether an agreement is an assignment or a license, the legal effect of the clauses and the grant must be considered and not the mere nomenclature of the agreement or the headings for various clauses.

[2] Section 2(d) and 2(uu), Copyright Act, 1957.

[3] Section 17, Copyright Act, 1957.

[4] 2018 (73) PTC 365 (Mad).

[5] For similar issues arising out of making a sequel of a film, see, Ian Eagles “Copyright and the Sequel: What Happens Next?” in F MacMillan (ed), New Directions in Copyright Law, Vol 6, (Edward Elgar Publishing, UK, 2007) pp. 35-65. See also, Zee Entertainment Enterprises Limited v. Ameya Vinod Khopkar Entertainment and Ors. , MANU/MH/0512/2020.

[6] For an overview of issues arising out of character- related rights, see, Arbaaz Khan Production Private Limited v. Northstar Entertainment Private Limited and Ors. , 2016 (67) PTC 525 (Bom).

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transfer of intellectual property rights fema

Transfer of Intellectual Property: Everything You Need to Know

The transfer of intellectual property can seem like a difficult process due to the intangible nature of the property. 3 min read updated on January 01, 2024

The transfer of intellectual property can seem like a difficult process due to the intangible nature of the property. One of the most important things to remember when transferring IP is that you cannot transfer what you do not technically own. 

By creating a license or assignment , you are essentially promising to transfer your ownership rights of the intellectual property. These agreements can often be necessary due to the fact that employees may believe that they own the rights to the intellectual property they create, while the employer may feel they own it as part of the employee's scope of work. 

The rules regarding employee ownership of intellectual property can vary by the type of property that is being protected. In general, the employer will own all

  • Trade secrets

This ownership extends to work that was specifically created during the course and under the scope of the worker's employment. Since the rights of ownership typically have to do with the employee/employer relationship, the general rules do not necessarily apply to independent contractors that work for the company. The rules and laws of intellectual property and ownership can be complex, so if you are trying to obtain rights for work by an independent contractor, it is best to contact a lawyer before attempting to transfer the intellectual property yourself. 

Intellectual property copyrights are extremely important in the growing global economy. The rights were created to help encourage businesses to invest in both innovation and marketing, which are the foundations of capitalism. Intellectual property is so important that it is often traded and used to secure investors and financing.

What Is the Assignment of Intellectual Property Rights? 

An assignment to intellectual property rights  refers to the act of transferring ownership from the assignor to the assignee. The document that creates this transfer is often referred to as the "assignment."

The two parties entering into the assignment can either be legal entities or individuals. The assignment will include language in which the assignor will transfer over their intellectual property rights such as:

  • Industrial Designs

The rights can be full rights or can have limitations to what the assignee is allowed to do or gain from the intellectual property. When intellectual property is transferred, it is most often done for one lump sum of royalties. 

When creating an assignment, it is essential to include all of the rights on a country-by-country basis to make sure that each of the country's national assignment requirements are met. Most intellectual property can be freely transferred by an assignor. 

In some cases, you can also execute a nunc pro tunc which will assign the rights over to the other party with an earlier date than the assignment was executed. The date will need to be specified in the agreement. 

What Does a Valid Assignment of Intellectual Property Rights Require? 

The laws for transferring intellectual property will vary from country to country and be subject to a wide range of rules depending on the national, regional, or international authorities where it is recorded. Since country regulations can vary as well as the type of intellectual property being assigned, it is virtually impossible to have a single set of regulations. The best thing to do is seek out a national representative where you are performing the transfer to ensure that you are complying with all necessary rights. 

What Are Typical Form Requirements for Assignments?

While it is hard to find a one-size-fits-all agreement, there are some basic rules and requirements that should be followed when creating an intellectual property agreement. You should always:

  • Put the assignment in writing
  • Require both the signature of the assignor and assignee or authorized signer for either party
  • Have it signed in ink
  • Keep the originals stored in a safe place
  • Get it notarized if the county requires it
  • Use a specific form if the county dictates

Why Are Assignments Important? 

The proper assignment of intellectual property is important to ensure the timely recording and transfer of rights. It is also essential for claiming priority rights. As soon as an assignment has been recorded the assignee may begin exercising their recently obtained rights. 

If you need help with the transfer of intellectual property, you can  post your legal need  on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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University of South Florida

USF Research & Innovation

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AUTM presenter of award

AUTM President Andrew Maas announces the winner of the 2024 Better World Project Award at the organization's national conference for university technology managers.

USF wins AUTM's Better World Project Award for Professor Yeh's NEWgenerator

  • February 23, 2024
  • Honors and Awards

michele and roisin with AUTM president

AUTM President Andrew Maas with USF Technology Transfer Director Michele Tyrpak and Associate Director Roisin McNally at the annual meeting in San Diego.

AUTM , the national organization for university technology managers, has named the University of South Florida the winner of its 2024 Better World Project Award. The USF Technology Transfer Office worked with inventor Daniel Yeh, a professor in the Civil & Environmental Engineering Department , and his team to secure intellectual property protection for NEWgenerator. The solar-powered innovation provides off-grid sanitation for people in remote locations and safely recovers nutrients, energy and water from human wastewater. The award was announced on the final day of AUTM's 2024 Annual Meeting in San Diego, CA.

Hundreds of elementary school students in South Africa lack access to clean water and sanitation due to their remote locations. They rely heavily on dangerous pit and chemical toilets, particularly in areas where water is scarce.  

Now those students and others have a new option for safe sanitation: NEWgenerator , designed and developed by Dr. Daniel Yeh and his team at USF. The solar-powered innovation provides off-grid sanitation and generates nutrients, energy and water by safely recovering them from human wastewater. 

NEWgenerator and Daniel Yeh

Professor Daniel Yeh with his NEWgenerator technology in South Africa.

NEWgenerator’s unique technology uses microbes to break down waste and is different than typical wastewater treatments because it recoups what other methods cast off. Byproducts such as nitrogen and phosphorus can be harvested as fertilizers, and the clean water can be used for irrigation or other applications.  

The USF invention requires little energy to use and creates an energy source in the form of methane gas. The entire process is net energy positive, which means it generates more energy than it consumes. This innovative technology, which is self-sustaining and operates completely off-grid, is designed to help take the strain off sewage infrastructure and help solve water and sanitation problems worldwide. 

Recognizing the potential impact of this breakthrough technology, the USF Tech Transfer Office (TTO) collaborated with the inventors, lawyers and the university to secure IP protection. To ensure this technology could reach the people who needed it most, the TTO team negotiated non-exclusive license agreements with companies in foreign countries and partnered with organizations like the Bill & Melinda Gates Foundation.   

After successful testing with electronic toilets in India in 2016, Yeh and his team installed NEWgenerators in Durban, South Africa as part of a $1.14 million grant from the Gates Foundation through its Reinvented Toilet program. NEWgenerators were connected to restroom facilities that include toilets, showers and sinks to recycle water for toilet flushing, cutting down on water demand. They also captured nutrients for fertilizers to help local community gardens, creating a potential food source.  

“As an engineer and an educator, I feel blessed to be in the position to witness our team’s invention make a direct improvement on the lives of the school children,” Yeh said. 

Yeh and his team are in talks with disadvantaged communities throughout the US as well, bringing safe sanitation to challenging rural environments. 

It wasn’t an easy journey for the team, which includes senior development engineer Robert Bair, who’s been working on the project since he was an undergraduate student at USF.  

“It has been an incredible opportunity to have worked on the technology since its inception. Plenty of hours, blood, sweat and tears were necessary to get us to this point. All that effort was worth it, knowing that we are making a positive impact in people’s lives," Bair said.   

Since entering mass production, the NEWgenerator has been modified to reduce costs – utilizing locally made materials and adjusted for local customer requirements.  

The NEWgenerator took home top prize from the Cade Museum in 2014. Other funding awards received include the USF Bull Ring Accelerator Grant (BRAG), NSF I-Corps Team and Florida High Tech Corridor. Yeh’s team was also recognized by the USPTO, winning a 2020 Patents for Humanity Award. 

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  1. India: Transfer Of Intellectual Property

    There are several ways in which IP can be monetized. 1 The IP owner can utilize these rights herself, or these rights can be transferred or licensed to other parties in exchange for a fee, royalties or other kinds of payments.

  2. Reserve Bank of India

    Answer: According to section 6 (4) of the FEMA, a person resident in India can hold, own, transfer or invest in any immovable property situated outside India if such property was acquired, held or owned by him/ her when he/ she was resident outside India or inherited from a person resident outside India.

  3. Foreign Exchange Management Act Notification

    In exercise of the powers conferred by clause (i) of sub-section (3) of Section 6, sub-section (2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), and in supersession of Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time, the Reserve Bank of India makes the following regulations, namely: -. 1.

  4. The Pandemic Treaty and Intellectual Property Sharing: Making Vaccine

    Fairly early on in the pandemic, a number of initiatives were taken aimed at voluntary sharing of intellectual property, including know-how and transfer of technology. In May 2020, the WHO established the COVID-19 Technology Access Pool (C-TAP). C-TAP was set up to offer a platform for developers of COVID-19 therapeutics, diagnostics, vaccines ...

  5. Flipping of Structures

    Transfer of IP to an overseas company is permitted under FEMA subject to certain conditions which inter-alia includes the requirement to transfer the IP at fair market value. Transfer pricing regulations should be kept in mind while structuring the flip. D. Companies Act Considerations:

  6. Offshore transfer of IP assets by pharma firms under RBI radar

    MUMBAI: For years, many pharma companies in India have been moving their intellectual property (IP) assets — the firms' prized possessions — to offshore subsidiaries in destinations like Dubai, Ireland, Switzerland and the UK for strategic reasons or to lower, or even escape, tax.

  7. Reserve Bank of India

    1. Short Title & Commencement:- (i) These Regulations may be called the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Third Amendment) Regulations, 2016. (ii) They shall come into force from the date of publication in the official Gazette. 2. Amendment to Regulation 2 A.

  8. WTO

    The TRIPS Agreement Article 8 Principles […] 2. Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

  9. What the COVID-19 pandemic revealed about intellectual property

    The COVID-19 pandemic dispelled some myths underlying intellectual property policy and revealed how stakeholders can develop policies to accelerate development and ensure access using existing ...

  10. Intellectual Property and Technology Transfer

    Technology transfer (TT) is a collaborative process that allows scientific findings, knowledge and intellectual property to flow from creators, such as universities and research institutions, to public and private users. Its goal is to transform inventions and scientific outcomes into new products and services that benefit society.

  11. February 2024: Impact of a waiver of intellectual property rights for

    COVID-19 Innovation Intellectual property Pandemic preparedness Technology transfer Trade. As discussions on an extension of a waiver of intellectual property (IP) rights on COVID-19 therapeutics continue, latest evidence and data published today explains what the adverse impact of a waiver may be on the entire innovation ecosystem and the ...

  12. Understanding Technology Transfer Regulations In India

    1. They strengthen commercial ties. 2. TT Agreements make a legally-binding, contractual agreement that is enforced by both parties. 3. Handle intellectual property, including ownership, licencing, and royalties (such as patents, copyrights, trademarks, and industrial designs). 4. Help in accessing technology. 5.

  13. Intellectual Property Rights, Internalization and Technology Transfer

    250. Intellectual property protection affects the manner in which multinational enterprises facilitate technology transfer from the innovating North to the developing South. Firms with products that are complex or technologically sophisticated will tend to internalize production through foreign direct investment. Firms that face a lower risk of ...

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    has arisen. The new model moves the transfer of intellectual property rights from a supporting role to the sole basis of the company's existence. Patent "aggregator" companies have arisen that obtain large numbers of patents, whether via internal labs or by purchasing patent rights from other companies and individual inventors. These include

  15. Flipping the structure for Indian start-ups -- Timing it right is critical

    Transfer of IP to an overseas company is permitted under FEMA subject to certain conditions which inter-alia includes the requirement to transfer the IP at fair market value - nonadherence to...

  16. Foreign Exchange Management Act Notification

    FEMA New Notifications Foreign Exchange Management Act Notification Corrigendum (55 kb) Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fourth Amendment) Regulations, 2015 Reserve Bank of India Foreign Exchange Department Central Office Mumbai- 400 001 Notification No. FEMA.344/2015 RB

  17. Q&A: key IP issues affecting licensing agreements in India

    In India, the invalidity or expiry of the registration of an IP right (patent, design, and copyright) may affect a related licence agreement. If the registration of an IP right is found to be ...

  18. Drafting Intellectual Property Rights Transfer Agreements

    Generally, in agreements concerning the use and/or transfer of IP, the following clauses are important: 1. Assignment: In any IP assignment, there is a clause specifically assigning/transferring the title in the IP from the assignor to the assignee. This clause must clearly state the extent of the rights that are being granted to the assignee.

  19. Transfer of Intellectual Property

    An assignment to intellectual property rights refers to the act of transferring ownership from the assignor to the assignee. The document that creates this transfer is often referred to as the "assignment." The two parties entering into the assignment can either be legal entities or individuals.

  20. China

    Released on 18 March 2018, the Measures set out review procedures for the transfer of intellectual property from China abroad and its implications for national security and China's innovation and development capabilities.

  21. How to Transfer IPR (Intellectual Property Rights)?

    Legal Law How to Transfer IPR (Intellectual Property Rights)? Narendra Kumar 05 Apr, 2023 What is Transfer IPR? Kinds of IPR: Ways of IPR Transfer: Licensing: The Possible Reasons for the Reversion are given below: Illustration The Basic Requirement of Transfer of the IPR: Illustration What is Transfer IPR?

  22. Acquisition and Transfer of Property in India under FEMA

    01 Apr, 2023 Any acquisition or transfer of immovable property in India by a Non-resident Indians (NRIs), persons of Indian origin, or foreign nationals of non-Indian origin takes place under the Foreign Exchange Management Act, 1999 ("FEMA[1]") along with Notification No. FEMA 21 (R) /2018-RB/GSR 280 (E) dated 26.03.2018.

  23. USF wins AUTM's Better World Project Award for Professor Yeh's

    AUTM, the national organization for university technology managers, has named the University of South Florida the winner of its 2024 Better World Project Award.The USF Technology Transfer Office worked with inventor Daniel Yeh, a professor in the Civil & Environmental Engineering Department, and his team to secure intellectual property protection for NEWgenerator.

  24. Reserve Bank of India

    Answer: As per section 2 (ze) of FEMA transfer means, sale, purchase, exchange, mortgage, pledge, gift, loan or any other form of transfer of right, title, possession or lien. Relative is as defined in section 2 (77) of the Companies Act, 2013. ii NRI refers to a person resident outside India who is a citizen of India.

  25. Reserve Bank of India

    Issue of shares without cash payment through sweat equity: Reserve Bank of India vide Notification No. FEMA.344/2015 RB dated June 11, 2015 has permitted Indian companies to issue sweat equity, subject to conditions, inter-alia, that the scheme has been drawn either in terms of regulations issued under the Securities Exchange Board of India Act,...