Intellectual Property Licensing in India

Intellectual property is one’s life’s whole work, in which he has put too much hard work, so one would want it to be commercially successful and earn great revenues from it so one would try to license it to someone capable of making it successful. This blog focuses on the various intellectual property rights which are licensed and how.

What is an Intellectual Property?

It is an intangible form of property coming into existence through the intellect of humans.  Intellectual property rights are conferred upon the people who are the creators of this intellectual property as per law. These are the rights that are given to the persons for the creation they have done through their mind. It is an exclusive right that a creator has which allows him to do anything with it. 

The inventions can be of any form be it literary, artistic work, designs symbols or names, or any image that is proven to be useful. The IPRs are the legal rights that govern the creation’s use and help the inventors benefit from it. The various types of intellectual property rights are patents, trademarks, copyrights, designs, and geographical indications.

What is Licensing in IPR?

Licensing is a kind of agreement between parties to permit the use of something. It is a form of contract between a licensor and a licensee in which the licensor gives the licensee the right to use the invention. In an IPR license, the licensee is permitted to use the intellectual property but is subject to terms and conditions. These terms and conditions are laid down in the license agreement that both parties negotiate and sign.

Categories of Intellectual Property Licenses

•  Exclusive License:

In this type of license, the licensee is granted all the rights but not the title of the invention. The licensee has all the responsibilities related to the invention but he can’t license it further; only he has the exclusive right on the Intellectual property and cannot sublicense it to a third party.

• Non-exclusive Patent License:

In this type, the licensor has the right to license the invention to more than one party.  It can be granted to many parties at the same time. The licensor has the title of the license and the licensee can still use the licensed patent rights. The licensees who have been granted the license can take the benefits of the patent and commercialize it in the market for financial benefits.

•  Sole License:

In this license, the licensee has been permitted to use the intellectual property, the licensor has also the authorization to use the intellectual property. These rights are non-transferrable; only the licensor and licensee have the rights, not any third party.

Advantages of Licensing

• Licensor:

1. The licensor will continue to have ownership of the invention even when the invention is licensed and earns revenue as well.
2. It generates income for the licensor. The income can be in the form of royalties as well. The licensor gets revenue as the licensee commercializes the invention in the market and thus earns from and a part of it is given to the licensor as per the agreement.
3. In case the invention is licensed to an already established licensee he would have a great base in the market which would help in manufacturing more easily.
4. Thus, being a part of the licensee business it will have a competitive edge, helping in the sales of the invention.
5. This turns beneficial for the licensor in case he doesn’t have enough capital still his product is in the market and he is earning through royalties.
6. It also helps in making the product available in the international market. The licensing can help the invention reach various new markets.

• Licensee:

1. The licensee gets access to the intellectual property be it a brand name, logo, or any other form with low investments, he could use it in any manner and earn through it.
2. The licensee gets to use the technology that has been invented for any purpose and earn through it.
3. In case the licensee is a company that doesn’t have the necessary equipment or capital to conduct research and development of a new product, it would be much more viable for them to get a license for the invention, which they can manufacture easily.
4. In case an exclusive license is granted to the licensee, he would be the sole person who would be using the invention.

Disadvantages of Licensing

• Licensor:

1. The licensee to prevent the licensor from earning through the royalty can make such changes that would affect the sales of the product of the licensor and not let him make the profits he intends to from the invention in any form be it royalty or anything else.
2. The licensor has to depend upon the licensor’s ability to commercialize the product and make it a success, a licensee can do anything to make it successful or just destroy it.
3. The image of the licensor is in the hands of the licensee any wrong step can tarnish the image of the licensor.
4. When the license is given to the licensee he gets to know a lot of the information and expertise about the invention which can help set him as a competitor of the licensor.

• Licensee:

1. The licensee would have an obligation as per the agreement to pay the royalty even in case the product performs poorly in the market.
2. The licensee does all the work about the product be it manufacturing or distributing it and marketing it as well to make the product successful and the licensee is not obligated to do any of such work.
3. In case the licensee wants to make expansion he would be required to make permission from the licensor and pay royalty to him as well.
4. The licensee will make the improvements in the product but it would be still the property of the licensor.

Challenges Associated with Intellectual Licensing Agreements

• Ownership Disputes:

There can be disputes about the title, ownership, or rights associated with the licensed intellectual property. It can arise due to a chain of issues in claims or title claims or there is any form of breach in a contractual obligation by one party.

• Infringement Claims:

There can be legal cases against the licensee and licensor in case claims of infringement have been made or there is an unauthorized use of the intellectual property. There could be injunctions or damage claims made.

• Validity and Expiry:

There could be any changes in the law or a new regulation passed that could affect the validity and the enforceability of the license agreement of the intellectual property rights. It could also be affected by any judicial decision passed about this matter.

• Unregistered Rights:

There can be various unregistered rights about intellectual property. These can only be protected through a licensing agreement, provided in the clauses of the licensing agreement.

• Subjects of Discussion:

There can be various subjects that are to be discussed in the licensing of intellectual property like creating, perfecting, or enforcing security interests, specifically liens and encumbrances, on licensed Intellectual Property (IP) assets. It is basically about the financial factors.

Licensing Provisions Under Various Acts

1. Copyrights Act, 1957:

• The chapter 6 of this act covers the provisions related to the licensing.
• Section 30 of the act says that the copyright owners of an existing work or a prospective owner of a future work have the right to license the rights of the copyright in written form by themselves or an agent authorized by him. The licenses for future work will come into effect only when the work comes into existence.
• Section 33(1) provides only through a registered copyright society can the license be granted for any kind of work related to literary, dramatic, musical, and artistic works incorporated in cinematograph films or sound recordings. An individual who is a member of a registered copyright society can on his grant a license for his work being obligated towards the society.
• Section 31 provides that any person can go to the appellate board and ask for a compulsory license for any work that has been withheld from the public by the copyright owner. Before going to the appellate board he has to go to the owner of copyright first and in case he rejects to give a license for any unreasonable reason, then an appeal can be made in front of the appellate board.
• Section 31A says that a person can apply for a compulsory license for the work whose creator is either dead or unknown or cannot be traced to the appellate board. This would help in making the work public before applying the person needs to publish an announcement relating to it in the newspaper.
• Section 31 B gives the authorization to a person or NGO working for disabled persons to apply for a compulsory license for any work that is for their accessibility and can be copyrighted to the appellate board.
• Section 31 C says that a statutory license can be issued for making cover versions of sound recordings of literary musical or dramatic life. A person needs to give a prior notice stating his intent to make a cover version.
• Section 31 D provides that a statutory license can be issued to a broadcasting organization that is interested in broadcasting any literary musical or sound recording that has already been published by its copyright owner to the public. There should be a notice given priorly by the organization providing its intention to broadcast for what duration and in which territory.
• Section 32 provides that a license can be given by the appellate board for producing and publishing a literary or dramatic work by translating it into any other language after 7 years of its actual publication. This type of license is not exclusive and against this license, royalty has to be paid as per the decision of the board.
• Section 32 A says that a person can apply for a license to publish work in India which is not available in India or has not been put on sale in India, this can be done after some time for publication of the work.

2. The Designs Act, 1999:

• Section 30(4) provides that a person who is registered as a proprietor of copyright of any design has the power to grant licenses in against of valuable consideration of some form.
• Section 30(3) provides that the licensing is to be written and should contain all the terms and conditions of both parties.
• Section 30(2) provides that the licensee is required to get himself registered in the register through an application to the controller regarding his title.

3. The Trademarks Act, 1999:

• This act does not mention the license of trademarks, but the licensing is governed by section 49 as it talks about the licensee as a registered user.
• It provides that there should be a written agreement between the registered proprietor and the proposed registered user. The written form should provide for the licensee to be a registered or an unregistered user.
• The license has also to be registered with the registrar.
• The agreement should provide for what be an extent of control over the trademark and the goods and services whose registration is proposed. It should also lay down various terms and conditions and what would be the duration of the license being provided.
• The act allows the registered user to initiate the proceedings of infringement while the unregistered users don’t have this type of power with them to take any action against the infringement.

4. The Indian Patents Act, 1970:

• It provides that patent licensing is an act of granting authority over an invention to another person to use, sell, manufacture, or commercialize in whatever way possible.
• Section 68 says that the licensing should be in writing containing all the terms and conditions about the licensee and licensor and also provide for their obligations and rights.
• Section 70 gives the power of issuing licenses of the patents to the proprietor or the grantee.
• Section 84 provides for the granting of compulsory licenses. It says that a person can apply for a compulsory license in case the patent has been granted for more than three years.
• Section 87 provides the procedure for the grant of compulsory licenses. The application is filed to the controller and if satisfied the license is granted.
• Section 92 says that the compulsory license can be granted in case of a national emergency for public use. The central government can put up to use a patent and grant it a compulsory license.
• Section 92 A deals with compulsory licensing in the case of pharmaceutical companies. It is basically to use the public health sectors.

Conclusion

Intellectual Property is important for a business to expand, to grow its horizons and the IPR  also provides significant commercial advantages. The inventor or the creator in this case doesn’t have enough capital to make the creation commercially available in the market, they opt for licensing which helps in making the creation available to society which can help in the betterment or any other purpose and the licensee and licensor both can earn through licensing.

Frequently Asked Questions on Intellectual Property Licensing in India

Q1. What is an Intellectual Property?

Ans1. It is an intangible form of property coming into existence through the intellect of humans.  Intellectual property rights are conferred upon the people who are the creators of this intellectual property as per law. 

Q2. What are the types of intellectual property?

Ans2. The IPRs are the legal rights that govern the creation’s use and help the inventors benefit from it. The various types of intellectual property rights are patents, trademarks, copyrights, designs, and geographical indications.

Q3. What is licensning in IPR?

Ans3.  In an IPR license, the licensee is permitted to use the intellectual property but is subject to terms and conditions. These terms and conditions are laid down in the license agreement that both parties negotiate and sign.

Q4. What are the types of licensing in IPR?

Ans4. The types of licensing in IPR are exclusive license, non-exclusive license, and sole license. 

Q5. What are Ownership Disputes?

Ans5. There can be disputes about the title, ownership, or rights associated with the licensed intellectual property. It can arise due to a chain of issues in claims or title claims or there is any form of breach in a contractual obligation by one party.

Q6. What are infringement claims?

Ans6. Infringement Claims can be legal cases against the licensee and licensor in case of claims of infringement have been made or there is unauthorized use of the intellectual property. There could be injunctions or damage claims made.

Q7. Which chapter of the Copyrights Act covers the topic of licensing?

Ans7. The chapter 6 of this act covers the provisions related to the licensing.

Q8. Which section of the Copyrights Act compulsory license for the work whose creator is either dead or unknown or cannot be traced to the appellate board? 

Ans8. Section 31A says that a person can apply for a compulsory license for the work whose creator is either dead or unknown or cannot be traced to the appellate board. This would help in making the work public before applying the person needs to publish an announcement relating to it in the newspaper.

Q9. Which section deals with licensing indirectly in the Trademarks Act?

Ans9. This act does not mention the license of trademarks, but the licensing is governed by section 49 as it talks about the licensee as a registered user.

Q10. What does section 68 of The Indian Patents Act 1970 deal with?

Ans10. Section 68 says that the licensing should be in writing containing all the terms and conditions about the licensee and licensor and also provide for their obligations and rights.