An Indian perspective on licensing or sale of patents

Patent licensing- Introduction

A patent grants the patent owner the right to stop others from making, using, selling or offering for sale the patent owner’s invention without consent. In effect, this allows the patent owner to license or sell their invention to other parties on mutually agreed terms. A license is a legal tool by which a patent owner can transfer the patent rights to any person seeking the rights to work the invention at any time before the expiry of the patent. By granting a license to a person, the patent owner authorizes the person (licensee) to exercise the patent rights under certain circumstances. Patent licensing plays a vital role in technology commercialization.

Granting/Acquiring a patent license 
Procedure for granting/acquiring a patent license: 
Documentation of the agreement between the parties:

The patent owner and the licensee should mutually arrive at and sign an agreement in writing, as recited in Section 68 of the Indian Patents Act. The agreement should include the terms and conditions of the license.

 Registration at the Patent Office:

Following the signing of the license agreement, the party acquiring the license has to write to the Controller to register the title or interest in the patent within six months from the date of agreement. The registration has to be done in accordance with Sections 69(1) and 69(2) and rules 90(1) and 90(2). The application must be accompanied by the agreement signed by both parties to support the validity of the license. The terms and conditions of the license can be kept confidential by the Controller on request by licensee or the licensor.

 Review by the Controller:

The Controller reviews the application upon reception. Once reviewed, the controller enters all details along with the details of the supporting documents in the register of patents as per Section 67.

 Any unregistered license agreement will be considered invalid by the controller or the court in case of related proceedings.

In the case of National Research Development Corp (NRDC) v. ABS Plastics, NRDC was the assignee of two patents relating to a process for the manufacture of Terpolymers of Acrylonitrile Butadine (ABS Resigns) using emulsion technology. NRDC licensed the patents to ABS Plastics on 23 July, 1975 for a period of eight years. Under the license, ABS paid a lump sum royalty and agreed to pay a running royalty as well. As ABS failed to pay the royalty due under the license agreement, NRDC filed a suit to claim the pending royalty with interest. After reviewing the case and hearing the arguments of both the parties, the court held that the license was invalid and therefore unenforceable because it was not registered at the patent office. Further the court cited that under section 69 of the Patent Act a license agreement must be registered at the patent office for it to be valid.
Restrictive/Unlawful Inclusions in a License
As per section 140 of the Indian Patent Act, unlawful insertions, considered as restrictive conditions, in any contract for sale or lease of a patented article or an article made by a patented process or in license to manufacture or use a patented article or to work any process protected by a patent includes:
  • to require the purchaser or licensee to acquire from the vendor or licensor or his nominees, or to prohibit from acquiring or to restrict in any manner or to any extent his right to acquire from any person or to prohibit him from acquiring except from the vendor or licensor or his nominees any article other than the patented article or an article other than that made by the patented process or
  • to prohibit the purchaser or licensee from using or to restrict in any manner or to any extent the right of the purchaser, lessee or licensee, to use an article other than the patented article or an article other than that made by the patented process, which is not supplied by the vendor or licensor or his nominee or
  • to prohibit the purchaser, lessee or licensee from using or to restrict in any manner or to any extent the right of the purchaser, lessee or licensee to use any process other than the patented process,
  • to provide exclusive grant back, prevention to challenges to validity of Patent & Coercive package licensing, and any such condition shall be void.
Conclusion
Appropriate care should be taken to ensure that clauses, which may be considered unlawful, are not included in patent licensing or sale agreements. Further, once the agreement is entered into, appropriate steps have to be taken to keep the agreement valid and enforceable.
 
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