IPR
Topic 149 Licensing Assignment Workshop
Topic 149 — Licensing and Assignment Drafting Workshop
LICENSING and ASSIGNMENT AGREEMENTS are the operational backbone of IP commercialisation. Licensing GRANTS RIGHTS to use IP while retaining ownership; assignment TRANSFERS OWNERSHIP. Drafting these agreements requires precision — a poorly drafted clause can lead to massive litigation exposure or failure to secure the bargained-for benefits. The Indian framework integrates: PATENTS ACT 1970 (Sections 67-69 recording assignments + licences); TRADE MARKS ACT 1999 (Sections 36-40 trademark licensing/assignment); COPYRIGHT ACT 1957 (Sections 19, 30-32 copyright licensing/assignment); DESIGNS ACT 2000 (Sections 29-30); INDIAN CONTRACT ACT 1872 (Sections 23 lawful object, 27 restraint of trade, 73-74 damages); COMPETITION ACT 2002 (Section 3(5) IP "reasonable conditions" exception); INCOME TAX ACT 1961 (Sections 9(1)(vi) royalty, 92CA transfer pricing, 115BBF patent box). Recent landmark cases shape drafting: TELEFONAKTIEBOLAGET v. LAVA (2024:DHC:2698) — watershed SEP/FRAND framework with substantial damages; ENGINEERING ANALYSIS v. CIT (2021) — software royalty taxation; FX ENTERPRISE v. HYUNDAI (2017 CCI) — Section 3(5) reasonableness test; NIRANJAN SHANKAR (1967) — during employment restrictions; KRISHNA MURGAI (1981) — post-employment non-compete invalid. The MEDIATION ACT 2023 + ARBITRATION AND CONCILIATION (AMENDMENT) ACT 2024 provide modern dispute resolution. Critical drafting considerations: SCOPE OF GRANT (specific rights, geographical, field of use); EXCLUSIVITY (exclusive vs sole vs non-exclusive); TERM and TERMINATION; ROYALTY structure (fixed vs running vs hybrid); QUALITY CONTROL (especially for trademarks); SUB-LICENSING permissions; IMPROVEMENTS framework (grant-back); REPS + WARRANTIES; INDEMNIFICATION; CROSS-LICENSING; PATENT POOL participation; SEP/FRAND obligations; LIMITATIONS OF LIABILITY; GOVERNING LAW + JURISDICTION; DISPUTE RESOLUTION (mediation + arbitration); CONFIDENTIALITY integration; TAX provisions. This topic walks through every aspect of licensing + assignment drafting — structure, key clauses, common pitfalls, and recent reforms.
1. Licensing vs. Assignment — Foundational Distinction
Aspect | Licensing | Assignment |
|---|---|---|
Ownership | Retained by licensor. | Transferred to assignee. |
Duration | Specific term. | Perpetual (subject to revocation). |
Recordation | Recommended (Section 67-69). | Required (Section 67-69). |
Royalty structure | Common feature. | Usually lump sum. |
Termination | Often available. | Generally not (except revocation). |
Sub-licensing | Subject to terms. | Independent right of assignee. |
Tax treatment | Royalty (Section 9(1)(vi)). | Capital gains (Section 45). |
Risk allocation | Licensor retains residual risk. | Assignee assumes risk. |
2. Patent Licensing Drafting Workshop
A. Patent Licence Structure
✅ Patent Licence Standard Structure 1. PARTIES + RECITALS · Identify parties + addresses. · Background of patent. · Purpose of agreement. 2. DEFINITIONS · "Licensed Patent" — specific patent number. · "Licensed Field" — specific field of use. · "Licensed Territory" — specific geography. · "Licensed Products" — specific products. · "Net Sales" — specific calculation. · "Affiliates" — control test. 3. GRANT · Specific rights granted. · Exclusive vs sole vs non-exclusive. · Field of use restrictions. · Territorial restrictions. · Sub-licensing rights. · Improvements framework. 4. ROYALTIES + PAYMENTS · Initial fee. · Running royalty (% of net sales). · Minimum royalty. · Reporting frequency. · Audit rights. · Payment terms. · Withholding tax (Section 195 ITA). 5. REPRESENTATIONS + WARRANTIES · Patent validity. · Ownership. · No third-party claims. · Right to grant. · Section 8 compliance (foreign filings). 6. IMPROVEMENTS · Grant-back framework. · Joint improvements. · Cost sharing. 7. ENFORCEMENT · Notice of infringement. · Litigation strategy. · Cost sharing. · Settlement authority. 8. CONFIDENTIALITY · Trade secret protection. · Term of confidentiality. · Permitted disclosures. 9. TERM + TERMINATION · Initial term. · Renewal options. · Termination for cause. · Termination for convenience. · Effect of termination. 10. DISPUTE RESOLUTION · Mediation Act 2023 first. · Arbitration second. · Court litigation last. 11. GENERAL PROVISIONS · Force majeure. · Notices. · Governing law. · Severability. · Entire agreement. |
B. Patent Licence Special Considerations
- Section 84 compulsory licensing risk for pharma — disclosure obligations.
- Section 92 government use — exception in licence.
- Section 100 government acquisition — recognise framework.
- Section 47 research/private use — exception language.
- Bolar exception (Section 107A) — pre-launch generic preparation.
- SEP/FRAND framework for telecom (Telefonaktiebolaget v. Lava 2024).
- Patent pools + cross-licensing.
- Section 67-69 recordation requirements.
3. Trade Mark Licensing Drafting
A. Trade Mark Licence Special Considerations
✅ Trade Mark Licensing Workshop STATUTORY FRAMEWORK: · Section 36 — Assignment + licence. · Section 37 — Registered user. · Section 38 — Permitted use. · Section 40 — Right of registered user. KEY DRAFTING ELEMENTS: 1. QUALITY CONTROL (CRITICAL) · Mandatory for trademark licensing. · Specific quality standards. · Audit rights. · Right to inspect. · Failure to maintain quality = abandonment risk. · Naked licence = invalidating risk. 2. REGISTERED USER FRAMEWORK · Form TM-12. · Application to Registrar. · Specific rights granted. · Term + conditions. · Termination provisions. 3. CO-EXISTENCE AGREEMENTS · Cross-product extensions. · Geographic divisions. · Field of use distinctions. · Mediation Act 2023 framework. 4. WELL-KNOWN MARK LICENSING · Cross-class protection considerations. · Article 6bis Paris Convention framework. · Premium royalty structure. 5. FRANCHISING · Comprehensive licensing framework. · Operations manual incorporation. · Royalty + advertising fees. · Renewal framework. |
B. Recent TM Licensing Cases
- Mars v. Cadbury "CELEBRATIONS" 2025 — Mediation Act 2023 settlement; coexistence framework.
- Pernod Ricard 2025 INSC 981 — composite test impact on licensing distinctions.
- WOW Momo v. WOW Burger 2025 — composite marks + secondary meaning licensing.
4. Copyright Licensing Drafting
A. Copyright Licence Structure
✅ Copyright Licence Workshop STATUTORY FRAMEWORK: · Section 19 — assignment in writing + signed. · Section 30 — licensing. · Section 30A — future copyright. · Section 31C — cover versions. · Section 31D — statutory broadcasting. KEY DRAFTING ELEMENTS: 1. SPECIFIC RIGHTS GRANTED (Section 14) · Reproduction. · Adaptation. · Communication to public. · Translation. · Performance. · Broadcasting. 2. TERRITORY (default India per Section 19) 3. TERM (default 5 years per Section 19A) 4. ROYALTY OR LUMP SUM 5. PERFORMERS RIGHTS (Section 38, 38A, 38B) 6. MORAL RIGHTS (Section 57) · Special considerations. · Cannot be assigned. · Can be waived (limited). 7. SYNCHRONIZATION RIGHTS (for music) · Audio-visual integration. · Specific sync licences. 8. STATUTORY LICENSING (Section 31D) · Broadcasting framework. · No need for individual negotiation. · Royalty rates by HC IP Divisions. 9. SOFTWARE LICENSING SPECIFICS · Source code access. · Modification rights. · Reverse engineering restrictions. · Open source compliance. |
5. Restraints of Trade — Section 27 ICA Critical
A. The Statutory Framework
Section 27 Indian Contract Act 1872 "27. Agreement in restraint of trade, void.—Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.—One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business." |
B. Application to IP Licensing
Permitted | Prohibited |
|---|---|
Field of use restrictions. | Tying unrelated products. |
Geographic restrictions. | Excessive royalties (anti-competitive). |
Quality control. | Resale price maintenance beyond reasonable. |
Reasonable royalty. | Refusal to deal beyond IP scope. |
Most-favoured-licensee. | Patent thickets to exclude competition. |
Cross-licensing for compatibility. | Exclusive grant-back overly restrictive. |
During employment confidentiality. | Post-employment non-compete (Niranjan Shankar 1967 vs Krishna Murgai 1981). |
Trade secret protection. | Vague confidentiality without specificity (Rochem rule). |
C. Goodwill Sale Exception
- Section 27 Exception 1 — sale of business with goodwill.
- Reasonable restrictions valid.
- Specific local limits.
- Time limit (during buyer's like business).
- Common in M&A IP transactions.
6. Tax Provisions in IP Agreements
A. Royalty Tax Framework
Provision | Application |
|---|---|
Section 9(1)(vi) ITA | Royalty deemed accrual. |
Section 195 ITA | Withholding tax (10% domestic; lower DTAA rates). |
Section 115A | Concessional rate for non-residents. |
Section 115BBF | Patent box (10% rate; India-developed patents). |
DTAA Hierarchy | Section 90 — DTAA prevails. |
Engineering Analysis 2021 | Software NOT royalty under DTAAs. |
B. Transfer Pricing
- Sections 92-92F ITA — international + specified domestic transactions.
- Master File + Local File + Country-by-Country Report.
- Arm's length valuation.
- Documentation requirements.
- Annual compliance.
7. Recent Cases Shaping Licensing Drafting
📖 Telefonaktiebolaget LM Ericsson v. Lava International, 2024:DHC:2698 Background — Ericsson SEPs licensed to Lava handsets; FRAND determination. Holding — Delhi HC: Substantial damages; seven-step novelty analysis; FRAND obligations binding. Drafting Lesson — Comprehensive SEP/FRAND framework; clear royalty structure. |
📖 Engineering Analysis Centre v. CIT, AIR 2021 SC 1394 Background — Software royalty taxation under DTAAs. Holding — Software NOT royalty under DTAAs. Drafting Lesson — Address DTAA tax positions explicitly; structure as licensing not royalty where appropriate. |
📖 FX Enterprise v. Hyundai, 2017 (CCI) Background — IP licensing competition concerns. Holding — Section 3(5) reasonableness test applied. Drafting Lesson — Ensure restrictions reasonable per Section 3(5). |
📖 Niranjan Shankar Golikari v. Century Spinning, AIR 1967 SC 1098 Background — During employment confidentiality. Holding — Reasonable restrictions VALID during employment. Drafting Lesson — During employment restrictions can be reasonable. |
📖 Krishna Murgai v. Superintendence Co., AIR 1981 SC 1717 Background — Post-employment non-compete. Holding — Post-employment non-compete generally INVALID under Section 27. Drafting Lesson — Avoid post-employment non-compete; rely on confidentiality + trade secret. |
8. Strategic Considerations
✅ For licensing drafters — eight points For exclusivity, weigh value vs. coverage carefully. For royalty, leverage market approach + comparable data. For territorial restrictions, ensure reasonable scope (Section 27 ICA). For quality control (TM), document specific standards. For improvements, balance grant-back framework. For tax, integrate Section 195 + 115BBF + 92CA. For ADR, leverage Mediation Act 2023. For software, leverage Engineering Analysis 2021 framework. |
9. Memory Aid — Quick Recall
✅ Quick Recall — Licensing + Assignment Drafting Licensing: rights granted, ownership retained. Assignment: ownership transferred. Patents: Sections 47-49, 67-69, 84, 92, 100. TM: Sections 36-40 with quality control mandatory. Copyright: Sections 19, 30-32; default 5 years/India. Designs: Sections 29-30. Section 27 ICA — restraint of trade VOID; goodwill exception. Section 3(5) Competition Act — IP "reasonable conditions" exception. Section 9(1)(vi), 92CA, 115BBF Income Tax Act. Engineering Analysis 2021 — software NOT royalty under DTAAs. FX Enterprise v. Hyundai 2017 — Section 3(5) reasonableness. Niranjan Shankar 1967 — during employment OK; Krishna Murgai 1981 — post-employment INVALID. Telefonaktiebolaget v. Lava 2024 — SEP/FRAND framework. Mediation Act 2023 + Arbitration (Amendment) Act 2024. |
🎯 EXAM POINTERS — TOPIC 149
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