Intellectual property is created by human intelligence or mental labour and is mostly intangible. It wasn’t bothered until recently, even though it accounts for a high percentage of the company’s worth and have a pivotal position in economics. From expanding an organization’s commercial worth and its market share to raising the accounting standards and legal protection of all entrepreneurs, the potential profits of intellectual property are staggering. Intellectual property right not only acts as a tool for security but also contributes to it’s worth and monetary growth.
IPR can be monetized in several ways, assignment and licensing are one of the modes of transfer. It is at the discretion of the owner whether to utilize the IP rights himself or to transfer these rights in exchange of monetary benefits. Let us see the modes of transfer in detail.
I. Assignment of Intellectual Property Rights
An assignment of IPR is a transfer of ownership between the assignor and assignee where the latter is free to exploit the rights for any purpose, and the former is paid for the same. Right to use is transferred with the ownership and the assignee is vested with the exclusive right to exercise the transferred rights. There is a complete transfer of ownership and cessation of interest. It must be in writing and duly signed by both the parties in order to be enforceable. The agreement should specify the purpose of the work for which the rights are being transferred and also the duration of the assignment.
Intellectual property rights that can be transferred include Copyright, Design, Patent and Trademark. The terms and conditions of assignment of these rights may vary because they are governed by different legislations.
II.Licensing of Intellectual Property Rights
License is an agreement between at least 2 parties, where the licensor consents upon sharing the rights to sell, use, make any items covered under the IP, with the licensee under certain terms and conditions. The Royalty is the consideration given by the licensee in exchange for the contractual license. It is a contract and therefore it must fulfil all the essential elements of a valid contract mentioned under Sections 10 and 11 of the Indian Contract Act, 1872. There are three types of licensing:
1. Exclusive License — This license enables the licensee to exclude everybody, even the licensor from using the IP rights, reserving them exclusively for himself.
2. Non-Exclusive License — It allows the licensee and licensor to utilize the IP rights together and it can be licensed to any third party as well.
3. Sole License- Both the licensee and the licensor are free to use the IP rights but it cannot be transferred to any third party.
A major difference between Assignment and License is that of the usage of the property. Licensed property can be used only for the purpose mentioned in the agreement whereas, in case of assignment, the assignee can utilize the rights and property however he wants to.
1. Transfer of Copyrights
All the matters relating to copyrights are governed by the Copyrights Act, 1957. The act recognizes the transfer of copyrights through both the modes i.e. License and Assignment.
· According to Section 30 of the act enables the owner of the work to grant any interest in the right by license in writing. The same section also provides that the prospective owner can also transfer rights of future work, but the licence shall take effect only when the work comes into existence.
· It must be in writing and duly signed in order to be valid and it must specify the duration, nature of the work, and its geographical extent.
· Non Exclusive license can be granted to one or more persons.
· Section 18 of the Copyrights Act, 1957 allows the first owner and the original creator of the work to assign the IP right to somebody else either wholly or partly and he can also transfer rights of future work, but the assignment shall take effect only when the work comes into existence.
· Going by Section 19, it is mandatory for the agreement to be writing and duly signed in order to be valid. The assignment must specify the duration and territorial limits of the assignment. If the period and territorial limits of the assignment are not stated, the period shall be deemed to be five years from the date of the assignment and the territorial extent should be presumed within India.
· Moral rights are independent of the author’s copyright and shall remain with the author even if he has assigned his copyright. He has right to claim damages if his original work is distorted, mutilated or modified and when his goodwill is being harmed.
2. Transfer of Design Rights
The Designs Act, 2000, does not specifically lay down provisions for the transfer of Design rights. But it does outline a few things regarding the same under Section 30(3). It requires the assignment or license agreement to be in writing with a specified duration and geographical extent. The transfer of a registered design is registered with the statutory authority and recorded in the Register of Designs. It serves as clear proof of the title.
3. Transfer of Patent Rights
A patent can be assigned or licensed to any third party under the Patents Act, 1970. It can be also transferred through a mortgage.
· Going by Section 68 of the Patents Act, 1970, it is mandatory for the assignment to be in writing and duly signed by the parties. The agreement must contain all the terms and conditions regarding the transfer along with the rights and obligations duly specified.
· The agreement should set out the invention being assigned, duration and geographical extent of the rights clearly. If there are multiple owners of the patent concerned, all co-owners must jointly assign the rights.
· If the assignment is made before the grant of the patent, then the pending application can continue under the name of the assignee and he becomes the owner of the invention.
· The license agreement is to be carried out like any other IPs agreement. Section 2 (1)(f) defines exclusive license where it excludes all other persons, including the patentee, except the one to whom the license is granted to utilize the licensed right.
· Patent Act recognizes statutory, compulsory and voluntary license. Section 84 throws light on the compulsory license. After the expiration of three years from the date of the grant of a patent, any person interested may make an application to the Controller for grant of a compulsory licence on patent on any of the following grounds:
a) that the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
b) that the patented invention is not available to the public at a reasonably affordable price, or
c) that the patented invention is not worked in the territory of India.
4. Transfer of Trademark
The Indian Trademarks Act, 1999, both registered and unregistered trademark can be transferred by means of assignment and license.
· Section 37and 38 governs the assignment of trademark rights. For a registered trademark owner, he can assign the rights to anyone in writing for consideration. This will enable the assignee to use the goods and services to which the registration applies. The transfer can be with or without the goodwill of the goods and services.
· Section 36 empowers an unregistered trademark to be assigned or transmitted with or without the goodwill of the business concerned.
· Assignment doesn’t confer the title of ownership in case of trademarks, it should be separately applied for registration under Section 45.
· Trademarks licensing in India is governed by Section 49 of the Trademarks Act, 1999. The proprietor is free to allow any third party to use its mark and can also register the licensee as the registered user of the trademark. Technically speaking, it’s a license granted by the owner to the licensee. The act does not explicitly mentions license but refers to the registered user as a licensee.
· The registered user has no right to further transfer this right by any means.
· To transfer the trademark rights, the owner and the registered user must jointly apply in writing to the Registrar in the manner prescribed under Section 49 of the act.
In conclusion, the idea of transfer of IP is a strategy that creates benefits for both, who gives the rights and who gets the rights. The procedure and necessary requirements will vary depending on the IP legislations.