Patent Rights Unveiled: The Distinction Between Patent Assignment and Licensing in India

To safeguard our original invention of any form be it a piece of music, a work of art, a creatively written draft, a complex set of codes, or any such masterpiece that hatched from an intellectual mind, our Indian government has provided us with a particular set of rights called “Intellectual Property Rights” which are often taken lightly or ignored due to confusion like the patent assignment and patent licensing; about which we will be understanding in the article today. So, are you ready to know what they are, how they differ, and why and when you need them?

Patent? A Quick Intro

To safeguard any idea or invention from being used, reproduced, or sold without any consent of the inventor, the Indian government under The Patents Act of 1970, allows any inventor to apply for a patent which is a Patent Right - an intellectual property right that provides exclusive rights to the owner for a specific invention to manufacture, use, exploit the patented product or process for a limited period and take action against those who misuse it.

A patent is like a safety token that is awarded to the original inventor of the invention for the innovation but can be transferred as well by the inventor itself to a third party, providing permission to use, make, or sell the invention and gain monetary benefits. Now there’s a procedure to pass on the rights to someone and that’s where patent assignment and patent licensing come into the picture which we will discuss in detail below.

Understanding Patent Assignment

Although the term ‘assignment of patent’ is not defined in the Indian Patents Act of 1970, patent assignment is like a permanent deal of IP between two parties. An assignment agreement is a legally binding contract that transfers all or part of the ownership rights of a patent from the assignor (the current patent holder) to the assignee (the new rights holder). The assignee then has the exclusive right to prevent others from making, using, selling, or offering to sell the invention, including the right to sue anyone who infringes on the patent.

To be valid, a patent assignment must be properly documented by an IP lawyer, signed by the parties involved, and registered according to Section 19 of the Patent Act.

Patent assignments are of three kinds (i) legal; (ii) equitable; and (iii) mortgages.

(i) Legal Assignment -

A legal assignment is the formal transfer of patent rights from the assignor (the original patent owner) to the assignee (the new patent owner). The assignee then enters their name as the patent owner in government records. Such an assignment is typically executed through a deed, and once the process is completed, the assignee gains full ownership rights to the patent.

(ii) Equitable Assignment -

Any form or agreement that includes a letter stating that the assignor has agreed to share a certain portion of the patent rights with the assignee is termed an equitable assignment of the patent. Unlike in legal assignment, the assignee cannot enter his/her name into the official government records as a patent owner but can notify the patent office of their interest in the patent. Equitable assignments may involve sharing specific benefits or profits from the patent, but the assignee does not gain complete ownership rights as in a legal assignment.

(iii) Mortgages -

An agreement where the patent owner transfers the patent rights either wholly or partly to the assignee in return for a lump-sum payment of royalty. Once the assignor repays the sum to an assignee, the patent owner gains back the patent rights to the mortgaged property. Even in this assignment, the assignee's name is not entered as a patent owner in government records but is mentioned as a mortgagee, reflecting their interest in the patent.

Decoding Patent Licensing

Licensing is a permission-based arrangement wherein the patent owner (licensor) grants rights to another party (licensee) to use the patented technology under predefined terms. Unlike assignment, ownership remains with the licensor.

Patent Act section 70 allows a patentee to grant a license through a contractual agreement to allow the licensee to make, use, or exercise the invention. The licensor and licensee sign the contract which certifies the shared use of IP rights (in part or whole) for mutually agreed payments (i.e., royalties).

A patent licensing agreement can be classified as exclusive, non-exclusive, voluntary, statutory, co-exclusive, sole-licensing, express and implied, limited, and compulsory. However, the two agreements that are commonly agreed upon are:

1. Exclusive License Agreement:

An agreement that gives a grant of exclusive rights to the licensee (the person or entity receiving the license) by the licensor (the patent holder), to use the patented invention; excluding all others (including the patentee) to exploit, use, or license the invention to anyone else during the term of the agreement. The rights can be divided and assigned, restrained entirely, or in part. The patent holder retains ownership of the patent, but only the licensee holds exclusive rights for the agreed-upon scope. The simplest instances of exclusive licensing agreements are copyright, trademarks, and patent licenses.

2. Non-exclusive License Agreement:

A license agreement in which the licensee can exploit the patented invention, but not exclusively. Under this arrangement, the patent holder may exploit the invention himself and can grant licenses to multiple parties, including the licensee, for the same invention for the length of the agreement entered into.

The Distinction Between Patent Assignment and Licensing in India

Now that you understand that patent licensing and patent assignment are two different things, here are some other factors that distinguish them further.

Key Points about Patent Assignment:

Parties Involved -

Assignor (Patent Holder) and Assignee (Third Party).

Type of Transaction -

Permanent transfer of ownership of the patent from the assignor to the assignee for consideration.

Rights Transferred -

The patent holder assigns all or a part of their rights to the assignee. The assignee becomes the owner of the transferred rights.

Nature of Interest -

Generally irrevocable, but rights may be revoked in specific circumstances.

Rights Available -

The assignee can sue for patent infringement and exercise all other rights available to a patent holder.

Consideration -

Lump-sum fees are paid to the assignor upon executing the assignment agreement.

Notice Requirement -

Formal, written documentation, such as an assignment agreement, to be recorded with the relevant patent office.

Key Points about Patent Licensing:

Parties Involved -

Licensor (Patent Holder) and Licensee (Third Party).

Type of Transaction -

Temporary permission granted by the licensor to the licensee to use the patented invention on the terms outlined in the licensing agreement.

Rights Granted -

The licensee is authorized to use the patented invention within the scope defined in the license agreement. The patent holder retains ownership.

Nature of Interest -

Revocable, subject to the terms of the license agreement.

Rights Available -

The licensee does not usually have the right to sue for infringement or sub-license the rights further unless otherwise agreed.

Consideration -

Royalties or compensation based on sales, usage, or other agreed-upon terms are paid to the licensor by the licensee.

Flexibility -

Licensing agreements can be tailored to specific needs, allowing licensors to grant different rights to different licensees for various uses.

In both cases, the Indian Patent Act of 1970, governs the provisions for licensing and assigning patents. It's important to note that the specific terms and conditions of both assignment and licensing agreements can vary and should be carefully negotiated and documented based on the parties' intentions and requirements, and registered to be considered valid.

In Conclusion,

Grasping the distinctions between patent assignment and licensing is pivotal for making informed decisions in the realm of intellectual property. Patent assignment involves a change in ownership, while licensing offers a strategic partnership without relinquishing ownership. Understanding the legal requirements and implications in India is essential to navigate these paths successfully.