Understanding Patent Licensing In India

Introduction

Patent licensing is a critical aspect in the domain of intellectual property management, enabling patent owners (licensors) to permit third parties (licensees) to exploit their patented inventions in exchange for financial remuneration or royalties. This agreement not only allows patent owners to derive economic benefits from their inventions but also catalyze innovation by facilitating access to proprietary technology. In India, the patent licensing framework is governed by The Indian Patents Act, 1970, which delineates a comprehensive legal structure outlining the rights and obligations of both parties involved in the licensing agreement.

Legal Framework For Licencing Under The Indian Patent Act:

The Indian Patents Act, 1970, governs the foundational legal framework for patent licensing in India, with several pivotal sections pertaining to licensing:

  • Section 68: This mandates that all license agreements must be documented in writing to ensure enforceability. It ensures the interest of both parties through clear articulation of the terms and conditions.
  • Sections 84: This section allows any interested person with a legitimate interest to apply for a compulsory license on a patent after three year period from its grant, contingent upon specific conditions such as unmet public demand, lack of affordability, or non-utilization within the Indian territory. The Controller can grant such a license after evaluating the applicant’s capability to work the invention and efforts made to obtain a voluntary license. Further, some special considerations are made for national emergencies or anti-competitive practices. The public’s requirements are deemed unmet if industry development is prejudiced, demand is not fulfilled, or the patent is being underutilized.
  • Section 89: This section empowers the Controller’s powers under Section 84, striving to ensure the timely commercia exploitation of patented inventions in India without unnecessary delays and as fully as possible, while concurrently safeguarding the rights of developer of patented inventions in India.
  • Section 92: This section enables the Central Government to issue a compulsory licenses for patents during national emergencies, extreme urgency, or public non-commercial use. Following the Official Gazette notification, any interested party may apply for a license, which the controller grants, striking a balance between public accessibility and reasonable profit for the patent holder. The license terms must ensure the patented products are available to the public at the lowest possible prices.
  • Section 94: This section delineates the process for terminating a compulsory license granted under Section 84, allowing termination if the condition necessitating its issuance cease to exist. However, the holder of the compulsory license possesses the right to contest this termination, prompting the Controller to evaluate the implications for the prior licensee’s interest
  • Sections 10 and 11: These sections outline the specific requirements that must be included in a licensing agreement, such as details regarding duration, territorial rights, and other pertinent terms.

Collectively, these provisions aim to create a balanced framework that not only protects the rights of patent holders but also upholds public interests.

Considerations Before Entering A License Agreement: Prior to entering into a patent licensing agreement, several critical factors must be evaluated:

  • Technical Competence: It is essential to evaluate whether the proposed licensee has the technical acumen and market presence to ensure effective commercialization of the patented invention. Licensing to an inept could result in suboptimal patent exploitation.
  • Through Review of the Agreement: A thorough review of the licensing agreement is paramount. It should delineate the rights conferred, payable royalties , duration of the license, and any restrictions on usage. Ensuring precision in these terms can prevent future disputes.
  • Legal Compliance: Adherence to The Indian Patent Act and other applicable regulation is indispensable. Additionally, engaging legal professionals for proper drafting and negotiation is highly advisable to ensure compliance with statutory requirements.
  • Financial Viability: Conduction a comprehensive assessment of the financial terms, including expected royalty rates, one-time payments, and the overall financial viability of the arrangement, is important in achieving a favorable outcome.

Relevant Case Laws In Patent Licensing

  1. A significant case that encapsulates the key principles of patent licensing in India is Bayer Corporation v. Natco Pharma Ltd. (2019). In this landmark case, the Indian Patent Office granted a compulsory license to Natco Pharma for the manufacturing and distribution of a cancer drug, patented by Bayer. The decision highlighted the pressing need for affordable medication in India and showcased how compulsory licensing can serve the public interest. The ruling underscored the equilibrium between the patent rights and public health needs, reflecting the principles laid out in Sections 84 and 92 of The Indian Patents Act, 1970.
  2. Another important case is Indian Performing Right Society Ltd. v. Sanjay Dalia (2007). In this case, the Supreme Court of India addressed significant issues related to the licensing of rights to perform music, emphasizing the necessity for clear contractual terms and the adherence to statutory requirements. This case exemplified the challenges inherent in enforcing licensing terms and the critical importance of drafting comprehensive agreements.

Conclusion

Patent licensing emerges as a vital mechanism for promoting innovation while providing financial benefits to both licensees and patent holders. For entities contemplating participation in licensing agreements, a profound comprehension of the legal framework articulated in The Indian Patents Act, 1970. Success in patent licensing demands careful consideration of factors such as the licensee’s ability, the terms of the licensing agreement, adherence to legal requirements, possible revenue, and consequences for future rights. The need of striking a balance between intellectual rights and the public interest is vividly reinforced by precedent-setting case laws such as Bayer Corporation v. Natco Pharma Ltd. The effective patent licensing will continue to be a vital component of Indian business strategy and innovation as the country’s intellectual property ecosystem develops.

Article By:- Nishant Veer Vikram Singh (Patent Analyst) & KASHISH BAJAJ (Patent Associate) 
Aumirah Insights

See More insights