Role Of IPR in Technology Licensing
Technology has become an inseparable part of modern life, shaping the way we live, work, communicate, and interact with the world around us. In today’s digital generation, technology is not an option but a necessity as a means to keep up with the fast paced and high adrenaline competition. The consecutive technological advancements have helped numerous businesses to grow and thrive in the marketplace. But with every invention comes a need for protection and comparison between the different consequences that drive our lives forward. This is where technology licensing comes in— it is important to ensure that these unique ideas are protected, preserved, and accessed responsibly.
Technology Licensing
Technology Licensing is a contractual arrangement in which the licensor’s Intellectual Property (IP) such as, patents, trademarks, service marks, copyrights, trade secrets, or other intellectual property may be transferred to a licensee for a specified period of time. It allows a user to use or access the technology, intellectual property, or other valuable assets for a given period in exchange for a fee or royalty. It imposes a deep impact in our increasingly interrelated industries and diversified global economy. When a company licenses its self-made technology to a third-party it gives access to its proprietary technology, allowing them to use it for commercial purposes, thereby allowing a company to monetize its intellectual property while the licensee in return can gain access to the technology that they have not yet developed itself.
Need Of Technology Licencing In Intellectual Property Rights
Over time, Intellectual Property Rights (IPR) have grown significantly in importance and now play a crucial role in the global economy. IPR refers to legal protections given to creators, inventors, and owners of intellectual property, which includes inventions, artistic works, designs, symbols, and commercial names. These rights safeguard the interests of creators by rewarding their creative efforts and allowing them to maintain ownership over their creations. Licensing technology is essential, especially for smaller companies or those lacking research and development capabilities, as it enables them to stay competitive within their industry by accessing necessary resources and innovations. A strong licensing framework also helps prevent technology from being shared with local companies, protecting against potential profit losses, particularly in developing countries where imitative products could pose a threat to innovation.
Role Of IPR in Technology Licensing
In essence, IPRs play a pivotal role in creating a favourable environment for inventors by ensuring that the benefits from successful innovations are significant enough to justify and compensate for the inherent risks and costs involved in the broader landscape of research and development. This, in turn, serves as an impetus for continuous innovation and exploration of new ideas.
When a new technology is valuable, there is a risk that others will copy or imitate it, reducing the original inventor’s potential profits and discouraging further innovation. If the cost of imitation is much lower than innovation, imitators have an advantage, especially if innovators restrict access to their innovation. This is where strong IPR licensing comes into play. IPR authorization grants innovators the legal power to prevent others from using their creations or to set specific terms for usage. In essence, IPR protection motivates inventors by providing temporary monopoly power over their innovations, fostering more innovation.
The temporary monopoly, while not ideal, aims to restore the incentive to innovate, ultimately promoting long-term growth and better product quality. The profits gained during this temporary monopoly period serve as a return on the successful investment in research and development.
Technology licensing provides an opportunity to the owners of intellectual property to monetize their innovations. Knowing that they can license their inventions, technologies, or creative works encourages inventors and creators to invest in research and development, contributing to technological and cultural progress. IPR licensing are often used as the basis for joint ventures and collaborations wherein businesses may enter into licensing agreements to pool their strengths, resources, and intellectual property assets for mutual benefit. The agreement may consist of terms and conditions on how the licensor and licensee will team up to protect the IP from infringement and unauthorized usage. A business can benefit from licensing in numerous forms such as defensive purposes – using the IP to prevent copying of the business’s products or service or to assert in response to an IP challenge from another party. IP may also be used maliciously to exploit intellectual property to defeat competitors, increase market share, dominate the market, or generate revenue.
Indian Patents Act
The Indian Patent Act of 1970 governs the licensing of patents, which are granted for new, non-obvious, and useful inventions. Patents give inventors exclusive rights to their inventions for about 20 years. The Act outlines procedures for obtaining patents and sets criteria for patentability, including novelty, inventive steps, and industrial application.
An exclusive license, defined in Section 2(f) of the Act, grants the licensee exclusive rights to use the patented invention. The title of the patent remains with the licensor, but ownership transfers to the licensee. However, the licensee cannot sublicense the patent to others.
Section 70 of the Act allows patent owners to assign or grant licenses for their patents. Sections 84 to 92 deal with compulsory licenses, which the government can grant to third parties under certain circumstances. These licenses aim to ensure public access to patented inventions, especially in cases where affordability or accessibility is an issue.
In Bayer Corporation vs Natco Pharma Ltd, involving the drug Nexavar used to treat kidney cancer. Natco Pharma sought a compulsory license due to the high price of Nexavar, arguing it hindered public access. Bayer Corporation opposed, claiming it would harm research and development. Ultimately, a compulsory license was granted to Natco Pharma, as it fulfilled public benefit criteria under the Act and the drug was not produced in India.
Copyright Licensing In Indian Copyrights Act,1957
Copyright protects original creative works like books, music, and art. It gives creators control over how their work is used, for up to 60 years in India. This protection encourages creativity by allowing creators to benefit from their work. The concept of Licensing is addressed in Chapter VI of the Copyright Act of 1957. According to Section 30, individuals with copyright ownership in existing or future works have the authority to grant written licenses for the rights to the copyright, either personally or through an authorized agent. The license under copyright act, 1957 can be classified into following categories:
There are two main types of copyright licenses under India’s Copyright Act, 1957
Voluntary Licenses (Section 30) grant copyright owners’ complete control over granting permission to use their work. This permission is formalized in a written license agreement signed by the owner or their authorized agent, specifying the scope of use (e.g., reproduction, distribution), duration of the license, and any royalties involved.
Compulsory Licenses (Sections 31-32A) allow third parties to use a copyrighted work without the owner’s direct consent in specific situations. This aims to balance the rights of copyright holders with public interest.
Beyond Copyright Owner Permission: Compulsory Licenses in Indian Law
- Refusal to republish? Seek compulsory license for public access (Section 31).
- Unpublished or unknown author? Board can grant access (Section 31A).
- Organizations can create accessible formats for the disabled (Section 31B).
- Make cover songs after 5 years with royalties (Section 31C).
- Unavailable or overpriced work? Apply for license after trying voluntary (Section 31D).
In a case involving Super Cassette Industries Ltd vs. Entertainment Network (India) Ltd the latter, operating Radio Mirchi, sought a license from SCIL to play its sound recordings. Despite multiple attempts, they failed to obtain it. Consequently, the Copyright Board issued a compulsory license, prompting an appeal to the Delhi High Court. The Court noted that if compulsory licenses were granted to all, there would be no need for an inquiry as per Section 31. It emphasized the need for reasonable grounds for refusal once copyright became public. The Court emphasized the delicate balance between private rights and public interest in issuing orders under Section 31, sending the case back to the Copyright Board for reconsideration.
Trademark Licensing Under Trademarks Act,1970
Trademark registration provides exclusive rights to the owner for its use and authorization to others for a fee. Section 2(zb) of the Trademarks Act, 1999 defines “trademark as a mark capable of graphical representation and which can be used to distinguish the goods or services of one person from those of others.” Registration lasts for 10 years but can be renewed indefinitely, adding value to the business and establishing a strong market presence.
The concept and the laws governing licensing of trademarks are found in Sections 48-55 of the Act. It can be said that the term “registered user” in the Act is synonymous with the term “licensee”. Under the 1999 Act, “permitted use” as defined in Section 2(1)(r) means the use of a registered trademark by a third person as a registered user; as well as, use by a third person by the mere consent of the registered proprietor. The use of the word “may” in Section 48(1) of the Act makes it apparent that registration of a licensing agreement is not mandatory for it to be licensed. The agreement, however, must be in writing as oral licensing is no licensing. The registration of the license agreement is not mandatory; however, it is advisable to do so since it creates a record that becomes useful in the case of any dispute in the future. By way of registration of the license agreement, a licensee becomes a “registered user” in lieu of Section 49. For the registration of a registered user, a joint application is to be filled to the Registrar through the TM-28 Form within six months from the date of the agreement.
In the Himalaya Drug Co. Pvt. Ltd., Bangalore v. Arya Aushadhi Pharmaceutical Works Indore, the court emphasized the importance of registering a trademark license with the Trade Mark Office. It ruled that failure to prove registration as a user can lead to dismissal of the suit. Only a registered owner or proprietor of the trademark can initiate infringement proceedings under the Trademarks Act, 1999. Unregistered users cannot maintain suits under the Act.
Design Licensing Under Indian Design Act,2000
Designs enhance the attractiveness and market value of a product, contributing to its business success. Design protection aims to safeguard a product’s unique visual characteristics that set it apart from others. Industrial design pertains to the aesthetic aspects of a product, encompassing its visual, ergonomic, and functional elements. This form of intellectual property protection is crucial in industries where visual appeal influences consumer choice. To qualify for protection, an industrial design must be innovative and possess distinctiveness, avoiding common or widely recognized features in the industry.
As per Section 30 of the Design Act,2000, a person is entitled by way of assignments, transmission or other operation of law of copyright can make an application in the prescribed form to the Controller of Designs for transmission of design rights. The section entitled a licensee having interest in a registered design make an application in writing to the controller to register their title and the controller on receipt of such application and on proof of title to his satisfaction, cause notice of the interest to be entered in the register of designs, with particulars of the instrument, creating such interest.
Conclusion
The role of Intellectual Property Rights (IPRs) in technology licensing plays a crucial part in fostering innovation, protecting the rights of inventors, and facilitating the monetization of intellectual property.
IPRs grant inventors temporary monopoly power, encouraging them to invest in research and development (R&D) by ensuring returns on successful innovations. Technology licensing serves as a vehicle for innovators to monetize their intellectual property, allowing them to generate revenue through royalties and licensing fees. This, in turn, promotes further research and development, contributing to technological and cultural progress.
The Indian Patent Act, Copyrights Act, Trademarks Act, and Design Act provide frameworks for licensing various IP rights. In essence, the effective utilization of IPRs in technology licensing not only rewards innovators for their efforts but also contributes to economic growth, collaboration, and the dissemination of knowledge. Striking a balance between protecting intellectual property and ensuring public welfare remains a critical aspect of fostering a conducive environment for innovation and creativity.
