IPR- How Can You Grant A License Under The Intellectual Property Rights?
IPR- How Can You Grant A License Under The Intellectual Property Rights?

 

Introduction

Intellectual Property is the backbone and bedrock of inventions in today’s times. Several inventors work tirelessly to create a masterpiece and the best way to protect the sweat of their effort is through registration of IP.

Intellectual Property Rights are the basic rights granted to inventors, innovators, writers, artists, etc. for the work of their hands. These rights come as copyright, patent, trademarks, industrial designs, circuit boards, etc. Each of these rights is governed by different laws. Most of the legal application includes the modality for registering, transferring, acquiring, and licensing any rights.

In the early days of India, IPR made no practical sense and raised little or no dust but with the recent trends of technological advancement, IPR is a hot topic and the people are made aware of it.

 

What is Intellectual Property?

Intellectual Property (IP) is a spark of creativity. It is the mind’s creation or creativity put down in different forms graphical, artistic, written, drawn, built in medium envisaged now, before and later. Intellectual Property comes in varying forms such as:

  • Copyright,
  • Patent,
  • Industrial Design,
  • Trademark,
  • Printed Circuit Board,
  • Technological innovations,
  • Trade Secrets,
  • Moral rights,
  • Rights against unfair competition, etc.

 

What are Intellectual Property Rights (IPR)?

Intellectual Property Rights (IPR) are synonymous to IP and both are sometimes used interchangeably. While IP is a broad spectrum, the IPR narrows and specifies the spectrum into different categories called rights. As such IPR revolves around trade secrets, moral rights, competition, publicity rights, etc.

The IPR rights are always enforceable against the infringer. Various laws govern IPR because each right has its distinct and unique feature which makes it impossible to muddle all as one. Thus, once the owner registers his or her invention, it will count against whoever uses it without the permission of the owner.

The permission can either be express or implied. The objective surrounding the permission is that it must be obtained legally and through the appropriate means.

 

What is a License?

A License is simply permission. In fact, it is a formal and documented permission granted by a Licensor to the Licensee for a limited or unlimited use of the rights protecting the invention and also, specifying its period of use (timeline).

Under the Intellectual Property, a License is a formal written agreement which is legally binding between two parties (the Licensor, the one granting the permission and the Licensee, the one receiving the license).

It is also a partnership agreement between a Licensor who is also the IP owner or beneficiary or Attorney and the Licensee, who is the person or individual or institution authorized to use the rights.

Licenses are granted based on a consideration which can either be monetary consideration such as running royalty or flat fee or a percentage of the revenue or a share of the profit or a percentage of the company’s equity, etc.

Although License authorizes a person to use the invention, it does not confer ownership on the Licensee. Conferment of ownership amounts to an outright sale of the rights and liabilities of the Intellectual Property in the invention.

The purpose of this discussion is not on the sale of intellectual property rights in an invention but rather the licensing of an intellectual property right.

 

Difference between a License and an Assignment

License Assignment
A License does not confer the IPR in its entirety. An Assignment confers the rights in its entirety.
Under License, the parties are labeled as Licensor and Licensee. Under Assignment, the parties are labeled Assignor and Assignee.
A License is a permission to use work or invention. An Assignment is a conferment of the entire rights of the work or invention to the exclusion of all others.
A License has duration and is bound to revert back to its own upon the expiration of its duration. An Assignment does not have duration and it does not expire. So, nothing reverts back to its previous owners.
A License can apply to both copyrighted works and future copyrightable works. An Assignment applies to work in the present and not one envisaged in the future.
Licensing can generate continuous revenue or be a source of income to the Licensor. Assignment is an outright sale or assignment and does not generate continuous revenue neither will it be a source of income.

 

 

Types of License-

There are two (2) types of License. They are:

  • The Licensed-In: This is granted within the organization or institution for the development of a branch of IP in another department. This may not necessarily be used within the company, it can be gotten by someone outside the organization to develop and improve on his or her invention.
  • The Licensed-Out: This is granted by an individual or organization or institution to an external body for the development and use of the invention for a royalty or fee or a revenue percentage.

Thus, a License can either be licensed-in or licensed-out depending on the side of the table the Licensor and Licensee is on.

 

Licensing Agreement-

As iterated earlier, for a License to be complete, it must be formal and in writing. Below, are the express terms expected of in the terms of an Agreement:

  • Parties Identification – In the terms of an Agreement, the parties must be defined. The parties are the Licensor and the Licensee. The Licensor is the person or institution licensing or authorized to license the IPR. The Licensee is the individual or institution receiving the license.
  • The Subject Matter – The subject matter of a License must be stipulated. As iterated earlier, a general blanket is not thrown over a work or invention. The Licensor must define what is being licensed and how it is being licensed.
  • The (Technical) Know-How – The Licensor must stipulate how the IP works. The Licensor must also state if the IP will be used for research and development purposes, for-profit or for non-profit purposes. In the agreement, there should be a provision for technical assistance if the IP requires such. The Know-How is the nitty-gritty details required in order not to exceed boundaries or be constrained.
  • Scope and Nature – This explains the nature of exploitation for the IP such as the subject matter, the level of know-how, the geographical location, whether it can be exported or not, etc.
  • Confidentiality – This section classifies how the Licensor wants to either keep his or her details private or not. In most instances, the Licensee will elect to have the Licensor’s details remain private. Nonetheless, whatever the option it is, it is sorted out in this section.
  • Remuneration – This is a crucial aspect of the Agreement. It defines the modality for payment and its means. For instance, the Licensor has to elect whether to be paid a percentage of the revenue or equity share or monetary compensation, etc. Whatever the choice, it must be stated in this section and agreed to by all the parties.

 

Granting License under Different Ambits of the Law-

When considering whether to grant a License in IPR to another in India, there are certain aspects of IP and Laws that come into play. They are as follows:

  • The Copyright Act 1957 – License can be granted by the owner of an existing copyrighted work or the prospective owner of a future copyrightable work or the Copyright Board in cases where the author is dead, unknown or cannot be traced.
  • The Patent Act 1970 – Under section 70 of the Act, a patentee can grant either an express or implied or exclusive or statutory or non-exclusive license. Applications for a license are filed under section 84.
  • The Trademarks Act 1999 – this covers for the registered and unregistered licensee and allows the parties to determine the terms of the agreement including the territorial scope. A Licensee can bring an action against an infringer of his or her rights but for such action to be effective, the License has to be in writing and signed by all parties once it is granted.

 

Primary Conditions of Licensing under Intellectual Property-

For an IPR License to be effective, there are four primary conditions to be considered. They include:

  • The IP in question must have the legal backing and protection of the law. This invariably means that such rights must be protected. For an invention to be protected, it must be registered or undergoing registration.
  • The Licensor must be the real owner or the person with authority from the owner (Attorney) related to the IP in order to grant a license. Granting a license without being the rightful owner or have the right authority is illegal and can amount to an offense of fraud or deceit.
  • The Licensor must specify in the terms of the Contract pertaining to the License what is being transferred. A License is not a general blanket to act or do in whatever manner as the Licensee may deem fit. Therefore, the Agreement must stipulate the express terms agreed to by both parties with respect to the IPR license.
  • Another feature is the economic consideration of the rights granted. The Agreement must specify the terms or modality for consideration such as the exchange of the rights for payment either monetary or otherwise.

 

Provision of the License Agreement-

There are certain terms or provisions in the Licensing Agreement which makes it an appealable option for the Licensor. These provisions are discussed as follows:

  • The License Agreement gives the Licensor the opportunity to focus on other works at hand, leaving the process of development, use, and improvement on the licensee.
  • The License Agreement binds the Licensor and the Licensee to the terms stipulated in the Agreement. It is effective, paramount and serves as evidence in instances of breach or infringement.
  • The Agreement is the permission either out rightly, expressly or impliedly to do or act as the Licensee wishes with the invention given to him.
  • The basis of the Agreement is to document the royalty and consideration given to Licensor by the Licensee for using the invention within the duration specified.
  • The License Agreement allows the Licensor to invariably retain ownership of the invention. This means that toward the end of the terms of the contract, the invention will revert back to the Licensor. Thus, the Licensor may decide either to renew or retain the License.

 

Advantages and Disadvantages of Licensing to the Licensee-

Advantages Disadvantages
Licensing to the Licensee creates room to focus on other development in the field of the invention. Licensing to the Licensee may create additional expenses which the Institution may not afford.
Licensing saves time. Licensing is expensive.
Licensing helps create a better quality product through superior technology. Licensing may lead to over-dependence on external sources, thus, limit the growth, profit, and expansion of the institution.
Licensing allows one to commit to both present and future IP. Licensing may make one commit to a future IP which is unlikely to work or yield a profit.

 

 

Conclusion-

Licensing IPR is an important aspect of transferring rights in IP for a limited period of time and use by the Licensor to the Licensee. It is better than Assignment because the rights can revert back to its owner. The Licensor has the upper hand to dictate and state how he or she wants rights to be used.

Licensing is an important ambit of a stable economy as it pushes both sides of the table to prosperity. There may be disadvantages associated with these rights but it is minimal when compared to other IPR strategies.

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