Jan 20, 2019 | Indian Patents Act 1970, IPR & Business
An over- simplification of licensing is monetizing the intellectual property of your invention by allowing third parties such as companies to license the intellectual property for various purposes that involve manufacturing, marketing and selling. A patent, trademark, copyright, trade secret, a tech algorithm, or techniques or procedures or know-how are all examples of intellectual property. Subject to the provisions of the licensing agreement, when an invention is given for licensing to a licensee, the organization is empowered with the ability to manufacture; market and sell the invention. The process of Licensing of the technology is completed upon execution of Technology License Agreement (TLA) between the Licensor and licensee whilst the inventor is given royalties by the licensee as a consideration for the said agreement.
It is of paramount importance that the terms and conditions of License Agreement are explicitly agreed by both parties and is in a written form.
Why license an innovation to a company?
The fundamental reason that inventors license their patents for royalties is so that they can focus exclusively on attempting to create rather than managing to manufacture, monetize, or distribute each of their inventions. Inventors can create intellectual property and then license the rights to another company to bring the product to market through a patent license agreement. For many innovators who may not have the resources to bring their invention to market on their own, this serves as a viable option.
Licensing inventions for royalties can also help inventors access new markets and expand the reach of the invented product. If an inventor intends to expand into a market where he has limited experience or in an industry across the borders or want to endorse a licensee who has similar products in the market and where the invention could be optimally used in, the inventors decide to license their patent.
Structure of a License Agreement
Licensee: Selecting an appropriate licensee to meet the requirements is one of the first crucial steps in licensing an intellectual property for royalties.
Scope: The scope of the license is determined by the licensor (inventor) which clarifies specifications of the intellectual property. The questions involved are whether the licensee is allowed to access the IP rights as a whole, or will the licensee only be allowed to use the patent for a precise task, for instance, manufacturing or distribution worldwide or in specific jurisdiction. The valid duration of such intellectual property license along with restrictions on geographical locations and various markets is important to be negotiated.
There are no specific requirements of the license to either be exclusive or non-exclusive. It solely depends upon choice of the parties. The license may contain a prohibition on the parties competing in the jurisdictions in which they operate; the contents of the contract will factor in the determination.
In order to receive protection against similar inventions or otherwise, a patent must be compulsorily registered or filed for priority protection, and the patent license must be in writing and registered under section 68 of the Patents Act 1970.
Validity of License Agreements
A license agreement, as previously said, should be in writing with all pertinent terms fully outlined. Would just a term-sheet, to the contrary, suffice as a legitimate license agreement? PVR Pictures Limited vs. Studio 18[1], the Delhi High Court delved at this issue. The parties had agreed in this matter to enter into a term-sheet agreement (TSA) under which PVR would be the exclusive licensee for distribution rights in respect of selected cinematic pictures for which written agreements would be executed. PVR accused Studio 18 for infringement, claiming that by refusing to enter into an agreement with PVR on the film, Studio 18 was infringing on PVR’s rights. PVR asked for ad interim relief against the defendant. The issue was whether PVR is Studio 18’s licensee for the film Short Kut, and if so, whether it is entitled to an ad-interim injunction. The courts held that the TSA does not signify a license agreement because the parties did not intend for the TSA to become a binding contract and a license as defined by the Copyright Act; and because PVR failed to develop any legal right or copyright for the grounds of suit, PVR cannot seek specific performance or an ad interim injunction.
Hence, the license terms must not only be in writing but should also be in the form of a binding definitive document for a valid License Agreement.
Terms of a License Agreement
A license agreement must be extensively drafted to provide for specific details of the rights and the limitations imposed on the licensee in the exercise of such right. The definition of licensed property, the geographical features for which licenses are granted, the right given to the licensee to further sublicense the property, clauses regarding revocation of the license, royalty or consideration for the grant of license, dispute resolution, cessation, all of which are inherent areas of the agreement.
To ensure that the licensee cannot claim that the IP has been transferred to it, the license agreement must be carefully drafted, and certain license constraints must be included. There have been certain cases where the licensor has executed an exclusive license and the licensee claims that the IP has been assigned. Indian courts have looked at the essence of the contract, notably the royalty payment clauses, to assess whether a transfer should be interpreted as an assignment or an exclusive license in a number of cases.
In Deshmukh and Co. (Publishers) Pvt. Ltd. vs. Avinash Vishnu Khandekar and Ors[2], the Court looked at the difference between assignment and licensing of Copyright. It was iterated that the essence of a document, not the manner of words used, must be considered when determining whether it is an assignment or just provides a license. The question usually arises in the context of whether the right in question has been partially assigned or licensed exclusively; the distinction is subtle but significant.
The copyright is not conveyed if the consideration is in the form of royalties or a portion of profits rather than a direct payment. It would be a publishing and selling license. In this situation, the payment of royalty rather than substantial money intended to be a sale, stands against partial assignment.
Consequently, the licensing provisions must unambiguously declare that it is a license (whether exclusive or non-exclusive) and clarify the contractual terms. More significantly, the royalty payment clause should be formulated carefully that it does not imply that any direct payment is made in exchange for Intellectual property assignment.
Improvements, enhancements, and revisions to IP are the responsibility of the IP owner.
Licensee can design and develop an enhancement to an existing technology or a component that improves the technology’s use or functionality. The new innovation could be the result of modifying the licensed IP to make any improvements, or it could be the outcome of an innovation related to the use of the licensed IP. These improvements signify advancement in the licensed technological field that improves the initial IP’s usage, functionality, efficiency, productivity, or other attributes. A license agreement must indicate what designates an improvement, and the ownership of such improvement and all property created as a result of it.
Mandated registration of License Agreement
When a license agreement is intended to be performed, the issue of whether the registration of the agreement is mandatory arises. If required by law, what are the consequences of non-registration? The Patents Act, the Trademarks Act, and the Designs Act all require license agreements to be registered, although the Copyright Act does not. The Indian Stamp Act, 1899 (the “Indian Stamp Act”) governs the transfer of intellectual property rights in the form of licenses, assignments, and sales, among other things.
Quantification of Royalty
As previously mentioned, when an inventor licenses his invention to a third party, the two parties engage into a license agreement in which the licensee acquires the patent rights and the licensor receives a fixed sum of money each time the product is sold.
The royalty is a fixed sum paid to the licensor or inventor as consideration, and the licensing royalty rate is a percentage of the net or gross profit selected to constitute the royalty. The quantification of royalties may heavily depend on the negotiations between the parties and merchantability of the invention. The Licensor may be in violation of The Competition Act, 2002 (the “Competition Act”) if it attempts to set extortionate prices as a result of its dominating market position. The test of accuracy of the royalty is reasonability.
The accuracy of the royalty base would determine the reasonableness of a royalty. The royalties is calculated on an individual basis. The Competition Commission of India (“CCI”) has adjudged on numerous cases regarding royalty rates assessment. It has been iterated that offering different licensing prices to different users for the same technology is in violation of FRAND requirements. Further, the CCI determined that Ericsson imposed unjustified royalties because no alternative technology for its patents 2G, 3G, and 4G standards was available.[3]
Even-though, licensing an invention comes with certain limitations and risks, the license agreement allows parties to expand the inventions to various jurisdictions and markets which aligns with the primary visions of licensor and reach larger targeted audience.
By Vinita R. Gaud, Pravin Gandhi College of Law
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[1] PVR Pictures Limited vs. Studio 18 2009 SCC OnLine Del 1878
[2] Deshmukh and Co. (Publishers) Pvt. Ltd. Vs. Avinash Vishnu Khandekar and Ors 2006 (2) BomCR 321
[3] Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India, 2016 SCC OnLine Del 1951
Nov 19, 2018 | Contracts, IPR & Business
A major chunk of a progressive company’s assets today is in the form of Intellectual property (IP) such as trademarks, patents, copyrights, trade secrets, designs and so on. Sharing of confidential information becomes unavoidable when two entities are transacting business. A non-disclosure agreement (NDA) is also known as a confidentiality agreement and is an agreement where two or more parties agree to keep certain information confidential. In most situations, NDAs serve as the first move towards subsequent business agreements and contracts that include additional provisions covering the complexity of business transactions between the parties. This can either be one-sided (only one party shares confidential information) or mutual (expecting exchange of confidential information from both the parties) but the outcome of it is to protect the information or the businesses’ trade secret.
- Parties
It is very important to list out the party names correctly on an NDA as a relatively minor error such as forgetting to include the word “Limited” can have disastrous consequences. Some companies have different legal names and trade names when they begin their operations. A legal name is the name used by an entity when registering as a business, when signing official legal documents, and when dealing with governmental processes. A business name or a trading name however is the name a company uses for ads and sales and under which it performs its business with the public. A party may have the same legal and trading name, but it is also entirely possible that they may not be the same.
Further, there is no legal protection to halt the use of a trade name by other companies unless the entity trademarks its name. It is therefore important to list both the legal and trade name of the businesses involved when drafting an NDA.
- Define what is deemed to be confidential information
Confidential information should be defined specifically for both parties. The parties involved must be precise when identifying the type of confidential information exchanged and whether it is the same or different for all parties. For example, the type of information to be shared by each party may not be the same in the case of a discussion involving the mutual exchange of confidential information between the two parties. Therefore in such cases, it makes sense to provide an exact definition of confidential information for each party.
Classifying all the information disclosed to a receiving party as confidential can be tempting. However, using catch-all clauses must be avoided and instead, the agreement should only include information that is truly necessary to keep a secret.
For example, in Trailer Leasing Co. v. Associates Commercial Corp, a federal court in Illinois declined to enforce an NDA where the concept of ‘confidential’ was deemed too vague, over and above a lack of specified geographical limitations.
The law treats confidential information differently than trade secrets and hence care must be taken to appropriately label the information as confidential information or a trade secret. A differentiator between the two is that trade secrets are known to last for a longer period of time across generations.
- Term of the agreement
The term of the NDA may or may not be the same as the term of contractual obligations and therefore it requires a specific definition of the term. Perpetual clauses should be avoided unless the same is in the context of the parties’ discussions.
- Clearly define non-disclosure and non-use
The agreement should include separate provisions on non-disclosure and non-use in both types of NDA (mutual and one-sided).
NDA clauses should be drafted so as to not create undesirable delays in discussions and negotiations. The business goal should always be given priority to the lawyers involved in drafting and negotiating NDAs and excessive clauses should be avoided while standard clauses in NDA should be given utmost importance. In the case of any problems, it is often best to adhere to the primary purpose of signing NDA, i.e. confidentiality and limiting the use of sensitive information, whereas additional agreements can be enforced to include relevant provisions (Non-compete, Non-solicited, IP Assignment, IP Licensing, etc.)
By Damini Mohan
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Nov 15, 2018 | Indian Patents Act 1970, IPR & Business, Patent
In this case, Medley Laboratories (P) Ltd. (hereinafter referred to as Medley) filed a suit of trademark infringement against Alkem Laboratories for usage of mark “SUPAXIN” which is deceptively similar to registered trademark of Medley, “SPOXIN”. Brief facts of the case are as follows:
- Medley is registered proprietor of the trademark “SPOXIN” in respect of Pharmaceutical and Medicinal Preparations in Class 5 vide Registration number 420835. They applied for registration in year 1984 and have been using the mark since 1999, for medicinal preparations containing the generic drug SPARFLOXACIN.
- Alkem, India’s 10th largest Pharmaceutical Company (at the time of suit), started using the mark “SUPAXIN” and for the same registration application had been sent to Registrar of Trademark as ‘proposed to be used’.
- Suit for infringement and notice of motion was taken out by plaintiff to restrain Alkem from using infringing mark, initially an ex-parte injunction was passed in favour of Medley, but on another notice of motion by Alkem, parties were heard afresh and it was held by a single judge that the marks in question are not similar and therefore injunction is bound to be said aside. On such order by the Single Judge, appeal was preferred by Medley, which was the subject matter of present case.
Arguments
By Medley i.e., Appellant
- That medley is the registered proprietor of the trademark “SPOXIN” vide registration number 420835 and by virtue of registration they are entitled to exclusively use the mark and protect it.
- That Single judge has committed error of law by not granting injunction in favour of Medley, decision of Hon’ble Supreme Court in case of Cadila Healthcare Ltd. v. Cadila Pharmaceuticals Ltd.; {[2001]2SCR743}, was relied upon, wherein Supreme Court decided upon similar question with respect to marks being used in medical preparation. Medley contented that Apex Court held that in medical products and drugs public interest should be considered and a stricter approach has to be adopted because confusion as to medicinal product can have disastrous effect on health and in some cases on life as well.
- That balance of convenience was in favour of Medley as their mark “SPOXIN” is a registered mark and irreparable loss and injury would also be caused to them if injunction is refused, as the suit will take a long time and in spite of registered trade mark, the defendant will continue to use ‘deceptively similar’ mark SUPAXIN.
By Alkem i.e., Defendant
- That Alkem is honest user of the mark “SUPAXIN”, it has coined the term by taking into consideration two words i.e., “SUPA” which means superior and “XIN” which is a common suffix for antibiotics. That prior to applying for registration, they made an application to Registrar under rule 24 of Trade and Merchandise Marks Rules, 1959, requesting him to conduct a search and issue a search for similar marks and on basis of such search report they started using the mark “SUPAXIN”.
- That there was no dishonest intention in applying the mark and the mark is neither deceptively similar nor it would create any confusion to customers.
- That a discretionary order has been passed by Single Judge and under ordinary circumstances such orders are not interfered with by Appellate Court.
- That balance of convenience was not in favour of Medley because as per the findings of Trial Court Medley and Alkem started using the mark at around same time. That Alkem has established its bona fide usage by making search request to Registrar.
- That no evidence is produced before the court of Medley regarding the confusion, on the contrary affidavits were produced by Alkem to support that there was no likelihood of deception or confusion to doctors, or to chemists, or to patients.
Issue
The primary issue before the court was, whether the mark of Medley i.e., “SPOXIN” is deceptively similar to mark of Alkem i.e., “SPUAXIN”.
Judgement
Hon’ble Delhi High court observed that by virtue of registration Medley got the right to exclusively use the mark “SPOXIN” and the right to prevent others from using deceptively similar mark. Further court observed that the marks “SPOXIN” and “SPUAXIN” are deceptively similar and that once the mark is proved “to be identical or deceptively similar, the other factors, viz., the packing being different, number of tablets contained in the competing package is not the same, prices are not identical and/or the goods being sold on doctor’s prescription are altogether irrelevant and immaterial.”
Decision of Single Judge was overruled, as he failed to promptly apply the principles laid out of Apex Court in the case of Cadila Health Care (supra). It was held by court that:
“In our opinion, however, when the test is ”possibility’ of confusion in medicinal preparations, as held by the Supreme Court in Cadila Health Care Ltd., and the Courts have been asked by the Apex Court to take special care, in such cases, since confusion may harm and result in unpleasant consequences, if not disastrous results, the learned Single Judge ought to have granted injunction as prayed by the plaintiffs (Medley).”
As to the issue of discretionary matter it was held that when an adjudication has been made, may be prima facie, and in doing so, correct test has not been applied, it is open to the Appellate Court to interfere with the discretionary order made by the trial Court.
Thus, the appeals were allowed and Alkem’s mark was found to be deceptively similar with the mark of Medley.
By: Dhruv Dangayach, Ramaiah College of Law
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Sep 14, 2018 | General
India is one of the countries where Iodine deficiency is a major cause of concern. According to a survey conducted by the Indian Journal of Medical Research it was found that 263 districts out of 325 that were examined for the survey showed high risk of Iodine Deficiency Disorder which shows the lack of iodine consumption by the people (Pandav et al., 2013, 418-433).
Such deficiency of Iodine in the body can lead to various diseases such as goitre, Hypothyroidism and additional complications like decreased fertility and increased death rate among infants. The lack of iodine consumption by the people shows the lack of awareness among people in rural areas regarding the importance of iodine. In order to combat the problem in India, the Government and various NGOs have started different initiatives at the local and national levels. However, no one comes close to the creativity and effectiveness of the mission launched by the NGO called Grey Singapore which is called ‘The Life Saving Dot’ (Basu, 2015). This article will talk about the idea behind the initiative and its impact on the lives of women in different parts of the country.
CORE INNOVATION
The objective behind launching such an initiative was to help the women in rural parts of India, fight the problem of Iodine deficiency without impacting their daily lifestyle or habits so that they don’t have to invest in any other fancy equipment. These conditions were fulfilled by an ornament. Bindi is widely worn by women in India and the idea of using it as a tool to fight against Iodine deficiency, firstly came to Ali Shabaz who is the Chief Creative Officer of Grey Singapore (Basu, 2015). This was the first initiative of its kind, as never before a traditional ornament was used to fight disease. Grey Singapore saw the potential in the idea and teamed up with “Talwar”, one of the major bindi manufacturers and distributors in India, and also with “Neelvasant Medical Foundation” another NGO, which is widely active in the region of South India, in distribute the bindis to the tribal women, with having the vision of overcoming the Iodine deficiency disease among women. (Basu, 2015).
Manufacturing of such bindis does not require any special machinery and the process of usage is also as simple as placing it on the forehead. Such bindis have a certain amount of iodine in its adhesive roughly around 150-200 micrograms. When a woman wears the bindi some of the iodine which is present in the adhesive, gets absorbed by the skin through the process of dispersion, which takes place through the skin of the person while wearing the bindi (WPP, n.d.). The amount of dispersion of iodine that takes place is around 12% which is around 24 micrograms of iodine a day which will have a significant impact on the health of women.
CONCLUSION
The iodine bindi can be seen as a very effective tool against Iodine deficiency disease. On top of providing various benefits to the user, it has no side effects on the body of women who use them regularly. When it comes to pregnant women, Iodine bindi is safe to use and has no effects on the health of the infants; rather they tend to lower the chances of headache which is common among iodine deficient women during pregnancy.
Iodine bindi has been helping women in rural areas, tremendously in combating iodine deficiency disease, uniquely and creatively. It is one of the very cheap fixes to the iodine deficient diet of rural Indian women. With the advancement of technology its effectiveness and awareness will go up significantly, which can be very helpful to India for eradicating the problem of Iodine deficiency.
Author: Prajal Joshi (2nd Year, BBA-LLB), Symbiosis Law School Hyderabad
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Aug 20, 2018 | Indian Patents Act 1970, IPR & Business
Bayer Corporation, a US based corporation had a patented drug in India under the brand name Nexavar. This landmark judgement became the first case where a compulsory license was issued after India became a signatory to Trade Related Aspects of Intellectual Property Rights [TRIPS] and also to the Doha Declaration in 2001. The Intellectual Property Appellate Board [IPAB] elaborated the grounds and conditions for compulsory licenses. Brief facts of the case are as follows:
- Bayer Corporation, a US based corporation which developed “Sorafenib Tosylate” sold under the patented drug “Nexavar” [Patent Number IN 215758] for curing kidney cancer. The drug relieves the pain and slows down the spread of cancer.
- Compulsory license for Nexavar was granted to Natco Pharmaceuticals Ltd. (hereinafter referred as Natco Pharma).
- On 3rd Mar, 2008, Bayer Corporation was granted a patent in India for “Nexavar”
- On 6th Dec, 2010, Natco Pharma approached Bayer Corporation for grant of voluntary license of the patented drug.
- Bayer Corporation was selling the drugs at Rs 2, 80,428 per month for 30 tablets. Natco Pharma proposed to sell the same drug at Rs 10,000/- per month to make it available at an affordable price in India. Later Bayer Corporation rejected this offer.
- On the other hand, CIPLA Ltd (hereinafter referred as CIPLA), another Indian Pharmaceutical, was already selling the drugs as “Soranib” at Rs 30,000/- for a month later it sold at Rs. 5,400/-. CIPLA didn’t take prior permission or license from Bayer Corporation and hence was undergoing litigation in Delhi High Court for infringement of Bayer Corporation’s Patent.
- On 29th July, 2011, Natco Pharma applied to the controller of Patents for grant of Compulsory License under Section 84(1) (3) of Patent Act, 1970.
- The controller drafted the terms and conditions of the compulsory license and awarded a 6% royalty from profits to Bayer. Then Bayer appealed the Controller’s decision before IPAB.
Issues
The main issues before the Hon’ble Court were:
- Whether the requirements for the grant of compulsory licensing are fulfilled?
- Whether the decision of the controller to grant compulsory license to Natco Pharma with a royalty at 6% of its net sales to Bayer Corporation was valid?
- Whether the supplies by Natco Pharma & CIPLA of the disputed drug have to be taken into account to determine the satisfaction of reasonable requirement test?
Arguments by the parties
By Plaintiff i.e., Bayer Corporation
Bayer Corporation alleged that if the Sorafenib Tosylate drug was already available in the market at affordable prices, then section 84(1) (b) of the Patents Act, 1970 cannot be one of the issues.
- The cost of inventing the drug is high and the corporation has invested a huge amount on research and development.
- Furthermore, they argued that the controller has ignored the mandatory nature of Section 90(1) (i) [7] of the Patent’s Act, 1970, as it has not taken into account the cost of invention incurred while fixing the royalties.
- Bayer contended that the utilization of “sale” along with “import” excluded the term “export” from the meaning of the expression “sale”. Section 84 and Section 92A has used the term “export” expressly. Therefore, the court should not accept Natco Pharma’s contention that an export transaction is covered by sale.
By Respondent i.e., Natco Pharma
The price charged by Bayer Corporation was not an affordable price when compared to purchasing power of the public or to meet the requirements in the market and hence Bayer Corporation contravened the Patent Act.
- They argued that the charitable program i.e., Patient Assistance Program [PAP] of Bayer Corporation is discretionary and conditional. Therefore, cannot be applied for public.
- Furthermore they stated that the IPAB has complied with Section 90 of the Patents Act, 1970 as they enhanced the royalty from 6% to 7%.
Judgement
Court relying on various judgments held that:
“The Hon’ble Supreme Court dismissed the SLP filed by the Bayer Corporation and upheld the decision of Bombay High Court providing compulsory licensing for a life-saving drug named ‘Nexavar’. The High Court judgement relied on the fact that even after taking Cipla’s supplies into consideration, the public prerequisite would not be met and commitment to meet the reasonable requirement of the general public must be of the patent holder alone, either by patentee himself or through his licensees. The charitable program by Bayer Corporation was unaccepted as a defense for Section 84 (1) (b) of the Patent Act, which insists on the fact that the patented drug should be made available to the public at a fairly affordable price i.e. to any portion of the public tendering the price. It was also held that the term “exports” is employed in different contexts in Sections 84, 90 and 92A all of which deal with compulsory licensing. The court observed that when it comes to drugs the sufficient extent test has to be 100% i.e. to the fullest extent. Under Doha declaration the concept of compulsory licensing empowers the government to provide an organization to use the patent technology and the use of patented product even without the real owner’s consent. In the present case, Natco Pharma fulfilled all the conditions for compulsory licensing.”
The judgement strikes a balance between the issues pertaining to public interest and also those made in regard to patentee’s rights. It demonstrates the focus of Indian Pharmaceutical patent law, which indeed pushes towards affordable access to the larger public and the Court’s primary concern is that of public interest.
Hence, the High Court then dismissed the petition of Bayer Corporation.
By: Runjhun Sharma, School of Law, Mody University
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