Patent licensing by co-owners in India

Before proceeding to stating anything regarding patent licenses in India, it is important to note that the though the Indian Patents Act speaks about licenses for “granted” patents and is silent about patents that have not yet been granted but are being assigned or licensed or undergoing some change ion ownership, it is to harmoniously and I believe correctly to be interpreted from Section 11A (7) that applicants shall have like privileges and rights in a patent, if published, as if a patent has been granted. The only time when a “patent, published, but yet to be granted” will not function as though the patent is granted is in the case of suit for infringement. Therefore, it would be reasonable to presume that for the purpose of licenses, mortgages etc, the Act treats “patent, published, but yet to be granted” as though the patent is granted. Based upon this, we shall proceed further as below.

For a patent to be licensed in India, the prerequisite is that the license agreement should be:

(a) in writing and duly executed as required under Section 68 of the Indian Patents Act (hereafter “the Act”); and

(b) registered as required under Section 69 of the Act since a license agreement falls within the ambit of “documents that must be registered with the Indian Patent Office” as prescribed by section 69 of the Act.

If there are co-owners of a patent then Section 50(1) of the Act provides that each of the co-owners equal undivided share in the patent unless there is an agreement to contrary.

Section 50 (2) of the Act states that each of the co-owners is entitled by “himself or his agents” to the rights in the patent for his own benefit without accounting to other co-owners. Both Sections 50(1) and 50 () come with the rider on “an agreement to the contrary in force” or/ and Section 51 of the Act does not apply.

Section 50(3) of the Act states that to license a patent by one of the co-owners in India there is a requirement that co-owner seeking to give license should have the consent of the second co-owners of the patents. Here again the Act has tempered this Section by adding a proviso of “an agreement to the contrary in force” or/ and Section 51 of the Act.

Thus, only instances envisaged under the Patents Act where permission is not required from the second co-owner by the first co-owner are:

(a) if there is an agreement between the co-owners which states that both the co-owners can act independently.

(b) Section 51 of the Act, where the Controller of Patents gives directions to the second co-owners.

In the second instance, the Controller is vested with powers under Section 51 to issue directions to the second co-owner about the licensing of the patent. This direction could be in form of a simple question such as if the second party has any objection against the licensing of the patent by the first co-owner. If the second co-owner fails to execute any instrument or do any other thing required by the Controller within fourteen days of such a request, the Controller can give directions to “any” person to execute the instrument or do that thing in the name and absence of the person in default.

Sub section 3 of Section 51 of the Act provides that an opportunity to be heard would be provided to the person in default.

Therefore, in situations where it happens that there is no agreement to the contrary in force and one of the co-owners does not give consent to the first co-owner for licensing, then the situation becomes very tricky. In such cases, proviso to Section 69 (3)of the Act states that the Controller would refuse to any action until the rights of the conflicting parties have been resolved by a competent court.

Therefore, if one of eth c-owners is looking to licence the patent, then as the first step, the co-owner should ensure that there is a clear agreement with the other co-owner regarding commercialisation of the patent. The agreement could be of such a nature that it gives both eth parties equal right to exploit the patent or divide the territories or may be limit the amount of commercialisation by other party.

The bottom line is that the co-owners require to have an agreement in force for commercialisation to avoid getting into nitty-gritties of interpretation of Sections and the discretion of the Controller.