Transfer of Patent Rights

The transfer of patent rights is an important aspect of intellectual property law, facilitating the commercialisation and dissemination of technological innovations. In India, the transfer of patent rights is governed by the Indian Patents Act, 1970.

Meaning of Transfer of Patent Rights

Transfer of patent rights is the process by which the ownership or interest in a patent is legally reassigned from one party to another. This transfer can occur through various mechanisms such as assignments, licences or by operation of law. In an assignment, the original patent holder (assignor) transfers their ownership rights to another party (assignee), who then gains the ability to enforce the patent.

Licensing involves granting permission to another party to use the patent under agreed terms without transferring ownership. Transfers can also happen through legal processes such as inheritance or company mergers. The transfer must comply with legal requirements to be valid, often involving written agreements and official registration.

Purpose of Transfer of Patent Rights

The purpose of transferring patent rights is to facilitate the commercialisation, utilisation and broader dissemination of innovations. For inventors and companies, transferring rights can provide financial benefits through sales, licensing fees or royalties, thereby recouping the costs of research and development. It enables entities without manufacturing capabilities or market access to bring inventions to market through partnerships or licensing agreements.

Additionally, it allows for the strategic management of patent portfolios, such as divesting non-core technologies or acquiring complementary patents to enhance competitive positioning. Transfers can also ensure that valuable intellectual property is leveraged effectively, contributing to technological advancement and economic growth by enabling the practical application of patented innovations.

Who Can Transfer the Patent Rights?

The transfer of patent rights can be executed by several entities, each with specific qualifications and capacities:

1. Patent Holder (Patentee): The original inventor or assignee who owns the patent has the primary right to transfer their patent rights through assignments or licences.
2. Assignee: An individual or entity that has been assigned the patent rights by the original patent holder can further transfer these rights, subject to the terms of the initial assignment.
3. Legal Representatives: Executors or administrators of an estate can transfer patent rights if the patent holder is deceased, ensuring the patent rights are managed according to the decedent’s will or legal stipulations.
4. Corporate Entities: Companies that own patents can transfer them through business transactions such as mergers, acquisitions or sales of assets.
5. Government and Public Institutions: In some cases, especially involving compulsory licences, government bodies can facilitate the transfer of patent rights to address public health or safety concerns.
6. Banks and Financial Institutions: Entities that hold a mortgage on a patent can transfer the rights if the terms of the mortgage agreement are met, such as in cases of default by the patent holder.

Requirements for Creation of Any Interest in a Patent

Section 68 of the Indian Patents Act, 1970, provides the legal framework for creating any interest in a patent, including mortgages, licences and other assignments. The section mandates that any transfer of patent rights must be documented and executed in a specific manner to be valid.

Section 68: Assignments, etc., Not Valid Unless in Writing and Duly Executed

1. Writing Requirement: An assignment of a patent, a share in a patent, a mortgage, licence or the creation of any other interest in a patent is invalid unless it is documented. The agreement must be in writing, embodying all the terms and conditions governing the parties’ rights and obligations.
2. Duly Executed: The document must be duly executed by all concerned parties. This includes signing the document in the presence of witnesses and ensuring compliance with any other formal requirements stipulated by law.
3. Registration: To effectuate the transfer, an application for registration of the document must be filed in the prescribed manner using Form-16 within the time frame specified under Section 68. Upon registration, the document will take effect from the date of execution.

Forms and Nature of Transfer of Patent Rights

The grant of a patent confers upon the patentee the exclusive right to prevent others from making, using, exercising or selling the patented invention without permission. There are several ways a patentee can deal with a patent:

1. Assignment
2. Licences
3. Transmission by Operation of Law

1. Assignment

Assignment involves transferring the proprietary rights of the patent from the patentee (assignor) to another party (assignee). The Indian Patents Act does not define “assignment,” but it is generally understood to include the following:

• Legal Assignment: This involves transferring an existing patent or agreeing to transfer a patent. The assignee can enter their name as the patent owner. A patent created by deed can only be assigned by a deed and the legal assignee acquires all rights associated with the patent. The process involves:
• Drafting a Deed: The deed should detail the rights being transferred and any conditions attached.
• Execution: Both parties must sign the deed in the presence of witnesses.
• Registration: The executed deed must be registered with the patent office.
• Equitable Assignment: An equitable assignment occurs when the patentee agrees to transfer a defined share of the patent to another person. The assignee in this case cannot register as the proprietor of the patent but can have notice of their interest entered in the register.
• Mortgage: A mortgage involves transferring patent rights wholly or partially to an assignee in return for a sum of money. Upon repayment, the patent rights are restored to the assignor. The mortgagee’s name can be entered in the register as the mortgagee but not as the proprietor. The key steps include:
• Agreement: Drafting a mortgage agreement detailing the terms, including repayment schedules and conditions for reverting rights.
• Execution and Registration: Similar to assignments, the agreement must be executed and registered.
• Repayment and Reversion: Upon repayment, the rights revert to the patentee and the mortgagee’s interest is removed from the register.

2. Licences

The Patents Act allows patentees to grant licences to others to make, use or sell the patented invention. Licences can be:

• Voluntary Licence: These are granted by the patentee without government intervention. The terms are mutually agreed upon by the licensor and licencee. The process involves:
• Negotiation and Agreement: The licensor and licencee negotiate terms, including scope, duration and royalties.
• Written Agreement: The terms are documented in a written contract, signed by both parties.
• Execution: The licence becomes effective upon execution and the licencee can use the patent as agreed.
• Statutory Licence: These are granted by the government, often in the public interest, such as compulsory licences under specific conditions.
• Exclusive/Limited Licence: An exclusive licence grants the licencee the sole right to use the patent, excluding even the patentee. A limited licence restricts the rights to specific conditions like time, place or purpose.
• Express/Implied Licence: An express licence is explicitly stated in writing, while an implied licence is inferred from circumstances, such as purchasing a patented product implying permission to use it.

3. Transmission by Operation of Law

When a patentee dies, their interest in the patent passes to their legal representative. Similarly, in cases of company dissolution or bankruptcy, the patent rights are transferred by operation of law.

Transmission by operation of law occurs in cases such as:

1. Death of Patentee: The patent rights pass to the legal representative of the deceased.
2. Company Dissolution: The patent rights are transferred as part of the liquidation process.
3. Bankruptcy: The patent rights may be sold or transferred to settle debts.

Conclusion

The transfer of patent rights is a multifaceted process involving various legal and practical considerations. Assignments, licences and transmissions by operation of law each have distinct requirements and implications. Adherence to Section 68 of the Indian Patents Act, 1970, is important for the validity of any transfer. By understanding and navigating these legal intricacies, patentees and assignees can effectively manage and commercialise patent rights, fostering innovation and benefiting from their intellectual property.