In this era of globalization and huge amounts of data being generated, companies are shifting focus towards owning and investing in intangible assets as they have become valuable than physical assets. The backdrop of Intellectual Property Rights ("IPR") lies on the point that anyone who creates something or comes up with a novel idea should have sole control over its use as it is a product of his hard work, toil, and intellect. They are necessary now more than ever in order to promote creativity, growth, innovation, and societal progress. Thus, IPR is the outcome of a contract between the owner of the rights and the state. The national law determining these rights is a balance between the rights given to the owner of the Intellectual Property(“IP”) and the need for benefits to flow to society.
The incentive for creating something new is the opportunity to commercially exploit it in the future and make a financial gain. Commercialization is nothing but the process of extracting a commercial value from a product or service. IP commercialization refers to bringing the IP into the market with the aim of future growth and profits. “IP Commercialization is the ability to protect and develop intellectual property (IP) towards economic and social prosperity. In addition, it is a core competency for economies, innovators, and enterprises around the world”
The prospect of commercializing IP sounds very tempting, however, managing it poses a problem as the success depends on various internal and external factors, proficiency in identifying the right channel, having a basic estimation about the IP commercialization possibilities, etc.
In India the statutes regulating the IPR regime providing for options for commercialization are:
Copyright Act, 1957
Trademark Act, 1999
Patent Act, 1970
Design Act, 2000
Semiconductor Integrated Circuits and Layout-design Act, 2000
Protection of Plant Varieties and Farmers’ Rights Act, 2001.
The most common ways of commercializing IP are:
III. Joint Venture
IV. Franchising, etc.
For the purpose of this article, the author will be focusing on the first two methods of commercialization with emphasis on the statutory provisions under the Indian IP Regime.
Assignment refers to the transfer of title in IP or a claim to another person upon agreed terms and conditions. This tool of commercialization is useful in cases when the assignor does not have the means to market his intellectual property and requires immediate cash flow from the asset.
It is a transfer of ownership, rights, interested vested of the IPR from the assignor i.e., the transferor of rights to the transferee i.e., the assignee, thus, making the assignee the new owner of the IPR. In today’s time where everything is done based on a contract, an IP Assignment agreement is paramount in giving legal effect to the transfer. Such an agreement such specify the rights assigned, the duration, territorial extent, the amount of royalty payable, and so on. An IP Assignment Agreement is a written and duly signed contract that formalizes an agreement for the transfer of IP between two parties.
A landmark case in this regard is Preston v. Marathon Oil Co., the US Court of Appeal decided the matter since as per the IP Assignment Agreement the invention was required to be made before the agreement came into effect. In the present case, only a rough draft of the invention was present prior to the employment, and the full working model was developed during the employment term. The main takeaway is the need to have an astutely drafted IP Assignment Agreement between the employer and employees to reduce the future chances of litigation.
In India, contracts are governed by the Indian Contract Act, 1872 (“ICA”). Hence, an IP Assignment Agreement must conform to the requirements of a valid contract as laid down under Section 10 of ICA i.e., free consent, competent parties, lawful consideration, lawful object, and not expressly declared to be void.
The second method of commercializing IP is known as Licensing. The term license refers to permission which is granted by the owner, to use a product belonging to the owner, for a limited period based on agreed terms and conditions.
A license is a contract that formalizes the limited permission granted by the holder of an IP i.e., the licensor to another person i.e., the licensee, to use the IP within the terms of the agreement. Licensing can be regarded as an important tool of commercialization as opens up possibilities of turning a competitor into a possible partnership with the chances of distribution of risk between the licensor and the licensee.
The following are the benefits of licensing:
(i) For the licensor-
There is no transfer in the ownership of the IP. He only receives certain income from the licensing agreement,
Licensing opens avenues for competing in new markets but with the existing products,
Reduces the risk of market failure when participating in a new market, as the entry is done with existing clientele and products.
No need for investment in marketing and distribution separately.
(ii) For the Licensee-
Chances of creating new businesses,
No separate cost for Research and Development,
No requirement of purchasing the IP and the same is received for limited use in lieu of some monetary amount,
Reduces the risk of market failure as the licensors' product or service is well established among existing consumers.
There are three major types of IP Licensing:
Exclusive License is a type of license which permits the use of the IPR by the licensee to the exclusion of all others including the licensor.
Non-exclusive License is a type of license that allows the licensee to use the IPR but also leaves open the scope for the licensor to exercise the rights and license the same to any third party.
Sole License is one that permits the licensee as well as the licensor to use the IPR, but the latter cannot be transferred to any third party.
Apart from the above, the World Intellectual Property Organization (“WIPO”) has further categorized IP Licensing under the following heads:
(i) Copyright Licensing Agreement- is drafted in order to permit the copyrighted works to be reproduced and published by others.
(ii) Trademark / Franchise Licensing Agreement- Trademarks help in differentiating the products and services of various businesses. The franchisor through a license agreement authorizes the franchisee to use his trademark which has gained a considerable reputation. Such use is restricted and regulated by the terms of the agreement.
(iii) Technology License Agreement- permits the licensee to use the rights related to utility models, patents or know-how protected by trade secrets under certain conditions.
Copyright is the exclusive right over a work given to the owner which prevents others from taking advantage of the creative efforts of the person without his permission. The main objective of copyright law to protect an original creation of intellect and award the creator with the exclusive right for a certain period. In Sulamangalam R Jayalakshmi v Meta Musicals Chennai, it was reaffirmed that the intention of copyright law is to provide protection to the result of a person’s labor, skill, work from being unlawfully annexed by others.
Copyright in India is governed under the Copyright Act, 1957 (“Copyright Act”) and Section 14 of the same affords certain rights to the owner of the copyright one of them being the Right of Assignment.
Copyright owners of an existing work or prospective owners of copyright of future works may assign the copyright to any person either partially or wholly. Chapter IV Sections 18,19 and 19A of the Copyright Act deals with the assignment of copyright. The Apex Court in the case of Indian Performing Rights Society v. Eastern India Motion Pictures Association & Ors., held that assignment of copyright for an existing or a future work can be done. If the author is underemployed during that time, the employer will become the owner of the work. In Pine Labs Pvt. Ltd. vs Gemalto Terminals India Pvt. Ltd & Ors., the Delhi High Court was dealing with the duration and territoriality of an assignment and confirmed that in case of duration is not specified it shall be deemed to be valid for 5 years and in case of territorial extent it would be applicable within the geographical territory of India, if not specified.
Copyright is a bundle of rights with one of them being Moral Rights. This right was recognized under Artice 6bis of the Berne Convention. India being a signatory to it, incorporating the concept of Moral Rights under Section 57 of the Copyright Act, thus giving statutory recognition to it.
Moral rights include:
The right to claim authorship of the work also known as Paternity rights under the English law and,
The right to claim damages for any mutilation, distortion, or modification which would be prejudicial to the honor or reputation of the author. Such right is also referred to as Integrity right.
This right deserves a special mention because even after the assignment of the copyright, the author remains in possession of moral rights. In Manu Bhandari v. Kala Vikas Pictures Private Ltd. and another, the appellant had filed a case that the respondents while making the film resorted to mutilation and dilution of the novel, to make a financial gain and in turn had violated the moral rights of the appellant. The Delhi Court interpreted Section 57 of the Copyright Act and held that post assignment the author would continue to be in possession of moral rights.
Chapter VI Section 30 to 32B of the Copyright Act read with Chapter IV-X, Rules 6-43 of the Copyright Rules 2013(“2013 Rules”) deals with the aspect of Copyright License.
Copyright License can be further divided into the following:
(i) Voluntary Licensing- is one where both parties lay down the terms and conditions in writing in the form of a license deed pursuant to negotiations held between them. It can further be classified as:
According to Section 30, the owner of a copyright of any existing work or the prospective owner of the copyright of future work can grant a license in writing duly signed by him or his authorized agent. In the case of Phonographic Performance Ltd. v. Avion Hospitality Private Ltd. & Ors., it was held that events when New Year or Christmas could be allowed by hotels and performed only with the license of the owners directly or from the Copyright Societies. The Bombay High Court in the case of Leopold Cafe Stores v. Novex Communications Pvt. Ltd., resolved the conflict between Section 30 and 33 of the Copyright Act by applying the rule of harmonious construction in deciding who can grant the license.
(ii) Compulsory License- is granted by the IP Authorities when an IP holder abuses the rights given to him by law. Chapter VI Sections 31, 31A, 31B, 32 and 32A of the Copyright Act, 1957 read with Chapter IV Rules 6-10, Chapter V Rules 11-16, Chapter VI Rules 17-22, Chapter IX Rules 32-37, and Chapter X Rules 38-43 of the 2013 Rules deal with the issuance of compulsory license.
(iii) Statutory License-as defined in Compendium Glossary by US Copyright Office refers to a “right to use certain works if certain statutory requirements are met as required by the Copyright Law”. The 2012 Amendment to the Copyright Act, 1957 introduced the provision of Statutory license under
Section 31C which deals with cover versions read with Rules 234-28 of the 2013 Rules
Section 31D which deals with the broadcasting of literary and musical works and sound recordings read with Rules 29-31 of the 2013 Rules.
Trademark is one of the most important forms of IPR. Most consumers seek quality and the brand name, symbol, sign, word, etc. is what best reflects the quality. Trademark is the best method of advertising and companies tend to spend a large amount of money on making their mark distinct from that of others. In a US case of Park ‘N Fly, Inc v Dollar Park and Fly, Inc., it was held that trademark fosters competition and, promotes maintenance of quality by attaching with itself a good reputation.
In India, Trademarks are protected under the Trademarks Act, 1999 (“Trademarks Act”) and the same provides for the Assignment of trademarks. Chapter V, Sections 37 to 45 of the Trademark Act read with Chapter V, Rules 75 to 85 of the Trademark Rules, 2017 (“2017 Rules”) deal with assignment along with transmission.
According to Section 38, the trademark owner is empowered to transfer his trademark with or without the goodwill of the business and such transfer can either be for all goods and services covered by the trademark in question or partially. A feature of the Trademark assignment is that Section 6 allows for notification of assignment of unregistered trademarks, which is in contrast to the earlier Trade and Merchandise Mark Act, 1958, and Section 39 allows the assignment of unregistered trademarks. According to Section 31, the registration of a trademark and notification of an assignment acts as evidence of the existence of the same. There is a condition for the assignment of trademarks i.e., if assignment results in various people using the trademark across the country, the same can be prohibited according to section 41. Furthermore, section 45 provides for a detailed discussion on the registration of assignments or transmissions.
Though Licensing is not explicitly dealt with under the Trademarks Act, Chapter VI, Sections 48 to 54 of the Act read with Chapter VI, Rules 86 to 96 of the 2017 Rules deal with registered users that can be referred to as licensees in a licensing agreement.
Francis Bacon said, “The works of founders of states, lawgivers tyrant destroyers and heroes cover but narrow spaces and endure but for a little time, while the work of the inventor though of less pomp is felt everywhere and lasts forever.”
Patent as an IPR is a grant awarded by the Government of a country to a person who has invented a new and useful product or brings an improvement to an already existing article or a new process of making a product. A patent is a monopoly right but cannot be granted for ideas or principles. Patent law gives the patent holder the right to prevent others from using his patented product for a limited period after the expiry of which it falls into the public domain.
In India patent is regulated by the Patents Act, 1970 (“Patents Act”) vide the Patents (Amendments) Act, 2002 and Patents (Amendment) Act, 2005. The Supreme Court in Bishwanath Prasad Radhe Shyam v Hindustan Metal Industries laid down the main objective of patent law as the incentive for scientific research, industrial development, and research in new technology.
Section 68 of the Patents Act under Chapter XIII deals with the assignment of patents. M/s National Research Development Corporation Vs Ineos ABS Ltd., the essentials of the Assignment of a patent were reaffirmed as laid down under Section 68. Assignment of patents refers to the complete or partial transfer of parental rights in an exclusive as well as non-exclusive manner. There are three types of assignment of patents:
Licensing, on the other hand, is the process where the owner of an invention grants permission to a third party to use the product in question and extract its benefits. Similarly, in a patent license, the patent holder grants access to an individual or an organization to use the patented inventions as per the agreement entered between the parties. A patent owner can license his invention in lieu of some royalty.
Rights of patentees under the Indian IPR regime is regulated by Chapter VII Sections 48 to 50, Chapters XII Sections 63, Chapter XII Sections 68, Chapter XVIII Section 108 of the Patents Act. The right of licensing of the patentee is also governed by Section 68 of the same.
What is the first thing that catches our eye when buying a product? Is it not the shape, design, or aesthetics? Design is a form of IPR that is granted protection under the law as it a type of niche market which is being heavily tapped into by companies to survive in the competitive markets. The new strategy adopted by companies is to attract customers using unique designs.
In India, Designs are protected under the Designs Act, 2002 (“Designs Act”) and as per Section 2(d) Design refers only to the features of shape, configuration, pattern, ornament, or composition of lines or colors applied to any article in any dimension, which when finished would appeal to and is judged by the eye solely. Thus, it gives the creator protection from his aesthetic look of the product being infringed.
Rights of a registered design owner are provided under Chapter III Sections 11 and 14, Chapter V Section 22 and Chapter VI Section 30 of the Designs Act read with Rules 32, 33, 34, and 35 of the Design Rules 2001 (“2001 Rules”) deal with Assignment, Licensing, mortgage and transmission of designs and lays down the procedure for the same. The person registered as the proprietor of the design has the absolute right to assign or license the design rights.
Semiconductor Integrated Circuits and Layout-design
According to Collins Dictionary Semi-conductor integrated circuit is an electronic circuit consisting of an assembly of elements made from a chip of semiconducting material, such as crystalline silicon or germanium. Over the years there has been rampant development in the field of semiconductor chips that have positively affected the lives of millions as they are used in most electronic gadgets, thus prompting the need to provide IP protection to the layout designs or topographies of the integrated circuits.
The arrangement of the chip is what enables the performance of an activity and the protection is provided to it under the Semiconductor Integrated Circuits Layouts Design Act, 2000 (“SICLD Act”) in India which was implemented in consonance with Article 35 of the TRIPS Agreement, 1994.
Section 2(r) of the statute defines a semiconductor integrated circuit as "a product having transistors and other circuitry elements which are inseparably formed on a semiconductor material or an insulating material or inside the semiconductor material and designed to perform an electronic circuitry function."
Chapter IV Section 17; Chapter V Sections 20 to 23 of the SICLD Act, read with Chapter III rules 47 to 54 of the Semiconductor Integrated Circuits Layouts Design Rules, 2001 lays down provisions for the rights of the proprietor of the design. According to Section 20 the proprietor can assign the layout design with or without the goodwill of the business and can give an effectual receipt for any consideration received.
The SICLD Act further permits the proprietor of registered layout design to license his design as provided under Sections 24 and 25 of the Act. A layout-design as defined under Section 2(h) means a layout of transistors and other circuitry elements and includes lead wires connecting such elements and expressed in any manner in a semiconductor integrated circuit.
In the latter half of the 20th century, new plant varieties played an important role in shaping the economies of nations especially the agricultural-based economy like that of India. Constant efforts in the field of science, breeding new varieties, biotechnology, and genetic engineering are pivotal in increasing the yield, tackling plant infection pests, etc. Thus, there arose a need to implement an effective framework to protect pant varieties, rights of farmers, and plant breeders, to promote further development. India has a sui generis system when it comes to protecting new plant varieties, rights of farmers, breeders namely the Protection of Plant Varieties and Farmers’ Rights Act, 2001 (“Act”) and the Protection of Plant Varieties and Farmers’ Rights Rules, 2003 (“2003 Rules”).
According to Section 28 and Chapter V Section 33 of the Act, a registered breeder has the right of assignment and license to authorize any person to produce, market, or sell the registered variety subject to the terms and conditions of the agreement. By way of an assignment agreement, a registered breeder can transfer his ownership rights over a plant variety in lieu of some monetary gain.
From the above, we can conclude that the two common tools of commercialization of IP i.e., Assignment and Licensing are not the same and cannot be used interchangeably. However, both are of equal importance as we are living in the age of technology and IP with companies investing millions in the research and development of new products, services, and processes that will contribute to the progress of society. It is but natural for them to want to make money out of their contributions. The current IPR regime prevalent in India recognizes, encourages, and promotes such need in the form of Assignment and Licensing among other tools of commercialization. The original creator deserves protection and options, because the moment his product is released into the market and is successful in attracting customers, it acts like blood for the competitive sharks who will try to make similar products and drive him out. Thus, the IP regime must be invoked to protect the intellectual creations of individuals as well as organizations, protect them from fraud even though commercialization might be a private transaction between the two parties because these intangible assets determine their success as well as their survival.
Furthermore, there is a need for awareness about the provision and procedures laid down under the statutes and rules to properly safeguard the rights of all parties and chalk out proper strategies to make sound investments today and reap the benefits tomorrow.
References:  WIPO, Introduction Module of the Course on Intellectual Property.  http://www.wevio.com/solution/ip-commercialization/ (Accessed on 9 February 2020)  Nos. 11-1013, -1026 (Fed. Cir. July 10, 2012).  2000 (1) RAJ 150 (Mad).  AIR 1977 SC 1443  FAO (OS) 635 & 636 of 2009.  1987 (7) PTC 87 Delhi.  2017 Bombay High Court.  2014 (59) PTC 505 (Bom).  https://www.copyright.gov/coomp3/docs/glossary.pdf (Acessed on 12 February 2020)  469 US 189, 198(1985).  (1979) 2 SCC 511.  (2012) 5 CTC (IP) 8  https://www.collinsdictionary.com (Accessed on 13 February 2020)