ip assignment agreement stamp duty

What Is an Intellectual Property Assignment Agreement?

An intellectual property assignment agreement is a legally binding contract that transfers ownership of intangible assets, such as patents, trademarks, copyrights, and trade secrets, from one party to another. This agreement establishes clear boundaries and legal clarity regarding the ownership and usage of intellectual property rights. A meticulously drafted assignment agreement offers numerous benefits, including clarity on ownership, enhanced legal protections, and streamlined dispute resolution mechanisms. By understanding the intricacies of intellectual property assignment agreements, parties can navigate complex transactions with confidence, securing a financial future and minimizing the risk of disputes and litigation .

Table of Contents

Purpose of an Assignment Agreement

Assigning intellectual property rights through an assignment agreement serves to legally transfer ownership and facilitate the smooth exchange of intangible assets between parties. This transfer can be vital in various business transactions, such as mergers and acquisitions, licensing agreements, and collaborations. The primary purpose of an assignment agreement is to establish clear boundaries and legal clarity regarding the ownership and usage of intellectual property rights.

Key Components of the Agreement

A thorough intellectual property assignment agreement typically comprises several fundamental elements that delineate the terms and scope of the intellectual property transfer. These components are pivotal in facilitating a seamless transfer of ownership and minimizing potential disputes.

One of the key components is the assignment scope, which outlines the specific intellectual property rights being transferred. This includes the type of intellectual property, such as patents, trademarks, or copyrights, as well as the geographical region in which the rights apply. The assignment scope should be clearly defined to avoid ambiguity and confirm that both parties understand the extent of the transfer.

Ownership clauses are another indispensable component of an intellectual property assignment agreement. These clauses establish the new owner's rights and responsibilities, including the right to use, modify, and license the assigned intellectual property. The ownership clauses should also address any existing licenses or agreements related to the intellectual property, facilitating a smooth transfer of ownership and minimizing potential disputes. By including these key components, an intellectual property assignment agreement can provide a clear and exhaustive framework for the transfer of intellectual property rights.

Types of Intellectual Property Assigned

The types of intellectual property assigned under an intellectual property assignment agreement can vary widely, spanning patents, trademarks, copyrights, trade secrets, and other forms of intangible assets. These intellectual property rights can include creative assets such as literary works, musical compositions, and artistic creations. Patent protections, including utility patents, design patents, and plant patents, can also be assigned. In addition, trade secrets, including confidential business information and proprietary knowledge, can be transferred under the agreement. Additionally, copyrights, including those related to software, databases, and other digital works, can be assigned. The agreement may also cover industrial property rights, such as industrial designs and geographical indications. The specific types of intellectual property assigned will depend on the nature of the transaction and the parties involved. By clearly defining the intellectual property rights being transferred, the assignment agreement guarantees that all parties are aware of their rights and obligations.

Benefits of a Comprehensive Agreement

A meticulously drafted intellectual property assignment agreement offers numerous benefits, including clarity on ownership, enhanced legal protections, and streamlined dispute resolution mechanisms. By establishing clear expectations, parties can avoid misunderstandings and guarantee a smooth transfer of intellectual property rights. This, in turn, fosters mutual trust and cooperation, vital for a successful collaboration. A detailed agreement also provides a clear understanding of the rights and obligations of each party, minimizing the risk of disputes and litigation. In addition, it enables parties to address potential issues proactively, reducing the likelihood of costly and time-consuming disputes. With a well-crafted agreement in place, parties can concentrate on their core objectives, secure in the knowledge that their intellectual property rights are protected. By providing a clear framework for the transfer of intellectual property rights, a detailed agreement promotes confidence, stability, and predictability, ultimately leading to more successful collaborations and business relationships.

Risks of Not Having an Agreement

In the absence of a thorough intellectual property assignment agreement, parties risk forfeiting valuable rights and facing unforeseen consequences. Without a clear understanding of ownership and usage rights, parties may inadvertently relinquish control over their intellectual property, leading to potential infringement and litigation. Additionally, failure to establish a formal agreement can lead to financial losses and reputational damage.

Loss of IP Rights

Frequently, failure to establish clear intellectual property rights through a formal agreement can lead to unintended and irreversible consequences, including loss of IP ownership and control. This can culminate in abandoned innovation, where valuable ideas and creations are left unprotected and open to exploitation by others. Without a formal agreement, creators and inventors risk expropriation, where their intellectual property is taken and used without their consent or compensation.

In the absence of a clear assignment agreement, intellectual property rights can be lost or compromised, leaving creators vulnerable to unauthorized use, reproduction, and distribution of their work. This can lead to a loss of revenue, reputation, and competitive advantage. Furthermore, the lack of a formal agreement can create uncertainty and ambiguity, making it challenging to resolve disputes or negotiate licensing agreements.

To avoid these risks, it is crucial to establish a clear and detailed intellectual property assignment agreement that defines the terms of ownership, use, and exploitation of intellectual property. By doing so, creators and innovators can safeguard their valuable assets and guarantee that their intellectual property rights are respected and enforced.

Infringement and Litigation

Without a thorough intellectual property assignment agreement, creators and innovators expose themselves to the risks of infringement and litigation, where unauthorized use of their intellectual property can lead to costly legal battles and reputational damage.

Infringement and litigation risks can manifest in various ways, including:

Risk	Description
Copyright Infringement	Unauthorized use of copyrighted material, such as music, literature, or software, can lead to legal action and financial losses.
Patent Disputes	Patent trolls may exploit unprotected intellectual property, leading to costly and damage to one's reputation.
Trademark Infringement	Unauthorized use of a trademark can lead to brand confusion, dilution, and legal action.
Trade Secret Misappropriation	Theft or unauthorized disclosure of can lead to financial losses and legal battles.

Financial Consequences

Failure to establish a thorough intellectual property assignment agreement can lead to substantial financial losses, including legal fees, damages, and lost revenue. Without a clear agreement, parties may be exposed to unforeseen financial burdens, which can be detrimental to a business's financial health.

Some of the financial consequences of not having an intellectual property assignment agreement include:

Unanticipated tax implications, such as unexpected tax liabilities or lost deductions
Increased legal fees associated with disputes or litigation
Loss of revenue due to unauthorized use or misappropriation of intellectual property

In the absence of a comprehensive agreement, parties may be forced to allocate significant resources to resolve disputes, which can divert attention and funds away from core business activities. Furthermore, the financial consequences of not having an agreement can have long-term effects on a business's financial stability and growth prospects. It is essential to prioritize the establishment of a thorough intellectual property assignment agreement to mitigate these risks and ensure a secure financial future.

Negotiating the Terms of Transfer

During the negotiation process, it is vital to carefully consider the terms of transfer to secure that the intellectual property rights are assigned in a manner that aligns with the parties' interests and objectives. This phase is pivotal in verifying that the rights are transferred effectively, and the parties' expectations are met.

Set Boundaries: A key aspect of negotiating the terms of transfer is to establish clear boundaries and define the scope of the intellectual property rights being assigned. This includes specifying the type of intellectual property, the territory where the rights will be exercised, and the duration of the assignment. By setting these boundaries, parties can avoid potential disputes and confirm a smooth transfer process.

Define Expectations: It is imperative to define the expectations of both parties regarding the assignment. This includes outlining the responsibilities of each party, the payment terms, and the consequences of non-compliance. By defining these expectations, parties can confirm that they are on the same page and that the assignment is carried out as intended. A well-negotiated agreement can prevent potential conflicts and confirm a successful transfer of intellectual property rights.

Enforcing the Assignment Agreement

Once the terms of the intellectual property assignment agreement have been negotiated and finalized, the next step is to guarantee that the agreement is properly enforced to protect the interests of all parties involved. This is crucial to ensure that the intellectual property rights are transferred correctly and that all obligations are fulfilled.

To ensure effective enforcement, parties should be aware of potential issues that may arise, including:

Contract Breaches : One or both parties may fail to fulfill their obligations, which can lead to disputes and legal action.
Jurisdictional Issues : Disputes may arise due to conflicting laws or regulations in different jurisdictions, making it essential to define the governing law and dispute resolution mechanisms in the agreement.
Dispute Resolution Mechanisms : Establishing clear procedures for resolving disputes, such as arbitration or mediation, can help prevent costly and time-consuming litigation.

Frequently Asked Questions

Can an assignment agreement be verbal or must it be written?.

While oral contracts are legally binding, it is highly advisable to have a written intellectual property assignment agreement, providing written proof of the terms and minimizing potential disputes, as verbal agreements can be difficult to enforce.

Are There Jurisdictional Differences in Assignment Agreement Laws?

Jurisdictional differences in assignment agreement laws exist, particularly in cross-border issues, with regional variations in contractual requirements, formalities, and statutory provisions governing intellectual property rights, necessitating careful consideration of local laws and regulations.

Can Intellectual Property Be Assigned to Multiple Parties Simultaneously?

Yes, intellectual property can be assigned to multiple parties simultaneously, leading to joint ownership and shared rights, where each co-owner holds an undivided interest in the IP, with corresponding rights and obligations.

Is an Assignment Agreement the Same as a Non-Disclosure Agreement?

No, an assignment agreement and a non-disclosure agreement are distinct, with contractual differences and legal implications. The former transfers intellectual property rights, while the latter protects confidential information, each serving unique purposes in safeguarding intellectual property.

Can an Assignment Agreement Be Terminated or Cancelled?

A well-drafted assignment agreement can be terminated or cancelled upon mutual agreement or due to material breach, with consequences outlined in the contract, while contractual loopholes may provide avenues for termination or renegotiation.

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Decoding Indian Stamp Duty Requirement for IP instruments

Musharaf Khan

July 20, 2023

As per the Indian Law, stamp duty is payable on every instrument [1] . It is an indirect tax paid to the government. The Indian Stamp Act, 1899 (2 of 1899) was enacted to consolidate and amend the law relating to stamps. It extends to the whole of India.

The Indian Stamp Act, 1899 (2 of 1899) is a fiscal statute prescribing the rates of Stamp Duty as specified in Entry 91 of List-I (Union list) of the Seventh Schedule to the Constitution of India List (viz. Bills of Exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts) The States are empowered under Entry 63 of List-II (State list) of the Seventh Schedule to the Constitution of India to prescribe the rate of stamp duty on instruments other than the instruments specified in Entry 91 of Union list.

The Indian Stamp Act, 1899 is a Central enactment and the state have the powers to adopt the Indian Stamp Act, 1899 with amendment to same, to suit the transaction peculiar to each state. Accordingly certain states have introduced Schedule 1 to the Indian Stamp Act, 1899 being the stamp duty payable in each state. State such as Maharashtra (The Bombay Stamp Act, 1958), Gujarat (The Gujarat Stamp Act, 1958), Karnataka (The Karnataka Stamp Act, 1957), Kerela (The Kerela Stamp Act, 1959) and Rajasthan (The Rajasthan Stamp Act, 1998) have their separate Stamp Act, while many State follows the Indian Stamp Act, 1899 [2] .

There are mainly two types of stamp paper.

Judicial stamp papers: As the name suggest, it is used for Court proceedings. It is called Court fees.
Non-Judicial stamp papers: This is used for contractual kind of activities between the parties e.g., contracts, agreements, registration of documents, entering leases /sale purchase transactions etc.

Stamp duty serves as a legal requirement for certain types of transactions to be considered valid and enforceable. For example, a sale agreement for a property must be executed on a stamp paper of appropriate value and stamped according to the relevant state’s stamp duty laws. Failure to pay the appropriate stamp duty on a transaction can result in penalties or fines and may render the document invalid in a court of law.

Stamp Duty payable on instruments specified by the statute is fixed or on ad valorem basis i.e., on basis of value of property. The stamp duty charges are mainly based upon the values which are mentioned in the documents. e.g., Articles of Association, Mortgage deed etc. However, for few documents e.g., Affidavits, Power of Authorization, indemnity bond, the stamp duty payable is always fixed regardless of the value which is mentioned in the document or the instrument. For certain other instrument, stamp duty is based on the consideration value mentioned in the document or the market value, whichever is higher. e.g. Conveyance, Sale Agreement, Partnership Deed etc

The payment of Stamp Duty is mostly done before the execution of the document. Failing to make the necessary payment will result in penalty charges. Documents which are inadequately stamped are not admitted as evidence in the court. The stamp papers are to be purchased in the name of one of the parties to the transaction. The validity of a stamp paper is six months from the date of purchase.

Patents, trademarks, and other forms of intellectual property are included within the meaning of movable property under the stamp laws. As such, state specific stamp laws are applicable for the IP rights. Stamp Duty pertaining to IP rights is levied at various stages of registration, licensing and transferring.

In general, stamp duty is applicable on various types of instruments, including;

POWER OF ATTORNEY (POA): – If an application for trademark/patent/design or any other Intellectual property rights, is filed in India by a person other than the Applicant, it is mandatory to submit a duly stamped Power of Attorney. The POA can be signed by the Authorized Signatory of the Applicant. The Stamp duty payable being state specific may approximately be up to 10 USD. There is no requirement for notarization and/or legalization.
AFFIDAVITS: In various proceedings, be it at Court or Registry level it is required to file an Affidavit. Basically, an affidavit is a sworn statement put in writing. With respect to trademark, if the Applicant claims prior use of the mark, in such case it is a mandatory requirement to submit the Affidavit of use. The Applicant shall file an affidavit testifying to such use along with supporting documents. [3] . The Stamp duty payable being state specific, may be up to 5 USD for Affidavit. The Affidavit of use must be duly notarized.
ASSIGNMENT AGREEMENT : Assignment refers to actual transfers of ownership of intellectual property from the assignor to the assignee. In this, the rights of the assignor is permanently transferred. It is an absolute transfer. Such transfer of Intellectual Property rights is carried out by way of an assignment deed. It is pertinent to note that payment of stamp duty is not required for the assignment of Copyrights. Stamp duty is payable on the monetary consideration stated in the assignment deed. Stamp duty payable varies in each State. The Assignor and Assignee can check for the stamp duty rates in its particular state and thereby execute a assignment deed in which the lower stamp duty is applicable. The applicable stamp duty rates in India varies from 3% to 7% of the consideration amount, depending on the state wherein it is executed.
LICENSING AGREEMENT (REGISTERED USER AGREEMENT ): – In a Licensing agreement, the IP holder (“licensor”) licenses its IP rights to any third party and allows a third-party to use the said rights for a limited time period. A licensing agreement is subject to stamp duty. Stamp duty is paid by the licensee to the licensor.
BUSINESS AGREEMENTS (e.g., Non-disclosure Agreement, Endorsement Agreement, memorandum of Understanding, Master Service Agreements, Franchise Agreement etc.) Stamp Papers are not mandatory for all the agreements but are necessary only for a few kinds of or instruments or agreements as specified by the State government. Generally, no stamp duty is payable on MOUs or NDA’s. However, as a general practice, people are putting it on stamp paper to make it enforceable in the Court of Law. A document which is stamped acts as valid evidence in a court of law.

Please feel free to consult us at [email protected] for drafting and advising and representing any commercial transaction.

[1] “Instrument” includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or record;”

[2] https://www.e-stampdutyreadyreckoner.com/faq-stamps-duty.php

[3] Rule 25 of Trade Marks Rule, 2017- Statement of user in applications— (1) An application to register a trademark shall, unless the trademark is proposed to be used, contain a statement of the period during which, and the person by whom it has been used in respect of all the goods or services mentioned in the application.

In case, the use of the trademark is claimed prior to the date of application, the applicant shall file an affidavit testifying to such use along with supporting documents.

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Legal Resolved

What is Intellectual Property Assignment Agreement (IPAA)

Intellectual Property (IP) is one of the most emerging areas in law because of its economic exploitation. Some entities or persons may reap the benefits out of an IP on their own while some assign it to other entities or persons in consideration of royalty. The Intellectual Property Assignment Agreement facilitates the whole process by assigning the concerned IP to other through a contractual agreement. These are also known as Rights Agreements/IP Transfer Agreements.

The term “assignment” refers to the transfer of rights vested in the owner of an IP to other entity or person. It is basically a sale and purchase of IP rights. The IP may include copyrights, patents, trademarks, industrial designs or geographical indications. The person who assigns the IP is known as the Assignor and the person to whom such IP is assigned is known as the Assignee . Assignment is different from licensing as the former facilitates the transfer of ownership of such IP for indefinite or limited time period while the latter allows the transfer of limited rights for a particular amount of time and ownership is not actually transferred.

Standard Terms & Conditions of an IPAA

It should be in writing,
Requirements of a valid contract to be fulfilled under the Indian Contract Act, 1872,
Identification of the assignor and assignee,
Definitions containing general and technical terms used throughout the contract,
Duly mention the IP to be assigned,
It must specify all the rights (economic and moral) and obligations assigned to the assignee,
Mention the liability and warranty in regards to the ownership of such IP,
Indemnification in case the IP is infringed on a third party’s rights,
The time duration of such assignment,
Territorial extent of the assignment,
Governing law over such agreement and dispute resolution,
Payment of Stamp Duty on such assignment,
A lump-sum amount or royalty payable to the assignor,
Attachment of the list and description of IPs to be assigned.

Important Points to Remember

Registration of IPAA for copyright is not compulsory.
IPAA for geographical indication is expressly prohibited by law.
Non-Payment of Stamp Duty does not invalidate the agreement.

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Statutory Law References

Sec. 2(h) of the Indian Contract Act, 1872
Sec. 2(4) and 23 of the Indian Stamp Act, 1899
Sec. 18, 19 & 19A of the Copyright Act, 1957
Sec. 69 & 70 of the Patents Act, 1970
Sec. 37 - 43 of the Trademarks Act, 1999
Sec. 24 of the Geographical Indications of Goods (Registration and Protection) Act, 1999
Sec. 30 of the Designs Act, 2000
Sec. 21-24 of the Semiconductor Integrated Circuits Layouts Design Act, 2000
Sec. 16 & 18 Plant Varieties and Farmers Rights Act, 2001

Important Do(s) and Don't(s)

Before IPAA, it is better to conclude a Non-Disclosure Agreement in regards to the concerned IP,
Register the IPAA with the concerned IP office with respect to the type of IP,
For assignee, it is feasible to analyze the risks and due diligence involved in the assignment of IP so as to verify its ownership,
Perform a valuation of the IP to be assigned in order to obtain a fair market price.
Above all, lawyer consultation is necessary to draft the agreement so as to review the legalities.

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What Is the Stamp Duty for Trademark Assignment?

Trademark assignment requires the transfer of trademark ownership from a single party to the next. This could happen for numerous reasons like company acquisitions, mergers or merely the purchase of a trademark. An essential component of this is the payment of stamp duty that the government levies on legal papers. Let us discuss what stamp duty is, why it is essential in trademark projects, and also how it’s estimated and paid out in India?

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What is Stamp Duty?

Stamp duty is tax paid on specific legal documents. This tax was created to make these documents legally binding. Without paying the appropriate stamp duty, documents are not legal under the law. When it comes to trademark transfer, stamp duty can make the transfer of trademark registration rights permissible.

Why Stamp Duty Matters in Trademark Assignment?

If a trademark is given to the next party, the new proprietor utilizes the trademark for their services or products. This can be a substantial change, particularly in case the trademark is recognizable and has a good reputation. Stamp duty is paid out on the assignment document to record this transfer of rights legally. Additionally, it protects both parties in the transaction through legal evidence of the assignment.

Types of Trademark Assignment

Prior to discussing stamp duty details, understand the kinds of trademark assignments:

Partial Assignment

This is transferring just part of the trademark rights to someone else. For instance, a business might appoint the right to work with a trademark for particular services or products but keep the rights for various other uses.

Complete Assignment

Here the whole trademark along with associated rights are assigned to the new owner. The assignee can subsequently use, sell and receive royalties from the trademark.

Assignment with Goodwill

Goodwill is the mark of the trademark’s reputation and brand name worth. An assignment with goodwill means the new owner receives a good track record and consumer loyalty related to the trademark too.

Assignment Without Goodwill

Here only the trademark is transferred (no brand value is transferred). The initial owner may still use the trademark for various other businesses however the new owner is authorized to put it to use for the agreed upon purposes.

How To Apply for Trademark Assignment in India?

There are numerous steps in applying for trademark assignment in India. This is a simplified guide to explaining the process:

Prepare the Assignment Agreement:

This document defines the terms and conditions associated with the trademark transfer. It should specify who’s involved, what trademark is being assigned and if the assignment is goodwill.

Calculate Stamp Duty:

The precise amount of stamp duty due depends upon the valuation of the trademark and also the nature of the assignment. Stamp duty is normally a proportion of the worth of the trademark. This is typically 5% of the transaction value in India.

Execute the Agreement:

Both need to sign the assignment agreement. Have the document notarized as a further legal validation.

Send the Agreement to the Trademark Registrar:

The assignment agreement has to be submitted with the Trademark Registrar within 6 weeks from the assignment date. It is possible to do this online with the Trademark Registrar of India site.

Pay Stamp Duty:

Stamp duty is usually paid by electronic stamping, physical stamp papers or franking. The fastest and most typical technique would be e-stamping.

Receive the Registration Certificate:

After the Trademark Registrar verifies the assignment agreement and stamp duty continues to be paid out, a brand new registration certificate is issued in the assignee’s name. This certificate is evidence of trademark assignment.

Detailed Calculation of Stamp Duty

Stamp duty might be calculated differently depending on the assignment. The way it’s typically calculated is shown below:

Trademark Value:

To begin with, figure out the worth of the trademark. This could be based on things including market value, earnings from the trademark, and brand popularity.

Percent of Stamp Duty:

India’s stamp duty rate on trademark assignments is 5% of the trademark value. However this rate could differ by state regulations and assignment specifics.

Consideration Amount:

Consideration amount is the cost paid for the trademark assignment. From this amount stamp duty is computed.

Extra Charges:

There could be extra fees or charges for paying stamp duty. They might include e-stamping service fees or notary fees.

The Benefits of Registering a Trademark Assignment

The registration of a trademark assignment and also the payment of stamp duty provides several benefits:

Legal Protection: Makes sure the assignment is legally recognized and enforced in court.
Clear Ownership: Gives evidence of the new ownership and decreases risk of disputes.
Value of Brand: Helps maintain and possibly improve brand value related to the trademark.
Market Expansion: Allows the assignee to enter new markets utilizing a recognized trademark or to expand existing markets.
Financial Benefits: Allows the original owner to profit from the trademark leading to financial returns.

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Anyone who transfers trademark rights should know about stamp duty for trademark assignment. Follow these steps and pay the proper stamp duty to help make the assignment legal and protected. This protects both parties and helps keep the trademark integrity and value.

Regardless of whether you’re a business person delegating a trademark or a person purchasing one, knowing the assignment and stamp duty procedure can help you deal with this area with confidence.

What is the stamp value assigned to a trademark?

The stamp value for trademark assignment is normally 5% of the trademark transaction value. This rate might differ by state regulations and the terms of the assignment agreement.

What is the stamp duty for trademark assignment deeds in Delhi?

The stamp duty for any trademark assignment deed is 5% in Delhi. Nevertheless, talk to local authorities for up-to-date rates.

Is stamp duty payable on a deed of assignment of IP rights?

Yes, stamp duty is levied on a deed of assignment of IP rights (including trademarks). The precise amount depends upon the IP value and state-specific regulations.

What are the requisites for trademark assignment?

The requirements for Trademark assignment are a signed assignment contract, payment of appropriate stamp duty, submission of the agreement to the trademark Registrar and updating the trademark registry with the new owner’s details.

How much does trademark assignment cost?

The cost of Trademark assignment includes stamp duty (5% of the transaction value) and filing charges by the trademark Registrar. There might also be legal fees related to drafting and notarizing the assignment deed.

What is the difference between trademark licensing and assignment?

Trademark licensing enables the licensee to use the trademark in specified conditions while ownership stays with the licensor. Trademark assignment is an entire transfer of trademark ownership to the assignee.

Ankit Pal is a content writer with a keen interest in law and legal research. A graduate of HNLU, Raipur, he has contributed numerous papers published in reputed journals, showcasing his expertise and dedication to delivering high-quality work.

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Key IP Considerations in M&A Transactions

This article is taken from GTDT Practice Guide: India M&A. Click here for the full guide .

The rapid increase in the acquisitions of companies with innovative and emerging businesses and technologies has given rise to the need to identify and deal with key intellectual property (IP) considerations pertaining to such businesses and technologies. In such cases, IP is fundamental to the business being acquired and hence a key driver or even at times the sole purpose of the acquisition. The acquirers therefore will have to undertake an extensive legal due diligence on the target companies from an intellectual property perspective.

In India, IP rights that have statutory protection comprise patents, designs, trademarks, geographical indications, protection of new plant varieties and semiconductor integrated circuit layout designs. Trade secrets do not have statutory protection, but they are protected under equity and contractual law.

In order to effectively complete the acquisition, it is necessary to ensure that the commercial objectives of the acquirer and the seller are met. In an acquisition of an IP-driven business company, the objective of the acquirer would be to ensure that the business and the underlying IP can be commercially exploited post-acquisition. In this regard the acquirer will need the following confirmations:

the title of the seller to the IP of the product is clear and unencumbered;
there are no third-party rights over the IP that restrict its commercial use post-acquisition;
the acquired IP is valid and enforceable in all jurisdictions that the acquirer intends to operate in;
there are no third-party infringement claims over the acquired IP;
the acquired IP covers in its scope the entire product or technology sought to be acquired; and
the term of the IP protection covers the period of its commercial exploitation.

It would be the objective of the seller that the IP sold is of the business concerned and does not extend to its other business. In this regard the seller will need the following confirmations:

that the scope of the IP covers the business or technology sought to be acquired and does not extend to technologies or businesses that are not part of the transaction, such as the background IP of the seller;
the seller is not making assurances for any third-party IP such as open-code software or third-party licensed IP; and
the seller does not assume risks for IP with inherent issues (eg, enforceability in a particular jurisdiction).

In light of the aforesaid objectives, the following are some of the key IP considerations that both the acquirer and the seller must keep in mind in the course of the acquisition transaction.

IP due diligence

An IP due diligence is required to be conducted on the target company and the technology sought to be acquired, which covers the following points.

Ownership of the IP In the business

The business of the target company being the crux of the acquisition it is fundamental that ownership in the IP in the business is clear, unencumbered and established in relation to legal registration documentation. In India, in this regard, the acquirer must conduct a patent search in order to confirm that ownership in the technology or product and patents in the technology or products does in fact vest with the target company. Patent certificates must also be reviewed in order to ensure that the patent does in fact cover the entire technology sought to be acquired. Trademark and logo registrations or applications will also have to be reviewed and confirmed.

It is also necessary to examine whether the individuals involved in the creation of the IP have assigned the IP to the target entity. In many cases it is found that such individuals are no longer with the target company. In such scenarios it is necessary to examine whether the target company will still have the right (in the absence of IP assignment documents) to exploit the IP in the key business post-acquisition.

It is also necessary to examine whether employees or consultants of the target company involved in the development of the technology have assigned their IP to the target company either under their employment/consultant agreement or in relation to a separate IP assignment agreement. The scope of such assignment provisions will also have to be reviewed to establish that they cover the entire technology or products and derivative forms therefrom. It would also be necessary to confirm whether the work created by such employees or consultants are ‘work made for hire’ for the purposes of Section 17 of the Indian Copyright Act 1957, as a result of which the ownership in the work vests with the target company and not with the employee or consultant.

In a cross-border acquisition, appropriate certificates of title as prescribed in that jurisdiction will have to be reviewed by the acquirer’s counsel to confirm title to the key IP.

Unregistered IP

It is also important for the acquirer to understand the dependence on the business on non-registerable or non-patentable IP. In India, for instance, computer programs per se and algorithms are not patentable inventions. 2 Consequently, should reliance be placed by the target company on such computer programs or algorithms, the implications of non-patentability maybe very severe and may even subvert the purpose of the acquisition.

Dependency on third-party IP

It is necessary to examine the dependence on the technology to any third-party-licensed IP. Factors that need consideration are, for instance, whether:

the licence of such IP would be extended on the same terms to the acquirer;
any acquisition of the technology would trigger any change of control provisions of the licensed IP; or
there are any other restrictions or consent requirements from the licensor of such IP in the event of any acquisition.

IP litigation

The acquirer will also examine whether there are any third-party claims on the IP or any suits pertaining to infringement, ownership disputes, etc.

In India court filings are not public documents. Hence it is not possible to undertake a court due diligence to determine whether there are any such IP disputes. Reliance will therefore have to be placed by the acquirer on the documents provided by the target company and the statements made by the management of the target company in this regard. These statements may be limited by knowledge qualifiers and such qualifiers should be largely avoided by the prudent acquirer.

IP rights are territorial in nature. In other words, IP rights protected in one country do not protect the same IP in another country unless steps are taken in each country of concern to protect such IP. In cases where the acquisitions involve multiple territories or an acquisition has global ramifications, it is necessary to determine the territorial extent of IP.

It is important to determine the places or countries where the acquired IP is protected. In this regard, it becomes necessary to ensure that the acquired IP is protected in the country of concern. Otherwise, although the acquirer would be paying significant consideration for transfer of IP under the acquisition, it would be open for free use by third parties in the country of concern. If an IP is not protected in a particular territory, there is a risk that any person can use such an IP in that territory without any hindrance and there could be no possibility of restraining such person. It is only if the IP is protected under statutory or equitable rights that the IP holder can enforce the rights against an unauthorised user.

Consideration

In India, consideration is one of the vital requirements to complete a contract. It is not sufficient that the amount of consideration is vaguely or implicitly incorporated in the agreement. Instead, it should be conspicuously present in the agreement.

Under Indian laws, an agreement regarding which rights in IP are transferred requires stamp duty to be paid to the government. The value of the stamp duty is proportional to the value of consideration mentioned in the agreement and varies from state to state. For example, in Delhi, the value of stamp duty for assignment of an IP right is 6 to 7 per cent of the value of the consideration. It is therefore necessary to clearly disclose the consideration amount in the agreement from which stamp duty can be determined.

In case no consideration amount is mentioned in an agreement, stamp duty is still required to be paid. In such scenarios, the parties may decide the amount of stamp duty to be paid. However, the stamp duty once paid for an agreement that does not disclose the consideration amount would determine the consideration amount of the agreement and the parties cannot claim more than the consideration amount proportional to the stamp duty so paid. In other words, the consideration amount would be calculated in reverse from the stamp duty paid by the parties and such amount would be final between the parties. The parties are not allowed to assess a low stamp duty and then later claim a higher consideration amount if no such amount has been initially mentioned in the agreement.

Representations and warranties related to IP

The IP-related representations and warranties in the acquisition of companies with IP-centric business must cover the following aspects.

The most critical of the representations and warranties pertaining to IP are the seller’s representations and warranties to title or ownership in the IP. The acquirer will want comfort that the seller is the absolute owner of the IP to each component of the technology and such ownership is not fettered, encumbered or subject to third-party rights. The seller would also want to ensure that there is nothing that restricts it from exploiting the IP in the technology to the fullest. Any such restriction will reduce the value of the technology and may affect the acquisition price that the acquirer is willing to pay for the target company and the technology concerned.

Third-party rights

The acquirer will also examine through the due diligence whether the seller has the right by licence or otherwise to use any IP owned by third parties that is material to the technology or the business of the target company. The acquirer will have to examine whether these licences or contracts will continue to operate in the event of a merger or change of control of the target company. The acquirer will have to examine the implications of the termination of these licences and contracts in the event of a merger or acquisition and its subsequent impact on the business of the target company post-acquisition.

The lack of continuity of these licences and contracts in the event of a merger or acquisition of the target company will affect the acquisition price.

Non-infringement of IP and disputes

The acquirer will also seek comfort that:

the IP of the target company does not infringe the IP of third parties;
no third-party IP is infringing upon the target company’s IP; and
there are no infringement disputes regarding the target company’s IP.

Indemnifications related to IP

As in the case of other indemnification provisions, the acquirer may insist that the pending IP claims or pending IP litigation be the subject of special indemnifications to protect the acquirer against subsequent substantial loss.

The seller may limit such indemnifications using standard indemnification limitation mechanisms such as capping the indemnity amount or limiting the time period for indemnification claims.

Ancillary documentation

In addition to the acquisition document, it may also be necessary to execute the following types of ancillary documentation:

IP assignment agreements: where the creators of the IP separately hold the concerned IP; and
trademark licence agreements: where the acquirer intends to use the trademarks of the seller, a robust trademark licence agreement with protective provisions may be entered into by the parties.

With rampant growth in industry and foreign investments in India, mergers and acquisitions have increased manifold. Although such arrangements contain clauses of assignment or transfer or licensing of IP rights, there is one more step under Indian laws to complete such transfer. That additional step is recordation of assignment or licence with the concerned IP authority. For instance, in case of patents, the IP authority is the Patent Office and, for trademarks, it is the Registrar of Trademarks. Only after a copy of the assignment deed or licence agreement is submitted and recorded will the transfer of IP right be complete.

1 Manisha Singh, Mini Raman and Varun Sharma are partners at LexOrbis.

2 Section 3(k) of the Indian Patents Act 1970.

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Assignment of Intellectual Property Rights in India

Assignment of copyright

Assignment of copyright has to be in writing and signed by the assignor or by his duly authorised agent. Copyright consists of a bundle of different rights in the same work, which can be assigned either as a whole to one party or separately to different parties.

· The deed of assignment must specify the `rights assigned’, the duration and territorial extent of assignment, and the royalty payable, if any. When duration of assignment is not specified, it is presumed to be for five years and when territorial extent is not specified, it is presumed to extend within India. (Section 19, Copyright Act, 1957)

· An assignment of a Copyright is exempted from Stamp Duty. (Article 25 of Schedule I of the Bombay Stamp Act, 1958).

The above provisions apply both to registered and unregistered copyright. Apart from the above requirements, in case of registered copyright, the following additional steps also have to be taken.

Registered Copyright

Assignee has to make an application for registration of changes in the particulars of copyright entered in the Register of Copyrights in Form V under Rule 16 of Copyright Rules, 1958 to be delivered by hand or registered post. Attested copies of the deeds of assignments should be enclosed with the application.

Assignment of Design

One can obtain copyright protection on a design either under the Copyright Act, 1957 or Designs Act, 2000. A design which is registrable under the Designs Act but not registered, ceases to have copyright protection after 50 copies have been made of the same using an industrial process. (Section 15 Copyright Act)

Once registered, on subsequent assignment of the design it will be necessary to apply for entry of subsequent ownership under Rule 33 of Designs Rules, 2001. Such application shall be made to the Controller in Form 11. The instrument of assignment has to be presented in original or notarised copy. (Rule 37, Design Rules, 2001)

· The document assigning the right on design has to be in writing and the agreement between the parties concerned should be reduced to the form of an instrument embodying all the terms and conditions governing their rights and obligations. Any contravention of this requirement will render the instrument invalid. (Design Manual) (Possibly based on Copyright Act)

· Upon entry of its particulars in the register of designs, the instrument shall be effective from the date of its execution.

· An application for registration of title shall be filed within six months from the date of execution of the instrument. This period is extendable by a maximum of six months.

https://lawsikho.com/course/diploma-intellectual-property-media-entertainment-laws

Assignment of Trademark

Registered Trademark

Assignment of trademark can be made by making a request on Form TM-23 or 24 depending on whether it is made by assignee alone or conjointly with the registered proprietor, along with the deed of assignment. (Rule 68 of Trademark Rules, 2002)

An application under Rule 68 has to contain full particulars of the instrument, if any, under which the applicant claims to be entitled to the trade mark and such instrument or a duly certified copy thereof has to be produced at the Trade Marks Registry for inspection at the time of application. The Registrar may require and retain an attested copy of any instrument produced for inspection in proof of title.

Unregistered Trademark

An unregistered trade mark may be assigned or transmitted with or without the goodwill of the business concerned. (Section 39 Trademark Act, 1999)

Assignment of Patents

An assignment of a patent has to be made in writing and the agreement between the parties concerned is required to be reduced to the form of a document embodying all the terms and conditions governing their rights and obligations, which must be duly executed. (Section 68, Patents Act, 1970).

Two copies of the assignment instrument certified to be true copies by the applicant or his agent along with an application in Form 16 and the Controller of Patents may call for such other proof of title or written consent as he may require. (Rule 91, Patent Rules, 2003).

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Concept of Intellectual property right

Intellectual Property Right Assignment Agreement

INTELLECTUAL PROPERTY RIGHT ASSIGNMENT AGREEMENT:

Concept of Intellectual property right:

Intellectual property refers to creations of the mind: inventions; literary and artistic works; and symbols, names and images used in commerce. I t legal rights granted with the aim to protect the creations of the intellect of either an individual or a group or an organization individually or collectively.

Intellectual property is divided into two broad classes: Industrial Property and Copyright. Industrial property includes patents, trademarks, industrial designs, and geographical indications; whereas copyright includes literary works, films, music, artistic works and architectural design and rights related to the same inclusive of rights of performers, artists, producers, and broadcasters.

Ipr Assignment Agreement:

In the era of commerce and trade intellectual property plays major role. Intellectual property includes industrial designs, Copyright, Patent, and Trademark. One of the most important challenges for businesses today is to remain profitable in a global economy. Increasingly, globalization dictates that companies must consider international markets and how best to leverage off the opportunities that emerging markets offer. With new opportunities come age old risks of how best to protect IPR whilst making the most of the existing brand reputation and good will.

The intellectual property assignment is a transfer of an owner's rights, title and interest in certain intellectual property rights. The transferring party ("assignor") transfers to the receiving party ("assignee") its property in intellectual property rights, such as patents, trademarks, industrial designs and copyrights. Details of both the parties must be clearly stated including name, address etc. Details of the assigned rights must be clearly stated. Description of rights must be included and whether the assignment is of all the rights or is partial in nature.

Duration of Assignment must be clearly stated in the agreement. The start date and period of assignment must be clearly stated.

All the other important information like previous assignments, infringement rights etc. must be clearly disclosed.

Confidentiality clause must form a part of the assignment agreement. It must clearly mention that the information relating to intellectual property right must not be disclosed to any third party does not form part of the agreement.

Advantages:

1.Assignment agreements for start-ups are a necessity. An intellectual property assignment agreement is a key legal document that investors look for when deciding whether to fund you.

2.Start-up founders should have complete ownership, in writing, of all intellectual property assets during the formation of the company. Not only is the legal ownership a requirement for most investors, but it can also keep patent trolls and companies that want to copy your products at bay.

3.In any case of dispute related to the Intellectual property, legal rights would easily be established only through the Intellectual property right assignment agreement.

Features Of Ipr Assignment Agreement:

Royalty: Royalty amount received from assignee is one of the best source of income from intellectual property assignment.

Competition in Business: IPR assignment agreements are useful to assignor as well as assignee with the help of intellectual property like trademark and patent one can start and develop new business in the competitive business.

Trust of Customer: Due to the intellectual property the customer can easily distinguish the similar kind of goods. Intellectual property is the best tool to for attraction of customer.

Important Clauses Of Ipr Assignmnet Agreement:

Representations and Warranties: Assignor represents and warrants to Assignee that: Assignor exclusively owns all right, title, and interest in and to the Assigned Property; Assignor has not granted and will not grant any licenses or other rights to the Assigned Property to any third party; the Assigned Property is free of any liens, encumbrances, security interests, and restrictions on transfer; to Assignor’s knowledge, the Intellectual Property that is assigned as part of the Assigned Property does not infringe Intellectual Property Rights of any third party; and there are no legal actions, investigations, claims, or proceedings pending or threatened relating to the Assigned Property.

Severability: If one or more of the provisions in this Intellectual Property Assignment Agreement are deemed void by law, then the remaining provisions will continue in full force and effect.

Indemnification: Assignor will defend, indemnify, and hold harmless Assignee, and Assignee’s officers, directors, shareholders, successors, and assigns, from and against all losses, liabilities, and costs including, without limitation, reasonable attorneys’ fees, expenses, penalties, judgments, claims and demands of every kind and character that Assignee, its officers, directors, shareholders, successors, and assigns may incur, suffer, or be required to pay arising out of, based upon, or by reason of: the breach by Assignor of any of the representations or warranties made by Assignor under this Agreement; Assignor’s use of the Assigned Property prior to the date of this Agreement; or Assignor’s failure to perform its obligations under this Agreement.

Miscellaneous : Agreement including the exhibits, schedules and other documents and instruments reffered to herein, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. This agreement supersedes all prior agreements and understanding between the parties with respect to such subject matter.

Registratioin And Stampp Duty:

Stamp Act, 1899 requires stamping of all the executed contracts. This stamp fee form part of the income of state governments. As stamp duty collection provides an added source of income they question the legal admissibility of an unstamped agreement. But in a recent verdict, the court has declared that stamping of any assignment agreement will not restrict anyone’s legal ownership of the IPR assignment contracts.

In most of the Indian states stamp duty payment is required in case an assignment agreement is executed, but in case of non-payment, the assignment cannot be invalidated.

Posted By: Snehal | Posted on: Apr 04, 2020 | Category: Intellectual Property Rights | Tag: Concept Of Ipr Origin And Development Of Ipr Intellectual Property Right Assignment Agreement Concept Of Intellectual Property Right Ipr Assignment Agreement Features Of Ipr Assignment Agreement Important Clauses Of Ipr Assignmnet Agreement long form of ipr what is Intellectual Property Right Assignment Agreement what are the Important Clauses Of Ipr Assignmnet Agreement

Tips For Developing and Protecting IP Rights in India

Banner artwork by chaylek / Shutterstock.com

Identify intellectual property assets at early stages of incorporation of start-ups and proactively protect such assets.
India’s intellectual property laws contain unique provisions that are not commonly found in other jurisdictions.
Parties often fail to take these provisions into consideration, resulting in an adverse impact on their intellectual property assets.

Introduction

The growing start-up ecosystem in India is, in great part, reliant on the creation of newer technology and solutions. Intellectual property (“IP”) assets of an entity can be a driving force behind big ticket transactions, including investments, mergers and acquisitions, in-licensing deals, etc.

To stand out in such a competitive market and maintain the exclusivity of the entity’s IP assets, it is crucial to identify such assets at an early stage and proactively protect them. Below are key aspects to consider while developing and protecting intellectual property in India.

I. Securing intellectual property rights

1. securing ownership: ensure that the ownership of ip assets duly vests in your company’s favor. below are a few common issues relating to ip ownership:, (a) intellectual property developed in-house:.

Put in place written assignments in respect of IP developed by employees, independent contractors, and consultants: Except for the Indian Copyright Act, 1957, no other Indian IP statute provides for an assumption that intellectual property created by an employee during his employment, is owned by the employer. Even the deeming fiction under the Indian Copyright Act is subject to any contract to the contrary entered into between the parties. Further, such a deeming fiction under the Indian Copyright Act does not extend to any independent contractors or consultants engaged by an entity.

Therefore, for the ownership of the IP rights developed by the employee (other than copyright), independent contractor, or consultant to duly vest with the employer entity, there must be an express written assignment of such IP rights.

When drafting such assignment agreements, keep in mind these unique provisions of the Indian Copyright Act:

Specify the term and territory of assignment: The Indian Copyright Act provides that if the assignment of copyright does not specify the term or territory of assignment, the assignment shall be deemed to be for the territory of India and for a period of five years only. Accordingly, it is important that the assignment document specifies the term and territory of assignment.
Consider the risk of the assignment lapsing due to non-use: The Indian Copyright Act also provides that in case any copyright assigned is not used by the assignor within a period of one year from the date of assignment, the assignment shall be deemed to have lapsed on expiry of such one-year period, unless the parties have agreed to the contrary. If the parties wish to contract out of the said provision, the assignment document should include specific language to that effect.
Consider requiring a waiver of moral rights: The Indian Copyright Act also grants an author “moral rights” in the work created by the author, which rights continue to vest with the author even after assignment of copyright in the concerned work. However, Indian courts have recognized that an author can waive such moral rights. Accordingly, consider putting in place a written waiver of such moral rights in the agreement executed between the employer entity and the employees, independent contractors, and consultants.

(B) Intellectual property acquired from third parties:

Check whether the ownership of such IP acquired from third parties duly vests with the concerned third party: The various unique provisions of the Indian law mentioned above would be equally relevant while undertaking such a check. Also conduct due diligence on other aspects relating to such intellectual property, such as non-infringement, no encumbrance, and no ongoing legal proceedings, etc.
Ensuring that your IP assignment agreement is adequately stamped: This is an essential requirement for the assignment to be enforceable under the Indian laws. Under the Indian Stamp Act , every agreement must be stamped as per the prescribed stamp duty. The stamp duty payable varies from state to state in India, and a few Indian states have exempted assignments of copyrights from stamp duty.

If an agreement that must be stamped under the applicable stamp laws of the state is not duly stamped, such instrument cannot be admitted in evidence before an Indian court, and cannot be acted upon, registered, or authenticated by any person before a judicial authority in India. Further, a penalty of up to 10 times the deficient stamp duty may be imposed by the authorities.

2. Assess the correct form of IP protection that the company should seek for securing its IP assets:

Certain intellectual property may be protectable under different intellectual property statutes or common law, in which case the entity would need to decide the most appropriate form of protection to seek, keeping its business objectives in mind. For instance, a technology developed by an entity may be protectable under Indian Patents Act but can also be protected as a trade secret if the entity maintains confidentiality of the said technology.

Patents vs. trade secrets:

While being one of the strongest forms of statutory protection, patents are limited to a specific period (20 years in total), and on expiry of such protection, the technology will fall in public domain name.

Trade secrets, on the other hand, are not protected by any statutory regime in India but are protected under common law principles. Trade secret protection is not as strong as patent rights, but such protection is not limited in time and can subsist as long as the concerned technology or information remains confidential.

The owner of the technology may decide to protect the technology by way of patent protection or as a trade secret or, where possible, partly under patent and partly as a trade secret, depending on its business goals and objectives.

Designs and copyright:

Also notable, the Indian Copyright law includes a peculiar provision which states that the copyright in any design, which is capable of being registered under the Designs Act, 2000 but is not, will lose its copyright protection as soon as the design has been reproduced 50 times by an industrial process by either the owner of the copyright or his licensee . Therefore, whether a work falls within the domain of copyright or design protection needs to be assessed prior to filing an application.

3. Filing for protection:

(a) trademarks.

Before commencing business operations under a particular brand, conduct a trademark search to identify whether there are any third-party rights which may pose a hurdle to the use and/or registration of the brand.

Keep in mind that under Indian trademarks law, rights accruing from use of a trademark are stronger than rights acquired based on the registration of a trademark. While filing an application to register a trademark that your company has already used, include a claim of such prior use under the application.

Courts in India have taken into account any admissions made by a party during prosecution of its trademark, including to overcome prior marks cited in an examination report, and have estopped such party from taking a contrary position in any subsequent proceedings (such as for enforcement of the mark). Therefore, carefully review submissions your company makes during prosecution of a trademark, to ensure that they do not limit its rights in future proceedings.

(B) Copyright

Under the Indian copyright laws, registration of copyright is not mandatory. The Copyright Act, 1957, provides for voluntary recordal of particulars of an author’s work with the Copyright Office. The registration merely acts as the prima facie evidence of ownership.

Registration of copyright can be of help in enforcement proceedings. However, in certain cases, such as software (which falls under the category of literary works), registration of copyright may result in the work itself (i.e., the software) being available in the public domain. When applying for registration of copyright in a software, an applicant is required to file copies of the source codes along with such application with the Copyright Office.

Any competitor can get access to the source code of the software from the Copyright Office, by filing a request for conducting inspection of the records for such application. Therefore, seeking registration of copyright may not be advisable where a party intends to maintain confidentiality of the work under consideration.

(C) Patents

Prior to applying for a patent for an invention, conduct a prior art search to understand the chances of the invention being granted a patent. Keep in mind certain inventions are not patentable under the Indian Patents Act (such as software per se , etc.).

Also consider a few other requirements under Indian law:

If an inventor who is a resident of India desires to file a patent application directly in any foreign country without filing an application in India, the inventor is required to obtain a prior permission (a “foreign filing license”) from the Controller of Patents in India i.e., prior to filing the application outside India.

As a part of prosecution of patents in India, an applicant is required to provide proof of right in the form of assignment of the said inventions from the inventors to the company or obtain a duly signed declaration by the inventor under the prescribed form . Given the possible movement of personnel from an organization from time to time, the organization must proactively obtain such assignment of the invention or a declaration in the prescribed form, to avoid future issues in establishing its right to apply for a patent.
If a person becomes entitled to a patent by virtue of any assignment or transmission or by operation of law, or to a share of patent by virtue of a mortgage or license, it is mandatory under the Indian Patents Act, for such person to apply to the Controller of Patents for recordal of the person’s title or interest in the said patent.

The Indian Patents Act declares it unlawful to include any one or more the conditions below in any agreement relating to sale or lease of a patented article or article made by the patented process or a license to manufacture or use a patented article or use a patented process:

i. A condition requiring the purchaser, lessee, or licensee to acquire from the vendor or licensor, or prohibiting the purchaser, lessee, licensee from acquiring from any third person, any article other than the patented article or an article other than that made by the patented process;

ii. A condition prohibiting or restricting the purchaser, lessee, or licensee from using an article other than the patented article or an article other than that made by the patented process, which is not supplied by the vendor or licensor;

iii. A condition prohibiting or restricting the purchaser, lessee, or licensee from using any process other than the patented process; or

iv. A condition providing for an exclusive grant back, preventing challenges to validity of the patent, and/or providing for coercive package licensing.

There is no perfect checklist that an entity can refer to for ensuring that it has taken all the required steps to protect its intellectual property. Above are a few key aspects that any entity involved in the creation and/or acquisition of intellectual property should be mindful of. Companies often overlook these aspects and as a result face adverse consequences such as adverse conditions or a reduced value of their corporate transactions.

Nirupam Lodha

Malika Nandkeolyar

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Importance of Assignment Agreements under Intellectual Property Laws in India

This article was published in Journal of Intellectual Property Rights on November 2009

Sindhura Chakravarty [**] Hidayatullah National Law University, HNLU Bhawan, Civil Lines, Raipur, Chhattisgarh 492 001

Received 20 August 2009, revised 29 October 2009

A well-established statutory, administrative and judicial framework exists in India to safeguard intellectual property, relating to patents, trademarks, copyright or industrial designs. [1] An important aspect of these laws deals with assignment agreements. An assignment agreement is an intellectual property (IP) transaction that deals with the ownership and disposition of intellectual property rights as well as with the control over the use of or access to intellectual property. This paper attempts to briefly explain assignment agreements in general terms as well as the essential requirements for assignment agreements under the Indian Contract Act, 1872, and the Indian Stamp Act, 1899. It discusses in detail the sections pertaining to assignment agreements in the legislations on Intellectual Property Law in India. It also provides information regarding the forms through which assignment of the intellectual property can be registered. The Madrid protocol and the rules regarding assignment of trademarks in the international forum have also been discussed.

Assignment Agreement, Contract Act, copyrights, patents, trademark, geographical indications, designs, semiconductor integrated circuit layout design, plant varieties, biological resources, Stamp Act, recordal procedure.

Assignment Agreements

Assignment agreements pertain to the transfer of intellectual property rights from the owner of the rights to another person or organization. An Intellectual Property Agreement (IP Agreement) or an Intellectual Property Assignment Agreement is a written and enforceable contract that consummates and formalizes an agreement between two companies for the purchase and sale of intellectual property rights. The intellectual property being purchased can consist of copyrights, trademarks and/or patents. [2] Assignment agreements differ from license agreements on the grounds that an assignment agreement actually transfers the ownership of that intellectual property from the assignor to the assignee whereas a license agreement only permits the licensee to use the intellectual property for a given period of time.

An assignment agreement cannot be compared to a negotiable instrument because in case of negotiation, the transferee can get better title than transferor, which can never happen in assignment/transfer.

For example, if A assigns to B, the assignment is stolen by C and assigned to D who takes it in good faith and for value without any notice of the defect in C’s title, D will have no rights against A. However if A draws a cheque (negotiable instrument) in favour of B, the cheque is stolen by C and negotiated to D, who takes it in good faith and for value without any notice of the defect in C’s title then D will be entitled to value of cheque. [3]

Intellectual property created by students in a University Research and Development (R&D) programme can be assigned by the student in the absence of an agreement as the student is the owner of the intellectual property created. Most universities, however, have policies requiring students to sign pre-invention agreements regarding the same.

An assignment agreement may involve a complete and exclusive sale of the rights, thus giving the assignee complete ownership to exploit the intellectual property rights in whatever way, shape, or form it likes, and this is, however, subject to any limitations listed in the agreement. Partial assignments are also possible as specified in Section 18 of the Indian Copyright Act. Usually the assignee will pay the assignor cash or stock consideration in exchange for these rights. [4]

Essential Requirements of an Assignment Agreement

Requirements under the indian contract act, 1872.

As per Section 2(h) of the Indian Contract Act, 1872, any agreement that is legally enforceable by law can be called a contract. An assignment agreement to be valid must satisfy the requirements of the Indian Contract Act, 1872. Therefore, it has to be made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object and also has to be made in such a manner that it is not declared void under Section 10 of the Indian Contract Act, 1872. For instance in the case of Alexander v Rayson, [5] P let a flat to R of $1200 a year. To reduce the municipal tax he entered into two agreements with R. One, by which the rent was stated to be $450 only and the other by which R agreed to pay $750 for services in connection with the flat. In a suit filed against R to recover $750, it was held that the agreement was made to defraud the municipal authority and was void and A cannot recover the money.

In contract law, the term ‘assignment’ means a transfer or making over to another of the whole of any property, real or personal, in possession or in action, or if in estate or in right therein. [6] To simplify, it refers to an agreement by means of which the rights or obligations of one party can be transferred to another party. Though not specifically mentioned in the Indian Contract Act, 1872, assignments have been inherited from English Contract Law. [7] Assignment agreements in the context of intellectual property law refers to the transfer of a specific kind of rightsintellectual property rights, which are personal, movable property. This is considered a lawful object.

To be a valid and legally enforceable contract it must be ensured that the consideration provided is also lawful and the contract itself is lawful. An agreement stating that a person would work for another person for two years in return for Rs 100 and in case of default would have to pay an exorbitant interest and principal at once was held to be indistinguishable from bonded labour and was thus held void. [8] Assignment can only be made from free consent of both parties. The parties to the agreement must also be competent to contract- thus neither can be a minor or of unsound mind according to Section 11 and 12 of the Indian Contract Act, respectively. It is interesting to note at this point that as per English law, a minor can dispose of a copyright in the same way as an adult subject to the rules of infant contracts. [9]

The Indian Contract Act, 1872 does contain certain provisions which indirectly refer to assignment yet it does not specify what assignments are or are not good in law. [10] The courts have however made certain guidelines regarding the same. For instance, it has been determined by the Madras High Court that an agreement regarding the publishing of a book between an author and a publisher is personal to the individuals entering it and the benefit received from this cannot be assigned. [11] It has also been determined by the High Court of Lahore that a copyright cannot be assigned for a non-existing work. [12]

Both Section 37 and Section 40 of the Indian Contract Act, 1872 allude to the enforceability of assignments by laying down that subject to certain exceptions, a contract in the absence of a contrary intention, express or implied, will be enforceable by and against the parties and their legal heirs and legal representatives including assignees and transferees. [13] Section 40 of the Indian Contract Act, 1872 specifies that a contract which the promisor is required to perform personally is not capable of assignment. [14]

Assignment agreements are thus a form of contract and must therefore satisfy the requirements that are mentioned under the Contract Act. It is only then that the assignment agreement can be enforced by filing a suit for damages under Section 73 of the Indian Contract Act, 1872.

Requirements under the Indian Stamp Act, 1899

The Stamp Act is a fiscal measure enacted to secure revenue for the state on certain classes of instruments. [15] As per Section 2(14) of the Indian Stamp Act, 1899, an instrument includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended extinguished or recorded. An assignment agreement involves the transfer of intellectual property rights and hence it would fall under the purview of the definition of the term ‘instrument’ as per the Act. As per the schedule, depending on whether the assignment pertains to ‘conveyance’, ‘transfer’ or ‘transfer of lease’ different stamp duty is to be charged. As per Section 23 on ‘conveyance’ in the Indian Stamp Act, 1899, an assignment of a Copyright is exempted from Stamp Duty. Therefore, in a Deed of Assignment, assigning copyright along with some other property, say trademarks, it is advisable to state as to what part of consideration is towards the assignment of copyright, thereby exemption from stamp duty can be sought on that portion of the assignment. In Bihar, however, the above-mentioned exemption of copyright assignments has been deleted by the Amendment made by the State Act with effect from 31st March 1958 as a result of the examination of exemptions suggested by the Taxation Enquiry Committee. [16] In Uttar Pradesh, the exemption is restricted to assignment of copyright in musical works. [17]

In a recent case regarding trademarks, [18] it was determined that Section 35 of the Indian Stamp Act, 1899 prohibited the courts from admitting into evidence documents not duly stamped merely to ensure Stamp duty collection and could not be used as a means of denying a person rightful ownership. Thus, it can be seen that though Stamp duty is applicable on assignment of intellectual property (except Copyright) in most States of India, the non-payment of this cannot invalidate the assignment.

Assignment of Intellectual Property

Assignment of copyrights.

Copyright is often referred to as the ‘Cinderella of Intellectual Property Law’. [19] This is because it was once over-shadowed by the twin sisters- Franchise Law and Patent Law but it now plays a very important role in the IP regime. It provides protection to authors, composers and other artists against unauthorized reproduction of their work. [20] The exact meaning of the term with respect to India is given in detail in Section 14 of the Copyright Act, 1957.

Copyrights are personal, moveable property and can be transferred though assignment agreements from one person to the other. In India, Sections 18, 19 and 19A of the Copyright Act, 1957 govern the assignment of copyrights. Section 18 of this Act gives every copyright holder the right to transfer his copyright to an assignee by means of an assignment agreement.

Section 19(1) of the Copyright Act, 1957 clearly states that no assignment of the copyright in any work shall be valid unless it is in writing signed by the assignor or by his duly authorized agent. Thus, no particular form of assignment is required under Section 19 of the Copyright Act, 1957 and it will suffice if the assignment can be culled out in writing from some document. [21] Oral assignment of copyright is neither permissible nor valid. [22] In a case, [23] the Supreme Court held that an existing and future right of a music composer and lyricist is capable of assignment, subject to the conditions that the assignment shall take effect only when the work comes into existence and the assignment is required to be in writing, signed by the assignor or his duly authorized agent. A deed of assignment of copyright is not compulsorily registrable. [24]

Section 19A of the Copyright Act, 1957 makes provisions in the case of disputes arising with respect to a transaction. It states that any such complaint will be dealt with by the Copyright Board. The Board cannot pass any order to revoke the assignment unless it is satisfied that the author is the assignor and that the terms of assignment are harsh to the assignor. In any event, no order of revocation of assignment can be made within a period of five years from the date of assignment. [25]

The term copyright encompasses a bundle of rights, one of which is a ‘moral right’. This constitutes certain specific rights that the author of an original literary, dramatic, musical or artistic work and the director of a film enjoy in their creation. It can only be exercised by the creator himself and these rights are not assignable as per English law. [20] The Law of the United States of America does not protect these rights conclusively. [26] Moral Rights of an author has been acknowledged under Section 57 of the Copyright Act, 1957. This states that even after the assignment of the copyright, the author of a work shall have the right to claim authorship of the work; and to restrain or claim damages in respect of any distortion or other act in relation to the said work which is done before the expiration of the term of copyright which brings the author into disrepute. [27]

The primary function of copyright law is to protect the fruits of a man’s work, labour, skill or test from annexation by other people. [28] This requires for the copyright owner to possess several rights including the right to transfer the intellectual property, if he chooses to do the same. Assignment agreements are integral to copyright law as it helps the copyright owner to implement this right. [29]

Assignment of Patents

A patent is a monopoly right granted to a person who has invented a new and useful article or an improvement of an existing article or a new process of making an article. During the term of the patent, the patentee can prevent any other person from using the patented invention. [30] Patent law recognises the exclusive rights of the patentee to gain commercial advantage out of his invention. [31] In India, patent law is covered by the Patents Act, 1970 which has been extensively amended vide the Patents (Amendment) Act, 1999, Patents (Amendment) Act, 2002 and Patents (Amendment) Act, 2005.

Patent law gives every inventor a reason to exercise his creative faculties by protecting his efforts and ingenuity from imitation. It has been held by the Supreme Court of India that the object of patent law is to encourage scientific research, new technology and industrial progress. Grant of exclusive privilege to own, use or sell the method or the product patented for a limited period, stimulates new inventions of commercial utility. [32]

In patent law, assignment refers to the act of the patentee by which the patent rights are wholly or partially transferred to the assignee who acquires the right to prevent others from making, using or exercising or vending the invention. The assignment can either be exclusive or non exclusive. The exclusivity can be further limited, for example exclusivity to a territory or market or line of products. There are three main types of assignments in patents, each of which have been discussed briefly as follows:

Legal Assignments

An assignment of an existing deed is a legal assignment. A patent which is created by deed can only be assigned by a deed. [33] A legal assignee entitled to be registered as the proprietor of the patent and acquires all the rights thereof.

Equitable Assignments

A document agreeing to transfer a patent or a share of a patent with immediate effect is an equitable assignment. This affects proprietorship, but does not directly change it. The man to whom it is equitably assigned gets the right in equity to have the ownership of the patent altered in law.

A mortgage is a document through which patent rights are transferred to the assignee in return for a sum of money. Once the assignor repays the sum, the patent rights are restored to him. [30] The term assignee as per Section 2(1) of the Patents Act, 1970 includes in its meaning the legal representative of a deceased assignee. Section 70 of the Patents Act, 1970 confers inter alia the right on a grantee to or proprietor of the patent to fully or partially assign his patent to another or others. As per the Patents (Amendment) Act, 2005 which replaces Section 68 of the Patents Act, 1970 an assignment of a patent shall not be valid unless the same were in writing and the agreement between the parties concerned is reduced to the form of a document embodying all the terms and conditions governing their rights and obligations and duly executed.

Section 69 of the Patents Act, 1970 describes the registration of those assignments. It is necessary for the agreement between the parties concerned to be reduced to the form of a document embodying all the terms and conditions governing their rights and obligations and the application for registration of such document ought to be filed in the prescribed manner with the Controller. The time-limit under the earlier law requiring ‘the application for registration of such document filed in the prescribed manner with the Controller within six months from the date of execution of the document’ has been omitted by the Patents (Amendment) Act 2005. Section 68 does not stipulate any time-limit for registration. [34]

As per the Law of the United States, the applicant for a patent must always be an individual. A corporation or a partnership, or other legal entity cannot properly be an inventor in an American Patent. [35] The government can own an invention, however. [36] This was reiterated in the case of Wright v US. [37] A corporation may be made an assignee to a patent through an assignment agreement.

Patents are a very important branch of intellectual property, as life saving drugs and other essentials come within its sphere. Thus assignment agreements of such rights must be couched in clear and concise terms to ensure that no controversy arises as to its interpretation.

Assignment of Trademark

Consumers all over the world seek quality. Brand consciousness is a very common method of achieving this end. Trademarks are the means by which consumers distinguish between brands. A trademark is any word, name, symbol, device or any combination thereof used by a manufacturer or retailer of a product, in connection with that product, to help consumers identify that product and to distinguish it from the products of competitors. [38] For example, the LEVI v-shaped stitching on the back pocket Levi’s blue jeans can be called a trademark. [39] The main purpose behind protecting trademarks is because it is of use both to the manufacturer and the consumer. For the merchant, the trademark serves as an advertising tool, facilitating repeated sales and successful marketing of new products. [40] Trademarks foster competition and the maintenance of quality by securing to the producer the benefits of a good reputation. [41]

In India, trademarks are protected by the Trademarks Act, 1999. Assignment is an important aspect of the Act. As per the Section 2(1)(b) of the Trademarks Act, 1999, assignment has been described as an assignment in writing by act of the parties concerned. Thus, this clarifies that for the assignment of trademarks it is necessary for the agreement to be in writing and to be an act of the assignor and the assignee of their own volition and not a third party. In Section 2(1)(zc) of the above-mentioned Act, assignment has been differentiated from other forms of transmission. Section 6 of the Trademarks Act, 1999 allows for the notification of assignment of trademarks which have been registered. Section 31 of the same Act states that registration of trademark and notification of assignments will act as prima facie evidence of the existence of a trademark.

Chapter V of the Trademarks Act, 1999 deals in depth with the transfer of trademark by means of assignment and transmission. Section 37 of the Act clearly states that only the registered proprietor has the right to assign a trademark. He is also subject to the rights conferred to him by registration. Section 38 of the Trademarks Act, 1999 provides the assignment of a registered trademark. Trademarks in India can be assigned with or without goodwill. In a marked change from the previously valid Trade and Merchandise Mark Act, 1958, Section 39 of the Trademarks Act, 1999 provides the assignment of an unregistered trademark. These Sections are subject to Section 40 and Section 41 of the Trademarks Act, 1999.

Section 40 of the Trademarks Act, 1999, prevents the occurrence of a situation wherein exclusive right of a trademark resides in more than one person. This is because if assignments and transmission lead to the creation of multiple exclusive rights in more than one person this may lead to deception and confusion. [42] The proprietor of a registered trademark who proposes to assign it may submit to the Registrar in the prescribed manner a statement of case setting out the circumstances and the Registrar may issue to him a certificate stating whether, having regard to the similarity of the goods or services and of the trademarks referred to in the case, the proposed assignment would or would not be invalid under Section 40(1). The certificate is subject to appeal. It will also be conclusive as to the validity or invalidity under Section 40(1), of the assignment in so far as such validity or invalidity depends upon the facts set out in the case. A certificate in favour of complete validity of assignment/transmission can be given only if application for the registration is made under Section 45 of the Trademarks Act, 1999 of the title of the person becoming entitled is made within six months from the date on which the certificate is issued as per Section 40(1).

Section 41 of the Trademarks Act, 1999 prohibits the assignment of a trademark whether it be registered or unregistered which may result in different people using trademark in different parts of the country. If an assignor retains exclusive right over trademark even after the assignment agreement, then the assignment will be void as per Common Law. [43]

Chapter V of the Trademarks Act, 1999 refers to the concept of ‘goodwill’ as previously mentioned, in Section 38, however the Act does not define the term. In Churton v Dogules, [44] it was determined that goodwill must mean every advantage that has been acquired by an old firm by carrying on its business, everything connected to the premises and the name of the firm, and everything connected or carrying with it the benefit of the business. There was a time when the law in UK considered goodwill to be inseparable from trademark. [45] This was subsequently changed. [46]

Section 42 of the Indian Trademarks Act, 1999 further provides for means by which a sale of trademark not in connection with goodwill must occur. It has to be registered before the expiration of six months from the date on which the assignment is made or within such extended period, if any, not exceeding three months in the aggregate, as the Registrar may allow. Thus the assignee applies to the Registrar for directions with respect to the advertisement of the assignment, and advertises it in such form and manner and within such period as the Registrar may direct.

Section 43 of the Trademarks Act, 1999 deals with certification trademarks, it states that the assignment of certified trademarks would not be possible without the consent of the registrar which was to be applied for in writing. Section 44 of the Trademarks Act, 1999 states that associated trademarks must be assigned or transmitted together and not separately. This provision is intended to ensure that the marks associated under Section 16 of the Trademarks Act, 1999 are not assigned separately to different persons entailing confusion and deception as a result of simultaneous use of same or similar mark by a different person in respect of the same goods or description of goods or same services or description of services. [47] Section 45 of the Trademarks Act, 1999 discusses the registration of assignments or transmissions in detail. Thus the significance of assignment agreements in Trademark law is amply clear from its exhaustive treatment in the Trademarks Act, 1999.

Assignment of Geographical Indications

Geographical indications have been defined under Section 2(e) of the Geographical Indications of Goods (Registration and Protection) Act, 1999. It basically pertains to an indication that is used to identify agricultural, natural or manufactured goods originating from a specific geographical territory having a special quality or reputation.

Section 24 of the Geographical Indication of Goods Act, 1999 clearly indicates that assignment, transmission, licensing, pledge, mortgage or any such agreement is prohibited by law. Hence there is no way in which the right over a geographical indication can be passed to another person except on the death of the authorized user. In case of which the geographical indication shall devolve to his successor. This is mainly because a geographical indication is a public property belonging to the producers of the concerned goods which cannot be used to describe another good as it is indicative of the reputation and quality of another product. [48]

Assignment of Designs

When we admire the sleekness of the cellular phone model or the cut of a formal shirt or even the shape of a new car, we are actually referring to its aesthetics or design. The object of the Designs Act, 2000 is to protect new or original designs so created to be applied or applicable to particular article to be manufactured by industrial process or means. It provides the creator of a design with the security that his aesthetic look will not be applied by others to their goods. [49]

This effort can be protected from imitation by seeking protection under the Design Act, 2000. As per Section 2(d) of the Designs Act, 2000 ‘design’ means only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article whether in two dimensional or three dimensional or in both forms, by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the finished article appeal to and are judged solely by the eye; but does not include any mode or principle of construction or anything which is in substance a mere mechanical device. Section 11 of the of the Designs Act, 2000 clearly states that a copyright upon design can last for 10 years from date of registration and can be extended to a maximum of 15 years.

Section 30 of the Design Act, 2000 read with Rules 32, 33, 34 and 35 of the Design Rules, 2001, recognizes the contracts relating to assignment of designs and provides procedure for the recordal thereof. Section 30(1) of the Design Act, 2000 states that where a person becomes entitled by assignments, transmission or other operation of law to the copyright in a registered design he may make application in the prescribed form to the Controller [50] to register his title. Section 30(3) of the Design Act, 2000 makes it clear that for an assignment to be valid it must be in writing and the agreement between the parties concerned has to be reduced to the form of an instrument embodying all the terms and conditions governing their rights and obligation and the application for registration of title under such instrument is filed in the prescribed manner with the Controller within the stipulated time- that being within six months from the execution of the instrument. Section 30(4) of the Design Act, 2000 states that the absolute right to assign the design rights lie with the person registered as proprietor of the design.

The Copyright in the design is only protected if the same is statutorily recognized under the provisions of the Designs Act, 2000. Similarly, the rights acquired by third parties by way of assignments or licenses are only made effective if the same is duly registered in accordance with the provisions of the Act and the Rules framed there-under. There is no concept of common law license under design law. [51]

Assignment of the Semiconductor Integrated Circuits Layout Design

Semiconductor integrated circuit is an electronic circuit manufactured on the surface of semiconductor material. [52] Integrated circuits are used in almost all electronic equipment in use today and have revolutionized the world of electronics. The sheer number of electronic appliances we use on an everyday basis is a clear indication of how important semiconductor integrated circuits or chips are in the modern world.

The manner of arrangement or the lay-out of the chip is what enables it to perform a particular function. Thus there was a need to protect the investment of the chip-designer by way of a separate enactment. [53] This protection is to be provided by the means of the Semiconductor Integrated Circuits Layouts Design Act, 2000 in India. This was enacted in keeping with India’s obligation under the TRIPS Agreement. [54]

Assignment as per Section 2(b) of the Semiconductor Integrated Circuits Layout-Design Act, 2000 has been defined as ‘an assignment in writing by act of the parties concerned’. Registration of the design as well as all subsequent assignments will act as prima facie evidence of the validity thereof as per Section 19 of the Act.

Chapter V of the Semiconductor Integrated Circuits Layouts Design Act, 2000 deals with Assignments and Transmissions. Section 20 of the Semiconductor Integrated Circuits Layouts Design Act, 2000 allows the proprietor of a layout-design the power to assign the layout-design, and to give effectual receipts for any consideration received for such assignment. This is subject to the provisions of the abovementioned Act and to any right appearing from the register to be vested in any other person. Section 21 of the Semiconductor Integrated Circuits Layouts Design Act, 2000 makes a registered layout-design assignable and transmissible with or without the goodwill of the business concerned. As per Section 22 of the Semiconductor Integrated Circuits Layouts Design Act, 2000, when an integrated circuit layout is assigned without goodwill then the assignment shall not take effect unless the assignee, not later than the expiration of six months from the date on which the assignment is made or within such extended period, if any, not exceeding three months in the aggregate, as the Registrar may allow, apply to the Registrar for directions with respect to the advertisement of the assignment, and advertises it in such form and manner and within such period as the Registrar may direct. Section 23 of the Semiconductor Integrated Circuits Layouts Design Act, 2000, states that the assignee must register the title with the registrar. Section 24 of the Semiconductor Integrated Circuits Layouts Design Act, 2000 prevents the assignee from using the registration as proof of title if the matter is still before the registrar or an appeal from an order there-from is pending.

Assignment of Plant Varieties

A need was felt in the latter half of the 20th century to provide for the establishment of an effective system for the protection of plant varieties, farmer’s rights and plant breeders, in order to encourage the development of new varieties of plants. [53] The Protection of Plant Varieties and Farmer’s Rights Act, 2001 was enacted by India under the obligation created by the TRIPS Agreement it had ratified in 1994. [55] India through the Protection of Plant Varieties and Farmer’s Rights Act, 2001 implemented a sui generic [56] system of protection. [57] It is essentially [but loosely] modelled on the Union for the Protection of new Varieties of Plants, 1978. [53]

Assignment agreements are permissible under the Plant Varieties and Farmers Rights Act, 2001. A plant breeder may through an assignment agreement transfer his right of ownership upon the plant strain he created to another person in return for pecuniary gain. Section 16(1)(c) of the Plant Varieties and Farmers Rights Act, 2001 acknowledges the legal validity of assignment agreements by stating that any person being the assignee of the breeder of the variety in respect of the rights to make such application, can apply for registration under Section 14(a) of such genera and species as specified under Section 29(2) or an extant variety or a farmers’ variety.

The Plant Varieties and Farmers Rights Act, 2001 provides some safeguards to ascertain the legitimacy of the assignment in the form of Section 18(3). The Section states that in case an application for registration is made by virtue of an assignment of the right to apply for registration, there shall be furnished at the time of making application, or within such period after making the application as may be prescribed, a proof of the rights to make the application. Thus the validity of the transfer of the intellectual property is gauged at the time of registration itself.

Assignment of Biological Resources

The Biological Diversity Act, 2002 was created in a bid to conserve, use sustainably and equitably distribute benefits accruing from use of biological resources and the traditional and contemporary knowledge associated therewith. [58] It prevents anyone claiming an intellectual property right (IPR), such as a patent, over biodiversity or related knowledge, without permission of the Indian Government. It contains measures for sharing of benefits from the use of biodiversity, including transfer of technology, monetary returns; joint R&D and joint IPR ownership. [59]

Section 4 of the Biological Diversity Act, 2002 states that the previous approval of the National Biodiversity Authority is necessary to transfer the results of any research relating to any biological resources occurring in, or obtained from, India for monetary consideration or otherwise to any person who is not a citizen of India, or is a non-resident [60] or a body corporate or organization which is not registered or incorporated in India or which has any non-Indian participation in its share capital or management. Collaborative research efforts and papers for the dissemination of knowledge are made exceptions to this definition of transfer. [61]

There is no specific provision in the Biological Diversity Act, 2002, dealing with Assignment Agreement. Assignment is also a form of transfer which under specific circumstances is permitted. It can be inferred that assignment agreements are not per se prohibited by the Biological Diversity Act, 2002 provided the assignment does not contravene any other rules of the Act.

Recordal Procedure with respect to Transfer of Trademark under Madrid System

Recordal or recordation [62] refers to the process or action of recording of any transfer. [63] The term came to the fore in the international forum with respect to trademarks after the advent of the Madrid Agreement. The Madrid Agreement was signed in 1891, yet it was only after the creation of the Madrid Protocol in 2004 that the concept of international registration became plausible. The Madrid Agreement and the Madrid Protocol jointly form the Madrid System that provides a centrally administered system of obtaining a bundle of single jurisdiction trademark registrations based on an ‘international registration’, and therefore provides a mechanism for obtaining trademark protection in many countries around the world. [64]

The Madrid System amongst other innovations suggested that the recordal of assignment agreements in an international register. India is in process of making amendments to its trademark law regime to streamline its trademark law and to make it consistent with evolving international trademark law regime and is also contemplating accession to the Madrid System.

The applicant for an international registration is required to file only one application, pay one fee in local currency, and is not required at least initially, to submit foreign powers of attorney. Renewals, assignment recordals, changes of name and/or address of an international registration may be effected by filing one document with the International Bureau. [65]

The Trademarks (Amendment) Bill, 2007 incorporates the changes necessitated by the Madrid Protocol. [66] Section 36F of this Bill states that from the date of the international registration of a trademark where India has been designated or the date of the recordal in the register of the International Bureau about the extension of the protection resulting from an international registration of a trademark to India, the protection of the trademark in India shall be the same as if the trademark had been registered in India. The bill is yet to be presented before the Lok Sabha and has no legal binding-ness as of now. However, there is a lot to suggest that the recordal system put forth by the Madrid Protocol will be implemented in India in the near future, thus the process for recordal of change of ownership [including assignment] has been analysed as follows:

Rule 25 of the Common regulations of the Madrid Agreement and Protocol explains the means by which transfer of ownership can take place. [67] First of all, a request for change in ownership through request for recording shall be presented to the International Bureau on the relevant official form, in one copy, where the request relates to a change in the ownership of the international registration [including assignment] in respect of all or some of the goods and services and all or some of the designated Contracting Parties. The request for the recording of a change in ownership may be presented through the Office of the Contracting Party, or of one of the Contracting Parties, this must comply with conditions of Article 2 of the Madrid Protocol [68] as Section 2(a)(iv) of rule 25 reiterates. The contents of the request must include the number of registration, the name of the holder, the name of the new holder their addresses and other specifications given in Rule 25 Section 2 of the Common Regulations of Madrid Protocol. [67]

As per Article 9 of the Madrid Protocol, the International Bureau shall record in the International Register any change in the ownership of that registration, in respect of all or some of the contracting parties in whose territories the said registration has effect and in respect of all or some of the goods and services listed in the registration, provided that the new holder is a person who, under Article 2(1), is entitled to file international applications.

Article 9sexies (1) also states that where, with regard to a given international application or a given international registration, the Office of origin is the Office of a State that is party to both this Protocol and the Madrid (Stockholm) Agreement, the provisions of this Protocol shall have no effect in the territory of any other State that is also party to both this Protocol and the Madrid (Stockholm) Agreement.

Assignment agreements are of considerable importance in IPR since they allow the intellectual property owners to transfer their intellectual property for commercial returns, ensuring that the intellectual property can be used for monetary gain. Intellectual property that is created is utilized and exploited by the Assignment Agreement, where the purchaser or assignee takes benefit of the assignment rights that are created. These assignment agreements give rise to legal and equitable rights in law and purport many issues if they are not carefully constructed as required by law.

Issues relating to ownership of IPR must be carefully considered where employees may be creating IPR outside the scope, time and available resources of the company that they work for. Companies who own valuable IP rights should execute non-disclosure agreements with their employees, agents, or other third parties and make sure to define the term ‘confidentiality’ and the obligations of the parties not to disclose it. It is prudent to include Assignment Agreement clauses which address issues relating to governing law, jurisdiction, Alternative Dispute Resolution [ADR] to seek speedy resolution of disputes. Intellectual Property Assignment Agreement is a legal contract and required to be in compliance with existing Laws.

It is important, in the field of intellectual property, to define transparent criteria for terms and conditions under which the institution/organization would be the owner of the IPRs and the situation in which the inventor or creator would have the right or privilege to be the owners of the IPRs that they created. [69] The enforceability of assignment agreements act as an incentive to these individuals to create new inventions which ultimately benefits society.

It is also essential to define the ownership of created intellectual property with relation to employeremployee agreements and contract for service to encourage innovation.

IPR legislations in India provide specific rules, regulations and procedure when dealing with assignment agreements. The Rules/Acts make provisions for registering the assignment agreements and their respective schedules also provide for forms through which parties can register their assignment agreements. In order for an assignment agreement to be valid and enforceable it is essential that the assignment agreement be recorded as prescribed by the Acts and relevant Rules.

In addition to abiding by the Rules, to avoid ambiguity it is essential to ensure that the agreement clearly defines which person the ownership rests with. The assignment must be concrete and also clarify the tenure for which the individual would be the owner of the intellectual property. This would provide a precaution in case of a potential dispute on the ownership of the intellectual property.

The position of an Assignment Agreement in the intellectual property law of India is one of great consequence despite being a private transaction between the assignor and the assignee. One of the reasons for this is that the law is required to protect the owner of the intellectual property from being defrauded. It must be noted, however, that though the law does provide certain safeguards, the onus of creating a suitable assignment agreement is upon the parties concerned. A valid assignment agreement and one that benefits all parties involved can only come into being if the fundamental issues, some of which have been discussed above, are addressed.

*Edited by Dr Sudhir Ravindran, Solicitor-England & Wales, Patent & Trademark Agent and Attorney with Altacit Global, Altacit Global, Creative Enclave, III Floor,#148-150, Luz Church Road, Mylapore, Chennai 600 004. Email: [email protected] **Email: Corresponding author: [email protected]

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This Web site is not intended to be a source of advertising or solicitation and the contents of the web site should not be construed as legal advice. The reader should not consider this information to be an invitation for a client relationship.

Altacit Global is a Crisil Rated Law Firm established in 2003. We have a strong international flavour in our areas of practices, addressing needs of individual industry groups and has a diverse client base.

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What is the Stamp Duty For Trademark Assignment?

Post author: D. Lalitha B.com B.L (Hons)
Post published: June 6, 2024
Post category: Intellectual Property / Trademark

Last Updated on June 6, 2024 by D. Lalitha B.com B.L (Hons)

Trademarks are important to businesses because they foster customer loyalty and memorability. They envelop names, logos, or particular images that separate an organization’s contributions from those of others in a particular industry. Trademark assignment is the most common way of moving brand name ownership starting with one entity then onto the next.

Kinds of Trademark Assignment:

There are four methods available for assigning a trademark. They’re:

Partial Assignment:
The new owner receives only a part of the rights, title, and interest in the trademark.
The current owner retains some rights, like the authority to use it in particular markets or with specific goods/services.
Complete Assignment:
All rights, titles, and interests in the trademark are transferred from the current owner to the new one.
The new owner becomes the sole owner, assuming all associated rights and duties of the trademark.
The assignment with goodwill:
Both the business associated with the trademark and its ownership rights are transferred.
This occurs when a business is sold, and the new owner wishes to obtain the related trademark in addition to the business.
The assignment without goodwill:
Only the ownership rights of the trademark are transferred.
Business or goodwill associated with the trademark is not included in the transfer.
Employed when the trademark owner wishes to sell the trademark separately from the business.

Why is trademark Assignment Important?

Financial gain for the assignor:
Selling the brand name can generate revenue for the business owner.
The funds can be applied to retirement or other companies.
Asset acquisition for the assignee:
Acquiring the trademark provides a valuable asset for establishing and growing the business.
Increasing efficiency in business processes:
Facilitates brand consolidations, strengthening identities and marketing effectiveness.
Resolves legal issues related to trademark ownership, saving time and money.
Safeguarding brand value:
Ensures the trademark is used according to the original brand vision.
Gives reassurance about the brand reputation and usage.

Requirements of the Trademark Assignment Deed:

The assignment deed must only be submitted in writing.
The trademark that is being issued should be identified.
The parties must both complete the assignment deed.
The purpose of the assignment deed should be money motive.
Whether the assignment is with or without goodwill should be included in the assignment deed.
In accordance with the Indian Stamp Act, the assignment deed must be stamped.

Applying Trademark Application:

Here’s the process of applying for a trademark online in India

Create a profile with the Trademark Registrar:
Register on the Trademark Registrar’s website.
Provide necessary information:
Identify goods and services.
Provide company name and type of mark filing.
Submit the required documents:
Drawing of the proposed mark.
Affidavit of use or intent to use the mark in commerce.
Proof of ownership of the mark.
Pay filing fee:
Submit the required fee for trademark application processing.
Send in an authentic, verified signature:
Authenticate the application with an authenticated copy of the signature.
Application review:
The application is sent to an examiner for review.
Examiner’s decision:
The examiner makes a decision about, to allow the mark to be put into use.
Approval and registration:
If approved, receive a registration certificate with the symbol ® and identifying information.

Fees and Payments:

Here’s the breakdown of the fees necessary for applying for a registered trademark online in India:

₹9,000 for electronic filing.
₹10,000 for filing in person with the Trademark Registrar.
₹4,500 for e-filing.
₹5,000 for filing by hand.
5% of the application or assignment value, as per the Stamp Duty Act, is payable per trademark application or assignment submitted.

Forms of Identification:

Here are the options for submitting forms of identification when applying for a registered trademark:

Submit a filing affidavit signed by the owner or owner’s representative.
The affidavit must be scrutinised by a competent individual.
Include brand logo, description, and date of first use.
List names and addresses of all owners or rights holders.
Submit an application containing documents establishing brand ownership.
Include a copy of the registration of the trademark certificate or a statement from the entity claiming ownership.
Provide a statement confirming the applicant’s consent to use the mark.
Provide contact information for authorised delegates.
Submit an application containing extracts from earlier submission documents.
Include a statement confirming the copying of copyrighted material without permission.

What does the “Stamp Duty” entail?

Here’s an overview of stamp duty and its significance:

Stamp duty is imposed by state governments.
It applies to different sorts of business endeavours, like real estate transactions, insurance policy administration, and financial transactions.
Mandated by the Indian Stamp Act of 1899 Section 3.
Ensures legal completion and validity of documents.
State governments collect revenue from stamp duty.
Rates are determined based on document type and transaction amount.

What is Stamp Duty for trademark Assignment?

Here’s a summary of stamp duty for trademark assignment, including relevant rates:

Stamp duty is payable on a deed of IP rights assignment, except for copyright assignments, which are exempt.
Imposed by state law, governed by the Indian Stamp Act of 1899.
For trademark transfer deeds and related paperwork to be legally enforceable in India, they must be stamped.
The amount of stamp duty for trademark assignment is based on the assigned trademark’s market value.
State governments determine market value, which varies from state to state.
Utilized to initiate registration requests for an individual’s title following an assignment.
Mumbai (Maharashtra): 3%
Kolkata (West Bengal): 5%
Ahmedabad (Gujarat): 5%

The Key role of Stamp Duty in the context of trademark assignment:

Here’s the key role of Stamp Duty in trademark assignment:

Legal documents, including trademark transfer deeds, must be duly stamped in accordance with the Indian Stamp Act of 1899.
Non-payment of stamp duty can render the deed invalid, unenforceable, and, or not valid in the court.
Stamp duty acts as a source of revenue for the government.
The generated revenue is contributing to funding various public benefits initiatives, like social welfare, education, and infrastructure development.

Conclusion:

All in all, consideration should be given to stamp duty while assigning a trademark. To ensure a consistent and hassle-free assignment of trademarks, it is advisable that you get the advice of a lawyer who can direct you through the stamp duty payment method and assist you with consenting to whatever legal criteria are still there. To ensure the viability of a trademark assignment in India, it is important to fathom the stamp duty guidelines and fulfil the associated requirements.

Could you explain the concept of a trademark assignment?

A trademark assignment, otherwise called a trademark transfer, alludes to the most common way of transferring the ownership of a brand, starting with one party and then onto the next. It includes the total transfer, with all rights, title, and interest in the brand.

Can a trademark assignment be partial?

Yes, it can be partial. It is possible to transfer only a part of the rights, title, and interest in a brand name as long as both parties agree and the terms are clearly stated in the assignment agreement.

Why Notarising a Trademark Assignment is Important?

The assignee benefits from the assignment being notarised. In order to prove that there’s not a possibility of deliberate document fraud pertaining to the assignment, notarising is also vital. The assignment consequently, it must be notarised with the appropriate stamp duty. Moreover, the assignor needs to give a notarised affidavit verifying the way that the brand name is really theirs.

Is trademark assignment possible before registration?

Yes, you can do it by submitting the TM – M form with the prescribed fees.

What if the registry raises a query on an assignment?

If the registry issues a notice on your request for an assignment, you can reply to it by submitting a letter in the prescribed format.

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Is stamp duty payable on an assignment of intellectual property rights?

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April 11, 2019

The dos and don’ts of licensing intellectual property in India

What is licensing of intellectual property (”IP”)? An owner of IP can grant another person the right or permission to make, use or sell property or items embodying or covered by this IP by means of a contractual license. A license may apply to any type of IP – trademark, patent, copyright, design and/or know-how. Under the license, the licensor maintains title in the IP and the licensee is authorized to make use of the IP only in accordance with the terms and conditions of the license.
What is a licensing agreement? A license agreement is a document, executed between two or more parties, evidencing the terms and conditions of such contractual license.
Does a license agreement have to be in writing? Once an entity/individual has taken the decision to license its IP, it is imperative that the terms of the license be captured in writing and explicitly agreed between the parties. Provisions of several acts governing different types of IP such as trademarks, copyrights, patents and design state that the license agreement should be in writing. Know-How as an IP has no specific legislation and though not required to be in writing by statute, it is recommended that license of any know-how be in writing as well to avoid ambiguity.
A license agreement should be in writing with the relevant terms clearly defined. But if the parties execute a term sheet, would that suffice as a valid license agreement? For a valid license, not only must the license terms be set out in writing but should also be in the form of a binding definitive document. A non-binding term sheet would not constitute a license agreement as held in the case of PVR Pictures Limited vs. Studio 18 by the Delhi High Court in 2009.
Definition of Licensed Property;
Exclusivity;
Right to grant sub-licenses; and
Revocability.
What is an exclusive license and a non-exclusive license? An exclusive license excludes the use of the licensed rights for anyone but the licensee. It must be clear whether that is meant to exclude the licensor itself from making use of the intellectual property. A non-exclusive license can be granted as often by the licensor to as many licensees as desired. Most commercial software licensed today is licensed on a non-exclusive basis.
Difference between exclusive license of IP and assignment of IP? There are numerous instances where the licensor has granted an exclusive license and the licensee has claimed that the same is an assignment of the IP. An exclusive license is not an assignment, when you license IP, you are granting the licensee permission to use your IP in a particular way while still retaining an interest in the IP being licensed. When assigning IP to another, there is a transfer of ownership from the assignor to the assignee. This is a permanent arrangement, and you cease to hold an interest in the IP once it is assigned. The terms of the license must explicitly state that it is a license (whether exclusive or non-exclusive) and define the mutual obligations. Most importantly, the clause on royalty payment should be drafted in a manner that does not give rise to implications that any downright payment is towards assignment of the IP.
What is royalty? One of the goals of licencing is to enable the proprietor of IP to receive quantifiable sums of money based on a licensee’s use of such licensed IP. The royalty is the consideration amount to be provided to the owner/licensor of the IP for the grant of the license. The consideration may be a lump sum payment or a continuous periodic fee payment, also known as royalties or a combination of lump sum fee and periodic payments.
A single up-front payment;
A pre- determined amount that is paid periodically;
A charge based on units of manufacture or sales; and
On early stage technology, royalties can be based on development costs.
Who owns any improvements, enhancements and modifications to the licensed IP? A person may create and design an improvement of an existing technology or a feature that enhances the use or functionality of the technology. The new invention may come about as a result of an idea that relates to the use of the licensed IP, or it may actually be the result of modification of that IP in order to produce any enhancement. An ”improvement” in the context of IP licenses, usually means a development within the field of the licensed technology that enhances the usability, functionality, efficiency, performance or other characteristic of the original IP. A license agreement must spell out what constitutes an improvement and who owns such improvement and all IP that vests in the same. The license agreement also needs to provide for ownership of IP if there is any joint development.
Is stamp duty payable on license agreements? Stamp duty refers to a tax on a transaction which is paid to the government and the tax is levied on the instrument recording the transaction. Stamp duty is payable on license agreements and the rate of stamp duty payable varies in each State. Prior to the execution of a license agreement, it is important to understand if the benefit of executing the license agreement in a particular state and availing lower stamp duty rates(if possible).
What are the consequences of not paying stamp duty? Under the Indian Stamp Act, 1899, if adequate stamp duty has not been paid on a document, such document cannot be admitted in evidence for any purpose nor can it be acted upon, registered or authenticated.
Patents – The Patents Act, 1970 states that a license agreement must be registered and that a licensee should apply in writing to the Controller of Patents for registration of his title.
Trademark – The Trade Marks Act, 1999 does not make registration of a license agreement mandatory, however it does provide for the concept of ‘registered user’. Provisions have been set forth to register any person other than the registered proprietor as the registered user for the use of the mark in commerce. The act provides that registered user can file infringement proceedings in his own name.
Copyright – The Copyright Act, 1957 does not make registration of the license agreement mandatory.
Design – The Designs Act, 2000 requires that an application for registration of title under a license agreement is filed with the Controller within six months from the execution of the license agreement. A license agreement in respect of which no entry has been made in the register cannot not be admitted in evidence in any court in proof of the title to copyright in a design or to any interest therein, unless otherwise directed by the court.

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Koo Chin Nam & Co. Koo Chin Nam & Co.

Law Firm in Kuala Lumpur, Malaysia

March 26, 2015 by

Stamp Duty for Transfer or Assignment of Intellectual Property

I was just looking through the Stamp Act 1949 (Act 378), which you can download by clicking here .

Under section 35, “The instruments appearing under the heading of “General Exemptions” in the First Schedule shall not be chargeable with duty.” This looks promising and I had a look.

Unfortunately, the words “intellectual property” never appear under the General Exemptions .

Then I kept reading. Under Item 32, which is related to “Conveyance, Assignment, Transfer or Absolute Bill of Sale”, there appears under the Exemptions :

“(d) Transfer or assignment on sale of any copyright, trade mark, patent or any similar right.”

That means that transfers, and assignments (pursuant to sale) of copyrights, trade marks, patents and “other similar rights”, which are generally known as “intellectual property rights (IPR)” would be exempted from stamp duty. At least, that’s how it looks like to me.

Incidentally, our Intellectual Property Corporation is pushing (and has established) a marketplace for various intellectual property. To visit the marketplace (called IPR Marketplace) please click the following link:

It stands to reason that if you, being an interested buyer or seller of intellectual property rights, happen to sell and transfer or assign your copyrights, trade marks, patents, and such other IPR’s, you’ll save on stamp duty.

Headquarters: Suites 2A&2C, PO Box 9, Wisma Pahlawan, Jalan Sultan Sulaiman, 50000 Kuala Lumpur. Tel: +603 22730688 / 2033 / 6033 Fax: +603 22738033 / 9033 e-mail: [email protected]

Branch Office: 21-1-1, Jalan Medan Putra 3, Medan Putra Business Center, Bandar Manjalara, Kepong, 52200 Kuala Lumpur. Tel: +603 62752511 / 2588 Fax: +603 62758511

Intellectual Property Buyback Agreement

Contributor.

Introduction

Do you know that in the year 2005, the popular music track identifying application, "Shazam", assigned its "Audio Recognition technology" and related patents to Broadcast Music Inc.® (BMI®), to facilitate immediate funding for its development, and in turn acquired an exclusive license from BMI® to use the same technology?

Also, do you know that in 2011, when Shazam successfully built its IP Portfolio and attracted a large "loyal" customer base, it reacquired the earlier assigned "Audio Recognition technology and related Patents" from BMI® for an undisclosed amount?

But how does this transaction facilitate? Why would BMI® even allow Shazam to reacquire its technology and related intellectual property despite knowing that there are about 200 commercially viable patents filed for this technology, all of which are synonyms of success?

Well, this is simply an example of an IP BUY-BACK Arrangement that took place between Shazam and BMI.

Intellectual Property Buyback: Concept and Relevance

Buyback is simply an arrangement wherein the 'Original Seller' repurchases its own intellectual property from the 'Original Buyer' after a certain time period and at a price, usually pre-defined by both the parties earlier in the Agreement. 1 It is one of the smartest strategies for sustaining in the market, where parties through their "mutual cooperation" enter into a win-win arrangement.

Generally, when a start-up with revolutionary IP enters the market, it requires financial resources to maintain and commercialize that IP as well as to further its research and development to come up with newer IPs. So, it looks for the investor who could finance it in exchange for a benefit that would work best for that investor, and mostly in these situations, it is the ownership rights in the IP that get transferred to the investor who agrees to maintain and exploit it for the time he owns the rights in IP.

However, since the start-up knows the worth of its current IP, it might feel reluctant in selling the ownership rights in that IP to an investor who promises to provide funds to the start-up, but then without funding it becomes extremely difficult to progress towards the targeted aim. So, the start-up and the investor, mutually and strategically, decide to enter into a two-way beneficial arrangement, whereby the start-up, here the 'Seller', assigns the ownership right in IP to an investor, here the 'Buyer', in exchange of a consideration, which the seller then uses to fund its start-up. Since the start-up knows the worth of its IP, it takes an exclusive license from the Investor, who is now the new IP owner, to commercialize the IP, and in return pays royalty at an agreed limit to the investor. Along with this, the Seller retains the option to "buy-back" the assigned IP from the Buyer, after a particular time period or after an event (say when the IP becomes commercially successful and holds a particular value in the market), at a certain price, which is either pre-defined during the transaction or could also be an inflated value as per the fair market value of that IP during the time the buy-back option is exercised.

The concept of exclusive license allows only the named licensee to exploit the licensed intellectual property, in exchange for a payment of royalty. Interestingly, the licensor is also excluded in this arrangement from exploiting the concerned IP, but he agrees to it because he is getting paid the royalty.

Once the predefined time period or pre-defined event happens, the Seller can exercise its buy-back option to reacquire the IP. Oftentimes, the Original Seller, subsequently, may even get into a co-ordinating relationship with the original buyer, if the parties so desire and if it benefits their market strategy, especially now when both the parties have acquired the credibility and trust of each other.

This is what happened between Shazam and BMI®.

Shazam, the London-based application, when entered the market in 2000 as a 'Music Identifying Application', it attracted 225 million people who used Shazam app approximately 10 million times per day. 2 However, Shazam did not just want the market to recognize it as a "Music Recognition" app, rather it wanted to leverage its revolutionary technology to further its research and reinvent itself as a modern-day application, whose usage extends beyond mobile phones.

In 2005, it decided to sell its IP to another UK-based company, named Broadcast Music Inc.® (BMI®), who in exchange agreed to enter into this mutual buy-back transaction, which in time, no doubt, proved beneficial for both the parties. Shazam, in its initial years, was forced to launch directly to consumers (D2C) since at that time, neither the customers were interested to invest in music nor the digital technology was developed to support Shazam's ambitions and ideas. The app was appreciated by UK consumers only, while people in North America showed no or little interest.

Fortunately, with time, the brand found its inflection point when the market witnessed a 360° turn, enabling Shazam to reinvent itself:

Mobile technology with better music players started to develop.
The idea of buying digital content started to normalize.
Unlimited data plans to use the internet were introduced.
Consumers started to get the content online at the same price as that of the offline content.

With its effort and change in approach from D2C to engaging in strategic relationships with carriers and manufacturers like Verizon and AT&T, the app co-branded itself in the market. Soon the app became one of the 500 applications to be offered by Apple in its version 2.0 iPhone software, which helped it tract customers from the United States as well. Apple's television ad campaign and PR activities, along with Shazam's partnership with the National Broadcasting Company (NBC), accelerated the growth of Shazam in the consumer market.

This was the optimal time when Shazam decided to exercise its buy-back option to purchase the IPs previously assigned to BMI®, and moved towards a broader and better strategy.

Intellectual Property Buy Back Agreement

IP Buy Agreement is ancillary or parallel to the standard/master assignment agreement containing the buy-back option. When the Original Seller decides to exercise its buy-back option, the Intellectual Property Buy Back Agreement comes into the picture.

In this agreement, the "Original Assignee" transfers all rights without any restrictions related to the commercialization of the works as well as the right to sue or take legal action in case of any infringement, current, and after the execution of this agreement, to the "Original Assignor".

In other words, it involves two parties,- the Buyer and the Seller. The Seller is buying back the IP rights previously given by him to the Buyer, at a pre-defined or inflated price. The application of buy-back clauses can be seen in all places where an assignment of Intellectual Property rights is involved, including the Media & Entertainment sector.

For instance, if a party A, a film producer has assigned exploitation rights to a party B with a corresponding agreement that party A can buy back the assigned rights at a specific price (or a mutually agreed price) if the expected commercialization threshold remains unaddressed.

In the absence of a "buy-back clause" in the Assignment Agreement, the Assignor of the Assignment agreement will have to convince the other party to return the assigned rights and if the assignee denies the same, then the previous Assignor would not be able to repurchase or buy back the concerned intellectual property rights. Therefore, it is advisable to have a buy-back clause in an assignment agreement, if the Assignor intends to buy-back his rights at some point in time.

Benefit of a Buy-Back Agreement

To the Original Assignor: The person buying the intellectual property rights can use and enjoy the asset to fulfil his qualitative and quantitative interests in the intellectual property. Such a person exclusively owns the IP asset and can exploit the related commercial rights to its maximum advantage, and can sue and be sued for the same. Such a person can also resell the same at a better price and pursue his endeavours with financial liquidity. 3

To the Original Assignee: The person selling the intellectual property rights will be free from maintaining the asset and paying for its renewal fee. The original Assignee will get lump-sum royalty for intellectual property works.

The buy-back agreement safeguards the interest of the Original Assignee without offending or causing damage to the interests of the Original Assignor. Both sides in the agreement are protected by certain warranties.

Important Clauses in an Intellectual Property Buy Back Agreement

Recital clause.

This clause highlights-

If the parties are individuals: Their names, KYC details (PAN/Aadhar No.), permanent address.
If the parties are a company: The name of the company, CIN no., law under which the company was incorporated, and permanent address.
The purpose of the Agreement, which is inclusive of the intention of the Parties to "Buy-Back" or "Re-transfer" of assigned IP;
The date from which the agreement comes into effect (Effective Date);

Definition Clause

This is one of the imperative clauses of all the agreements which helps in interpreting the meaning and scope of the terms used in the agreement. The prominent definitions would be that of "Assigned Rights", "Intellectual Property", "Intellectual Property Rights", "Assignment", "Buy-Back", "Confidential Information", etc.

Repurchase/Transfer and Payment Clause

This clause enunciates that the Original Seller/Assignor hereby agrees to repurchase from the Original Buyer/Assignee the assigned IP Rights, and that the Original Buyer/Assignee hereby agrees to re-transfer the assigned IP rights to the Original Seller/Assignor.

The Payment Clause highlights the price at which the Original Assignor would buyback the assigned IP from the Original Assignee. This could be a pre-defined price agreed upon between the parties during the main assignment and mentioned in the master Assignment Agreement, or it could be the current market price of the IP. The price of the IP, after the pre-defined terms, say 5 years, could be calculated by using the DCF method of income approach, and be adjusted keeping in mind the probable market factors. It is important to note that the income valuation approach does not take into account the market factors, and so the same has to be separately taken note of by the parties to arrive at a suitable value.

Confidentiality Clause

This is the binding clause that describes the time period for which any confidential information related to the assigned IP rights, the business transaction of the Original Assignor and the Original Assignee, their financials, etc. will stay confidential and not be disclosed to any third party without prior consent of the other party to whom the confidential information belongs.

Non-Compete and Non-Solicitation Clause

This clause clearly prohibits the parties from competing with each other, post-buyback, by using the earlier assigned IP or any other confidential information exchanged between the parties. To align with the fundamental right to practice any business or activity, this clause has to be reasonably drafted, restricting the time period for which the prohibition would continue. Most preferably, 12 months is the minimum time period for which the parties agree to abide by this clause, however, depending on the negotiations, the time period could be extended up to 5 years as well. The parties could also restrict the carrying out of the same business in the same radius as that of the other party which might result in the diversion of customers, affecting the business revenue.

The non-solicitation clause restricts the Original Assignee from soliciting any of the employees, clients, or customers of the Original Assignor, post-buyback, for a reasonable time period, which could affect the legitimate business interests of the Original Assignor. This can also be drafted as a surviving clause saving interests of both the parties.

Representation and Warranties Clause

This Clause prescribes that the Original Assignor -

is the exclusive owner of the re-assigned IP rights;
has the right to commercialize the works, without any restrictions;
has the right to sue or take legal action in case of any infringement, current, and after the execution of this agreement;

This clause also represents and lays out warranties by the Original Assignee/Original Buyer, like the re-assigned IP rights are free from encumbrances, liens, any restrictions on transfer; that they do not infringe upon third-party intellectual property rights ; and there do not lie any legal proceedings or claims related to such assigned IP rights.

Dispute Resolution Clause and Governing Law

It prescribes the law by which such buy-back or re-transfer or repurchase of IP rights would be governed. The dispute resolution clause would lay down the mechanism agreed by both the parties to solve the disputes related to the present transaction, which could be arbitration, mediation, or even reaching out to the court of a particular jurisdiction as defined in the agreement itself.

Stamp Duty and Registration

Any assignment of IP rights is subject to the payment of Stamp Duty, 4 the amount of which varies from state to state, and must be procured and paid before executing the assignment or in this case, re-assignment deed.

Along with this, registration of such re-assignment of IP in favour of the Original Assignor is also mandatory, thus, such IP assignment deed must be registered with the relevant IP office in India.

Documentation

In the execution of the Buy-Back Agreement, the Parties consent to assist each other with any paperwork that may seem necessary and the Original Assignee promises to deliver any or all records, documents, and material in physical or digital form in the same manner as transferred by the Original Assignee pursuant to the main assignment agreement. Such documents and materials shall be affixed with the Agreement as an Annexure. 5 >

Where do third-party agreements with the Original Assignor stand?

After the assignment of IP Rights to another party prior to a buy-back agreement, the Assignee commercializes the IP Rights by giving licenses to third-parties. The question then comes as to the fate of the revenues received from third-parties.

The agreements in force by the Original Assignor and his licensees do not cease to exist, although, at the time of buy-back of rights in the IP, the developments made in the commercialization of the IP Asset will be transferred to the buyer and such person will then be the right person to enjoy the royalties and compensations, if any, from the licenses, unless anything related to the treatment of revenue streams from third-party agreements is not expressly mentioned in the buy-back agreement.

1. UPCOUNSEL, Buy Back Agreement Definition: Everything You Need to Know (Oct. 14, 2020), https://www.upcounsel.com/buy-back-agreement-definition .

2. JVG, How Shazam stayed on top by reinventing itself - twice , VENTURE BEAT (Aug. 31, 2012, 5:00 PM), https://venturebeat.com/2012/08/31/shazam-evolution/ .

3. LawSikho, Copyright Monetization and Licensing, Buy-Back Agreement , 2.

4. The Indian Stamp Act, 1899, Schedule 1, No. 2, Acts of Parliament, 1899 (India).

5. LawSikho, Copyright Monetization and Licensing, Buy-Back Agreement , 5.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Intellectual Property

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COMMENTS

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Intellectual Property Buy Back Agreement. ... The application of buy-back clauses can be seen in all places where an assignment of Intellectual Property rights is involved, including the Media & Entertainment sector. ... Stamp Duty and Registration. Any assignment of IP rights is subject to the payment of Stamp Duty, 4 the amount of which ...
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What Is an Intellectual Property Assignment Agreement?

Purpose of an Assignment Agreement

Key Components of the Agreement

Types of Intellectual Property Assigned

Benefits of a Comprehensive Agreement

Risks of Not Having an Agreement

Loss of IP Rights

Infringement and Litigation

Financial Consequences

Negotiating the Terms of Transfer

Enforcing the Assignment Agreement

Frequently Asked Questions

Are There Jurisdictional Differences in Assignment Agreement Laws?

Can Intellectual Property Be Assigned to Multiple Parties Simultaneously?

Is an Assignment Agreement the Same as a Non-Disclosure Agreement?

Can an Assignment Agreement Be Terminated or Cancelled?

Decoding Indian Stamp Duty Requirement for IP instruments

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Introduction