PART ONE — ASSIGNMENT

What Can Be Transferred

• A granted patent, in whole
• An undivided share in a patent
• A pending application, which can be assigned and the change of applicant recorded
• Rights limited by territory, where the patent covers more than one jurisdiction through corresponding filings
• Rights limited by field of use, structured as a licence rather than an assignment in most cases
• A mortgage or charge over the patent as security
• Transmission by operation of law — succession on death, amalgamation under a scheme, transfer by a liquidator or resolution professional

Types of Assignment

Legal assignment. The registered proprietor transfers the patent by a deed, and the assignee applies to have their title entered in the register. This is the complete and preferred form.

Equitable assignment. An agreement to transfer that has not been perfected by a formal deed and recordal. The assignee has rights against the assignor but a weak position against third parties and a serious problem under Section 69(5).

Partial assignment. Transfer of a defined share, or of rights in a defined territory or field. Partial transfers create co-ownership, which brings Section 50 into play and should be structured with a co-ownership agreement executed at the same time.

Mortgage. The patent is transferred or charged as security for a debt, with a right of redemption on repayment. Registrable under Section 69 and, where the borrower is a company, requiring attention to charge registration under the Companies Act, 2013.

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Co-Ownership: Section 50 and the Trap It Creates

Where a patent is granted to two or more persons, Section 50 provides that, subject to any agreement to the contrary, each is entitled to an equal undivided share.

Two consequences follow, and they pull in opposite directions:

1. Each co-owner may work the invention for their own benefit, without accounting to the other co-owners. Your research partner can commercialise the invention and keep the entire proceeds.
2. No co-owner may grant a licence, or assign their share or interest, without the consent of all the other co-owners. So neither of you can monetise it through third parties without the other’s agreement.

The combined effect is a stalemate that is very common in university–industry collaborations, joint development projects and co-founder situations. One party wants to license; the other refuses; both can work it themselves; neither can extract value from the market.

Section 51 allows the Controller, on the application of a co-owner, to give directions regarding the sale or lease of the patent or any interest in it, or the grant of licences, and to settle terms — but this is a remedy for a breakdown, not a substitute for planning.

The answer is a co-ownership agreement executed at the outset, dealing expressly with: shares, decision-making on licensing and assignment, who bears renewal and prosecution costs, who controls enforcement and how recoveries are shared, exploitation rights and accounting, improvements, deadlock resolution, and exit.

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Executing and Recording an Assignment

Requirements for validity — Section 68

• In writing
• Reduced to a document embodying all the terms and conditions governing the parties’ rights and obligations
• Duly executed

A short assignment clause buried in a services agreement, or a one-line deed that does not set out the terms, is exposed under Section 68.

Recordal — Section 69

An application is made to the Controller on Form 16 for entry of the assignee’s title in the register, supported by:

• The original or a certified copy of the executed and duly stamped deed
• Form 16 with the prescribed fee
• Power of attorney on Form 26 in favour of the agent or attorney
• Proof of title and, where a company is a party, the board resolution or authorisation
• Where the transfer is by transmission — succession certificate, probate, scheme of amalgamation, or the order or instrument of transfer

The Controller may require further proof of title. On being satisfied, the particulars are entered in the register and the assignee becomes the registered proprietor with the power under Section 70 to deal with the patent.

Rectification of the register, where an entry is wrongly made or wrongly remains, lies under Section 71 — before the High Court, following the abolition of the Appellate Board by the Tribunals Reforms Act, 2021.

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PART TWO — LICENSING

The Three Basic Structures

The distinction between exclusive and sole is frequently drafted carelessly and is commercially significant. An “exclusive” licence that does not exclude the patentee is a sole licence, and a licensee who has paid exclusive-licence money for it has not received what it bargained for.

Section 109 confers on the holder of an exclusive licence the right to institute a suit in respect of any infringement committed after the date of the licence, with the patentee joined as a defendant if they do not join as a plaintiff. This right is one of the principal commercial reasons an exclusive structure is chosen, and it depends on the licence being properly documented and, for evidentiary purposes, recorded.

Other Arrangements

Cross-licence. Each party licenses its patents to the other, commonly to resolve blocking positions. Section 91 separately allows the Controller, on application, to order licensing of related patents where a patentee cannot work their own invention efficiently without infringing another patent.

Sub-licence. Only where expressly permitted. The head licence must state whether sub-licensing is allowed, on what terms, and whether the sub-licence survives termination of the head licence.

Technology transfer and know-how licensing. Patents rarely transfer alone. The commercially useful package usually includes know-how, technical documentation, training, materials specifications and support — none of which is covered by the patent licence itself and all of which needs separate treatment and confidentiality protection.

Licence combined with an option or right of first refusal to acquire, common in university and research-institution licensing.

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Section 140: The Clauses That Are Void in India

This is the provision that most distinguishes Indian patent licensing from licensing under other systems, and it must be applied at the drafting stage rather than discovered later.

Section 140 makes it unlawful to insert, in any contract for the sale or lease of a patented article or an article made by a patented process, or in a licence to work a patented process, conditions of the following kinds:

• Tie-ins requiring acquisition of other articles — requiring the purchaser, lessee or licensee to acquire from the seller, lessor or licensor, or their nominee, any article other than the patented article
• Restrictions on third-party sourcing — prohibiting the purchaser, lessee or licensee from acquiring or using articles, other than the patented article or an article made by the patented process, supplied by any person other than the seller, lessor or licensor
• Restrictions on using unprotected articles or processes — prohibiting the use of any article or class of articles not protected by the patent
• Exclusive grant-back, no-challenge and coercive package licensing — providing for exclusive grant-back of improvements, preventing challenges to the validity of the patent, or coercive package licensing

Such conditions are void, and their inclusion is available as a defence in an infringement suit under Section 140(3).

Practical drafting consequences:

• Grant-back may be non-exclusive; it may not be exclusive
• No-challenge clauses should not be used; where the commercial concern is genuine, a termination right on a validity challenge is the route to consider, drafted carefully
• Bundling several patents into a single mandatory package is exposed
• Requirements that the licensee buy unpatented components, consumables or raw materials from the licensor are exposed

Separately, licensing terms remain subject to the Competition Act, 2002. Section 3(5) preserves reasonable conditions necessary to protect intellectual property rights from the prohibition on anti-competitive agreements, but the exemption is not unlimited, and abuse of a dominant position under Section 4 is not exempted at all.

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Compulsory Licensing: Why an Indian Patent Cannot Simply Be Shelved

Section 84 — at any time after three years from the date of grant, any person interested may apply for a compulsory licence on the grounds that:

• the reasonable requirements of the public with respect to the patented invention have not been satisfied; or
• the patented invention is not available to the public at a reasonably affordable price; or
• the patented invention is not worked in the territory of India.

Section 85 allows revocation of the patent for non-working, on an application made after two years from the grant of the first compulsory licence.

Section 92 permits compulsory licences on notification by the Central Government in circumstances of national emergency, extreme urgency, or public non-commercial use. Section 92A provides for compulsory licences for the export of patented pharmaceutical products to countries with insufficient manufacturing capacity.

Sections 100 and 102 allow use of inventions for the purposes of Government and acquisition of inventions and patents by the Central Government.

Section 146 and Form 27 require the patentee and every licensee to furnish statements as to the extent to which the patented invention has been worked in India. The Patents (Amendment) Rules, 2024 changed the frequency to once every three financial years, with the statement due within six months of the expiry of each period. Failure to furnish the information carries consequences under Section 122.

The drafting implication: a licence should allocate responsibility for Form 27 filings expressly, and should require the licensee to provide the working data the patentee needs. A patentee who cannot evidence working because the licensee will not supply the figures is exposed on two fronts at once.

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Drafting: What the Documents Must Contain

Assignment deed

• Parties, constitution and addresses
• Recitals establishing the chain of title — how the assignor came to own the patent, including inventor assignments
• Schedule of patents and applications — number, jurisdiction, filing and grant dates, status, expiry date and renewal position for each
• Operative transfer — whole or share, territory, and whether it includes pending applications, divisionals, patents of addition and corresponding foreign rights
• The right to sue for past infringements, expressly assigned if intended — it does not pass automatically
• Consideration, and the mechanics of payment
• Assignor’s warranties — sole ownership, no encumbrance, charge, prior licence or assignment, no pending opposition, revocation or infringement proceedings, renewal fees paid to date, and Section 8 and Form 27 compliance to date
• Validity — ordinarily not warranted; assignees who ask for a validity warranty rarely get one, and should price the risk instead
• Delivery of the file — prosecution history, correspondence, deadlines and technical documentation
• Further assurance — the assignor’s obligation to execute everything needed for recordal in India and abroad
• Indemnity, governing law and dispute resolution
• Execution, with board resolutions and witnessing as required

Licence agreement

• Grant clause — exclusive, sole or non-exclusive, stated unambiguously and stating expressly whether the patentee retains the right to work
• Field of use and territory, defined precisely
• Term, and whether it is co-extensive with the patent
• Sub-licensing — permitted or not, and on what conditions
• Financial terms — lump sum, milestone payments, running royalty, the royalty base and how it is calculated, minimum guaranteed royalties, royalty stacking provisions, currency, and payment timing
• Records and audit rights, with a mechanism and cost allocation
• Improvements — ownership of licensee improvements, and non-exclusive grant-back only
• Maintenance — who pays renewal fees, and a step-in right for the licensee if the patentee fails to pay
• Prosecution and portfolio decisions — who controls, and consultation obligations
• Enforcement — who may sue, who bears costs, how recoveries are shared, and the Section 109 position for exclusive licensees
• Know-how, technical documentation and training, with confidentiality
• Quality, performance and diligence obligations, including minimum working obligations that support the Form 27 position
• Form 27 working data — the licensee’s obligation to supply it
• Warranties, disclaimers, indemnity and liability caps
• Termination — for breach, insolvency, change of control, and the effect on sub-licences
• Section 141 — the statutory right of either party to determine the contract, on three months’ notice, after the patent or all the patents by which the article or process was protected ceases to be in force
• Post-termination — sell-off period, return of materials, survival clauses
• Governing law, jurisdiction and arbitration

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Stamp Duty, Tax and Regulatory

Stamp duty. An assignment of a patent is treated as a conveyance for stamp purposes, and rates and computation vary from state to state. The deed must be adequately stamped before or at execution — under-stamping causes objections at recordal and affects admissibility. Get the duty assessed for the relevant state before signing.

GST. Transfer and licensing of intellectual property rights is a supply and attracts GST. Rate, classification and place of supply need to be determined for the specific transaction, particularly for cross-border licensing.

Income tax. Consideration on assignment is generally taxable as capital gains. Royalty income is taxable as income. Section 115BBF of the Income-tax Act, 1961 provides a concessional rate of tax on royalty income in respect of a patent developed and registered in India by an eligible resident patentee — the Indian patent box regime — subject to the prescribed conditions and elections.

Withholding tax. Royalty payments attract TDS, and cross-border royalties require analysis of the applicable rate under the Act read with the relevant Double Taxation Avoidance Agreement, along with Form 15CA and 15CB compliance.

FEMA. Payment of royalties and lump-sum fees for technology transfer to foreign licensors is permitted under the automatic route, subject to the prevailing conditions. The position for each transaction should be confirmed against the regulations in force.

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Due Diligence Before Any Patent Transaction

On the patent itself

• Legal status on the register — granted, in force, and renewal fees paid to date
• Term remaining, and the expiry date calculated from the correct starting point
• Any pending pre-grant or post-grant opposition, revocation petition or rectification
• Any compulsory licence application or order
• Form 27 working statements filed as required
• Section 8 / Form 3 compliance, since non-compliance is a ground of revocation
• Corresponding foreign family members and their status

On title

• Complete chain from the named inventors to the current proprietor
• Inventor assignments executed and, where relevant, recorded
• Whether any earlier assignment or licence is unrecorded, and therefore inadmissible under Section 69(5)
• Existing licences, sub-licences, options, mortgages, charges and encumbrances
• Co-ownership, and whether the consent required by Section 50(3) has been obtained
• Government funding conditions, institutional IP policies and collaboration agreements that may restrict transfer

On the contract stack

• Existing licence terms that survive the transaction
• Change of control clauses in existing agreements
• Restrictive conditions that may be void under Section 140
• Any assignment of the right to sue for past infringements

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Mistakes We Are Regularly Asked to Fix

1. An assignment agreed by email or term sheet and never reduced to a Section 68 compliant deed
2. A properly executed deed that was never recorded under Section 69, discovered when the buyer tries to sue an infringer
3. A deed that is under-stamped for the relevant state and objected to at recordal
4. An “exclusive” licence that does not actually exclude the patentee
5. Exclusive grant-back and no-challenge clauses, void under Section 140
6. Co-owned patents with no co-ownership agreement, deadlocked under Section 50(3)
7. The right to sue for past infringements not assigned, so historic damages are lost
8. Renewal responsibility unallocated, and the patent allowed to cease during the licence term
9. Form 27 working data not contractually required from the licensee, leaving the patentee exposed
10. Inventor assignments never obtained, so the company’s own title is defective
11. Royalty base loosely defined, producing a dispute in the first audit
12. Sub-licences granted without authority, or surviving termination in an unintended way
13. Foreign corresponding patents left out of the schedule
14. Withholding tax and FEMA treatment addressed after signing rather than during structuring

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How Delhi Legal Company Handles Patent Transactions

• Title and status diligence — register verification, renewal position, oppositions, encumbrances, unrecorded instruments and the complete chain from inventor to proprietor
• Structuring — assignment versus licence, exclusive versus sole versus non-exclusive, field and territory carve-outs, and the tax and stamp duty consequences of each
• Drafting — assignment deeds, licence and sub-licence agreements, co-ownership agreements, technology transfer and know-how agreements, mortgages and security documents, and inventor assignment deeds
• Section 140 review — screening commercial terms against the statutory prohibitions and the Competition Act, 2002
• Execution and stamping — duty assessment for the relevant state and execution formalities
• Recordal — Form 16 filings under Section 69, prosecution of objections, and corresponding recordals in foreign jurisdictions through associates
• Compliance — Form 27 working statements, renewal docketing and Section 8 compliance during the life of the agreement
• Disputes — rectification under Section 71, licence and royalty disputes, compulsory licence proceedings, and enforcement including exclusive licensee actions under Section 109

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Frequently Asked Questions (FAQs)

1. Can a patent be sold or transferred in India?

A. Yes. A patent is property and may be assigned in whole or in part, mortgaged, licensed, inherited or transferred by operation of law. A pending application can also be assigned and the change of applicant recorded.

2. Does a patent assignment have to be in writing?

A. Yes, and this is not merely good practice. Section 68 provides that an assignment, mortgage, licence or the creation of any other interest in a patent is not valid unless it is in writing and the agreement is reduced to a document embodying all the terms and conditions governing the parties’ rights and obligations, and duly executed.

3. Is registration of the assignment compulsory?

A. Registration is no longer a condition of validity, the earlier six-month filing requirement having been removed by the 2005 amendment. However Section 69(5) provides that an unrecorded document shall not be admitted in evidence by the Controller or any court in proof of title unless the court or Controller directs otherwise for reasons recorded in writing. In practice, an unrecorded assignment is a title you may be unable to prove.

4. Which form is used to record an assignment?

A. Form 16, filed with the Controller under Section 69, together with the original or certified copy of the executed and duly stamped deed, power of attorney on Form 26, proof of title, and the prescribed fee.

5. Is stamp duty payable on a patent assignment?

A. Yes. An assignment of a patent is treated as a conveyance for stamp purposes, and the rate varies from state to state. The deed must be adequately stamped before or at execution, because under-stamping causes objections at recordal and affects admissibility in evidence.

6. What is the difference between an assignment and a licence?

A. An assignment transfers ownership of the patent permanently. A licence permits another party to work the invention while ownership remains with the patentee, usually for a defined term, territory and field of use, and usually in return for royalties.

7. What is the difference between an exclusive, sole and non-exclusive licence?

A. An exclusive licence gives the licensee the sole right to work the invention in the defined field and territory, to the exclusion of the patentee as well. A sole licence means no further licences will be granted, but the patentee may still work the invention. A non-exclusive licence permits the licensee to work the invention alongside the patentee and any number of other licensees.

8. Can an exclusive licensee sue for infringement?

A. Yes. Section 109 confers on the holder of an exclusive licence the right to institute a suit in respect of infringement committed after the date of the licence, with the patentee joined as a defendant if they do not join as a plaintiff. This is one of the main commercial reasons for choosing an exclusive structure.

9. Two of us own a patent jointly. Can either of us license it?

A. No, not unilaterally. Under Section 50, each co-owner may work the invention for their own benefit without accounting to the others, but no co-owner may grant a licence or assign their share without the consent of all the other co-owners. This produces frequent deadlocks, which is why a co-ownership agreement should be executed at the outset.

10. What can be done if co-owners cannot agree?

A. Section 51 allows the Controller, on the application of a co-owner, to give directions regarding the sale or lease of the patent or any interest in it, or the grant of licences, and to settle the terms. It is a remedy for a breakdown rather than a substitute for a properly drafted co-ownership agreement.

11. What is Section 140 and why does it matter in licensing?

A. Section 140 makes certain restrictive conditions void in contracts relating to patented articles and processes. These include requiring the licensee to acquire other articles from the licensor, prohibiting the licensee from sourcing unpatented articles from third parties, prohibiting use of articles or processes not covered by the patent, exclusive grant-back of improvements, clauses preventing challenges to validity, and coercive package licensing. Inclusion of such a condition is also a defence in an infringement suit.

12. Can I require the licensee to assign improvements back to me?

A. Non-exclusive grant-back is permissible. Exclusive grant-back falls within the conditions rendered void by Section 140, so improvements clauses must be drafted as a non-exclusive licence back to the patentee rather than as an exclusive assignment of the licensee’s improvements.

13. Can I stop the licensee from challenging my patent’s validity?

A. A clause preventing the licensee from challenging validity is within the scope of the conditions voided by Section 140. Where the commercial concern is genuine, the route to consider is a carefully drafted termination right triggered by a validity challenge, rather than a prohibition on challenging.

14. Who pays the renewal fees during a licence?

A. Whoever the agreement says. It must be stated expressly, and the licensee should have a step-in right to pay if the patentee fails to, with reimbursement, because a lapsed patent destroys the value of the licence.

15. Does the right to sue for past infringements pass automatically on assignment?

A. No. The right to sue in respect of infringements committed before the assignment must be expressly assigned. If it is not, the assignee cannot recover damages for the period before it acquired the patent, and that can be a significant part of the value.

16. What is a compulsory licence?

A. Under Section 84, at any time after three years from the date of grant, any person interested may apply for a compulsory licence on the grounds that the reasonable requirements of the public have not been satisfied, that the invention is not available at a reasonably affordable price, or that it is not worked in the territory of India.

17. Can my patent be revoked if I do not work it?

A. Section 85 allows the Controller, on an application made after two years from the grant of the first compulsory licence, to revoke a patent on the ground that the patented invention has not been worked in India or that the reasonable requirements of the public have not been satisfied. Working, or licensing to someone who will work it, is therefore a substantive obligation and not merely commercial preference.

18. What is Form 27 and does the licensee have to file it?

A. Form 27 is the statement under Section 146 as to the extent to which the patented invention has been worked in India, required from the patentee and every licensee. The Patents (Amendment) Rules, 2024 changed the frequency to once every three financial years, due within six months of the expiry of each period. Licence agreements should expressly require the licensee to provide the underlying working data.

19. Can a patent application, as opposed to a granted patent, be assigned?

A. Yes. A pending application may be assigned and the change of applicant recorded with the Controller. The assignee takes the application as it stands, including the prosecution risk, so the position should be assessed before the consideration is fixed.

20. Can a patent be mortgaged or given as security?

A. Yes. A mortgage or charge over a patent may be created and is registrable under Section 69. Where the borrower is a company, attention should also be given to charge registration requirements under the Companies Act, 2013, and the security documentation should address enforcement, renewal payments and step-in rights.

21. What tax applies to patent assignment and royalties?

A. Consideration on assignment is generally taxable as capital gains, and royalty income is taxable as income. Section 115BBF of the Income-tax Act, 1961 provides a concessional rate on royalty income from a patent developed and registered in India by an eligible resident patentee, subject to the prescribed conditions. GST applies to the transfer or licensing of intellectual property, and cross-border royalties require analysis of withholding tax and the applicable treaty.

22. Are there restrictions on paying royalties to a foreign licensor?

A. Payment of royalties and lump-sum technology transfer fees to foreign licensors is permitted under the automatic route under the foreign exchange regime, subject to the conditions in force. Withholding tax, treaty benefits and the related filings should be structured at the drafting stage rather than after signing.

23. Can a licence be terminated when the patent expires?

A. Yes. Beyond whatever the contract provides, Section 141 gives either party a statutory right to determine the contract, on three months’ notice, at or after the time when the patent, or all the patents by which the article or process was protected at the time the contract was made, ceases to be in force.

24. What due diligence should a buyer of a patent carry out?

A. Verify the legal status and renewal position on the register, the remaining term, any pending opposition, revocation or compulsory licence proceedings, Section 8 and Form 27 compliance, the complete chain of title from the named inventors, whether any earlier instrument is unrecorded, existing licences and encumbrances, co-ownership consents under Section 50, and the status of corresponding foreign family members.

25. We funded the research at a university. Who owns the patent?

A. It depends on the collaboration agreement, the institution’s intellectual property policy, and the terms of any government or grant funding, all of which frequently reserve rights to the institution or impose conditions on transfer. This must be resolved contractually at the start of the project, because it is extremely difficult to resolve after a patentable result exists.

26. What does Delhi Legal Company charge for patent assignment and licensing work?

A. It depends on whether the engagement is drafting, diligence, recordal or a negotiated transaction, and on the size of the portfolio involved. We quote in writing, with the government fee and stamp duty shown separately from the professional fee, and we begin with a title and status check so that the deal is structured on facts rather than assumptions.