Business Concerns in Commercializing Intellectual Property Rights: formula sheet

Key formulas

Patent holder's rights over a product

Right to prevent third parties, without consent, from making, using, offering for sale, selling or importing the product in India

Section 48(a), Patents Act, 1970. For a process patent, the right covers using the process and dealing in the product obtained directly by it (Section 48(b)).

Income approach to valuation

Value = Σ [Expected net cash flow in year t ÷ (1 + r)^t]

r is the discount rate reflecting risk. Sum over the remaining legal and economic life of the IP.

Cost approach to valuation

Value = Cost of creating or replacing the asset (adjusted for obsolescence)

Useful for new or unique IP with no market or income history.

Royalty under licensing

Royalty = Royalty rate × Net sales of licensed products

May also be a fixed fee, minimum guarantee or a mix. Terms are set by contract.

Trade mark assignment without goodwill

Apply to Registrar within 6 months (extension up to 3 months in aggregate), then advertise as directed

Section 42, Trade Marks Act, 1999. Otherwise the assignment does not take effect.

Assignment vs licence

Assignment = transfer of ownership; Licence = permission to use, ownership retained

Use this one-line contrast to open any comparison answer.

Power of registered owner (Patents Act, s. 70)

Registered grantee/proprietor may assign, license or otherwise deal with the patent

Subject to co-ownership provisions and rights of others of which notice is entered in the register. Equities can be enforced as for other movable property.

Compulsory licence timing (s. 84(1))

Application after 3 years from the grant of the patent

Any person interested may apply to the Controller.

Grounds under s. 84(1)

(a) public requirements not satisfied; (b) not available at a reasonably affordable price; (c) not worked in India

Any one ground is enough.

Factors for the Controller (s. 84(6))

Nature of invention and time elapsed; applicant's ability to work it; capacity to bear risk and capital; efforts to get a voluntary licence

Efforts to obtain a licence on reasonable terms: a reasonable period ordinarily does not exceed six months. This is not required in national emergency, extreme urgency, public non-commercial use or anti-competitive practice.

Special compulsory licence (s. 92)

Central Government notification for national emergency, extreme urgency or public non-commercial use

The Controller then grants a licence on application. Section 87 procedure is not applied in the circumstances in s. 92(3), and the patentee is informed as soon as practicable.

Licence of related patents (s. 91)

Holder of another patent may seek a licence if prevented from working it efficiently

The applicant must be willing to grant a licence on reasonable terms for their own invention, and the other invention must have made a substantial contribution to commercial or industrial activities in India. The licence is non-assignable except with the patents.

Revision of terms (s. 88(4))

After 12 months of commercial working, one application for revision if terms are onerous and cause loss

No second application is entertained.

Copyright assignment

In writing, signed by assignor or authorised agent

Mention the work, rights, duration, territory and royalty.

Equal share (s 50(1))

Patent granted to two or more persons → equal undivided shares, unless an agreement to the contrary is in force

Shares are equal even if contributions to the invention were unequal, unless they agreed otherwise.

Right to work (s 50(2))

Each registered co-owner may exercise the s 48 rights for his own benefit, by himself or his agents, without accounting to the others (unless agreed otherwise)

Subject to sections 50 and 51. No duty to share profits from own working.

Consent rule (s 50(3))

No licence and no assignment of a share by one co-owner except with the consent of the other co-owner(s)

Subject to sections 50 and 51 and any agreement in force.

Sale of article (s 50(4))

Article sold by one co-owner → buyer and those claiming through him deal with it as if sold by a sole patentee

Protects purchasers of the product.

Movable property rules (s 50(5))

Law on ownership and devolution of movable property applies to patents; trustees' and legal representatives' mutual rights are not affected

Sub-sections (1) and (2) do not disturb those rights.

Controller's directions (s 51)

On application by a co-owner, the Controller may direct on sale or lease of the patent, grant of licences, or exercise of s 50 rights, after hearing the others

If a co-owner fails to sign an instrument within 14 days of written request, the Controller may empower another person to sign for him. Directions cannot be inconsistent with an agreement between the co-owners.

Section 127 rights

Registered agent = (a) practise before the Controller + (b) prepare documents, transact business, discharge prescribed functions in proceedings before the Controller

Both rights are subject to the Act and the rules. They apply only to proceedings before the Controller.

Section 126 qualifications

Indian citizen + age ≥ 21 years + science/engineering/technology degree (or specified equivalent) + qualifying exam passed (or 10 years as examiner/Controller functions) + fee paid

The ten-year route requires that the person has ceased to hold that capacity when applying.

Section 129(1) restriction

No one may practise or hold out as a patent agent unless registered; in a partnership, all partners must be registered

Applies to individuals and partnerships.

Section 129(2) restriction

No company or other body corporate may practise or hold itself out as patent agents

A company cannot be a patent agent even if its directors are registered agents.

Section 131(2) rule

Controller shall refuse to recognise as agent any person who neither resides nor has a place of business in India

This is mandatory. Refusals under section 131(1) are discretionary (may).

Deeming rule (s. 58)

Infringing copies + plates used or intended for making them = deemed property of the copyright owner

Applies to works in which copyright subsists. The owner may sue for recovery of possession or for conversion.

Proviso to s. 58: loss of conversion remedy

No conversion remedy if opponent proves (a) no awareness and no reasonable ground to believe copyright subsisted, OR (b) reasonable grounds to believe copies/plates do not infringe

Burden of proof is on the opponent. The two grounds are alternatives.

Innocent infringer, general civil relief (s. 55(1) proviso)

If defendant proves no awareness and no reasonable ground to believe copyright subsisted: only injunction + decree for whole or part of profits from sale of infringing copies

Do not confuse with s. 58. This limits damages in the infringement suit.

Criminal court's power (s. 66)

Court trying an offence may order delivery up of copies/plates to owner, or make such other order on disposal as it deems fit, whether or not the accused is convicted

Disposal wording was added in 2012.

Possession of plates (s. 65)

Knowingly making or possessing a plate for making infringing copies: imprisonment up to two years and also fine

Knowledge is required.

Income approach (present value)

Value = Σ [Expected net cash flow of year t ÷ (1 + r)^t], for t = 1 to n

r is the discount rate reflecting risk. Use net cash flows attributable to the IP only. Add a terminal value if the IP lasts beyond year n.

Relief from royalty

Value = Σ [(Sales × Royalty rate × (1 − tax rate)) ÷ (1 + r)^t]

A form of the income approach. The royalty rate comes from comparable licences. It shows what the owner saves by not paying a licence fee.

Cost approach

Value = Cost to recreate or replace the IP − Obsolescence

Useful for new IP with no income history. It ignores future earning power.

Groundless threats (patents, s.106 Patents Act)

Threat of infringement suit → aggrieved person may seek declaration, injunction and damages, unless defendant proves infringement

A mere notification of the existence of a patent is not a threat.

Groundless threats (trade marks, s.142 Trade Marks Act)

Threat → declaration, injunction, damages, unless threatener satisfies court that the mark is registered and the acts infringe

Does not apply if the proprietor or registered user with due diligence starts and pursues an infringement action. A legal practitioner or registered trade marks agent acting professionally for a client is not liable. Suit lies in a court not inferior to a District Court.

Groundless threats (copyright, s.60 Copyright Act)

Threat by claimed owner → declaratory suit, injunction, damages, unless the threatener with due diligence starts and prosecutes an infringement action

Applies where a person claiming copyright ownership threatens legal proceedings or liability.

Offences by companies (s.124 Patents Act)

Company + every person in charge and responsible at the time = deemed guilty

Defence: offence was without his knowledge or he exercised all due diligence. Directors, managers, secretaries or officers are also guilty if the offence was with their consent or connivance or due to their neglect.

Quick revision

• Section 50(1), Patents Act: co-grantees have equal undivided shares unless an agreement says otherwise.
• Section 50(2): each co-owner may exploit the patent for his own benefit without accounting to the others, unless agreed otherwise.
• Section 50(3): a licence cannot be granted, and a share cannot be assigned, without the other co-owners' consent.
• Section 50(4): a buyer of a patented article from one co-owner deals with it as if sold by a sole patentee.
• Section 70: the registered proprietor may assign, license or deal with the patent, subject to co-ownership rules and noted rights.
• Section 42, Trade Marks Act: assignment without goodwill takes effect only if the assignee applies to the Registrar within six months (extendable by up to three months) and advertises as directed.
• Section 127, Patents Act: a registered patent agent may practise before the Controller and prepare documents.
• Section 131: the Controller must refuse to recognise as agent a person who neither resides nor has a place of business in India.
• Section 91: a related-patent licence is non-assignable except with the assignment of the respective patents.
• Section 53, Copyright Act: the owner may notify Customs for up to one year; goods are released if no court order is produced within fourteen days of detention.
• Section 58: infringing copies are deemed the owner's property, but there is no remedy for conversion if the opponent proves lack of awareness or reasonable belief of no infringement.
• Section 65B: knowingly removing rights management information is punishable with imprisonment up to two years and fine.

Common mistakes

• Treating IP as only a legal right and ignoring its business value. Fix: Always link the right to income, market position or cost saving and name a valuation approach.
• Recommending sale without noting loss of future earnings and control. Fix: State the trade-off. Compare lump sum with expected royalty stream.
• Treating a licence as a transfer of ownership Fix: Ask who owns the right after the deal. If the owner is unchanged, it is a licence.
• Saying a compulsory licence can be sought at any time after filing Fix: For s. 84, state: application after three years from the grant of the patent.
• Saying a co-owner may grant a licence alone because he has an equal share. Fix: Remember that section 50(3) requires consent of the other co-owners for any licence or assignment of a share, unless an agreement says otherwise.
• Saying a co-owner must share profits from his own working of the invention. Fix: Section 50(2) says he may work it for his own benefit without accounting, unless there is an agreement to the contrary.
• Saying a company of registered patent agents can itself be a patent agent. Fix: Remember section 129(2): no company or body corporate may practise or hold itself out as patent agents.
• Listing only 'practise before the Controller' as the section 127 right. Fix: Always give both limbs: (a) practise before the Controller and (b) prepare documents, transact business and discharge prescribed functions.
• Saying the proviso bars every remedy against an innocent holder. Fix: Write that the proviso removes only the remedy in respect of conversion. The opponent must prove his innocence.
• Putting the burden of proof on the owner. Fix: State that the opponent must prove lack of awareness or reasonable belief of non-infringement.

Exam tips

• Write answers in the order provision, facts, conclusion. Examiners reward a clear recommendation.
• Name the valuation approach and justify it from the facts in one line.
• Quote the Section 42 timelines exactly when a trade mark assignment is involved.
• Weigh all three routes in a strategy question, even if you reject two.
• Add a drafting point such as quality control, royalty clause or confidentiality to show practical skill.
• Open every comparison question with the one-line contrast between assignment and licence, then add a short bullet table in words, not a drawn table.
• Learn the s. 84 trio of grounds and the three-year rule cold. Examiners often test them in a short fact pattern.
• In case-based questions, always check the formality first: written signed assignment for copyright, and registered owner status for patents.