How to Buy & Sell IP Rights in India?

Intellectual property (IP) rights may be defined as the rights given to an individual over the creation of assets by the IP right holder. Some things you may get IP rights for include inventions, literary work, artistic work, symbols, names, and images. Such rights give you exclusive rights over the use of any creation for a certain period of time.

Some common types of IP rights are:

• Trademarks
• Copyrights
• Patents
• Designs
• Geographical indications

IP rights are quite similar to intangible assets, which basically means such assets are not physical in nature. Similar to other assets, IP rights can be bought, sold, licensed, assigned, mortgaged, etc.

IP rights can be valued to ascertain their price through the following three ways:

• Income Method: This is the most commonly used method for IP valuation. The value is determined based upon the economic income that it is expected to generate, adjusted to its present-day value.
• Market Method: This method relies upon a comparison with the actual price paid to transfer of rights to a similar IP asset that can be considered under comparable circumstances. This is based on market data and is quite a simple way to calculate the price, which means it is often used to determine the royalty rates, taxes, etc.
• Cost Method: The cost method determines the value of an IP asset by assessing the cost of a similar IP asset. This method proves to be especially helpful in cases where the asset can be easily reproduced and when the economic gains of the asset cannot be accurately calculated.

Note: The Cost Method does not account for wasted costs and does not take unique aspects of the asset into consideration.

Let us now dive into some different types of IP rights and how to buy and sell them in India.

Trademark

Everything related to selling a trademark, also referred to as ‘trademark assignment’, falls under the legal provisions stated under the Trademarks Act, 1999. As per Section 2(b), assignment means an assignment in writing by act of the parties concerned. Furthermore, Chapter V of the Act handles Assignment and Transmission of Trademarks.

The four types of trademark assignments are:

• Partial Trademark Assignment: The ownership transferred is only with respect to some products.
• Complete Assignment.
• Assignment with goodwill: Transfer of trademark is carried out right along with the brand value.
• Assignment without goodwill.

As per Section 38 of the Act, a trademark may be assigned with or without the goodwill of the business concerned and with respect to either all of the goods or services for which trademark is registered or with respect to only some of those goods or services.

Note: Assignment can be of both registered and unregistered trademarks (Section 38 r/w Section 39).

The person or business selling the trademark is known as the ‘Assignor’ and buyer is known as the ‘Assignee’.

A restriction on selling trademarks that may lead to confusion amongst the public is imposed under Section 40. In addition, Section 43 states that a certification trademark cannot be assigned without the permission of the Registrar. Furthermore, as per Section 44, associated trademarks can only be assigned as a whole and not partially.

Agreement between the Assignor and Assignee

A formal agreement must be entered by the assignor and assignee:

• The agreement must be in a written format.
• To accurately identify the trademark, the agreement must refer to the registration number of the trademark.
• The consideration for trademark sale must be mentioned in the agreement.
• Whether partial or complete and with goodwill or without goodwill should be mentioned in the agreement.
• The geographical limits of where the buyer shall possess rights in the trademark must be mentioned in the agreement.
• The assignment agreement must be duly stamped and notarized.

Trademark Assignment Process

As per Trademarks Rules 2017, the following is the procedure of trademark assignment in India:

• An application must be filed through Form TM-P to register title of person by way of assignment.
• A certified copy of the original deed of assignment must be attested with the application.
• Once the registration is approved, the assignment details will be entered in the Register.

Patent

Assignment has not specifically been defined under the Patents Act, 1970. It, however, means that all or certain rights of the Assignor in the patent are transferred to the Assignee. Once the assignment is complete, the Assignee shall have the right to sue anyone that uses the patent without the consent of the owner or assignee.

• Section 50(3) must be paid attention to as it states that if a patent has two or more owners, any share in the patent cannot be assigned to anyone else by one of the owners without the consent of the other co-owners.
• As per Section 68 of the Patents Act, an assignment of the patent or a part of the patent shall not be valid unless it has been drafted in writing and the agreement between both the parties is reduced to form a document that has been duly executed. This basically means that a valid assignment can be deemed valid only through a duly executed written instrument.

Details to be included in the Written Instrument

The written instrument for assignment must contain the following details:

• Parties to the assignment and their description – the Assignor and the Assignee.
• Patent description: Patent type, registration number, date of registration.
• Consideration amount in lieu of assignment.
• The rights and responsibilities of both parties.
• An undertaking of the assignor stating that he has not assigned or otherwise dealt with the patent, so that there is no third-party interest in the patent.
• Termination clause.
• Dispute resolution clause.

The assignee shall submit a written application to the Controller of Patents to enter their name in the register of patents. Once the Controller of Patents is satisfied that the person registering their name has a valid interest in the patent, they shall enter the instrument details executed between the parties involved in their Register.

Form-16 must be filed before the Controller General of Patents, Designs and Trademarks. Reading Form-16 shows that the mandatory information that must be provided therein includes applicant’s details, description and nature of the document based on which the registration of title is being sought and the details of parties involved.

• The fees for this filing has been stated under the First Schedule of the Patent Act, which varies for individuals, startups, small entities, or educational institutions. This also depends on how the patent assignment is being carried out, i.e., physical filing or e-filing.

Copyright

The rights held by the author or owner in original literary, musical, dramatic, or artistic works, photographs, and the rights held by the producer in a cinematograph film or sound recording for a specific term are known as copyright. Copyright is basically the creation of a set of rules that is limited to the rights granted under the rules created.

Assignment basically transfers the copyright or a transfer of the interest in the work from the assignor to the assignee. Sections 18, 19 and 19A of the Copyright Act provide the provisions that govern copyright assignments. As per Section 18 of the Copyright Act, an assignment may be made in full or in part.

Vital Details of Assignment

• Manner of Assignment: An assignment shall only be deemed valid if it is in writing and is duly signed by the assignor or any other individual authorized to do so.
• Future Work: Assignment can also be made for a future work, i.e., a work that has not yet been produced as on the date of the assignment. Any assignment created in a future work shall become valid when the work is created.
• Scope of Assignment: An assignment agreement must clearly state the work that is being assigned, the extent of the assignment, the rights that are being assigned, and the territory within which the copyright shall be valid.
• Terms of Payment: The terms of payment, as agreed between the parties, must be clearly stated in the agreement. The amount may be a lumpsum payment, a series of payments, as a share in the revenue generated, or in the form of royalties.
• Term: The assignment must clearly state if the agreement is perpetual or limited by time. As per the Copyright Act, if the agreement does not define a specific term, the term of the assignment shall be for five years.
• Territory: If the territorial boundary of the assignment is not stated, the exercisable limit shall be within the territory of India.
• Notarization: Although it is not mandatory, it is recommended to get an agreement notarized.

Designs

Under the Designs Act, 2000, a design refers to the features of shape, pattern, ornament, configuration, or composition of lines or colors applied to any finished article making the article visually appealable to the consumer. However, this Act does not define ‘assignment’.

• There are no specific provisions that govern assignments. However, as per Section 30 (3), an assignment or license must be in writing.
• Such an agreement must be reduced to the form of an instrument representing all terms and conditions that govern their rights and responsibilities.
• It must be noted that an application for registration of title under such instruments must be filed within six months from the date of execution of instrument.
• The instrument must be duly signed by the assignor and the assignee.
• In addition, the scope of assignment must be clearly stated in the agreement with respect to the specific design and the territory within which the assignment would be valid.
• Furthermore, the instrument must also include the terms of payment.

Conclusion

Intellectual property can be easily assigned to other parties by proprietors by following the procedures prescribed by the government. It is imperative to carry out such assignments while adhering to legal norms and guidelines to ensure there are no disputes or conflicts in the future due to the same.