Transfer of the Patent Rights
by The transfer of patent rights refers to the legal mechanism through which a patentee can assign, license, or otherwise deal with the rights granted under a patent. Under the Patents Act, 1970, a patent is recognized as transferable property, and Section 70 expressly empowers the registered proprietor to assign, grant licenses under, or otherwise deal with the patent. This statutory framework enables patent holders to commercialize their inventions by transferring rights to others. The transfer can be voluntary through assignments or licenses, or by operation of law through transmission. Such transfers must be in writing and duly executed, with registration before the Controller of Patents being essential for enforceability against third parties.
Transfer of Patent Rights:
1. Assignment of Patents
Assignment is the transfer of ownership rights in a patent from the patentee (assignor) to another person (assignee). Under Section 70 of the Patents Act, a patentee may assign their whole right, title, and interest in the patent to another. Assignment can be legal, where the assignee becomes the registered proprietor, or equitable, where the assignee has the beneficial interest but legal title remains with the assignor. It may be absolute, transferring complete ownership, or partial, transferring only specific rights. The assignment deed must clearly specify the rights being transferred and must be in writing and duly executed. Registration of assignment with the Controller is mandatory for validity against third parties.
2. Licensing of Patents
Licensing is a contractual arrangement where the patentee (licensor) grants permission to another party (licensee) to use the patented invention without transferring ownership. Under Section 84, licenses can be exclusive, where only the licensee can use the patent, or non-exclusive, where multiple licensees can operate simultaneously. The license agreement specifies the scope of use, territorial limits, duration, and royalty terms. Licenses are voluntary and negotiated freely between parties. However, compulsory licenses may be granted by the Controller under certain circumstances like non-working of the patent or unaffordable pricing. A license must be registered with the Controller to be effective against third parties and to confer legal rights on the licensee.
3. Transmission of Patent Rights
Transmission refers to the transfer of patent rights by operation of law rather than by voluntary act of the patentee. This occurs through inheritance upon the death of the patentee, where the patent devolves to the legal heirs or executors of the estate. Under Section 75, transmission also occurs in cases of bankruptcy, insolvency, or winding up of the patentee company, where the patent becomes part of the estate and vests in the official receiver or liquidator. The transmission takes effect automatically by law, but the new proprietor must file an application with the Controller to record the change of ownership in the register. The Controller, upon verification, amends the register to reflect the new proprietor’s name.
4. Mortgage and Charge over Patents
A patent can be used as security for borrowing by creating a mortgage or charge over it. Section 70 permits the patentee to create equitable interests in the patent, including mortgages and charges. A mortgage involves transferring the legal interest in the patent to the lender as security, with the condition that it will be reconveyed upon repayment of the debt. A charge, on the other hand, creates only a security interest without transferring ownership. Such transactions must be recorded in the Register of Patents to give notice to third parties. Failure to register these transactions renders them invalid against subsequent purchasers. The mortgagor continues to hold the patent subject to the mortgagee’s rights.
5. Registration of Transfers
Registration of every transfer of patent rights is mandatory under Section 69 of the Patents Act to confer legal validity and enforceability against third parties. The transferee must apply to the Controller in the prescribed manner along with the transfer document within six months from the date of execution. The Controller examines the application and, if satisfied, records the transfer in the Register of Patents and issues a certificate of registration. This certificate serves as prima facie evidence of the transfer. Failure to register within the prescribed period renders the transfer ineffective against any subsequent bona fide purchaser or licensee. However, the Controller may extend the period upon sufficient cause being shown.
6. Rectification of Register
The Register of Patents, maintained under Section 67, is the official record of all patents and transfers. Errors or omissions in the register can be rectified upon application by the aggrieved party. Any person claiming to be the proprietor of a patent by virtue of a transfer can apply for entry of their name in the register. Similarly, if the register incorrectly records a transfer, the true owner can apply for rectification. The Controller may also suo-motu correct clerical errors. Rectification ensures that the register remains accurate and reflects the true ownership and transfer history of patents. An accurate register provides legal certainty and protects the rights of bona fide purchasers who rely on it.
7. Compulsory Licenses
Under Sections 84 to 92 of the Patents Act, the Controller may grant compulsory licenses to third parties to use a patented invention without the patentee’s consent. This is not a voluntary transfer but a statutory intervention to ensure public access to inventions. Grounds for compulsory licensing include reasonable requirements of the public not being met, the invention not being available at reasonably affordable prices, or the patent not being worked in India. Any interested person can apply for a compulsory license after three years from the date of sealing of the patent. The Controller determines the terms, scope, and royalty for such licenses. Compulsory licensing serves as a check against monopolistic abuse of patent rights.
8. Rights of Licensees and Assignees
Both licensees and assignees acquire legal rights and obligations upon transfer of patent rights. An assignee steps into the shoes of the patentee and enjoys the full bundle of rights, including the right to sue for infringement. A licensee, however, only gets the rights specified in the license agreement and cannot sue third parties except where the license is exclusive and the infringement affects the licensee’s interests. Section 109 permits exclusive licensees to institute infringement proceedings with the patentee joined as a defendant. Section 110 protects licensees by requiring compulsory licensees to pay royalties. The rights of assignees and licensees are enforceable only upon registration of the transfer with the Controller.
9. Revocation of Assignments and Licenses
A transfer of patent rights may be revoked or terminated under certain circumstances. The assignment deed or license agreement may contain termination clauses, such as expiry of the term or breach of conditions. The Controller can also revoke a compulsory license if the conditions for its grant cease to exist. Section 85 provides for revocation of patents on grounds like non-working or public interest. Licensees must carefully draft termination clauses to protect their investments. Upon revocation of the assignment, the rights revert to the original patentee. Courts may also rescind the transfer if it was obtained through fraud, misrepresentation, or coercion. Proper documentation ensures clarity on revocation terms.