In India, intellectual property is viewed as a bundle of distinct rights (to reproduce, to adapt, to perform, to distribute, to make, to sell, to import) and the owner of the bundle has the liberty to deal with each of these rights separately. There are two transactions which dominate how this is done commercially – a licence which allows another party to enjoy one or more of the title rights without interfering with the underlying title of the owner; and an assignment which transfers title in a right, either in whole or in part, so that the assignee becomes the new owner of that right. Whilst the distinction may seem simple, its implications for who is eligible to sue an infringer, what occurs on the death or insolvency of party, whether the transaction needs to be registered, and how it can be unwound are anything but simple, with Indian statutes in copyright law, patent law and trademarks law each providing their own detailed, though not necessarily the same, mechanism.
The Core Distinction
A licence is permissive – it allows the licensee to exercise an activity that would otherwise be infringing the owner's exclusive right but it does not take away the owner's exclusive right. The owner maintains his ownership throughout, since what is licensed are the ones that cannot be interfered by the owner. An assignment, on the other hand, is a transfer of proprietary interest, the assignee becoming the assignee's successor as a holder of the right with respect thereto, and the assignee is generally entitled to deal with the right, license it or assign it further, in the same manner as the original assignee was. This difference is sometimes expressed as a difference between the personal right to use and the proprietary right of ownership, and is repeated, subject to, local variations, in each of the Indian IP statutes.
Copyright: Sections 18, 19, and 30
The Copyright Act, 1957 is the most detailed of the statutory treatment of the distinction. Section 18 allows copyright holders of existing works, or even potential copyright holders of future works, to assign the copyright, in whole or in part, and for the whole term or portion of it, allowing, for example, a novelist to assign the rights to make a film out of his novel but keep all the other rights. In Saregama India Ltd. v. Suresh Jindal, the Culcutta High Court has ruled that once the copyright is validly assigned to the assignee in a work which is not yet created, then the assignee is considered to be the owner of the copyright for the purpose of assignment under the Act. Section 19 then lays down the formalities, they are: an assignment to be valid should be in writing, it should be signed by the assignor and then the work should be identified and the rights should be assigned. In the absence of any such indication as to territorial extent, the assignment is taken to be presumed to extend within India; and in the absence of any such indication as to duration, the assignment is presumed to be effected for such duration of five years from the date of the assignment.
Licensing is dealt with separately, in Section 30, which permits the owner of copyright (including a potential owner) to grant any interest in it by licence in writing signed by the owner or by a duly authorised agent, and the formal requirements of Section 19 are most of the time applied mutatis mutandis to licences in Section 30A. The practical consequence is a licence, no matter how exclusive, does not transfer ownership; and it gives an exclusive licensee a contractual and statutory right to exclude even the licensor from exercising the licensed right for the duration of the licence, but the title itself never leaves the owner. In the case of Bombay High Court's judgment in Video Master v. Nishi Productions, the court had said that satellite broadcasting rights and video rights in a cinematograph film are separate, independently assignable or licensable rights under the copyright bundle and therefore a grant of one does not necessarily extend to the other.
This important statute followed the Supreme Court's ruling in the case of Indian Performing Right Society Ltd. v. Eastern India Motion Pictures Association (1977) which established that after the composer or lyricist grants permission to use his work in a cinematograph film, he has no “separate right” to receive royalties for the public showing of the film and that this right is vested with the film producer. Parliament has overturned the reality of this with the Copyright (Amendment) Act 2012, by adding sub-sections (9) and (10) to Section 19 of the Copyright Act which provides that the copyright in a cinematograph film or a sound recording cannot be assigned in such a way as to take away the author's rights to receive an equal share of royalties and consideration for the utilisation of that work, which is a right not subject to waiver except in very limited circumstances. The amendment is a reminder that under statute, an assignment, whether it is a complete assignment or not, is not necessarily a complete extinguishment of all economic interests of the original creator.
Patents: Registration as a Condition of Effect
The Patents Act, 1970 is based on the same distinction, but imposes more definite legal consequences. The key points of Section 68 are that an assignment of a patent must be made in writing, contain all terms and conditions which govern the rights and obligations of the assignee and the assignee must execute it and must file an application for registration of the assignee's title with the Controller within the prescribed time, and that an assignment will only take effect against third parties once it is duly registered. However, a patent licence does not transfer ownership rights, and does not have the same requirement for registration in order to be valid, even though the validity of a patent licence still requires the licence to be in writing (see Section 68). The significance of a patent licence registration for the registration of a licence with the Controller is primarily for the purpose of binding successors-in-title, and for establishing the position of the licensee in any infringement proceedings. The patent law further gives a public interest dimension which are unique to it. Sections 84-92 states that: If a patented invention is not being worked in India to a reasonable extent, or is not available at a reasonably affordable price, any interested person may apply for a compulsory licence; the Central Government may use, or authorise the use of, a patented invention in defined circumstances, which is a form of statutory, non-consensual licensing without any parallel in the ordinary assignment framework.
Trade Marks: Ownership, Goodwill, and Public Deception
The Trade Marks Act, 1999 allows for trade mark assignment with or without the goodwill of the business concerned (Section 37-45), and for registered users- the statutory way of licensing (Section 48-53, now referred to as permitted use). A peculiar protection for an assignment without goodwill or in favour of a 'gross' assignment is Section 41, which provides that it cannot be effective unless directions are obtained from the Registrar with respect to the advertising of it this is because a mark which has been severed from the goodwill of its originator is likely to deceive or confuse the public as to the origin of trade in the goods. This forms a concern, which doesn't have a real parallel in patent or copyright law, in which the underlying subject matter is not, to the same extent, a reflection of the reputation-based expectations of the consumer. Control of the mark may be transferred to another person through a licence, where the owner of the mark is still the proprietor and the use of the mark is still controlled by the proprietor under a licence (franchising or brand merchandising are the typical scenarios for the licensing of a trade mark).
Practical Consequences of the Distinction
- Standing to sue: Non-exclusive licensee – generally no right to sue, relies on the right of the owner; an assignee having acquired title generally has the same right to sue as the original owner, with an equivalent statutory right, determined by the statute, generally granted to an exclusive licensee (for example, Section 61 of the Copyright Act, Section 109 of the Patents Act).
- Reversion: A licence that has expired or been terminated for breach reverts back to the owner, an assignment does not automatically revert — there needs to be reassignment or an assignment agreement, which needs to include a provision for reversion on specified events.
- Registration Requirements: The registration of assignments is required to be registered with the Controller to be valid against third parties and to be enforceable against them; the copyright assignments are not compulsorily registrable to be valid in between assignment and assignee, but are regularly registered with the Copyright Office for evidentiary certainty; trade mark assignments are not registered to be valid between the parties, but the Registrar's directions are required before the assignment takes effect.
- Statutory Royalty Protections: The Copyright Act gives the author statutory rights, including rights to a share of royalties under Sections 19(9) and 19(10) of the Copyright Act, which might result in an assignment, even a complete one, not transferring all of those rights.
Choosing Between Them
The decision between licensing or assignment is as much commercial as it is legal. An outright assignment is appropriate for a party who wants to remove themselves in full and final satisfaction, selling a patent portfolio, copyright to a commissioned work, or a trade mark and a line of business, for a lump sum or for a continuing royalty, and for not having any further interest in the way the rights are used. It also suits the owner who wants to keep the ultimate control and residual value in the IP, while still being able to earn some money from it. It permits an IP owner to grant licenses to different parties to use its IP for the same purpose, in the same space, and for the same duration, for instance, licensing a patented process and licensing a right to broadcast a film for a specific territory and period; and to grant overlapping rights to multiple which an assignment, once made, bars the assignor from doing so in respect of the transferred IP.
Conclusion
In terms of copyright, patent, and trade mark law, Indian legislations are following a similar trend, where one side represents permission without ownership (Copyright Act) and the other side represents transfer of title (Patents Act) while diverging significantly with regard to the formalities they require: written and signed instruments (Copyright Act), compulsory registration to bind third parties (Patents Act), and Registrar oversight to prevent public deception (Trade Marks Act). It is important to recognize which transaction actually is being executed, which label is being applied to a contract, because the practical consequences that follow — who can sue, what reverts, and what must be registered — are guided by the substance of the grant, rather than its title.
Key Authorities Referred To
- Indian Performing Right Society Ltd. v. Eastern India Motion Pictures Association, (1977) 2 SCC 820
- Saregama India Ltd. v. Suresh Jindal, (2007) 34 PTC 522 (Cal)
- Video Master v. Nishi Productions, 2000 (2) Bom CR 118
- Copyright Act, 1957, ss. 14, 17, 18, 19, 19A, 30, 30A
- Copyright (Amendment) Act, 2012 — ss. 19(9) and 19(10)
- Patents Act, 1970, ss. 68, 70, 84–92
- Trade Marks Act, 1999, ss. 37–45, 48–53