Registration Of Assignment Agreement: Mandatory Under Patent Act?
Patent is granted to an inventor to enjoy monopoly rights over an invention for new and useful product or process, or a new technical solution to a problem, or an improvement of an existing invention. In India, patent is granted for twenty years, during which the patentee has the right to prevent any other person from using the patented product or process.
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Patent rights and other intellectual property rights are granted as exclusive rights to earn commercial advantage out of their invention before it comes under public domain, by protecting their labour and imagination . Patent rights are granted to protect exclusive rights of the owner; however, India follows the belief that such rights are granted with the object of encouraging invention and industrial progression. The patent owners are given the right to own, use and transfer the rights over the products or processes patented to stimulate new inventions of commercial utility.
One of the most important aspects of ownership is the right to transfer such right to another person. Such right to alienation is also recognized under Patent Act. A patent can be transferred from the original owner to another person by way of assignment, licensing or by operation of law. By granting a license, the patentee permits the licensee to make, use or exercise the invention on the agreed terms and conditions. Whereas under assignment, the patentee transfers complete ownership to exploit the IP rights.
The Patent Act 1970 and the Patent Rules, 2003 prescribes various parameters for use, transfer and assignment of patents along with their procedural aspects.
Commercialization of the intellectual property (IP) rights is the most imperative facet of managing IP rights in order to reap economic benefits of your IP. One such way of exploiting IP is assignment.
An IPR assignment is a transfer of ownership in which the assignor receives compensation and the assignee is allowed to use the rights for any purpose. The right to use the IP is transferred with ownership and it gives the assignee the exclusive right to exercise these transferred rights. Assignment results in complete transfer of ownership transfer and cessation interest.
The individual who transfers possession is known as the assignor, and the person who receives possession is known as the assignee. Through such a contract, the assignor obtains an immediate economic benefit of the IP, with no additional risk, obligation, or responsibility to maintain the IP.
The relevance of an Assignment Agreement in IP Law in India is essential when looked at with the lens of commercialization, despite being a private transaction between the assignor and the assignee. The statutes regulating IP laws has laid down different provisions for registering the assignment agreements and other requirements in order to make it legally binding and to avoid any future discrepancy.
Under Indian Patent law, assignment of patent is covered by Section 68, 69 and 70. Section 68 provides that assignment agreement for a patent is not valid unless it is in writing and has all the terms and conditions governing their rights and obligations and is duly executed.
Section 69 further provides the provision for registration of assignment agreement, where it is given that where any person becomes entitled to a patent by assignment, he shall apply in writing for registration of his title and interests to the Controller. Rule 90 of the Patent Rules, 2003, further provides that the application for registration of title & interest is to be made in Form 16, along with evidence for transfer of patent, proprietorship and interest.
ANALYSIS: IS REGISTRATION MANDATORY?
One critical question for people who are entitled of patent rights through assignment is whether registration of assignment agreement is mandatory in order to enforce their rights?
Section 68 of the 1970 Act talks about when the assignment of patent is valid. Under this provision, it is not valid unless the assignment of patent and other interests, if any, are in writing and the parties agree to it in form of any document which embodies all the terms and conditions.
Section 69 provides that a person entitled of patent through assignment shall apply in writing to the Controller, in the prescribed manner, for registration of their title and interest. It further provides that registration was title will be granted Controller is satisfied with proof of title. Sub-section (5) further elaborates that Controller shall not admit an agreement that is not registered, as evidence for proving title of patent, unless reasons recorded by the Controller.
A bare perusal of these provisions reflects that registration is nowhere made mandatory for the assignment agreement to be valid and executed. It does however highlight the consequences that might follow if such registration is not obtained by the title holder.
In 2004, the Supreme Court in Collector of Central Excise, Ahmedabad v. Vikshara Trading & Investment (P) Ltd. , held that registration of assignment is not a statutory requirement and that the mere fact that assignment was not registered will not alter the position of the agreement to claim benefits, especially where the fact that such agreement is in favour of the claimant is not disputed.
This aspect of mandatory registration was discussed at length by a Division Bench of Delhi High Court in the case of Sergi Transformer Explosion Prevention Technologies Private Limited v. CTR Manufacturing Industries Limited & Ors. wherein it was held that assignment is valid from the moment it is executed and that registration is not mandatory to validate the same. Given below is a detailed analysis of the important aspects covered by the court.
Facts: In this case, the plaintiff claimed that he was the exclusive licensee of defendant’s patent and has made efforts to register the license agreement with the patent office. The dispute arose when in floating a tender, the defendant offered to supply the products already licensed to the plaintiff. The defendant contended that the plaintiff does not enjoy an exclusive license for using the said product. It was further contended that the plaintiff’s license was made fraudulently, suffers from legal defect and therefore cannot be used as evidence. They further claimed that exclusive agreements require compulsory registration and since the agreement in question is not registered, it cannot be considered a valid document.
The learned Division bench while deciding the matter examined the scope of Section 68 by making a comparison of the said section pre- and post- amendment of 2005.
The learned bench held that before the 2005 amendment for an assignment to be valid, it had to be registered with the patent office within six months from the date of execution; however post-amendment, registration of assignment is not a mandate. The only requirement for it to be valid is that it should be in writing and all the terms and conditions agreed between the parties should be reduced to a form of a document.
It was further stressed that the fact that certain words were omitted from Section 68 clearly indicates that mandatory registration and limitation for such registration have been done away with. The deletion of the proviso also shows that registration of the assignment agreement is not a pre-condition for deciding its validity and that it is valid from the day it is executed.
The court also discussed the reliability of the agreement as evidence of title under Section 69 in absence of registration of the said assignment agreement. The court emphasized that Section 69(5) though, requires the documents to be relied upon to be registered, it does not completely prohibit the admission of such unregistered documents. That, the Controller and the courts are empowered to accept such agreements as evidence of title, even if unregistered and reasons for same should be recorded, which means that admissibility of such documents is not entirely prohibited.
It was opined that the admissibility of agreements under Section 69(5) is not completely prohibited, the only embargo is assignment will not be accepted as proof of title, unless reasons mentioned by the adjudicator, which does not mean that non-registration will invalidate the agreement. The learned judges stressed upon point that at the prima facie stage, the court can always refer to the assignment agreement without formal proof to form a prima facie view of the case.
The court while opining that validity of assignment would not depend on its registration, held that merely because the agreement is not registered on the date of filing of the suit does not itself mean that suit is not maintainable and the plaint cannot be rejected under Order VII Rule 1 of CPC 1908. The court also pointed out the error of the learned Single Judge who held that exclusive agreement needs to be registered to be considered evidence by the court.
Assignment agreements have considerable importance in regulation of IP rights since they enable the IP owners to transfer their rights and interests to gain commercial benefit and ensure that the IP is used effectively.
By perusing Section 68 and Section 69, it can be concluded that for an assignment agreement to be valid in the eyes of law, its registration with the patent office is not mandatory. Although, it is advisable to make such registration to reap maximum benefits and to avoid any future complications.
Section 69(1) and (2) provides for the manner in which registration of title and interest is to be done, however, it does not mention a specific timeframe within which such registration must be performed. Under Section 68, the only requirement is to be in written form and documentation of all the agreed terms and conditions, which effectively means assignment will be considered effective between the parties, even when not registered in the register.
The enforceability of such agreements acts as an incentive for both, assignor and assignee, and encourages them to create new inventions which may help in the betterment of society. Therefore, critical aspects of such agreements are clear in the minds of the parties.