Commercialisation of Intellectual Property Rights : IP Assignment & IP Licensing

Commercialisation of Intellectual Property Rights : IP Assignment and IP Licensing

Commercialisation may be understood as a process of organisation of something in way to generate profit or managing a product or service or right or anything for financial gain. Assignment agreements are important since they allow the IP rights holder to transfer the IP for commercial returns and monetary gain and the licensing agreements are documents to permit the Licencee to use the IP for given period of time.

This write up will explain as to how the creator or Owner of intellectual ideas or innovation can convert or transpose their intellectual property rights into a commercially viable product or process or service by using the Legal tools such as licensing or assignments and through entering into commercial relationships.

In the era of Google thing, any person may find numerous drafts and sample contracts, however it is very important to asses that these samples are to be followed as a base of your strategy not to copy them verbatim. It is always suggestive to analyse all the key points and specific interest of owner to avoid any conflict in future.

Before explaining the tools for commercialisation of IP Rights, a brief idea about IP Rights is required to be kept in mind:-

IP Rights ?

Intellectual property rights are the rights given to persons over the creations of their minds[1]. These rights covers Copyrights, trademaks, Geographical Indication, industrial Design, lay-outs, Trade Secrets etc. which are governed by the respective statutes in India. These statutes lays down the procedure to commercial the IP rights and consequences followed by such commercialisation.

While preparing to commercialise the IP Rights, many business owner think that their business does not possess or own any IP unless they require their business ideas to be protected under some defined law like copyright, Trademark or Patent. However, may other IP Rights like domain names, Trade Secrets, third party Licences (MS Office etc.), IT maintenance and support service also constitute the important IPs while considering the sale of business.

Tools to Commercialise

There are two important tools by which owners may commercialise their intellectual property:

1. Assignment
2. Licence

Assignment

The transfer of ownership in IP Rights may be effected by a formal assignment or it may be termed as direct sale of IP Rights by which the whole or part of IP rights can be assigned. It is formal document by which a IP Rights is transferred by one person to another. IP Rights can not be effectively transferred except through a written assignment contract. The consideration in form of Lump sum payment of an assignment is purchase price.

The relevance of an assignment Agreement in IP Law in India is most important despite being a private transaction between the assignor and the assignee. IPR legal Regime in India provides specific legal guidelines [Rules, Regulations, Forms and Procedure] when dealing with the assignment agreements. The Different statutes make provisions for registering the assignment Agreements and their respective schedules also specify for forms through which such agreements can be registered with concerned authority in order to make it legal and binding and to avoid any further discrepancy they safeguarding the interest of Owner.

Guiding Factors for IP Assignment Agreements:

1. Issue of Ownership must be carefully dealt with particularly for the Companies.

2. Whether the assignment is being effected with Goodwill or without goodwill

3. All costs and expenses, including direct and indirect costs of research and development, any outsourcing and the cost of protecting the IP

4. Profit Component

5. Governing Law and Disputes

6. Potential market value of the IP.

7. Complaint with the relevant statute as prevailed in India.

Licence

A very common and effective means of commercialisation is the licensing of intellectual property rights through one or more licensing agreements. The term Licensing means the owner has granted permission to another person for use of IP under the agreed terms and conditions. This licensing strategy is a significant tool of commercialisation if the owner does not have the resources or experience or innovative strategy to develop and market the product or service.

In general, the licence Agreement is a formal instrument that serves several purposes. The scope of grant of Licence depends on the nature of the intellectual property being licensed. It is sine qua non to define the intellectual property specifically [described in the schedule] which is being licensed in the agreement. The Concept of Licence is bases on the Legal Maxim “Nemo Dat Quod Non Habet” meaning thereby that a licensor can only grant rights which he himself possesses under the law.

Guiding Factors for IP Licensing Agreements:

1. Ownership Right in IP Rights;

2. Usage of IP rights by Licencee : Exclusive or Non-exclusive

3. Terms for Sub-licensing;

4. Territorial Scope [ Country or outside ]

5. Limitations attached to the IP being licensed

6. Reservation or restrictions of any special right

7. Termination Clause

8. Period of licensing

9. Royalty or Lump-sum payments

10. Obligation of Parties

11. Indemnity Clause

12. Through the use of this tool, the Licencee acquires a rapid expansion in the business with a minimum capital expenditure.

IP Licence and IP assignment : Comparative Outlook

The difference between the IP Licence and the IP assignment can never be ascertained as it depends on several factors and condition of entity and the market space for such entity, moreover, the contents and words or terms used in Documents of arrangement must be handled with utmost care.

However an Comparative outlook may be discussed in the following table:

	ASSIGNMENT	LICENSING
Advantage	1. One time Consideration 2. Reduction in cost for managing IP	1. Restrictive grant of Rights 2. Restoration of IPR after completion of period
Disadvantage	1. Permanent Arrangement : One Asset Lost except certain rights reserved  2. Less attractive in case of specific IPRs	1. Risk of lowing of Royalities 2. Competition with the licensee.

Other tools of IP commercialisation

1. Franchising
2. Mergers and Acquisitions (Mergers and Acquisitions)
3. Joint Venture (JV)

The above overview on Commercialisation does not ends here. This IP Commercialisation pertains to specific study on each kind of IPRs in light of respective statute and to understand the intrinsic features of numerous agreements such as franchising, licensing, assigning or transferring of intellectual property safeguarding  and protection the business interests of owners.

{The author i.e. Narendra Mohan is a Practicing Lawyer and can be reached at (E) narendra4legal@gmail.com and (M) 9717998362}