Licensing: Scope, Purpose and Application

Scope of Licensing

The scope of the license refers to the degree of control and rights that it grants to the  Licensee. The scope of a license depends on the kind of license. An Exclusive License grants absolutely exclusive rights to the Licensee, even excluding the Licensor. Sole Licenses permit the Licensor and the Licensee to use the IP, but do not allow the rights to be transferred to any third party. A non-exclusive license allow for the Licensee to exercise the rights as well as keeps open the scope for the Licensor to exercise his rights to further license these rights to any other third party.

For all practical purposes, the scope of a license can be determined by a bare reading of the Licensing Agreement governing it. The Licensing Agreement covers all aspects which determine the scope of the License, inter-alia, the description of the rights granted to the Licensee, the term/duration of the license, the territorial jurisdiction within which the licensing rights can be exercised, etc.

Purpose of Licensing

There are multi-fold purposes of licensing of intellectual property rights. Many a times, IP holders want to maintain control over their IP, and decide to license it. This is advantageous because it ensures to the IP holder that he can control/determine the manner in which his IP is used, and ensure far reaching production and use of his IP. He is also at liberty to change his licensing partners, after the term of a licensing agreement ends. Further, licensing his IP ensures the Licensor, a steady income from his IP and confers the same rights of use on multiple users.

Besides the advantages and benefits to the Licensor and Licensee, licensing is beneficial for a number of other stakeholders.

Situations in which the Central Government itself steps in, to grant compulsory license?

These grounds are as follows:

  • If the product is used for exporting to another country then government can grant licenses to ensure a smooth export system, and ensure that there is enough domestic supply at the same time, but this is only in exceptional circumstances.
  • In case of a national emergency, where the product is needed on an urgent basis like in war or in health crisis.
  • A good example of this would be a global pandemic, such as the Covid-19 pandemic which has engulfed almost the entire world. If India were to create a vaccine/cure for the virus, the Central Government may have to step in and ensure that compulsory licenses for the patented medicine are granted to multiple manufacturers to ensure sufficient quantity and inexpensive access to buyers within and outside India.

The purpose behind granting compulsory licenses is to ensure easy and affordable access of essential medicines to the public at large. For this to become possible, the Government ensures that the monopoly control over manufacture and sale is taken out of the hands of the Patentee, and licensed to other manufactures, in the same industry, who have the means to manufacture and sell the drug/medicine which is the subject matter of patent. The reason for this is that when one company alone has the exclusive right to manufacture and sell the drug, all pricing related decisions are within its exclusive control. More often than not, this implies that the private enterprise charges exorbitant rates for the medicine in question, thereby making it unaffordable to the masses. Further, only one company manufacturing the drug automatically means that the supply for the same, is limited, both in quantity, as well as the geographical location. This is another issue that is handled when licenses are granted to other manufacturers, having physical presence in different geographical locations.

Natco Pharma Ltd. was the first Company in India to apply for a compulsory license for the production of the generic version of Bayer Corporation’s patented medicine, Nexavar. This medicine was used for treatment of kidney and liver cancer. In 2012, the Patent Office granted the compulsory license to Natco Pharma for the same drug for the reason that the public did not have access to this drug at affordable price and the patented invention was not worked in India. They stated that all the 3 conditions of Section 84 were fulfilled.1 Before the grant of this compulsory license, Bayer Corporation was selling the medicine, at $6299 for a month’s course; but Natco Pharma offered to market the same medicine for just $196 in India.

In the year 2015, the Patent Office refused to grant Lee Pharma a compulsory license for AstraZeneca’s diabtetes management drug “Saxagliptin” for the reason that Lee Pharma failed to establish that the reasonable requirement for the subject drug was not being met by AstraZeneca. The Controller General also stated that Lee Pharma failed to show the exact number of patients being prescribed the patented drug and how many of them were unable to obtain it due to its non-availability and consequently it was difficult to hold whether manufacturing in India was necessary or not.2

Application

An application for license is always made in writing. The Licensor enters into a formal Licensing Agreement with the Licensee, which contains all the necessary particulars with respect to the nature and kind of license. The clauses in a typical Licensing Agreement include:

  • Parties
  • Recitals
  • Definition of Licenses Property
  • Jurisdiction
  • Grant
  • Term
  • Consideration/Royalty
  • Confidentiality
  • Warranties
  • Indemnity

.

Trademark License

A license can be obtained for both registered and u registered trademarks. The licensee of a trademark will enjoy the same rights as that enjoyed by a registered trademark proprietor. Thus, the benefit of use of the mark by an unregistered user also accrues to the registered proprietor. The Trademark Act, 1999 also recognizes non-registered licensed use provided that the proprietor has licensed the right in a written agreement and all conditions of that agreement are met by the user. The registered user can institute infringement proceedings in certain circumstances, while the unregistered permitted user does not have this power under the Trademark Act.

Patent License

The Patent Act, 1970 allows a Patentee to grant licenses under Section 70 of the Act. This right of the Patentee to grant licenses on his invention however, is limited by way of Compulsory licensing under special circumstances (as provided for under Section 84  of the Act). In accepting an application for the grant of a compulsory license, the Patent Office ensures that the Applicant fulfils the criteria prescribed under Section 84(6) of the Patent Act; comprising inter-alia the ability of the Applicant to work the invention to the public advantage and the ability of the Applicant to undertake the risk associated with the capital and working of the invention. After being satisfied with the Application, the Controller grants an opportunity to the Patentee and any other person interested in the Patent to raise objections against the application, and publish the application in the official Journal. Upon receipt of any objections, the Controller then grants an opportunity to the Applicant an opportunity to be heard, before deciding the fate of the application. Section 90 of the Patents Act expressly lists out the considerations to be taken into account by the Controller

Copyright License

Section 29 of the Copyright Act, 1957 provides that the owner of a copyright in any existing work or the prospective owner of the copyright in any future work, may grant any interest in the right, by License in writing, signed by him or by his duly authorized agent. A copyrighted work can also be licensed by way of a Licensing Agreement. The Agreement must be in writing, and signed by the Licensor. The copyrighted work sought to be licensed must be clearly identified and the rights being licensed to the Licensee must be expressly provided for. The Agreement must contain a Clause clearly enumerating terms relating to consideration/royalty payable to the Licensor and the terms relating to the revision, extension and termination of the terms of the License.

A copyright licensing agreement also comprises a clause specifying whether royalty is payable to the legal heirs of the Author/Licensor. The term of the License ought to be provided for in the Agreement, however, in the absence of such a clause, the license is presumed to be for a period of 5 years. Similarly, if the territorial extent of the license is not provided for, it is presumed to extend within India.

Section 31A empowers the Copyright Board to grant a Compulsory License to an applicant for an unpublished work or any work published or communicated to the public and which work is withheld from the public in India, the author is dead or unknown or cannot be traced, or the owner of the copyright in such work cannot be found.

Sections 31C and 31D also empower the Copyright Board to grant Statutory licenses for cover versions of sound recordings and musical works under special circumstances.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

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