Intellectual
Property Rights (IPR) play a critical role in any technology acquisition that
is completed through written technology license agreement(s). IPR include eight
different forms of rights, each of which is governed by a separate law and each
right is exclusive and independent of others. The different forms are patents,
copyrights, trademarks, designs, geographical indications, undisclosed
information, new plant variety and lay-out design of integrated circuits. All
forms may not appear in any single license agreement and their reflection will
be dependent on the technology area, the type of industry, area of operation,
market size and coverage and so on. However in every case of technology
acquisition, patents, copyrights, trademarks and undisclosed information
(sometimes also known as know-how) will be part of any agreement.
The
topics of technology up-gradation, off-set policy and technology acquisition
are under sharp focus of Government and the industries, for a meaningful leap
forward to face and beat the competition on the home and international fronts.
Technology up-gradation can be the result of in-house R&D or due to a
bought out technology. Under the off-set policy, new technologies will be
deployed by the Indian industries for manufacturing new products. This will
entail technology acquisition, setting up new infrastructure and facilities,
enhancement of human skills and training etc. There could be acquisition of
technology outside the off-set policy as well. India has signed bilateral trade agreements like CECA, CEPA and FTA with
some countries and many may be in pipeline. IPR constitutes an important part
of all these agreements with coverage varying from agreement to agreement and therefore
MSME engaged in any technology acquisition must be aware about IPR aspects and
know how to deal with IPR issues during negotiations.
While getting engaged in a technology transaction, all
IPR must be clearly spelt out along with the left over protection term,
jurisdiction of protection and ownership. Other essential elements are the nature
of license and restrictions for use, territory of exploitation, period of
license, license fees and down payment at the time of licensing, responsibility
of handling infringement and meeting expenses for litigation, obligations of
the licensor and licensee, arbitration procedure and the rights / obligations
of each party after the expiration of the agreement. A technology transaction
would entail different types of taxes both for the licensor and licensee which
should also be accounted for. It should be reckoned that Indian companies need
to have negotiating skills on the IPR front which in turn would also call for
excellent skills on drafting and finalizing contracts. For example, it may be
difficult for many companies to determine the chain of ownership of a patent
which they may be obtaining under a license. This may become critical in case
of an already known technology. There are certain anti-competitive practices in
contractual licensing of IPR defined in our IPR laws and the Competition Act 2002.
Similar practices are also stipulated in Trade Related Aspects of IPR (TRIPS)
under WTO. Such practices should be kept out of any license agreement. MSME should be educated to ensure that these
practices should become a part of the agreement.
Technology up-gradation without consideration to
patents and other forms of IPR may be filled with risks of infringement,
barriers to innovations and limitations on manufacturing. Identification of
possible technologies likely to provide benefit in the long term is the central
issue while considering technology up-gradation. Patent information and
information about other IPR would provide information about niche areas,
important players, identifying technology partner(s), determining chain of
ownership, expiration of rights, competitive technologies and so on. It is always
recommended that the expiry date of an IPR be checked and it is ensured that payment
is not made for the IPR beyond the expiry date.
The government has many schemes providing incentives including
tax benefits for generating intellectual property and protecting it legally,
creating awareness about IPR and training in IPR. While MSME make full use of
various schemes, they should invest in educating their management in the field
of IPR and the developing strength to understand IPR so that they extract the
maximum advantage while acquiring technology and exploit newly generated IPR for
growth, expansion and profits.
(This article appeared in CII's publication : MSME business, a Journal of Small Business and Enterprise) , Volume 2, Issue 5, November 2012)
© R Saha
