Sunday, 28 April 2013

Technology Acquisition and Intellectual Property Rights (IPR)

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