licensing and transfer of technology in patent rights

“A patent, or invention, is any assemblage of technologies or ideas that you can put together that nobody put together that way before” as defined by the American Patent Office. An extraordinary amount of effort, research, labour, and insight goes in to making of an invention. Hence, it is imperative to grant the inventor rights to protect its invention. A patent is a right granted on an invention which gives the inventor a monopoly over his/her invention. However, concepts begin to get murkier as one delves into a deeper analysis of the rights granted to a patentee.

In the Patents Act, 1970 of India, (“the Act”), the rights of a patentee are provisioned in Section 481, a cursory look to which can elucidate that the Act inter alia bestows upon the patentee the right to prevent third parties from benefitting from the invention, unless with an express consent of the patentee. Giving rights to the patentee for its invention is the most logical approach for the effort and faculties employed by him/her to come up with an invention and hence no one else should be allowed to profit by exercising that invention. The more subtle question is whether a patent allows the patentee to freely manufacture a product or use a process that incorporates the patented invention. This boils down to the question of whether a patentee, in an endeavour to exploit the invention in his own patent, manufactures a product or uses a process which infringes the patent rights of another. This question leads us to the concept of “deblocking of patents” which means permitting (hence, deblocking) the use of secondary or prophetic patents where its use might possibly violate the primary or any earlier filed patent. In such a scenario, the secondary patent can be allowed by compulsorily cross-licensing with the primary patentee for the purpose of technological advancement and economic growth.

A blocking patent may allow one party to prevent another party from executing his or her patented invention. For ease of understanding, let us call the patent of the other party who is seeking to execute the invention as the basic patent. In other words, for the patentee to exercise the invention in the basic patent, another patentee’s rights afforded by the blocking patent have to be necessarily infringed. Suppose that A holds a patent for an invention X, and B creates an improved version of X, referred to as super-X, having new features and advantages which were not present in the original X. However, B cannot manufacture super-X without infringing A’s patent on X. In this case, the patent on X that A holds is the blocking patent. In practice, companies develop profound strategies built around blocking patents to gain market advantage over their competitors. The deblocking provisions allow, subject to certain conditions being met, a patentee of the basic patent to use the invention of the blocking patent.

The deblocking provisions in India are founded in Section 912 of the Act under which a patentee/licensee of the basic patent who is unable to efficiently or advantageously exercise a patented invention unless a blocking patent is infringed, can benefit. Under Section 91 which allows licensing of related inventions, the patentee/licensee of the basic patent, as soon as the basic patent is granted, may apply to the Controller i.e. apply at the Indian patent office, for a licence for the blocking patent, if, in the absence of such a licence, the patentee/licensee is prevented or hindered from working the invention in the basic patent efficiently or to the best advantage possible.

However, as mentioned earlier, the patentee/licensee must fulfil certain conditions before they may be accorded such a licence —— firstly, the patentee/licensee is required to be able and willing to cross-licence the basic patent to the patentee of the blocking patent on reasonable terms (Section 1403 of the Act includes certain provisions as to the reasonability of the terms of the licences). Secondly, the licence under Section 91 is not arbitrarily granted for exercising just any invention —— the invention covered in the basic patent and that the blocking patent hinders from being exercised, must be one that has made a significant contribution to either establishing or developing commercial activities in India.

In terms of cross-licensing the basic patent to the patentee of the blocking patent, the patentee of the blocking patent may or may not pursue that cross-licensing opportunity. Under Section 91, the patentee (or a licensee) of the blocking patent has the option to request or not for licensing the basic patent, and the “cross-licence” is conferred only if it is requested. Therefore, while Section 91 provides the opportunity to cross-licence, to seize that opportunity is purely discretionary on part of the patentee/licensee of the blocking patent and is not compulsory.

Further, Section 91 is grouped along with the provisions for compulsory licensing under Chapter XVI of the Act, and rightly so, since the licence granted under Section 91 is granted without the express consent of the patentee of the blocking patent, similar to grant of a compulsory licence under Section 844. However, the yardsticks for grant of licence under Section 91 and the compulsory licence under Section 84 differ as much as chalk differs from cheese. For a party to seek a licence under Section 91, the party is necessarily required be a patentee or a licensee of the basic patent, seeking to work the invention in India, on the grounds that (1) the blocking patent hinders the working of the invention in the basic patent efficiently or to the best possible benefit; and (2) the invention has significantly contributed to commercial and industrial activities in India.

On the other hand, the grant of a compulsory licence under Section 84 is an authorisation to any party seeking to work an otherwise patented invention in India to exploit that patented invention without the patentee’s consent, on the grounds that (1) the reasonable requirements of the public with respect to the patented invention have not been satisfied; (2) the patented invention is not available to the public at a reasonably affordable price; or (3) the patented invention is not worked in India. Therefore, while the fundamental basis of grant of the compulsory licence under Section 84 is public interest and welfare, the fundamental basis for granting the licence under Section 91 is promotion of trade and industry —— a purely commercial objective.

The deblocking provisions, though provisioned in Section 91, may also be found to hold a close kinship with Section 195 of the Act which ushers in for the patentee of the basic patent a prospect of finding solace under Section 91. Under Section 19, which in distinction to Section 91 comes into play during prosecution of a patent application i.e. before grant, if the invention in that patent application cannot be exercised without a risk of a potential infringement of the blocking patent, then the patent application is required to reference the blocking patent, as a public notice. Therefore, in paving way for Section 91 prospects, the reference to the blocking patent may be considered an indisputable declaration that when the invention is to be exercised, the licence for the blocking patent maybe required (unless the blocking patent itself expires or ceases to be in force, or at least the claim of the blocking patent that is likely to be infringed is rendered unenforceable). Besides, the reference to the blocking patent is a public announcement for the potential licensees to be wary of the fact that the attempts to commercialise the invention in the patent application will require crossing the obstacle course, that is, Section 91.

Therefore, the deblocking provisions under the Act serve as an effective way of fostering the working of inventions which may otherwise find themselves entangled in arduous infringement suits. At the same time, such provisions give rise to the concept of a “patent pool” which refers to the association of two or more parties agreeing to cross- licence their patents with respect to inventions in a common technological area. This allows the patentees to jointly exploit the patented technologies to their respective benefits. Unfortunately, so far India has not seen any case in this realm, and it seems that the concept of licensing of related patents is at a rather nascent stage still. Nevertheless, it will be interesting to see which way the wind blows in the future.

†Associate Partner, Lakshmikumaran and Sridharan Attorneys

1. Patents Act, 1970, S. 48

2. Patents Act, 1970, S. 91

3. Patents Act, 1970, S. 140

4. Patents Act, 1970, S. 84

5. Patents Act, 1970, S. 19

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