Course 9 Block 2 SIM

Indira Gandhi
National Open University MIR-038

School of Law
Commercialization of
IP
Block
2
TOOLS FOR NEGOTIATION
UNIT 5
Licenses and Assignment 5
UNIT 6
Contractual Obligations 20
UNIT 7
Anticompetitive Practices 33
UNIT 8
Protection Against Anticompetitive Practices in India 39
Tools for Negotiation
4
Licenses and Assignment
UNIT 5 LICENSES AND ASSIGNMENT
Structure
5.1 Introduction
5.2 Assignment
5.3 Licence as a Tool for Negotiation
5.4 Patent Pools
5.5 Submarine Patents
5.6 Patent Trolls
5.7 Compulsory Licences
5.8 Summary
5.9 Self Assessment Exercise
5.10 References and Suggested Readings
5.1 INTRODUCTION
After having understood the various types of intellectual assets (IA) and
intellectual property rights (IPR), the next step is to get a basic understanding of
the quickest and the most cost-effective way of reaching out to the maximum
number of consumers.
As seen from the previous chapters, the IPR grants the rights holder the right to
exclude others, which depends heavily on enforcement by way of litigation. In
litigation, the rights owners of various IP’s extract value in the form of damages
or accounts of profits or by way of injunction which serves to effectively stop
the infringer. However, litigation is a double-edged sword to be used judiciously.
A case in point is that of Polaroid-Kodak battle (Polaroid Corp v Eastman Kodak

Co 789 F.2d 1556 (Fed. Cir.), cert. denied, 479 U.S. 850 (1986)). Kodak was the
exclusive supplier of negatives for Polaroid cameras from 1963 until 1969 and
had several patents on the technology. However when Polaroid chose to
manufacture its own instant film, Kodak continued to be in business.
Polaroid Corporation filed a suit against Eastman Kodak Co. for the infringement
of seven of its patents on instant film, which raged on for over 10 years. Kodak
lost the case. The damages paid is the highest in history, that of USD 924.5
million of which USD 454 million was in lost profits and USD 455 million in
interests with post judgment interest making up the rest of the final amount.
After its defeat in the patent infringement case, Kodak left the instant film camera
business on 9 January 1986.
While wiping out competition may appear to be a great way to succeed in business,
it is definitely not the smartest way to capture the biggest markets. In the Kodak
case, a lot of time, effort and money were spent in the litigation which ran for
almost 10 years before the courts decreed the final order. Incidentally, on 11
October 2001, Polaroid Corporation filed for bankruptcy widely believed to have
been due to the failure of the business, managed to anticipate the effect of digital
camera on its film business.
5
Tools for Negotiation So what can be done with the IA right to maximise profits? Apart from working
the intellectual property (IP) by oneself which requires a good distribution network
among other things, the other option available to the owner of an intellectual
property right (IPR) or an intellectual asset (IA) is to give the IPR or IA to a third
party to commercialise or use it. This may be by way of:
• an outright sale, also called an assignment;
• licensing the right in the IP; or
• negotiating a deal.
These are pictorially represented below:
This block intends to deal with the mechanisms and techniques involved in the
process of negotiation and preparation of intellectual property agreements. The
processes involved includes
a) the search for and the selection of the prospective transferor and the potential
transferee of IP,
b) the preparation and presentation of the IP to be offered,
c) the participants of the negotiation,
d) the negotiation of terms and conditions of the transaction, and
e) the preparation and execution of necessary legal documents.
The selection of the partner as the prospective transferor or the potential transferee
of IP is of equal importance as the choice of the most appropriate IP. The
information about the technology and the potential technology partners can be
garnered from the Patent Office journals / databases, trade magazines and
newspapers, foreign departments of banks and other financial institutions,
government supported trade promotion offices or even commercial sections in
embassies and consulates. Usually the literature obtained from these sources
describes the technology offered briefly, often providing illustrations and drawings
in detail, and references to existing or pending IPR.
6
The negotiation of the terms and conditions of the transaction between the Licenses and Assignment
interested parties may range from being a simple series of meetings over a few
months to a complex and time consuming transaction that may take as long as
two to three years for the negotiations and preparation of necessary legal
documents especially where a Merger & Acquisition of a company is involved.
In a complex transaction, it is usually advisable to incorporate various elements
of the transaction in a different license or agreement. Thus, separate licenses or
agreements may be used in respect of each matter such as licensing of the patent
or of the trademark or the technical know-how. Even if, all these are incorporated
in one license or agreement, then each of the elements should be spelled out very
clearly.
The various tools for the negotiation of IP include licenses and assignment usually
by way of contracts. Before executing such contracts it is advisable to ensure
that the contracts are devoid of anticompetitive practices. Many countries
including India have laws against such practices. In subsequent units, we shall
discuss each of the negotiation tools in detail.
5.2 ASSIGNMENT
Assignment of rights in an intellectual property involves a transfer of title from
the seller (assignor) to the buyer (assignee) by way of a contract which involves
the payment of a consideration or a fee which is usually paid up-front as a one-
time payment or in parts depending on the way a contract of assignment or a
deed of assignment is drawn up and agreed to between the contracting parties.
The defining aspect of an assignment is that once it comes into effect, the assignee
assumes all the rights to the intellectual property/intellectual asset, including the
right to sue, to be sued and to further alienate the assigned property/asset. The
assignor in this way is dissociated from all ownership of the intellectual property,
and along with that, is divested of all future interest in the intellectual property.
An assignment is usually in writing either as a separate assignment agreement or

as a part of some other sets of agreement such as in case of a merger and
acquisition. Once assigned, the assignment agreement is irrevocable and the
assignee becomes the holder of rights in the intellectual property. Ideally, an
assignee, after the execution of the assignment, must be able to exercise all rights
of the owner of the IP.
For instance the acquisition of Amati Communications by Texas Instruments in

November 1997 was in effect an assignment of all the rights in the intellectual
properties held by Amati Communications to Texas Instruments. These included
the 25 patents over the DSL technology as well as all the other intellectual
properties, assets and technical know-how on the technology. The consideration
for this assignment of rights was USD 395 million.
Significance of Assignments: As an assignment generally involves the complete

sale of rights, the assignee can exploit the rights in any which way, however,
subject to the limitations in the agreement. An assignment is also significant
where the holder of the IP does not want to enter into the arrangement of collecting
royalties; and, instead prefers to receive a lump sum price for the sale of the IP
and the rights therein. In this way, the holder can collect all the value of the IP on
a single occasion only as a one-time payment. By assigning of rights, the holder
7
Tools for Negotiation is free of any risks of reduced royalties in the case of technical failure, market
failure, regulatory failure, and competing products. The assignment is also another
way of raising substantial capital for further research and development. However,
the downside of assignment of rights involving a technology is that there may be
ne indicators on the value of the IP at the time of assignment. A number of IP
have known to become very valuable towards the end of its patent term after all
rights have been assigned; thereby leaving the inventor with a lesser value.
Types of Assignments: Based on the execution of assignment deeds by the

party(ies), patent assignments may be classified into three types of patent
assignments:
i) Legal Assignment – The assignment of the patent by deed, where the
assignee becomes the patent owner and acquires all the rights thereof.
ii) Equitable Assignment – An equitable assignment is the one where there is
assignment of the share of the patent. Any document, in which the patentee
agrees with another person to give him a certain defined share of the patent
with immediate effect, is an equitable assignment of the patent. As per this
agreement the share has to be given from the date of the document. The
person to whom the patent is assigned gets the right in equity for the affecting
the ownership but not altering the proprietorship. An equitable assignee
cannot have his name entered in the Patent Register as the proprietor but at
the same time may have notice of his interest entered in the register. An
assignment of the patent application is an equitable assignment, which gives
the assignee the right to ask the patentee to assign the patent once it is
granted. An equitable assignee cannot get his name entered in the register
until he obtains the legal assignment.
iii) Mortgages – A mortgage is a document transferring the patent rights, wholly
or partly, to the mortgagee for money. A mortgagee cannot have his name
entered in the Register as the proprietor but at the same time may have
notice of his interest entered in the register. On repayment of the money, the
mortgagee transfers back the patent rights to the mortgagor. Deals involving
the securitization of intangible assets have enabled owners of IP rights to
borrow money more easily and safely from adequately secured lenders. IP
asset-backed securitizations are most common in the film and music
industries, but the practice is increasing in the biotechnology and software
industries.
Some high profile examples of such transactions include the securitized royalty
streams on the copyrights owned by famous musicians. For example: In 1997,
David Bowie issued 10-year asset backed bonds on the basis of future royalties
on publishing rights and master recordings from 25 pre-recorded albums, and
raised US$55 million. The purchaser of the bonds gained the right to receive
future royalties from Bowie’s albums until the principal plus 8% annual interest
was repaid.
Nickolas Ashford and Valerie Simpson, songwriters and producers of hit songs
including “Ain’t No Mountain High Enough” used the copyright on 247 of their
songs as assets to back bonds, raising US$25 million.
Instruments of Assignments: As per the Indian Stamp Act, 1899, the instrument
includes any document by which any right or liability is, or purports to be created,
8
transferred, limited, extended, extinguished or recorded. Since deed of assignment Licenses and Assignment
involves transfer of IP it falls under the purview of this Act. The stamp duty is
charged depending on whether it is a ‘conveyance’, ‘transfer’ or ‘transfer of
lease’. An assignment of Copyright was until recently exempted from the Stamp
Duty; on the other hand assignment of other forms of IP including trademarks
and patents have to made by the payment of Stamp Duty of appropriate value.
The assignment of patent and trademarks is not valid unless it is in writing. The
assignment and / or licensing of Geographical Indications is not allowed under
the law.
5.3 LICENSE AS A TOOL FOR NEGOTIATION

An understanding of licensing techniques is incomplete without touching upon
the use of licensing as a negotiation tool.
A license gives an assurance by way of a contract to the licensee to exploit
licensor’s IP and that the licensor will not sue. Since license is also a contract, it
binds both the parties with the contractual rights, duties and obligations. This
then becomes a valuable tool to foster an amiable environment for a greater give
and take. A license is not valid unless it is in writing. Licensing creates a
continuous source of income, disseminates the IP to a wider group thereby
promoting further development and commercialization.
For example, cartoon characters are protected under copyright as artistic works,
but in parallel to such protection companies such as Warner Bros Entertainment
have registered cartoon characters as trademarks, including Roadrunner, Tweety
Pie, Daffy Duck and Elmer Fudd. U.S and Canadian retail sales of entertainment-
based licensed merchandise were estimated by the Licensing Letter, a trade
publication to have been USD 13.4 Bn in 2004.
Some of the tools used under licensing are cross-licensing and patent pooling
(please see Units 2.5.3 and 2.5.4) Based on the scope of rights, duties and
obligations, there are different types of licenses.
Types of licenses: In case of a license, there are different types of licenses
depending on the type and extent of control the licensor would like to exercise
over the intellectual property and the third party. Broadly, there are two types of
licenses:
i) Voluntary License
ii) Non-voluntary License
i) Voluntary license agreements - In a voluntary license agreement, all the
terms and conditions including the scope of the license and the payment
terms are a matter of mutual agreement between the parties. This permission
or license may be given orally, by implication or in writing. While oral
license is common enough on a day to day basis, a license by implication
occurs when an action or omission to act is performed and continues to be
performed under notice without the restraint. The permission or license here
is deemed to be implicit. However, when a license is in writing, the agreement
between the licensor and the licensee clearly lays down a series of terms
and conditions that define the permission, the term of license, the territory
in which the license can be practiced, the royalty to be paid in return for the
license, the renewal of the license when the term expires, etc. 9
Tools for Negotiation A license agreement is usually a voluntary agreement between at least two parties.
In short, a license is a promise by the licensor not to sue the licensee. Based on
the extent of rights granted to the licensee and the control exerted by the licensor
over the licensee, a license agreement may be broadly classified as:
• sole license;
• exclusive license;
• non-exclusive license.
Briefly,
• If the license is a sole license agreement, then the licensee is the only entity
other than the licensor, allowed to exercise the rights under the license
agreement in the licensed territory or licensed group of consumers. The
licensor may also compete with the sole licensee in that territory.
• In case of an exclusive license agreement, the rights of the licensee exclude
even the licensor from exercising his right in the licensed territory or in the
licensed group of customers. It gives the licensee the right to exclude even
the licensor from exercising his right in the licensed territory for the duration
of the licensed term.
• In case of a non-exclusive license agreement, the licensor reserves the right
to appoint more than one licensee in a given territory for the duration of the
license.
A sole license and an exclusive license have a fine line of distinction in so far as
the role of the licensor is concerned. So a license agreement with a term “this is
a sole and exclusive license agreement” is a misnomer of sorts since the two
terms are mutually exclusive. An exclusive license cannot be a sole license and
vice-versa. These are instances of voluntary license agreements.
As cautioned earlier, the terms and conditions of a license agreement must be

carefully drafted to avoid ambiguity. Usually, a checklist helps in keeping the
drafting in perspective. While there is no standard checklist, the terms and
conditions varying on a case to case basis depending on the field of technology,
the licensing of future technology, the provisions relating to grant-back of rights,
etc, there are basic requirements that have to be incorporated in a license
agreement.
The following is a checklist of provisions in a license agreement:
• Name and address of parties,
• Type of license agreement (whether sole, exclusive or non-exclusive),
• Defining of the subject matter of the license agreement (goods/services/
technology),
• Identification of trade secrets, if any,
• Confidentiality clauses,
• Duration of the agreement,
• Extent of rights (territorial, customer based, product based),
• Extent of rights functionally (distributorship, sales, manufacture),
10
• Royalty payments/down payments, if any, Licenses and Assignment
• Periodic inspection of books of accounts and inventory,

• Development of intellectual property rights during the term of license and
the rights over it,
• Sub-licensing rights,
• Rights to sub-license “have-made” requirements to fulfill the terms of the
license agreement,
• Termination of agreement,
• Actions to be taken on natural termination of clauses,
• Conditions on breach of agreement,
• Conditions on situations arising out of “Acts of God” (force majeure),
• Renewal of agreement,
• Indemnification clauses,
• Arbitration clauses,
• Jurisdiction in case of dispute.
ii) Non-voluntary License Agreements - As the name suggests, in the non-
voluntary licensing system, one party to the license, usually the patent owner
has no right to negotiate his terms and conditions for access to his intellectual
property.
Government use - Use of an intellectual property by the Government is a feature

that may happen in patents more than in any other area of intellectual property
rights. Patent has the same exclusionary effect against the government as against
any other third person. Theoretically, this means that an unauthorized use by the
Government is an infringement. However, under the prevailing Indian patent
law, the government has the right to use the patent for its own use. In effect, the
government can import, make the patent product or use the patented process to
make a product for the purpose of its own use. The Government here refers to
both State as well as Central Government.
Difference between Assignment and License:
Cross licensing: A cross-license is a form of bargain tool where two or more

companies having strong and robust intellectual property portfolios that may
tread upon the other’s rights use their intellectual property to negotiate a cross-
license arrangement of their rights rather than block each other or enter into
time-consuming litigation. This is very effective in the area of patents, design,
copyright, and sometimes in the area of trademark.
11
Tools for Negotiation Cross-license arrangements are voluntary arrangement and the terms and
conditions of a cross-license are mutually decided by the parties. The cross-
license agreement between parties that each possess and own formidable
intellectual property portfolios to swap access to their portfolios is usually between
competitors. These cross-licensing agreements eliminate uncertainties of
infringement of patents especially where claims are broad and cover core
technology areas. In effect a cross-licensing agreement is a promise of sorts
between the parties, to neither sue nor be sued. This saves huge costs in litigation
expense.
Expenses related to research and development are also reduced since the
companies no longer have to consider expensive inventing around an existing
patent owned by the party to the cross-license agreement for fear of accidentally
infringing a patent, particularly a submarine patent. This is especially true where
a party has a large portfolio of patents that cover a technology which strengthens
and gains significance by network effects.
A cross-license is simply an agreement between two companies that grants each

the right to practice the other’s intellectual property especially patents. A cross-
license:
• may or may not involve fixed fees or running royalties; running royalties
can, in principle, run in one direction (from one company to another) or
both;
• may involve various field-of-use restrictions or geographic restrictions like
regular licenses;
• may involve some but not all relevant patents held by either party; “carve-
outs” are not uncommon;
• like regular licenses, may be confined to patents issued (or pending) as of
the date of the license, or they may include patents to be granted through a
certain time in the future.
Cross-licensing of intellectual property such as patents is almost a norm in some

areas of technology. For instance, it is the norm in the design and manufacture
of microprocessors. For instance, the microprocessor giant, Intel, has cross-
license arrangements with IBM. Similarly, since the launch of Microsoft’s
licensing program in 2003, the company has entered into similar cross-licensing
agreements with a number of companies including Samsung, LG Electronics,
Novell Inc, Fuji Xerox and Onkyo Corporation. Recently, in August 2008,
Microsoft Corporation signed a patent cross-licensing agreement with Nikon
Corporation to develop “a broad range of consumer products each company
manufactures and sells”.
Cross-license agreements provide a means for avoiding head-on confrontation

such as infringement actions which are a drain on the companies’ resources
dragging on for years involving immense expenses in terms of time, money and
manpower. A well thought out cross-license arrangement can create a win-win
situation providing an environment that fosters creativity and innovation.
12
5.4 PATENT POOLS
Unlike cross-licensing arrangements which are usually between two entities, in
certain fields of technology such as electronics, mechanics, electrical engineering,
multiple companies come together to pool their assets and create a collective
management system to manage their patent pool.
The advantages of pooling together assets are that the collective management
systems can:
• overcome market inefficiencies,
• offer lower transaction costs, and
• ensure effective access to multiple rights.
These systems facilitate the legitimate use of works and features to their users by
granting licenses and authorisations. Such arrangements can be voluntary or non-
voluntary, and involve a variety of different policy objectives, as well as legal
and management regimes.
Essentially, a patent pool is an agreement between two or more patent owners to

aggregate (pool) their patents and to license them to one another or to third
parties. The collective management of the pool usually offers standard licensing
terms to licensees and allocates a portion of the licensing fees, also called royalties,
to patent owners according to a pre-set formula or procedure. The pool may
involve simple cross-licensing among two or more competitors in order to share
a handful of patents necessary for the manufacture and sale of a particular product,
or it may involve a large industry-wide pool open to anyone, encompassing
hundreds of manufacturers and thousands of patents, as well as other intellectual
property, such as rights to use data, know-how or trademarks.
While patent pools are not a new idea, having been used widely in the late
nineteenth century for industries such as the sewing machine and in the early
twentieth century for development of aircrafts, they have gained new stature and
significance in the present age. In a global arena with a wide application of
technology across political and geographical borders, there is a new need for
industry standards to ensure that investments made into the industry can yield
global returns. Today, there are a number of fields of technology that require
common standards, for instance radio, television, cellular phone technology,
DVD-video, DVD-ROM and MPEG2 compression technology. Having a patent
pool solves problems in two ways:
1) It simplifies upstream use of technology for use in research and development.
2) It simplifies downstream access to technology.
Apart from the easy access to other patents without the fear of infringement
suits, patent pools have several other benefits which include:
• clearing of blocking patents of other parties that would be infringed in the
course of innovation;
• reduction of licensing transaction costs through a single window or one-
stop licensing rather than multiple agreements;
13
Tools for Negotiation • management of multiple owners, and therefore, stacking of royalties;
• facilitate professional management of the negotiation and administration of
licensing arrangements;
• reduction of infringement litigation costs;
• the potential to encompass non-patent technology and know-how;
• the potential to facilitate technology transfer and a sustainable scaling up of
capacity and access in the developing world.
Though patent pools usually are voluntary arrangements, they may also be created
by an authority or governments. An example of this is the creation of a patent
pool, the Manufacturers Aircraft Association (MAA) by the Government of the
United States. The MAA pool was formed in 1917 against the backdrop of
legislation threatening to compulsorily licence the patents in order to overcome
barriers for the scaling up of aircraft manufacturing as the US prepared to enter
World War I.
The US government also insisted that rights to license patents for radio
technologies be consolidated in order to promote the development of the modern
radio industry. In 1924, the American Radio Manufacturers, later the Radio
Corporation of America (RCA), merged the radio patents of American Marconi,
AT&T, Westinghouse and General Electric and established a standard for radio
parts, airway frequency locations and TV transmission standards.
A well-known example of a patent pool is that formed by Sony, Philips and

Pioneer for inventions that are essential to comply with certain DVD Video and
DVD-ROM standard specifications.
The advantages and disadvantages can be enumerated as follows:
14
5.5 SUBMARINE PATENTS
Submarine patents usually happen by accident but may be used in a deliberate
tactic to make money. Patents at the beginning of their life cycle may not have
any value and may remain unobtrusively in the patent portfolio. But later due to
a new technology platform or a new market demand, or even a economic reform
by a government, the patented invention can become extremely useful and
therefore, lucrative in terms of licensing deals requiring active enforcement.
The history of technology development in the nineteenth and twentieth century

are replete with statements from inventors who thought that their invention had
only novelty value and could not possible be widely used. The generation of
electricity, the use of the electric bulb, the significance of the transmission of
audio signals and the use of radio for telecommunication, cellular phone
technology, the use of computers for public use were all considered not feasible
in the early days of their invention or usage.
The dangers of the attack of the submarine patents are quite the same as it would
in a war. To elaborate, a patent for a technology which if used as a standalone
will have little worth but increases its value in leaps and bounds if the invention
is widely used. As an example, a cell-phone technology such as video conferencing
facility in its stand alone form as a single piece is of little use. However, when
the same technology is used by a large number of people who are networked, the
technology gains immense value and the technology is strengthened by network
effects.
If the patent owner of such technology tries to license his technology for a high
royalty in the initial stages of the commercialisation, it may never take off, since
the potential licensees may work around the patent. If, however, the patent owner
waits until after the technology becomes popular and had been “strengthened by
network effects”, he will have greater success at getting a suitable royalty.
A solution to this situation is to keep people unaware of the patent which means
that the patent owner does not make a move to license it or enforce the patent
hoping that the patent will miss the competitor’s “watch cell” which searches for
and scrutinises all patent applications and patents published in their area of
interest. Once the technology becomes widely used and the usage is firmly
entrenched in the daily usage, the patent holder can start collecting royalties and
enforcing the patents.
These kinds of patents that surface in the thick of patent usage action are called
submarine patents and create potentially dangerous patent minefields.
In jurisdictions where working of a patent to hold on to a patent is a not a necessary
condition, such manoeuvres may be used deliberately to generate profits. Such
patent holder companies are called patent trolls.
5.6 PATENT TROLLS

A patent troll is a patent holder who deliberately uses the patent system to gain
immediate profits against the basic principle of patent system, i.e. of encouraging
new invention and the advancement of new technology. Obviously, the patent
troll cannot be troubled about working his own patents.
15
Tools for Negotiation The term “patent troll” has been attributed to a patent lawyer at Intel, Peter Detkin,
who used the term to denote companies that purchased low value patents, which
they then used in nuisance law suits1 .
An recent example of patent troll at work is seen in the slew of “BlackBerry

cases” in the US. NTP Inc is a patent holding company based in Virginia, USA.
It holds over 50 patents. A patent troll, the company aggressively enforces its
patent rights even though they do not, themselves, practice their patents. In 2000,
NTP Inc filed a suit for infringement against Research in Motion (RIM) the
makers of BlackBerry mobile phones. After acrimonious litigation going up to
the Supreme Court with briefs filed by the US Government stating that enforcing
the injunction on BlackBerry would be harmful to US government due to its
widespread use, the matter was finally settled with Blackberry reportedly paying
USD 612 million to NTP Inc2 .
5.7 COMPULSORY LICENSE

Often there are times when a compulsory license by an authority may be imposed,
usually under a statutory law, whereby the licensee is perforce required to offer
his intellectual property for a predetermined royalty or for a royalty to be decided
by the authority on a case to case basis.
Examples of compulsory license are available in different areas of intellectual

property and have been discussed or implemented widely in the area copyright
and patent. While compulsory license in copyright has been followed assiduously
across film, music and publishing industry, it is a very contentious issue when
compulsory license is sought for a patented invention.
The principle behind having compulsory licensing provision is to provide a system

of checks and balances to counter monopoly by the intellectual property rights
holder.
Compulsory license - Copyright

A compulsory copyright license is an exception to copyright law that is usually
philosophically justified as an attempt by the government to correct a market
failure. As an exception to copyright, another party can exercise one or more of
the copyright’s exclusive rights without having to obtain the copyright holder’s
permission (hence “compulsory”) but will have to pay a licensing fee.
Some compulsory licenses protect those who wish to use a “work” for educational
or non-commercial purposes. In cases when it is judged too burdensome for
scattered or small-scale buyers and sellers to find one another and negotiate a
price, governments sometimes issue a compulsory license for the use so that the
relative difficulty of obtaining permission for it does not extinguish it.
Compulsory license – Patent

In case of patents which specifically require the patent owner and/or the exclusive
licensee to furnish details of the working of the patent in India, periodically or
when so demanded by the Controller, the non-working of a patent in India forms
one of the grounds for obtaining a compulsory license.
16
It is interesting to note at this point that the concept of patent troll, which is so Licenses and Assignment
prevalent in the US and has recently been in the limelight in a number of cases,
most notably in the BlackBerry case (NTP v RIM which was decreed, appealed
and finally settled out-of-court for USD 612 million), may not be an option in
India in view of this “working of the patent in India” requirement codified in the
Patents Act, 1970. In a hypothetical case, an equivalent situation in India would
have brought in the compulsory licensing option either by way of an application
by RIM to the Controller or by the Government!
Reverting to compulsory licenses, a better way to address compulsory licensing

mechanism in patents is by way of referring to them as non-voluntary license
mechanism because under the prevailing patent law in India, there are quite a
few provisions that could amount to some form of compulsory licensing.
As seen from the diagrammatic representation above, the patent law provides
for a number of mechanisms for non-voluntary license of patent rights. For
instance, if a Government (Central Government or State Government) finds an
invention useful, the Government may acquire the patent or the patent application
if pending. Alternatively, the Government may not acquire the invention but
would look to use the invention by way of a notification in the Gazette. In both
cases, the Government will use the invention for its own use.
The Government may also apply for a compulsory license to the Controller of
Patents just like any other person on the grounds that the patented invention is
not available to the public at reasonable price, in reasonable quantities or that
the invention is not adequately worded in India. Despite being codified into law,
there are very few situations in India where these rights have been exercised by
the Government.
Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property

Rights (TRIPS agreement) allows Governments to waive authorization from the
patent holder for the right to use the invention “in case of national emergency, or
other circumstances of extreme urgency or in cases of public non-commercial
use” provided of course the right holder is informed of this waiver at the first
available opportunity. The Indian Patent Act codifies this provision of the TRIPS
Agreement in s 92 of the Patents Act as amended by the Patents (Amendment)
Act of 2002. The effect of this provision empowers the Government of India to
use the patent without consulting the patent owner in case of national emergencies,
circumstances of extreme urgency and public non-commercial use such as in the
case of bird-flu, HIV, diseases of epidemic proportions, etc.
17
Tools for Negotiation This provision is available in laws of other countries as well. Recently, Brazil
and Thailand have been in news for the declaration of national emergency and
subsequent issuance of compulsory licenses. In case of Brazil, on 4 May 2007,
the Brazilian President, Luiz Inacio Lula da Silva, issued a compulsory license
to produce a low-cost generic version of the antiretroviral medicine, Efavirenz,
used in the treatment of HIV. The patent was owned by Merck.
Another interesting feature of the Indian patent law as codified in Section 92A
of the Patents Act after the recent amendment is that it seeks to provide patented
pharmaceutical medicines to least developed countries that either have declared
compulsory license in their countries or, where they do not have a patent regime,
have declared a national emergency by way of a Government notification. In
such a situation, a third party in India can apply to the Controller for a compulsory
license to manufacture the patented pharmaceutical invention solely for export
to the afflicted country.
5.8 SUMMARY
• In this Unit the explanation on the concept of the license and assignment
which is IP rights protection by way of contractual obligations has been
discussed more.
• Assignment is a transfer of title from the seller (assignor) to the buyer
(assignee) by way of a contract which involves the payment of a consideration
or a fee which is usually paid up-front as a one-time payment or in parts
depending on the way a contract of assignment or a deed of assignment is
drawn up and agreed to between the contracting parties.
• A license gives an assurance by way of a contract to the licensee to exploit
licensor’s IP and that the licensor will not sue. Since license is also a contract,
it binds both the parties with the contractual rights, duties and obligations.
Thus to understand the feature of these two concepts is very important
because there are both similarities and distinctions.
• In this Unit besides the license and assignment, the other concepts such
patent pool, submarine patent, and patent trolls are also studied. Moreover
the case laws have been provided in order to give more understanding on
those terms.
5.9 SELF ASSESSMENT EXERCISE

1) How many types of license are there, briefly explain?
2) Explain on how the compulsory license functions
3) What is the distinction between license and assignment?
4) What are the benefits of patent pool?
5.10 REFERENCES AND SUGGESTED READINGS

1) Licensing Guide for Developing Countries by World Intellectual Property
Organisation
18
2) Licence Agreements: Forms and Checklists by Gregory J. Battersby & Licenses and Assignment
Charles W. Grimes
3) Licensing Intellectual Property in the Information Age by Kenneth L. Port,
Jay Dratler, Jr., Faye M. Hammersley, terence P. McElwee, Charles R.
McManis and Barbara A. Wrigley
4) Efficient Patent Pools by Josh Lerner & Jean Tirole
19
UNIT 6 CONTRACTUAL OBLIGATIONS
Structure
6.1 Introduction
6.2 Employment Agreement
6.3 Non-disclosure Agreements
6.4 Indemnification
6.5 Anti-royalty Stacking
6.6 Summary
6.8 Reference and Suggested Readings
6.1 INTRODUCTION
A lot of intellectual property is owned by legal persons such as companies,
partnerships, trusts. The devolution of rights in the inventions from the natural
person or persons to another person, whether natural or legal is usually by way
of a contract which may be a deed of assignment or a license agreement. Apart
from these, there are
• employment agreements
• non disclosure agreements
• indemnification
• anti royalty stacking
6.2 EMPLOYMENT AGREEMENT

In large companies which have a separate research and development department,
the employment agreement signed by the employee at the time of joining the
company may carry a clause in the agreement by which the employee
acknowledges that intellectual property developed by the employee during the
course of his/her tenure is a property of the company and all rights vests with the
company. The main elements of employment agreement are checklist of a basic
employment is given below:
• the job position,
• whether the position can be changed by the employer,
• the length of the agreement,
• the salary, bonus, and benefits,
• whether the employee gets stock or stock options in the company (Note: the
employee should typically earn these over time),
• when the employee can be terminated for good cause,
• what “good cause’ means,
• when the employee can be terminated without good cause and what the
severance payment will be due,
20
• the employee’s job responsibilities, Contractual Obligations
• the employee’s confidentiality obligations,

• where and how disputes will be handled.
Sample Employment Agreement
THIS AGREEMENT dated ________ day of___________, _______ which

is the date of signing is being made effective from the _____ day of
______________, _______ which is the date of joining of the Employee
(hereinafter “Effective Date”).
BETWEEN:
[…………. (name and address of Group Company if required) …….], which

is the Group Company of ABC, an Indian Company incorporated under the
Companies Act, 1956 and having its registered office [address] hereinafter
the “COMPANY”, which expression shall, unless it be repugnant to the
context or meaning thereof, be deemed to mean and include its successors
and assigns OF THE ONE PART
And -
[…………(name of employee)………..] a citizen of ………… [name of

the country] residing at ………………..[address] (hereinafter referred to
as the “EMPLOYEE”), which expression shall, unless it is repugnant to the
context or meaning thereof, be deemed to mean and include his/ her
successors and assigns) OF THE OTHER PART
Whereas the COMPANY is desirous of engaging the EMPLOYEE and the

EMPLOYEE wishes to accept employment with the COMPANY, on the
terms and conditions set forth in this AGREEMENT.
And Whereas the COMPANY is a limited company engaged in research,

development, production and sale of various hybrid seeds having its
headquarters at New Delhi and branches all over India ,
And Whereas, the EMPLOYEE is a person with desired qualifications who

is under the contract of service as an employee in continuing service / freshly
appointed
NOW THEREFORE it is agreed by and between the parties hereto and in

pursuance of the above, the EMPLOYEE agrees to execute this Employment
Agreement on the following terms and conditions.
1. Employment
1.1 The COMPANY shall employ the EMPLOYEE and the EMPLOYEE
shall serve the COMPANY, in the role of __________________________
[job title], with such duties and responsibilities as may be assigned to the
EMPLOYEE by the COMPANY and as are normally associated with a
position of that nature.
21
Tools for Negotiation 1.2 The EMPLOYEE shall devote his/ her best efforts and all of his/ her
business time to the performance of his/ her duties under this Agreement
and shall perform them faithfully, diligently and competently and in a manner
consistent with the policies of the COMPANY as determined from time to
time by the COMPANY.
1.3 During the term of his/ her employment with the COMPANY, the
EMPLOYEE shall not engage in activities outside the scope of his/ her
employment if such activities would detract from or interfere with the
fulfillment of his/ her responsibilities or duties under this Agreement or
require substantial time or services on the part of the EMPLOYEE. The
EMPLOYEE shall not serve as a director (or the equivalent position) of any
corporation or other entity and shall not receive fees or any other
remuneration for work performed outside the scope of his/ her employment
without prior written consent of the Chairman and Managing Director of
the COMPANY, which consent shall not be unreasonably withheld.
2. Term of Employment
The EMPLOYEE’s employment under this Agreement shall commence from

the Effective Date of this Agreement and shall continue until terminated by
either party, as hereinafter provided.
3. Compensation
As full compensation for all services rendered by the EMPLOYEE to the

COMPANY under this Agreement, the COMPANY shall pay to the
EMPLOYEE the compensation set forth in Schedule A attached hereto as
per the companies personnel policies. The COMPANY may revise/ amend
this Schedule A from time to time in writing.
4. Employee benefit
The EMPLOYEE shall be entitled to receive the benefits as per the personnel
policies of the COMPANY time to time.
5. Assignment of Inventions by the EMPLOYEE to the COMPANY
The Intellectual Property created as the outcome of any work of the

EMPLOYEE during the course of his/ her employment with the COMPANY,
whether on or off the premises of the COMPANY, shall vest with the
COMPANY. The EMPLOYEE agrees to assign all rights, interests, title to
the said Intellectual Property to the COMPANY. The COMPANY reserves
the right to utilize all rights in the said Intellectual Property at its own
discretion.
6. Transfers/ Postings
The EMPLOYEE agrees to work at any location in India and abroad the
COMPANY may assign to him during the course of the employment. In
case the EMPLOYEE is unable to undertake the said assignment, he / she
shall inform the COMPANY of his inability along with the reasons in writing.
However the final decision about the transfer /posting rest with the discretion
22 of the COMPANY which shall be binding on of the EMPLOYEE.
Contractual Obligations
7. Duties of Non Disclosure of an EMPLOYEE
7.1 The EMPLOYEE shall not disclose any information pertaining to

research, production, marketing, administrative, finance or any other matter
including but not limited to, information pertaining to hybrid combinations,
germplasm, gene construct, DNA samples, vectors, breeding material, trade
related techniques, production techniques, marketing information or
administrative information which may come into his / her possession during
his / her association with the COMPANY to any third person or any other
company dealing in business while in service or after separation from the
COMPANY without prior written consent of the COMPANY.
7.2 The EMPLOYEE shall not at any point of time discuss any matter or
divulge the information in any seminar, or conference or in any business
talk and also, shall not write any article or column for any media without
the prior written consent of the COMPANY.
7.3 The EMPLOYEE shall not carry any material or information pertaining
to research, production, marketing, administrative or any other matter
including but not limited to research information such as hybrid
combinations, germplasm, gene construct, DNA samples, vectors, breeding
material, parental lines, trade related techniques, production techniques,
marketing information or administrative information etc., outside the official
premises of the COMPANY including research farms, cold storage, godown,
parent seed farms and production fields except with the prior written consent
of the COMPANY.
7.4 The EMPLOYEE shall not, encourage, instigate, indulge or include

any employee(s) in any activity whereby the employees of the COMPANY
leave the COMPANY.
7.5 The EMPLOYEE has further agreed to work for the COMPANY
honestly and diligently keeping all the aforesaid information confidential.
7.6 The EMPLOYEE agrees to indemnify the COMPANY for any loss
incurred due to breach of any of the above conditions. The COMPANY,
however, retains the right to exercise its discretion in taking criminal or
civil action against the said EMPLOYEE.
8. Resignation by an EMPLOYEE
8.1 The EMPLOYEE at the time of resigning from the COMPANY shall
serve his/ her resignation to the concerned officer and shall give Notice
period of_________ days. The EMPLOYEE shall at the time of serving
his/ her resignation shall also return all documents, materials, germplasm
etc. that were in his / her possession during the course of his/ her employment
with the COMPANY. The EMPLOYEE shall also give an undertaking that
he/ she shall not divulge or become a source thereof of any official
information to the Competitor Company that comes to his possession during
the course of his employment with the COMPANY.
8.2 The EMPLOYEE shall hand over to his / her successor or the
Supervisor as the case may be all official documents concerning
23
administration or research, shall explain all the status of research-in-progress,
or administrative projects in hand along with any other relevant information
no sooner the EMPLOYEE submits the resignation
8.3 The EMPLOYEE shall extend full cooperation to the COMPANY at

the time of resigning and shall also participate in the exit interview(s)
conducted by the COMPANY if it is considered necessary by the COMPANY.
The EMPLOYEE shall be shifted immediately from the current assignment
which he/she handles at that point of time. However the COMPANY on its
discretion may ask the EMPLOYEE to complete the pending job if any.
8.4 On satisfactory completion of formalities the COMPANY at its

discretion may relieve upon completion of ________days notice period or
earlier to that considering as per the EMPLOYEE’S appointment order.
9. Termination of Service of the Employee by the Company
9.1 EMPLOYEE shall be liable for the termination of the Service with
immediate effect and without Notice if:
(i) He/ She is found to be involved in corrupt/ fraudulent practices viz.

leaking the official information(s) to the third party;
(ii) He/She is carrying away any research information, hybrid combinations,

germplasm, gene construct, DNA samples, vectors, breeding material,
parental lines, trade related techniques, production techniques, marketing
information or administrative information etc., which may come into his /
her possession during his / her employment with the COMPANY;
(iii) He/ She is found to be involved in any activity that may be illegal /
immoral / behavioral which is or which might bring bad reputation to the
Company; or
(iv) He/ She is publicly criticizing the various products / projects of the
Company.
9.2 On any of the grounds as mentioned in para 9.1 of this Agreement, the
COMPANY also reserves the right to initiate civil/ criminal proceedings
before the concerned Court having appropriate jurisdiction.
10. Disciplinary Action Against the Employee
10.1 If the EMPLOYEE is alleged to be guilty of any act as described in

para 10.1 of this agreement COMPANY reserves the right to take disciplinary
action or initiate Departmental proceedings against him/ her. During the
disciplinary proceedings the EMPLOYEE may be treated as under
suspension for the period as may be required under the proceedings. In case
the EMPLOYEE is proven to be guilty, his/ her services shall be treated to
be terminated from the date of suspension. The loss suffered by the
COMPANY shall be deducted from the salary of the EMPLOYEE or as per
para 8.6 of this Agreement.
24
10.2 During the period of Suspension, the EMPLOYEE shall not be
permitted to enter the premises of the Company and shall not be permitted
to carry away any information either administrative/ finance/research
including those pertaining to hybrid combinations, germplasm, gene
construct, DNA samples, vectors, breeding material, parental lines, trade
related techniques, production techniques, marketing information or
administrative information etc., which may come into his / her possession
during his / her employment with the COMPANY.
10.3 During the period of Suspension, the EMPLOYEE shall be entitled to

only the subsistence allowance in accordance with the COMPANY’S Policy.
However, if the EMPLOYEE is proven to be ‘Not Guilty’ under the
disciplinary proceedings, he/ she shall be entitled to the entire salary for the
time taken in conclusion of the disciplinary proceedings. The EMPLOYEE
shall also be reinstated to his existing post with immediate effect.
In witness whereof both the parties have signed the agreement.
Signature of the EMPLOYEE: for Company

Chairman and
Managing Director
WITNESS:
1. ________________________
2. _________________________
6.3 NON DISCLOSURE AGREEMENT

At different times, during the creation of intellectual property as well as at the
time of acquisition of intellectual property or transfer of technology, the parties
may enter into a non disclosure agreement, independent of the main agreement.
The non disclosure agreements precedes the main agreement and seeks to protect
all confidential information written or oral that may be exchanged between parties
for taking informed decision on the main activity. Thus while the main agreement
such as transfer of technology may have a non disclosure clause, they will usually
be a preceding non disclosure agreement to protect the interest of the disclosing
party that discloses its confidential and proprietary information.
A non-disclosure agreement (NDA) also called confidentiality agreement or a

confidential disclosure agreement (CDA), or secrecy agreement, is a legal contract
between at least two parties, who wish to share with one another information for
certain purposes, but wish to restrict access to. It is a contract through which the
parties agree not to disclose information covered by the agreement. An NDA
creates a confidential relationship between the parties to protect any type of
confidential and proprietary information or a trade secret.
25
Tools for Negotiation Non-disclosure agreements are commonly signed when two organizations or
individuals are considering doing business and need to understand the processes
used in each other business for the purpose evaluating the potential business
relationship. NDAs can be “mutual”, meaning both parties are restricted in their
use of the materials provided, or they can restrict the use of the material by a
single party.
It is also possible for an employee to sign an NDA or NDA-like agreement with

an employer. In fact, some employment agreements will include a clause
restricting employees’ use and dissemination of company-owned “confidential
information”. In rare cases, the contract may also state that the exercise of the
NDA itself cannot be disclosed.
The other party to the agreement can be any person or an organization. For
example, it may include not only potential business partners but also your own
associates, contractors, employees, or even your families or friends. Normally
confidentiality clauses will form part of a broader agreement, such as a contract
of employment. But for new companies it is important to consider what may
happen in the event that associates/contractors or employees do not, for one
reason or another, actually sign up a contract.
Some common issues addressed in an NDA include:
• Outlining the parties to the agreement.
• The definition of what is confidential, i.e. the information to be held
confidential. Modern NDA will typically include a list of types of items
which are covered, including unpublished patent applications, know-how,
schematic, financial information, verbal representations, customer lists,
vendor lists, business practices/strategies, etc.
• The exclusion room what must be kept confidential. Typically, the restrictions
on the disclosure or use of the confidential data will be invalid if:
a) The recipient had prior knowledge of the materials;
b) The recipient gained subsequent knowledge of the materials from another
source;
c) The materials are generally available to the public; or
d) The materials are subject to subpoena. In any case, a subpoena would more
likely than not override a contract of any sort.
• Provisions restricting the transfer of data in violation of national security.
• The term (in years) of the confidentiality, i.e. the time period of confidentiality.
• The term (in years) the agreements is binding.
• Permission to obtain ex parte injunctive relief.
• The obligations of the recipient regarding the confidential information,
typically including some version of obligations:
1) To use the information only for enumerated purpose;
2) To disclose it only to person with a need to know the information for those
purposes;
26
3) To use appropriate efforts (not less than reasonable efforts) to keep the Contractual Obligations
information secure; reasonable effort is often defined as a standard of care
relating to confidential information that is no less rigorous than that which
the recipient uses to keep its own similar information secure; and
4) To ensure that anyone to whom the information is disclosed further abides
by obligations restricting use, restricting disclosure, and ensuring security
at least as protective as the agreement.
• Types of permissible disclosure – such as those required by law or court
order.
For example: Sabeer Bhatia, the founder of Hotmail, is reported to have collected
over 400 NDAs from employees, friends and roommates. He believes that his
secrecy efforts gave him a crucial six-month lead on the competition. He
eventually sold hotmail to Microsoft for a reported $400 million in stock.
Elements of non disclosure agreement - There are five important elements in a

nondisclosure agreement:
• definition of confidential information
• exclusions from confidential information
• obligations of receiving party
• time periods, and
• miscellaneous provisions.
Definition of Confidential Information - Every nondisclosure agreement
provides a list of the types or categories of confidential information to be protected
in the agreement. The purpose is to establish the boundaries, or subject matter,
of the disclosure, without actually disclosing the secrets. For example, an NDA
may define confidential information by listing the various types of information
considered confidential, such as: Confidential information includes programming
code, financial information, related software materials and innovative processes.
When reviewing your agreement, make sure something on the list fits your type
of disclosure.
Exclusions From Confidential Information - Every nondisclosure agreement

excludes some information from protection, meaning that the party that receives
the excluded information has no obligation to protect it. These exceptions are
based on established principles of law—the most important one being that
information is not protected if it was created or discovered by the receiving party
prior to (or independent of) any involvement with the disclosing party. For
example, if another company develops an invention with similar trade secret
information before being exposed to the disclosing party’s secrets, then that
company is still free to use its independently created invention.
Obligations of the Receiving Party - The nondisclosure agreement will generally

state that the receiving party must hold and maintain the information in confidence
and limit its use. Under most state laws, the receiving party cannot breach the
confidential relationship, induce others to breach it or induce others to acquire
the secret by improper means. Most businesses will accept these contract
obligations without discussion.
27
Tools for Negotiation Time Periods - Some agreements require that the receiving party maintain the
secret information for a limited period of years, including language such as “the
receiving party shall not use or disclose the secret for a period of five years from
the date of execution of the agreement.” You can often negotiate the time period.
Disclosing parties want an open period with no limits; receiving parties usually
want a short period. Five years is a common length in American nondisclosure
agreements, although many companies insist on only two or three years. In
European nondisclosure agreements, it is not unusual for the period to be as long
as ten years. Ultimately, the length you decide to use will depend on the relative
bargaining power of the parties.
Miscellaneous Provisions - Miscellaneous terms (sometimes known as

“boilerplate”) are included at the end of every agreement. They include such
matters as which state’s law will apply in the event the agreement is breached,
whether arbitration will be used in the event of a dispute or whether attorney
fees will be awarded to the prevailing party in a dispute.
SAMPLE
Basic non disclosure agreement:
This Nondisclosure Agreement (the “Agreement”) is entered into by and
between _______________ with its principal offices at _______________,
(“Disclosing Party”) and _______________, located at _______________
(“Receiving Party”) for the purpose of preventing the unauthorized disclosure
of Confidential Information as defined below. The parties agree to enter
into a confidential relationship with respect to the disclosure of certain
proprietary and confidential information (“Confidential Information”).
1. Definition of Confidential Information. For purposes of this

Agreement, “Confidential Information” shall include all information
or material that has or could have commercial value or other utility in
the business in which Disclosing Party is engaged. If Confidential
Information is in written form, the Disclosing Party shall label or stamp
the materials with the word “Confidential” or some similar warning. If
Confidential Information is transmitted orally, the Disclosing Party shall
promptly provide a writing indicating that such oral communication
constituted Confidential Information.
2. Exclusions from Confidential Information. Receiving Party’s

obligations under this Agreement do not extend to information that is:
(a) publicly known at the time of disclosure or subsequently becomes
publicly known through no fault of the Receiving Party; (b) discovered
or created by the Receiving Party before disclosure by Disclosing Party;
(c) learned by the Receiving Party through legitimate means other than
from the Disclosing Party or Disclosing Party’s representatives; or (d)
is disclosed by Receiving Party with Disclosing Party’s prior written
approval.
3. Obligations of Receiving Party. Receiving Party shall hold and maintain

the Confidential Information in strictest confidence for the sole and
exclusive benefit of the Disclosing Party. Receiving Party shall carefully
restrict access to Confidential Information to employees, contractors
28
and third parties as is reasonably required and shall require those persons
to sign nondisclosure restrictions at least as protective as those in this
Agreement. Receiving Party shall not, without prior written approval
of Disclosing Party, use for Receiving Party’s own benefit, publish,
copy, or otherwise disclose to others, or permit the use by others for
their benefit or to the detriment of Disclosing Party, any Confidential
Information. Receiving Party shall return to Disclosing Party any and
all records, notes, and other written, printed, or tangible materials in its
possession pertaining to Confidential Information immediately if
Disclosing Party requests it in writing.
4. Time Periods. The nondisclosure provisions of this Agreement shall

survive the termination of this Agreement and Receiving Party’s duty
to hold Confidential Information in confidence shall remain in effect
until the Confidential Information no longer qualifies as a trade secret
or until Disclosing Party sends Receiving Party written notice releasing
Receiving Party from this Agreement, whichever occurs first.
5. Relationships. Nothing contained in this Agreement shall be deemed

to constitute either party a partner, joint venturer or employee of the
other party for any purpose.
6. Severability. If a court finds any provision of this Agreement invalid or

unenforceable, the remainder of this Agreement shall be interpreted so
as best to effect the intent of the parties.
7. Integration. This Agreement expresses the complete understanding of

the parties with respect to the subject matter and supersedes all prior
proposals, agreements, representations and understandings. This
Agreement may not be amended except in a writing signed by both
parties.
8. Waiver. The failure to exercise any right provided in this Agreement

shall not be a waiver of prior or subsequent rights.
This Agreement and each party’s obligations shall be binding on the

representatives, assigns and successors of such party. Each party has signed
this Agreement through its authorized representative.
_________________________________________________ (Signature)
___________________________ (Typed or Printed Name)
Date: _______________
__________________________________________________ (Signature)
___________________________ (Typed or Printed Name)
Date: _______________
29
6.4 INDEMNIFICATION
Indemnification: Indemnification is another way to have the licensing patent
owner share the risk of an uncertain patent landscape. The license can ensure the
inclusion of an indemnification clause in the licensing agreement. The licensing
patent owner then agrees to defend the license user form patent infringement
claims by third parties. This is a sound arrangement to have in cases where the
risk factor is zero.
However, obtaining indemnification from the licensing patent owner is usually

difficult. The best way to prepare for indemnification negotiations is to properly
assess the level of risk posed by the patent landscape. The more the license user
knows about the potential threat of third party patents, the more leverage the
license user will have in negotiations.
6.5 ANTI-ROYALTY STACKING

“Royalty stacking” refers to a situation where a product is covered by a number
of separate royalty obligations. These licenses are covered under separate license
agreements with separate licensors. In order to commercialise the product, the
licensee has to pay for all the licenses since they all appear to be stacked or
layered upon each other.
Given this situation, a licensee will want its licensor to share some of the burden
of this stack of royalties. He may request the licensor a deduction of some or all
of the royalties paid by a licensee to third parties, from amounts payable to its
licensor. On his part, the licensor will want to minimize that loss of royalties.
The licensee may wish to stack, or layer the royalty to the two parties, so that the
aggregate of them reduces the total royalty obligations for a particular product,
and reduces correspondingly the possibility that the sum of all royalty obligations
may put the economic viability of the product at a risk.
However, the economics of the product may be such that a combined royalty
cannot be sustained. For instance, the maximum royalty that can be sustained
and be paid upon a product may be 8%, with any greater royalty rate putting at
risk the economic viability of exploiting the product at all. This is where royalty
anti-stacking provisions can be used. For instance, a product may rely upon a
number of separate technologies for the completion of product in the final
commercial form. In the case of a pharmaceutical product, a compound may be
licensed in from another. Both licenses are required to enable the product to be
manufactured and sold.
One mechanism used to reduce the total royalty burden is to include a clause that
the royalty rate will be reduced by a percentage (say, one-half) of the second
royalty rate. For example, where a first royalty rate is 8% and a second license
includes a rate 4%, the resulting royalty rate will be calculated at 6% i.e. 1st
royalties rate 8%* (2nd royalty rate *0.5).
Clauses - A licensee usually tries to build in flexibility into a license agreement

to take care of all eventualities. These clauses relating to anti-royalty stacking
must be very carefully drafted to ensure that the staking royalties do not drain
30
away the licensee’s resources. The usual way to deal with the complex issue of Contractual Obligations
royalty stacking is to include a royalty offset clause. Such clauses operate to
reduce the royalties payable to a licensor in the event the licensee is required to
license patents from other third parties in order to take the product to market.
Elements of anti-royalty stacking clause: In order to avoid the risk of dispute

between the licensee and the licensor as to the royalties payable to the licensor,
the anti-royalty stacking clause should be clear and detailed. The anti-royalty
stacking clauses should address the following;
a) The circumstances in which the deduction can be made. For example, the
deduction will only apply to royalties payable in respect of such rights which
would, in the absence of a licence, be infringed by the licensor’s technology.
The licensee then need not pay the entire royalty.
b) The clauses should also examine the extent to which the third party royalty
payments are to be deducted and the control the licensor has over the third
party licence enter into by product developer.
c) Whether the anti-stacking provision is only accepted by the licensor on the
basis that the royalty rates of all other licensors are reduced proportionately
in response to third party licenses or whether all parties share the royalty
reduction equally?
d) Whether the anti-stacking provision will include a lower limit below which
the licensor’s royalty may not be reduced or whether the licensee will be
required to reach a ceiling of stacked royalties before reductions or credits
for royalties occur?
e) The basis of the deduction including calculation as well as from what source-
royalties or net sales.
Overcoming risk of royalty stacking - In order to limit the risk of royalty stacking
operating as financial obstacle to the product development pathway, it is important
to ensure that the commercial agreements are not just “boiler plate” clauses
especially on payment of royalty.
Other ways to overcome stacking of licenses is by way of creating consortia or a

patent pools, payments other than the royalties and encouraging cross-licensing
agreements.
6.6 SUMMARY
• In this Unit we have discussed on the Contractual Obligation which is the
way for the rights’ owner to make the contract which may be a deed of
assignment or a license agreement to the devolution of rights in the inventions
from the natural person or persons to another person, whether natural or
legal.
• Also there are some other ways to make the contract i.e. employment
agreements, non disclosure agreements, indemnification, anti royalty
stacking.
• Each of these contracts, they have features and functions differently.
31
Tools for Negotiation • The basic concept and the element have been provided to make the better
understanding on each contract.

1) Make the checklist of elements which are important in employment
agreement
2) What is royalty stacking?
3) How to limit the risk of royalty stacking?
6.8 REFERENCE AND SUGGESTED READINGS

1) An Introduction to Intellectual Asset Management by Sunita K. Shreedharan
2) Law of Contracts by Avtar Singh
3) The Law of Contract by P.C. Markanda
32
UNIT 7 ANTICOMPETITIVE PRACTICES
Structure
7.1 Introduction
7.2 Indulgence in Anti-competitive Practices
7.3 Types of Anti-competitive Practices
7.4 Other Forms of Anti-competitive Practices
7.5 Effects and Case Laws
7.6 Non-compete Contracts/Contractual Clauses
7.7 Summary
7.9 Reference and Suggested Readings
7.1 INTRODUCTION
Healthy competition in the market leads to creative and innovative ideas which
provide quality product and services to the consumers. There is a vibrant market
and a persistent rise in productivity it is a given fact that in a competition among
rivals, it is the consumers that stand to gain. For example, entry into market by
consumer giant and the resultant benefit to the consumer or competitive pricing
and resultant benefit to the consumer.
7.2 INDULGENCE IN ANTI COMPETITIVE

PRACTICES
In the course of providing competitive services at competitive prices and as a
result of completion itself, many companies end up indulging in monopolistic
activities to drive completion away from the market. In a free market such
monopolistic activity are abhorrent and are termed as anti competitive practices.
Anti competitive practices encompass a wide range of practices some subtle

while others very overt which trying to control the market in a number of ways
including price fixing, tying in market share fixing, a forming of cartel
(cartelization of market) and dumping in the market. In all fairness a number of
companies in their bid to outdo competition indulge in these practices without
so realizing. It is only as time goes by and they become bigger than their
competition that their anticompetitive practices are noticed.
A point in case is that of Microsoft. European Union Microsoft competition

Case - The case was brought by the Europe Commission of the European Union
(EU) against Microsoft for abuse of its dominant position in the market (according
to competition law). It started as a complaint from the Novell over Microsoft’s
licensing practices in 1993, and eventually resulted in the EU ordering Microsoft
to divulge certain information about its server products and release a version of
Microsoft Windows without Window Media Player. Citing ongoing abuse by
Microsoft, the EU reached a preliminary decision in the case in 2003 and ordered
the company to offer both a version of Windows without Windows Media Player
33
Tools for Negotiation and the information necessary for competing networking software to interact
fully with Windows Desktops and servers. In March 2004, the EU ordered
Microsoft to pay • 497 million, the largest fine ever handed out by the EU at the
time, in addition to the previous penalties, which included 120 days to divulge
the server information and 90 days to produce a version of Windows about
Windows Media Player.
7.3 TYPES OF ANTI COMPETITIVE PRACTICES

The anti competitive practices can be broadly put into 7 categories:
i) Price fixing of a commodity or services - Price fixing is an agreement
between competitors to sell the same product at a pre-determined price.
The idea is to push the price as high as possible, the profit being shared by
all the members. Generally price fixing is illegal, but it may be tolerated by
governments to a certain extent. In circumstances where consumers are the
beneficiaries, price fixing may also be beneficial with governments fixing a
minimum price for essential commodities or regulating the market for
essential products such as petroleum, medicines, etc.. Thus, price fixing
can also involve an agreement to stabilize prices.
For example, In October 2005, the Korean company Samsung pleaded guilty
conspiring with other companies, including Infineon and Hynix
Semiconductor, to fix the price of dynamic random access memory (DRAM)
chips. Samsung was the third company to be charged in connection with the
international cartel and was slapped with a USD 300 million fine, the second
largest antitrust penalty in US history. In October 2004, four executives
from Infineon, a German chip maker, had received reduced sentences of 4
to 6 months in federal prison and USD 250,000 in fines after agreeing to
help the US Department of Justice with their ongoing investigation of the
conspiracy.
ii) Market allocation: Market allocation or market division schemes are
agreements in which competitors divide markets among themselves which
may be based on customers, products or territories. In such schemes,
competing firm allocate specific customers or types of customers, products,
or territories among themselves.
For example, under a market allocation agreement, the competitors decide
among themselves and allocate market in such as way that each competitor
will be allowed to sell to, or bid on contracts let by, certain customers or
types of customers. In return, each member of the collusion will agree not
to sell to, or bid on contracts let by, customers allocated to the other
competitors.
In other schemes, competitors agree to sell only to customers in certain
geographical areas and refused to sell to, or quote intentionally high prices
to, customers in geographical areas allocated to conspirator companies. Each
member of such a collusion team agrees to sell to consumers only in his
area.
For example, According to various reports Microsoft took part in a number
of market allocation efforts with Netscape, Apple, and Intel in an effort to
minimize the competitive threat to its OS monopoly. Microsoft attempted
34
to limit Netscape to the server market, so Microsoft could dominate the PC Anticompetitive Practices
browser market. It threatened to deny support for Intel’s new generation of
processors. Microsoft also required Apple to make Internet Explorer the
default browser on all Macintosh operating systems
iii) Bid rigging between two or more competitors agree to win the contract
called for a bid: Bid-rigging is a form of fraud, and almost always results
in economic harm to the agency which is seeking the bids, and to the public,
who ultimately bear the costs as taxpayers or consumers. The Explanation
to sub-section (3) of Section 3, of the Competition Act, 2002 defines “bid
rigging” as “any agreement, between enterprises or persons referred to in
sub-section (3) engaged in identical or similar production or trading of goods
or provision of services, which has the effect of eliminating or reducing
competition for bids or adversely affecting or manipulating the process for
bidding.” Some of the common types of bidding are:
a) Bid rotation.
b) Bid suppression.
c) Complementary bidding.
d) Subcontract bid rigging.
For example: A number of office machine distributors agree that, in bidding
for government purchases of typewriters, they will take turns discounting
from list price. Each distributor will bid at a discount only when it is his
turn. The distributors have rigged the bids.
iv) Tying: In this type of collusion, the parties to the agreement tie the goods to
the purchase of a second product which may or may not be related to the
first product. Tying may be classified as horizontal tying or vertical tying.
In horizontal tying, the consumer is required to pay for an unrelated product,
while in vertical tying, the consumer is required to but a products and services
of the same company. For instance, the consumer who has bought a printer
has to but the printer ribbon from the market vendor. Tying may amount to
price discrimination.
v) Cross-licensing and pooling: While pooling arrangements and cross-
licensing agreement provide precompetitive benefits, they can also have
anti-competitive effect. For instance, member of a cross licensing
arrangement decide to enter the market at fixed price, it could lead to anti-
competitive practice. Similarly, if a pooling arrangement deters research
and developments, there could be a deterrent anti-competitive effect. For
example, In re Summit Tech, the Federal Trade Commission (FTC) settled
through consent agreement allegations that a pooling arrangement between
eye surgery patent holders was a horizontal restraint of trade. The pool
gave the firms veto power over decisions to license the pooled patents to
any other licensees, and to set a fee for each surgical procedure performed
by their sub licensees. According to the complaint, the pool reduced or
eliminated competition between its two participants with respect to selling
the surgical equipment and licensing the technology; it deterred entry, and
resulted in a raised cost of using the technology.
vi) Grantbacks: A grantback is an arrangement under which a licensee agrees
to extend to the licensor the right to use the licensee’s improvements to the
35
Tools for Negotiation licensee’s technology. A non-exclusive grantback arrangement is useful and
is procompetitve. However in case of an exclusive grantback in which the
licensee is forced to grant back his innovations will be considered to be a
regressive practice as it demotivates the licensee from conducting research
and development.
vii) Dumping in the market: Anti-competitive practices can include dumping
in the market so that they can wipe out their competitor. This requires a lot
of money to flood the market, and push down the price so that the products
are available at so cheap rate that the competitor is forced to leave the market.
In the short run, there are huge losses incurred by the company indulging in
the anti-competitive practices, but in the long run, he retains a monopoly in
the market.
7.4 OTHER FORMS OF ANTI COMPETITIVE

PRACTICES
The other forms of anticompetitive practices include Cartel. A cartel is a formal
agreement among firms to agree on some points for a division of profits. Cartel
may be an association of producers, traders and service providers, etc, who
amongst themselves enter into an agreement to control prices, production, etc.
Due to the very nature of this agreement, cartel tends to form where there are a
small numbers of sellers in a large market involving homogenous products. Cartel
members collude to increase their own profits by reducing competition. The
colluding members may agree on a number of ways to fix the market to gain
maximum profits. The most dangerous form of anti-competitive practice is the
forming of a cartel.
However, today cartels exist with government sanctions. OPEC, the Organization
of Petroleum Exporting Countries is one such cartel comprising of 12 petroleum
exporting countries3 .
7.5 EFFECTS AND CASE LAWS

It is usually difficult to carry on anti-competitive practices unless the parties
involved have significant market power or government backing.
Although anti-competitive practices often enrich those who practice them, they
are generally believed to have a negative effect on the economy as a whole, and
to disadvantage competing firms and consumers who are not able to avoid their
effects, generating a significant social cost. For these reasons, most countries
have competition laws to prevent anti-competitive practices, and government
regulators to aid the enforcement of these laws.
Taming Hindustan Lever in Bhutan - An example of how small landlocked country
like Bhutan could stop anti-competitive practices by taking a big MNC head on
deserves a mention here. Over 80% of goods sold in Bhutan come from India.
All Indian companies operate through local wholesale distributors in Bhutan,
who are licensed by the Bhutanese government to operate as such. In 1994, the
King of Bhutan directed the Ministry of Trade and Industry (MTI) to regulate
the dealership of Indian companies. Following this, it promulgated a regulation
to demonopolise the wholesale distribution trade in Bhutan. It had two main
36
provisions. Firstly any trader will not hold more than 10 agencies, thus widening Anticompetitive Practices
the scope and opportunity; secondly, no single firm will be the sole agent for any
companies selling goods in Bhutan. At that time, HLL was operating through
the Tashi Business Group as its sole distributors. Tashi is the biggest business
house in Bhutan with varied interests from hotels to cooking gas, etc, and its
owner are related to the royal family. In response to the MTI’s directive, the HLL
responded that since the market in Bhutan is too small it does not feel the necessity
of appointing another agency. The turnover of HLL in Bhutan at that time was
in the range of Rs. 15 mn or USD 326,000 per annum.
Anyway, the MTI insisted on HLL to appoint another agency, but the firm’s
response was evasive. HLL dodged MTI by claiming that either the new applicant
party has little capital or that is has no experience of trading in consumers
goods and so on. Finally, the MTI suggested the name of the Food Corporation
of Bhutan, a government company, which had both capital and distribution
network. Yet HLL did not respond positively. This time, the MTI sent an ultimatum
to HLL that it will cancel Tashi’s license to operate as HLL’s wholesaler. This
worked and HLL soon appointed FCB as its second wholesaler.
FCB rose to the occasion and soon multiplied HLL’s business in Bhutan to nearly
INR 40-45 million by aggressive marketing through its 75 sub-distributors in
the whole country. Today, HLL is happy that its business has nearly quadrupled
by creating new markets, where Tashi could never have reached or was too
complacent to make the efforts. In another similar situation, Nestle India Ltd
heeded MTI’s advice and it has more than two wholesalers.
7.6 NON COMPETE CONTRACTS AND

CONTRACTUAL CLAUSES
A very subtle way of imposing anti competitive practices on companies or
professionals is the use of non compete contracts. Ordinarily one year about the
non compete contract which professional leave their companies and move to
another company under the non compete clause a person may not join a
competition organization for X number of years. While may sound fair, it restricts
a professional from applying his knowledge in his field of expertise and earn a
livelihood. In many cases this restriction may extend from 5 to 10 years. However,
a contract which has for its object a restraint of trade is prima facie void. Section
27 of the Indian Contract Act. It is significant that in Superetendence Co. of
India v. Krishan Murgai, AIR 1980 SC 1717, a restraint of two years after the
service was held reasonable. This of course is subject to the facts of case.
7.7 SUMMARY
• In this Unit, Anti-Competitive Practices which is very crucial under
Intellectual Property Rights has been learnt. This term has played very
significant role in the market especially in the current situation of the market
which is plenty of the competitive products with the competitive price.
Healthy competition in the market leads to creative and innovative ideas
which provide quality product and services to the consumers.
• In addition there are many forms of Anti-Competitive Practices which they
are functioning i.e. price fixing of a commodity or services, market allocation,
Cross-licensing and pooling, tying, grants back etc. 37
Tools for Negotiation • In addition the discussion on the effect of such Anti-Competitive Practices
and the case law has been provided.

1) List out forms of anti-competitive practices.
2) Is Cross-licensing and pooling anti-competitive? Explain with examples.
3) Define cartel.

1) Exploring International Business Environments, by J.J. Sullivan
2) On ‘Patent Trolls’ and Injunctive Relief by Alexander Polorak
3) BlackBerry maker, NTP ink $612 million settlement by Rob Kelly
38
Anticompetitive Practices
UNIT 8 PROTECTION AGAINST
ANTICOMPETITIVE PRACTICES
IN INDIA
Structure
8.1 Introduction
8.2 MRTP Act
8.3 MRTP Commission
8.4 Competition Act
8.5 Anti-competitive clauses in statutory law and common law
8.1 INTRODUCTION
The survival of free markets and competition go hand-in-hand. This combination
in turn provides consumers with lower prices and increased variety of products
and services. Such markets provide choice which would not be possible in a
monopolistic market. To prevent monopoly by private companies with vested
interests, governments have been taking a deep interest in the licensing
arrangements as well as the merger and acquisition exercise undertaken by
companies. In fact, a number of countries have passed laws regulating anti-
competitive practices.
One may well ask “what are the anti-competitive practices”. Anti-competitive
practices or anti-trust activities are practices indulged in by companies to corner
the largest market share by restricting or removing competition from the market
place. This may be achieved in a number of ways including:
a) By way of execution of agreements that restrict free trade. One example of
this is the formation of cartels.
b) Abusive practices indulged in by the companies over the others leading to
dominant position such as entering into tying arrangement, predatory pricing
and refusal to the deal.
c) Entering into transactions such as mergers and acquisition leading to the
formation of large companies that may control the entry of goods and pricing
in the consumer market.
In India, such monopolistic and anti-competitive practices have been dealt with
through the Monopolistic and Restrictive Trade Practices Act, 1969 (MRTP Act)
followed by the Monopolies and Restrictive Trade Practices Commission (MRTP
Commission). Presently, the Competition Act 2002 is in force.
8.2 MONOPOLIES AND RESTRICTIVE TRADE

PRACTICES ACT, 1969 (MRTP ACT)
The Monopolistic and Restrictive Trade Practices Act, 1969, was enacted:
a) To ensure that the operation of the economic system does not result in the
concentration of economic power in hands of few, 39
Tools for Negotiation b) To provide for the control of monopolies, and
c) To prohibit monopolies and restrictive trade practices.
According to the Section 2(o) of the Act, a restrictive trade practice is a trade
practice which:
a) Prevents, distorts or restricts competition in any manner; or
b) Obstructs the flow of capital or resources into the stream of production; or
c) Which tends to bring about manipulation of prices or conditions of delivery
or affected the flow of supplies in the market of any goods or services,
imposing on the consumers unjustified cost or restrictions.
A monopolistic trade practice is deemed to be prejudicial to the public interest,

unless it is expressly authorised under any law or the Central Government permits
to carry on any such practice. A monopolistic trade practice is one, which has or
is likely to have the effect of:
a) Maintaining the prices of goods or charges for the service at an unreasonable
level by limiting, reducing or otherwise controlling the production, supply
or distribution of goods or services;
b) Unreasonably preventing or lessening competition in the production, supply
or distribution of any goods or services whether or not by adopting unfair
methods or fair or deceptive practices;
c) Limiting technical development or capital investment to the common
detriment;
d) Deteriorating the quality of any goods produced, supplied or distributed;
and
e) Increasing unreasonably-
– The cost of any production of any goods; or
– Charges for the provision, or maintenance of any services; or
– The prices for sale or resale of goods; or
– The profits derived from the production, supply or distribution of any
goods or services.
The MRTP laws were inspired by the Directive Principles of State Policy aimed
at securing social justice with economic growth. The thrust areas of protection
under this Act were the prevention of concentration of economic power and
control of monopolies by way of:
a) Prohibition of restrictive trade practices;
b) Prohibition of monopolistic trade practices;
c) Prohibition of unfair trade practices.
An unfair trade practice is one where companies indulge in:
• Misleading advertisements;
• Bargaining sales;
40
• Offering of gifts or prizes or conducting promotional contests with the Protection Against
Anticompetitive Practices in
intention of not providing the promised prizes; India
• Hoarding or destruction of goods;

• Non-compliance of prescribed product safety standards.
Under the MRTP Act, a regulatory body had been set up to deal with offences
such as:
• Refusal to deal
• Tie-up or tying as mentioned earlier.
• Exclusive dealing.
• Price discrimination.
• Resale price maintenance.
• Area restriction or market allocation.
A monopolistic trade practice is deemed to be prejudicial to the public interest,
unless it is expressly authorized under any law or the Central Government permits
to carry on such practice.
Under the MRTP Act, where any monopolistic, restrictive or unfair trade practice
that had caused damage to any Government, or trader or consumer, an application
could have been made to the Commission asking for compensation. Whenever,
any such damage has been caused to the number of persons having the same
interest, compensation can be claimed with the permission of the commission,
by any of them on behalf of all of them.
8.3 MRTP COMMISSION

The Monopolies & Restrictive Trade Practices Act, 1969 is the first
enactment to deal with competition issues and came into effect on 1st June
1970. Since its enactment, the MRTP Act has been amended repeatedly in
1974, 1980, 1982, 1984, 1985, 1986, 1988, and 1991. It has now been
repealed with effect from 1 September 2009 with the passing of the
Competition (Amendment) Bill 2009 which established the Competition
Appellate Tribunal. All matters pending before the MRTPC stand transferred
to the CAT..
The MRTP Commission was established in 1970 under Section 5(1) of the MRTP
Act, 1969. The Commission was empowered to enquire into Monopolistic or
Restrictive Trade Practices upon a reference from the Central Government or
upon its own knowledge or information. The MRTP Act provides for appointment
of a Director General of Investigation and Registration for making investigations
for the purpose of enquiries by the MRTP Commission and for maintenance of
register of agreements relating to restrictive trade practices.
The MRTP Commission functioned in two capacities, namely, advisory and

administrative. In case of monopolistic practices, the Commission has only
advisory role. On a reference being made by the Government, it enquiries whether
any monopoly has developed leading to concentration of economic power in a
41
Tools for Negotiation few hands. It has to give its report to the Government and the final decision on
the report lies with the Government. In regard to restrictive trade practices, the
Commission has been given the status of a Court and its verdict is mandatory. Its
orders were, however, subject to appeal to the Supreme Court.
It was the duty of the MRTP Commission to protect the consumers by keeping
the market place competitive. It is presumed that competition in the market offers
fair prices through the operation of the law of demand and supply. In a free
market, price mechanism regulates market conditions objectively and impartially.
The Commission, whenever satisfied, can take appropriate action, to prevent
unfair restrictive trade practices. The Commission can take direct action to prevent
unfair trade practices like resale price maintenance, exclusive dealership, boycott,
etc.
The MRTP Commission (1994) in Vallal Peruman and Dillep Singh Bhuria v.
Godfrey Philips (India) Ltd. – IA 91/92 in UTPE 180/92 – MRTP Commission,
New Delhi, 24 May 1994 ruled that manipulation, distortion, contrivances and
embellishments, etc, by way of misuse of trademarks invite the application of
MRTP Act.
8.4 THE COMPETITION ACT, 2002

While unfair trade practice provisions were included by way of one of the
amendments, the general perception is that the MRTP Act does not have enough
“teeth” to enforce the law. A need has been felt for legislation with greater
enforcement powers. The Government appointed a committee in October 1999
to examine the existing MRTP Act for shifting the focus of the law from curbing
monopolies to promoting competition and to suggest a modern competition law.
Pursuant to the recommendations of this committee, the Competition Act, 2002,
was enacted on 13th January 2003.
It provides for different notifications for making different provisions of the Act
effective including repeal of MRTP Act and dissolution of the MRTP Commission.
The provision relating to repeal of MRTP Act has not yet been notified. Certain
provisions such as those relating to establishment of the Commission, appointment
of Chairperson and Members, appointment of staff, undertaking of competition
advocacy have been notified. Other provisions of the Act are yet to be notified
such as those relating to adjudication of anti-competitive practices and regulation
of combinations. The objectives of the Competition Act are to prevent anti-
competitive practices, promote and sustain competition, protect the interests of
the consumers and ensure freedom of trade.
The Act addresses the concern of anti-competitive practices that may accompany
the exercise of intellectual property rights. As per the Competition Act, 2002
there are three types of anti-competitive practices:
a) Anti-competitive agreements,
b) Abuse of dominant position,
c) Acquisition and merger.
The objectives of the Act are sought to be achieved through the instrumentality
of the Competition Commission of India (CCI) which has been established by
42
the Central Government with effect from 14th October, 2003. The functions of Protection Against
the CCI are as follows: India
• CCI shall prohibit anti-competitive agreements and abuse of dominance,

and regulate combinations (merger or amalgamation or acquisition) through
a process of enquiry.
• It shall give opinion on competition issues on a reference received from an
authority established under any law (statutory authority)/Central
Government.
• CCI is also mandated to undertake competition advocacy, create public
awareness and impart training on competition issues.
The Commission may initiate enquiry into anti-competitive agreements/abuse

of dominance on its own on the basis of information and knowledge in its
possession, or on receipt of a complaint, or on receipt of a reference. On its own,
or receipt of complaint/ reference, if the Commission is of the opinion that there
is a prima facie case, it shall direct the Director General, appointed under the
Act, to investigate the matter and report his findings. The Commission can pass
the following orders in case of anti-competitive agreements and abuse of
dominance:
• During the course of enquiry, the Commission can grant interim relief
restraining a party from continuing with anti competitive agreement or abuse
of dominant position
• Impose a penalty of not more than 10% of turn-over of the enterprises and
in case of cartel - 3 times of the amount of profit made out of cartel or 10%
of turnover of all the enterprises whichever is higher
• After the enquiry, the Commission may direct a delinquent enterprise to
discontinue and not to re-enter anti-competitive agreement or abuse the
dominant position
• Award compensation
• Modify agreement
• Recommend to the Central Govt. for division of enterprise in case it enjoys
dominant position.
The parties in person or through authorized representative or through a legal

practitioner or a practicing Company Secretary/Chartered Accountant/Cost and
Works Accountant can represent the parties before the Commission. During the
course of any proceeding before it, a Statutory Authority may make a reference
for opinion if any party raises an issue that the decision of the authority is likely
to be contrary to the provisions of the Competition Act. Yes. The Central
Government, in formulating policy relating to competition, may seek opinion of
the Commission by making a reference which the Commission is mandatorily
required to give within sixty days from the date of reference.
43
8.5 ANTI-COMPETITIVE CLAUSES IN
STATUTORY LAW AND COMMON LAW
The Intellectual Property laws are is direct conflict with the anti-competitive
laws. While the former provides exclusive rights bordering on monopoly, the
latter strikes at the very root of monopolistic ventures. This interesting dilemma
is reconciled through the incorporation of a series of checks and balances built
in the IP laws themselves. One such example of checks and balances is the
compulsory license provisions in the copyright and patent law as discussed above.
The strongest and the most potent of the IP laws namely the Patent Law, has
around six mechanisms built into the law including provisions relating to
Compulsory Licence, acquisition by Government and use by Government for
public non-commercial use, The law goes on further to lay down strictures on
voluntary licences, holding clauses having restrictive conditions are void ab initio
and can be severed from the contract (Sections 140 and 141 of the Patents Act
1970).
8.6 SUMMARY
• In this Unit the clear picture of the protection of Anti-Competitive Practices
in India under the relevant provisions of law has been provided i.e. MRTP
Act, Competition Act, 2002.
• This combination, survival of free markets and competition go hand-in-
hand, provides consumers with lower prices and increased variety of products
and services. There is choice which would not be possible in a monopolistic
market.
• To prevent monopoly by private companies with vested interests,
governments have been taking a deep interest in the licensing arrangements
as well as the merger and acquisition exercise undertaken by companies.
• This may be achieved in a number of ways of execution of the agreements,
abusive practices, and the transaction like merger and acquisition.

1) Write a note on MRTP Act? Why was it repealed?
2) Describe briefly the composition and functions of the MRTP Commission.
3) What are the salient features of the Competition Act, 2002?

1) An Introduction to Intellectual Asset Management by Sunita K. Sreedharan
2) The Competition Act, 2002
1
IpInsight.com, May 12, 2006, “On ‘Patent Trolls’ and Injunctive Relief” by
Alexander Polorak
44
2 Protection Against
CNNMoney.com, March 3, 2006, “BlackBerry maker, NTP ink $612 million
settlement” by Rob Kelly, CNNMoney.com staff writer India
3
An Introduction to Intellectual Asset Management, by Sunita K. Sreedharan
published by CCH on page 282
45

Course 9 Block 2 SIM

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Course 9 Block 2 SIM

Uploaded by

Copyright:

Available Formats

Indira Gandhi

National Open University MIR-038

A case in point is that of Polaroid-Kodak battle (Polaroid Corp v Eastman Kodak

An assignment is usually in writing either as a separate assignment agreement or

For instance the acquisition of Amati Communications by Texas Instruments in

Significance of Assignments: As an assignment generally involves the complete

Types of Assignments: Based on the execution of assignment deeds by the

5.3 LICENSE AS A TOOL FOR NEGOTIATION

As cautioned earlier, the terms and conditions of a license agreement must be

• Periodic inspection of books of accounts and inventory,

Government use - Use of an intellectual property by the Government is a feature

Difference between Assignment and License:

Cross licensing: A cross-license is a form of bargain tool where two or more

A cross-license is simply an agreement between two companies that grants each

Cross-licensing of intellectual property such as patents is almost a norm in some

Cross-license agreements provide a means for avoiding head-on confrontation

Essentially, a patent pool is an agreement between two or more patent owners to

A well-known example of a patent pool is that formed by Sony, Philips and

The advantages and disadvantages can be enumerated as follows:

The history of technology development in the nineteenth and twentieth century

5.6 PATENT TROLLS

An recent example of patent troll at work is seen in the slew of “BlackBerry

5.7 COMPULSORY LICENSE

Examples of compulsory license are available in different areas of intellectual

The principle behind having compulsory licensing provision is to provide a system

Compulsory license - Copyright

Compulsory license – Patent

Reverting to compulsory licenses, a better way to address compulsory licensing

Article 31 of the Agreement on Trade-Related Aspects of Intellectual Property

5.9 SELF ASSESSMENT EXERCISE

5.10 REFERENCES AND SUGGESTED READINGS

6.2 EMPLOYMENT AGREEMENT

• the employee’s confidentiality obligations,

Sample Employment Agreement

THIS AGREEMENT dated ________ day of___________, _______ which

[…………. (name and address of Group Company if required) …….], which

[…………(name of employee)………..] a citizen of ………… [name of

Whereas the COMPANY is desirous of engaging the EMPLOYEE and the

And Whereas the COMPANY is a limited company engaged in research,

And Whereas, the EMPLOYEE is a person with desired qualifications who

NOW THEREFORE it is agreed by and between the parties hereto and in

The EMPLOYEE’s employment under this Agreement shall commence from

As full compensation for all services rendered by the EMPLOYEE to the

5. Assignment of Inventions by the EMPLOYEE to the COMPANY

The Intellectual Property created as the outcome of any work of the

7.1 The EMPLOYEE shall not disclose any information pertaining to

7.4 The EMPLOYEE shall not, encourage, instigate, indulge or include

8.3 The EMPLOYEE shall extend full cooperation to the COMPANY at

8.4 On satisfactory completion of formalities the COMPANY at its

9. Termination of Service of the Employee by the Company

(i) He/ She is found to be involved in corrupt/ fraudulent practices viz.

(ii) He/She is carrying away any research information, hybrid combinations,

10. Disciplinary Action Against the Employee

10.1 If the EMPLOYEE is alleged to be guilty of any act as described in

10.3 During the period of Suspension, the EMPLOYEE shall be entitled to

In witness whereof both the parties have signed the agreement.

Signature of the EMPLOYEE: for Company

6.3 NON DISCLOSURE AGREEMENT

A non-disclosure agreement (NDA) also called confidentiality agreement or a

It is also possible for an employee to sign an NDA or NDA-like agreement with

Elements of non disclosure agreement - There are five important elements in a

Exclusions From Confidential Information - Every nondisclosure agreement

Obligations of the Receiving Party - The nondisclosure agreement will generally

THIS AGREEMENT dated __ day of_, ___ which