Here is the second article of the series, 5 Important IP Contracts.  In this article, Varshita Dogra of VIPS discusses Assignment or Transfer Contracts.

Part 1 of the series can be visited by clicking the link below.

IP Licensing Agreements – The First in The Series of 5 Important IP Contracts

Assignment or Transfer Contracts

An Assignment Agreement is a contract that transfers the whole or part of intellectual property rights by the owner of such IP to the assignee, who acquires ownership over such IP including the right to prevent others from exploiting the rights so assigned. In simple terms, assignment of IP means sale of IP. If the assignor, after assigning the IP uses it, such use will be considered an infringement.

An assignment agreement must be in conformity with the Indian Contract Act, 1872 and if required, must be duly stamped, when required, as per the provisions of the Indian Stamp Act, 1899. Specific laws governing specific forms of IP provide in detail about when, how and to what extent assignment of rights is permitted under the law. Registration of assignment of IP depends on whether the IP is registered or not.

Assignment can either be complete or partial in nature. Partial assignment of Copyright is also possible, as specified in Section 18 of Indian Copyright Act. Assignment can be limited in terms of use or territory as well. The only difference between license and assignment would be that the ownership of the right does not transfer in a license, whereas the ownership changes in an assignment.

Intellectual property created by students in a University Research and Development (R&D) programme can be assigned by the student in the absence of an agreement, as the student is the owner of the intellectual property created. Most universities, however, have policies requiring students to sign pre-invention agreements regarding the same. [3]

Types of assignment:

1. Legal Assignment – An assignment of an existing registered intellectual property is a legal assignment, where the assignee would become the owner of the intellectual property and would acquire all or partial rights with respect to the property.
2. Equitable Assignment – A grant of right before the IP is registered is an equitable assignment, which gives the assignee the right to call upon the assignor when the IP is granted, to assign the same to the assignee. An equitable assignee cannot have his name entered in the register as proprietor of the IP, but he may have notice of his interest in the IP entered in the register.
3. Mortgage – A mortgage is an agreement in which the intellectual property is wholly or partially transferred to assignee in return for a sum of money. Once the assignor repays the sum to the assignee, the rights with respect to the property are restored with the assignor. The person in whose favour a mortgage is made is not entitled to be the owner, but will be called the mortgagee. [4]

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Key Points to remember while drafting an Assignment Contract

• Scope and Object of the Agreement

The first task at hand is to analyse the scope of the assignment, identification of the rights assigned and the extent of the assignment. While defining the scope of the assignment of an IP, it is also important to define the status of the accompanying IP as well. For example, in a patent assignment, the know-how associated with the patent would be the accompanying IP. It is important to remember that only an existing and future right in copyright is capable of assignment. The agreement shall specifically define the ‘intellectual property’ which is being assigned under the agreement.

• The Clause stating the actual assignment of IP

A specific clause stating the conveyance of ownership of the IP must be included in the agreement. This is the defining clause for the scope of the assignment. The right to sue for infringement of IP before the assignment is made, can also be transferred when the IP is assigned perpetually. If any approvals are to be obtained by the assignor, the effect of not being able to obtain such approval must be specified in the agreement.

• Term of Assignment

An assignment can be perpetual in nature or for a fixed definite period of time. The same must be specified in the agreement assigning IP to the assignee. In case the parties have agreed for a process to renew the term of the agreement, the same should be specified in the agreement. In case the assignment is for a fixed period of time, the agreement must also specify the consequences on expiration of such fixed term. For example, who would have the right to sue for infringement for the duration of the agreement. In absence of a term specified in the assignment agreement, the term will be deemed to be the duration of the period under which the intellectual property rights may be enforced under the laws of India.

• Territory of Assignment

The territory for which the assignee has acquired the rights in an intellectual property as an owner is to be clearly specified to avoid confusion. As assignment is transfer of ownership, the assignor will not be the owner of the IP in the particular territory till the end of term of the agreement.

• Future Transfers

Generally, when ownership of IP is transferred, it would mean that the right to make any future transfer is also included. But in case of assignment for a fixed term, the agreement can provide for a restriction on the right of the assignee to make future transfers during the term of the agreement. A future transfer can be made only to the extent of the right, that the assignee has acquired in the IP. It is only effective to the extent it is within the scope of any earlier transfer, under which access to or use of the intellectual property was acquired or authorized.

• Warranties

An assignment agreement must include warranties from the IP owner stating the following 

1. The assignor is the only owner of the IP assigned, and that he has the authority and capacity to assign the IP
2. The IP has not been licensed; or no right, title or interest has been created in the property towards any third party
3. The IP is free from any burdens, such as infringement of third party rights
4. There are no other obligations to any third party that are inconsistent with the rights and obligations set out in the agreement

Such a clause is important for the assignee to safeguard his interests and protect him from future litigation.

Apart from these provisions, most of the provisions used in an IP License agreement can be used in an assignment contract by careful consideration of the same beforehand and making them fit for an assignment contract.

Difference between an IP License Agreement and IP Assignment

The major difference between assignment and license is that the owner retains the ownership over the intellectual property when he grants a license for the same, whereas when an owner of an intellectual property assigns a right or bundle of rights to another person, he himself loses those rights. As assignment transfer the whole interest in the copyright itself, while a license merely grants the permission to do something and not the ownership of the copyright. Usually the difficulty arises, when the question with respect to whether there has been partial assignment or an exclusive license of the right has been granted arises in the Court.

The Hon’ble Supreme Court analysed the difference between assignment and licensing of Copyright in the case of Deshmukh and Co. (Publishers) Pvt. Ltd. v. Avinash Vishnu Khandekar and Others [2006 (32) PTC 358 (Bom)]. It was held as follows :

“ 1. To determine whether a document is an assignment or merely confers a licence, regard must be given to the substance and not to the form of words used. The question usually arises in the context of whether there has been a partial assignment or an exclusive license of the right in question. The distinction is a slender but an important one.

2. Two proposition in respect of commercial contracts are well recognised. Firstly, that there is no presumption in favour of permanence of an agreement. Secondly, if a contract involved mutual trust and confidence in its fulfilment. Normally, courts would not interpret its term to employ permanence.

3. If the consideration consists of payment of royalties or a share of profits instead of a downright payment, then the copyright is not assigned. It would a license to publish and sell. In this case, payment of royalty instead of a sum of money paid down will also weigh heavily against partial assignment.”

Difference between a License Contract and an Assignment Agreement

In some cases, it is mandatory to enter into an Assignment Agreement such as when the employee is making inventions for the employer. Inventions made in the course of employment are by default owned by the employer, however a contract to this effect can save employer from vexatious litigation. The concept of royalties work better with license instead of assignment. This is because, an assignment being a conveyance of title that is irrevocable, as assignee that fails to pay royalties does not have to deal with the risk of loss of right in the IP, since the assignee owns it unconditionally. An assignment may be appropriate where the IP owner prefers to receive a lump sum price, at the time of the assignment, rather than collecting royalties [5].

Technology Transfer and Licensing Agreements

Technology transfer and licensing agreements are entered into for improving own product by using rights owned by others in the form of patent, utility model, or know-how protected by a trade secret [6]. A detailed analysis on drafting such agreements can be found here.

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ASSIGNMENT AND TRANSFER AGREEMENT – SAMPLE TEMPLATE

This Assignment and Transfer Agreement (“Agreement”) is made as of _________ __, 20__ (“Effective Date”) between ________________. (“Assignee”), and ________________ (“Assignor”). In consideration of the mutual promises and covenants contained in this Agreement, the parties agree as follows:

1. Definitions

1.1 “Assigned Property” means the property listed in Exhibit A and all Intellectual Property and Intellectual Property Rights forming a part of, embodied, in or necessary for use of the property.

1.2 “Intellectual Property” means all technology and intellectual property, regardless of form, including without limitation: published and unpublished works of authorship, including without limitation audiovisual works, collective works, computer programs, compilations, databases, derivative works, literary works, maskworks, and sound recordings (“Works of Authorship”); inventions and discoveries, including without limitation articles of manufacture, business methods, compositions of matter, improvements, machines, methods, and processes and new uses for any of the preceding items (“Inventions”); words, names, symbols, devices, designs, and other designations, and combinations of the preceding items, used to identify or distinguish a business, good, group, product, or service or to indicate a form of certification, including without limitation logos, product designs, and product features (“Trademarks”); and information that is not generally known or readily ascertainable through proper means, whether tangible or intangible, including without limitation algorithms, customer lists, ideas, designs, formulas, know-how, methods, processes, programs, prototypes, systems, and techniques (“Confidential Information”).

1.3 “Intellectual Property Rights” means all rights in, arising out of, or associated with Intellectual Property in any jurisdiction, including without limitation: rights in, arising out of, or associated with Works of Authorship, including without limitation rights in maskworks and databases and rights granted under the Copyright Act (“Copyrights”); rights in, arising out of, or associated with Inventions, including without limitation rights granted under the Patent Act (“Patent Rights”); rights in, arising out of, or associated with Trademarks, including without limitation rights granted under the Lanham Act (“Trademark Rights”); rights in, arising out of, or associated with Confidential Information, including without limitation rights granted under the Uniform Trade Secrets Act (“Trade Secret Rights”); rights in, arising out of, or associated with a person’s name, voice, signature, photograph, or likeness, including without limitation rights of personality, privacy, and publicity (“Personality Rights”); rights of attribution and integrity and other moral rights of an author (“Moral Rights”); and rights in, arising out of, or associated with domain names (“Domain Name Rights”).

2. Assignment. Assignor hereby perpetually, irrevocably, and unconditionally assigns, transfers, and conveys to Assignee and its successors and assigns, all of Assignor’s right, title, and interest in and to the Assigned Property. Assignor further perpetually, irrevocably, and unconditionally assigns, transfers, and conveys to Assignee and its successors and assigns all claims for past, present and future infringement or misappropriation of the Intellectual Property Rights included in the Assigned Property, including all rights to sue for and to receive and recover all profits and damages accruing from an infringement misappropriation prior to the Effective Date as well as the right to grant releases for past infringements. Assignor hereby waives and agrees not to enforce all Moral Rights and all Personality Rights that Assignor may have in the Assigned Property.
3. Consideration. In consideration for assignments made by Assignor under this Agreement, Assignee will pay Assignor $________ dollars.
4. Confidentiality. Assignor must not use any Confidential Information assigned as part of the Assigned Property except for the benefit of Assignee. Assignor must not disclose such Confidential Information to third parties. Assignor must take reasonable steps to maintain the confidentiality and secrecy of such Confidential Information and to prevent the unauthorized use or disclosure of such Confidential Information. Any breach of these restrictions will cause irreparable harm to Assignee and will entitle Assignee to injunctive relief in addition to all applicable legal remedies.
5. Representations and Warranties. Assignor represents and warrants to Assignee that: Assignor exclusively owns all right, title, and interest in and to the Assigned Property; Assignor has not granted and will not grant any licenses or other rights to the Assigned Property to any third party; the Assigned Property is free of any liens, encumbrances, security interests, and restrictions on transfer; to Assignor’s knowledge, the Intellectual Property that is assigned as part of the Assigned Property does not infringe Intellectual Property Rights of any third party; and there are no legal actions, investigations, claims, or proceedings pending or threatened relating to the Assigned Property.
6. Indemnification. Assignor will defend, indemnify, and hold harmless Assignee, and Assignee’s officers, directors, shareholders, successors, and assigns, from and against all losses, liabilities, and costs including, without limitation, reasonable attorneys’ fees, expenses, penalties, judgments, claims and demands of every kind and character that Assignee, its officers, directors, shareholders, successors, and assigns may incur, suffer, or be required to pay arising out of, based upon, or by reason of: the breach by Assignor of any of the representations or warranties made by Assignor under this Agreement; Assignor’s use of the Assigned Property prior to the date of this Agreement; or Assignor’s failure to perform its obligations under this Agreement.
7. Further Assurances

7.1 Assistance. Assignor will take all action and execute all documents as Assignee may reasonably request to effectuate the transfer of the Assigned Property and the vesting of complete and exclusive ownership of the Assigned Property in Assignee. In addition, Assignor will, at the request and sole cost and expense of Assignee, but without additional compensation, promptly sign, execute, make, and do all such deeds, documents, acts, and things as Assignee may reasonably require:

(a) to apply for, obtain, register, maintain and vest in the name of Assignee alone (unless Assignee otherwise directs) Intellectual Property Rights protection relating to any or all of the Assigned Property in any country throughout the world, and when so obtained or vested, to renew and restore the same;

(b) to defend any judicial, opposition, or other proceedings in respect of such applications and any judicial, opposition, or other proceedings or petitions or applications for revocation of such Intellectual Property Rights; and

(c) to assist Assignee with the defense and enforcement of its rights in any registrations issuing from such applications and in all Intellectual Property Rights protection in the Intellectual Property.

7.2 Power of Attorney. If at any time Assignee is unable, for any reason, to secure Assignor’s signature on any letters patent, copyright, or trademark assignments or applications for registrations, or other documents or filings pertaining to any or all of the Assigned Property, whether because of Assignor’s unwillingness, or for any other reason whatsoever, Assignor hereby irrevocably designates and appoints Assignee and its duly authorized officers and agents as its agents and attorneys-in-fact, to act for and on its behalf and stead to execute and file any and all such applications, registrations, and other documents and to do all other lawfully permitted acts to further the prosecution thereon with the same legal force and effect as if executed by Assignor.

8. Miscellaneous

8.1 Injunctive Relief. A breach of this Agreement may result in irreparable harm to Assignee and a remedy at law for any such breach will be inadequate, and in recognition thereof, Assignee will be entitled to injunctive and other equitable relief to prevent any breach or the threat of any breach of this Agreement by Assignor without showing or proving actual damages.

8.2 Binding on Successors. This Agreement will inure to the benefit of, and be binding upon, the parties, together with their respective representatives, successors, and assigns, except that Assignor may not assign this Agreement without the consent of Assignee.Assignee may assign this Agreement in its discretion.

8.3 Governing Law and Jurisdiction. This Agreement will be governed by, and construed in accordance with, the laws of the State of New York without reference to its conflict of laws provisions.With respect to any dispute arising out of or related to this Agreement, the parties consent to the exclusive jurisdiction of, and venue in, the federal and state courts located in New York County, New York.

8.4 Amendment and Waiver. This Agreement may not be amended or modified unless mutually agreed upon in writing by the parties and no waiver will be effective unless signed by the party from whom such waiver is sought. The waiver by any party of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach.

8.5 Severability. If any provision of this Agreement is held invalid by any court of competent jurisdiction, such invalidity will not affect the validity or operation of any other provision, and the invalid provision will be deemed severed from this Agreement.

8.6 Entire Agreement. This Agreement is the entire agreement concerning the subject matter hereof. It supersedes all prior and contemporaneous agreements, assurances, representations, and communications between the parties.

[Assignor] [Assignee]

By:_________________________ By:____________________________

Title:_______________________ Title:__________________________

EXHIBIT A

PROPERTY

References

[3] “Importance of Assignment Agreements under Intellectual Property Laws in India” written by Sindhura Chakravarty; published in the Journal of Intellectual Property Rights, Vol 14, November 2009, pp 513-522

[4] Article on “To License or to Assign a Patent?” published with PSA legal in issue XV, September 2010

[5] ibid

[6] Article on “Technology License Agreement” by WIPO