This article is written by Anurag Mawai, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com.

Introduction

India is the seventh largest economy of the world with close to three trillion dollars’ worth in GDP and over a billion strong workforce. It has been regarded for a long time as the next industrial workhorse of the world. And in this Global Fifth Industrial Revolution, a new kind of right has come to dominate other aspects of business, i.e. a right to intellectual property. Intellectual property (“IP”) rights can be defined as the rights acquired by people over various creations and inventions derived by the faculties of their intellect and genius. These intellectual properties are usually classified as Trademark, Industrial Design Copyright, Trade Secrets, Patent etc. which are governed by different statutes promulgated by the respective legislatures. These laws tend to encapsulate different rights associated with these IPs; while some rights can be specific to those with registered IPs, some are available to all owners of IP. These rights which are derived from such IP are, in simple terms, a way to exploit them for commercial gains in terms of its different uses, modifications, enhancements, etc. If there is no written agreement, IP rights usually remain with the creator of the IP, even if they have been paid by another for creation of the said IP. However, there are some exceptions to this general rule e.g. where a joint venture is undertaken and there is no agreement between the parties to cooperate, both the parties can license the IP independently. It is the prerogative of an IP Attorney to safeguard the interest of their clients and to advise them to protect their respective IP rights through various agreements which provide for the safeguarding, selling, transferring or licensing of the said IP rights. One of such important agreements governing the rights and liabilities of Intellectual Property owners is an IP Assignment Agreement.

What is IP Assignment?

Assignment of intellectual property (IP) means the process by which ownership of some creative work made for a company/organisation/person by an innovator is transferred to the entity which commissioned the said work. This is usually done by making the inventor sign an agreement which details an explicit transfer of all rights and authority over the said commissioner IP made during the course of their engagement to the said commissioning company/organisation/person. In case of employees, this IP Assignment clause is usually attached with either a Confidentiality and Inventions Assignment Agreement (CIIAA) or a Proprietary Information and Inventions Assignment Agreement (PIIAA).

The process of intellectual property assignment consists of transfer of an owner’s rights, title and interest vested in the intellectual property rights. The transferring party (Assignor’) of the intellectual property rights may transfer all or part of his rights – e.g. the copyright owner could assign only some of his economic prerogatives. The transfer of intellectual property rights is made upon a payment of a lump sum or royalties. An IP Assignment Agreement is very crucial for any organisation in today’s time when everything is done through contract employment and in this scenario an independent contractor may be paid by the organisation to develop a program or to create a product and in case the organisation does not have an IP Assignment Clause in the said employment or consultant agreement all the IP rights to the said product will be vested with the said individual only. In this matter a landmark case of Preston Vs. Marathon Oil Co. in the U.S. Court of Appeals is of immense relevance. The facts of the case could be summarized as follows. Yale Preston was an employee of a U.S Oil Company by the name of Marathon Oil Company (“Marathon”), he signed the employment agreements of Marathon. which assigned all intellectual property “made and conceived” during the term of the Agreement to Marathon. The dispute was about a methane extraction device for which Preston claimed to have devised plans before being employed by Marathon, while during the term of the Agreement, Marathon manufactured these devices, obtained a patent for them and deployed them at various plants. Preston contended the ownership and assignment of the device, arguing it to be a prior invention and not covered by the assignment Agreement. The U.S. Court of Appeals conclusively decided the matter on the basis of one simple argument, that the device/invention was not clearly conceived prior to the employment and only a rough idea was drawn, and the full working model was developed during the employment term and so was given in the IP Assignment Agreement which required the invention to be not only conceived but made before the term of the Agreement began. Hence not only do all employers need to have an IP Assignment contract with all employees but they need to have it drafted as astutely as possible to curb any loopholes which may in future cost them billions.

Types of IP Assignment Agreement

• Assignment of Copyright

The Copyright Act, 1957 is the statute governing assignment of copyrights in India. According to Section 19 of Copyright Act, 1957 the deed of assignment shall specify the `rights assigned’, the duration as well as the territorial extent of the said assignment, and the royalty payable, if any. In case the duration of assignment is not specified, it shall be deemed to be for five years and in case the territorial extent is not specified, it shall be deemed to extend within the entire territory of India as confirmed in Delhi High Court judgement of Pine Labs Pvt. Ltd. vs Gemalto Terminals India Pvt. Ltd & Ors. FAO (OS) 635 & 636 of 2009. It is mandatory for the assignor or his agent to give written assent, an oral agreement is invalid in this case. If the assignee fails to exercise any of the rights assigned to him within a period of one year of the assignment, the assignment is deemed to have lapsed unless a contrary provision is made in the Assignment Agreement.

Section 19A details provisions regarding dispute in Copyright Assignment. The section states that the assignor has the right to apply for revocation of the assignment with the Copyright Board, in case an assignee fails to sufficiently exercise the rights assigned to them and in the inquiry carried out by the board it the said failure is not attributable to any act or omission of the assignor. The section also makes the provision that the Copyright Board cannot revoke an assignment unless it deems the terms as too harsh for the assignor. And no such revocation shall be made within a period of five years from the date of assignment.

In some jurisdictions, a copyright assignment is even exempt from stamp duty (As provided in Article 25 of Schedule I of Bombay Stamp Act, 1958).

 For an application for changes in registration of Copyright provisions as laid down in Form V under Rule 16 of Copyright Act, 1958 shall be applicable. This application has to be delivered by hand or by post.

• Assignment of Patents

The Statute governing patent assignment is Patents Act, 1970. This Statute provides for patents to be assigned in partial manner or complete manner in exclusive as well as non-exclusive. Section 68 of Patents Act, 1970 states that a patent assignment must be made in writing and thereafter it should be registered with the Controller to operate as a legally enforceable contract [M/s National Research Development Corporation Vs Ineos ABS Ltd (2012) 5 CTC (IP) 8].

The controller shall ask to be presented with every document which gives effect to the assignment or it is an evidence of the transfer of the IP or it affects the proprietorship of the IP or creates an interest in the said IP along with two copies of the assignment deed and other ancillary documents certified to be true copies. The Controller may further call for such other proof of title or written consent as he may require.

• Assignment of Design

An Assignment of Design can be obtained under provisions of Section 15 of Copyright Act, 1957 or under instrument of design as specified in Rule 37 of Designs Act, 2000. An application for registering the title shall be filed within six months of the execution of the instrument of assignment.

• Assignment of Trademark

A Registered trademark can be assigned as per Rule 68 of Trademark Rules, 2003, by making a request under Form TM-23 or 24 depending if assignment is made to the assignee only or assignment is done to assignee along with the proprietor. This application should contain detailed particulars of the applicant’s claim to the trademark and a duly certified copy which has to be produced at the Registry for inspection during the time of application. 

An unregistered Trademark may be assigned or transmitted without goodwill to the business who has devised it as provided under Section 39 of Trademark Act, 1999.

Key Provisions of an Assignment Agreement

• Object and scope of the Agreement

The Object and Scope Clause is a vital part of any assignment agreement. The Scope of an assignment clause identifies and specifies the exclusive rights with respect to the IP and the extent to which the assignor shall enjoy them. 

The Object of the IP Assignment defines and elaborates on the purposes for which the said assignment of IP can be used the assignor like in a patent assignment for its object i.e. use of patent in commercial use the additional know how of the patent is also deemed as transferred. It is important to know that the assignor can only transfer those rights which he possesses or shall possess in the future as specified in the agreement and so shall the scope be defined.

Where the Assignor is the innovator of the patent as specified in Annexure to the Agreement and specified in reference in this Agreement.

And whereas the Assignor has agreed to assign, sell and transfer the said patent to the assignees for the use and purposes as laid down under the Agreement.

• The Assignment Clause 

The main assignment clause which specifies the transfer or conveyance of ownership of rights over the IP is the keystone to an IP Assignment Agreement.

If a clear outline of the scope of ownership and the procedure of such transfer is not laid out, then the entire IP Assignment Agreement would collapse. 

An IP Assignment clause also details the manner in which such transfer over the right is shifted from the assignor to the assignee e.g. if any particular permission is to be taken and only after such process laid down in the assignment clause is completed does the contract become effective. 

“In pursuance of the Deed/Agreement and in consideration of the payment of consideration in the Agreement, and other good and valid consideration the receipt and validity of which is hereby acknowledged. Assignor hereby conveys, transfers assigns, delivers, and contributes to Assignee all of the Assignor’s right, title, and interest of whatever kind in and to the patent, together with:

1. the goodwill of businesses related to the products, services in respect of which the patents are used and for which they are registered.
2. all income, royalties and damages hereafter due or payable to Assignor with respect to the patent including damages and payments for future infringement or misappropriations.”

• Term of Assignment

Term of an IP Assignment Agreement specifies the time period for which the said assignment over the rights of the IP will operate. This Assignment can be indefinite or for a definite period of time. The Term Clause should also specify the procedure of renewal of the said Agreement, mostly IP Assignment Agreements have an auto renewal clause which states that unless the parties agree to terminate the agreement in writing, it shall renew perpetually for the same term. An assignment can be perpetual in nature or for a fixed definite period of time. 

• Territory of Assignment

The territory clause of an IP Assignment Agreement specifies the territorial limits within which said IP ownership operates. The Assignment Agreement shall clearly lay down the areas and boundaries within which the assignor surrenders his proprietary rights as they will not be surrendered till the Agreement is terminated and territorial boundaries can add the specificity to operation of the IP Assignment especially for commercial ventures.

The Clause for Term and Territory is usually drafted together for e.g.:

“Thus as per the conditions laid down in this Agreement, the Assignor hereby makes the patents an absolute property of the Assignee starting from the Execution Date of this Agreement. This Assignment would operate on a worldwide basis and the Assignees shall be empowered to take all necessary actions to effect the registration of this Agreement in the Registrar’s office of the appropriate jurisdiction.”

• Future Transfers

Usually in perpetual IP Assignment Agreements right to make any future transfers is also included and parties should specify and clarify their intentions in writing regarding these future rights. In a fixed term assignment future transfer rights are very restricted and practically withdrawn. Any future transfer of right by the assignee is limited to the right acquired by him in the Assignment Agreement only as well as limited to the scope and territory within which such assigned right operated in the original assignment agreement.

An Example of Future Transfer Rights Clause in a limited Assignment Agreement:

“Assignee shall not transfer or assign any right, title or interest in the Intellectual Property, or any ancillary rights derived from them, to any third party without the Assignor’s prior written consent. Any purported transfer or assignment in violation of this Clause shall be deemed as null and void.”

• Representations and Warranties

These clauses lay down clear aspects of the Assignor’s liabilities and specify the aspects on which the Assignee can lawfully and easily terminate the Assignment Agreement without much financial hassle.

“The Assignment Agreement should have clear laid out warranties from the Assignor stating various aspects like:

1. Assignor represents and warrants to Assignee that: Assignor exclusively owns all right, title, and interest in and to the Assigned Property;
2. Assignor has not granted and will not grant any licenses or other rights to the Assigned Property to any third party;
3. The Assigned Property is free of any liens, encumbrances, security interests, and restrictions on transfer; 
4. To the best of 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.”

• Confidentiality

A Confidentiality Clause not only serves the Assignor’s interests while the Agreement is in operation but proves to be a vital safeguard in case of termination of Agreement as well. A well drafted confidentiality clause being part of the saving clause in an agreement can prevent losses to Assignor and prevent unauthorized access, use or disclosure of sensitive proprietary information which can prove to be fatal for an enterprise. Confidentiality Clauses paired with a Non-Disclosure Agreement also prove to be an asset in litigation as all the rights which need to be safeguarded are put under the shield of Non-Disclosure and an injunctive order in case of breach is quickly received from the courts.

“The Parties, its agents, employees shall hold and maintain in strictest confidence all Confidential Information, and shall not disclose the said information to any third party, except when necessary for the performance of its obligations under this Agreement, or requested by a statutory, government, or regulatory authority. Notwithstanding the foregoing, Confidential Information shall not include information in public domain or which comes to the knowledge of the public through no fault of the Parties. The Parties agree to enter into a Non-Disclosure Agreement the terms of which shall supersede and which shall survive termination of this Agreement.”

• Indemnification

An Indemnification Clause is essential to protect the Assignee from any future losses or litigation expense which they might have to incur on account of any misrepresentation in the Assignment Agreement. Or any other breach of warranties by the Assignor himself or by his officers, shareholders, successors, partners or assigns. The Indemnification clause protects the Assignee from any expense, judgements, penalties, claims or demands which may be imposed on the Assignee through no fault of his and hence a vital protection against fraud or breach. 

“Assignor agrees to indemnify, defend and hold harmless Assignee and its employees, officers, directors, representatives, and agents against any claim, loss, damage, settlement, cost, expense, or other liability including without limitation attorney’s fees arising or relating to:

1. Assignee’s actual or alleged breach of any obligations in this Agreement.
2. Any actual or alleged infringement of any intellectual property rights of any third party’s rights infringed by the Assignor or its employees, representatives, agents, directors or employees.

Assignor shall use a counsel reasonably satisfactory to the Assignee to defend each indemnified Claim, if at any time Assignee should reasonably determine that any indemnified Claim might adversely affect the Assignee, he may take control of the defense at its expense.”

• Further Assurances

In a Further Assistance Clause, the Assignor assures the Assignee to assist in any further procedural clearances or regulatory permissions which may include registration of documents, defense of any judicial opposition or any other proceedings to effectuate and fully complete the ownership of the IP rights for their complete use and enjoyment Assistance. This clause also enables the Assignee to complete the transfer procedure to use the IP rights seamlessly and make effective use instead of being entangled in legal or procedural hurdles.

“The Assignor further covenants that on the request of the Assignee, it will execute all documents, papers, forms and authorization that may be necessary for securing, completing or vesting in the Assignee full right, title and interest in the Patent.”

• Power of Attorney

Power of attorney is also one of the vital clauses for seamless transfer of the assigned IP rights supposedly if at any time after the assignment agreement is executed Assignee is unable to secure Assignor’s signature on any letters patent, copyright, or trademark assignments or applications for registrations, or for filings relating to the Assigned Property, the assignor can appoint assignee and his authorized officers or agents as his agents, to act for and on its behalf and stead to execute and file any and all such applications, registrations, and other documents with their authorisation having the same legal force and effect as if executed by Assignor himself.

“The Assignor hereby appoints as their true and lawful attorney-in-fact who may for Assignor and in their name, place and stead, and for their use and benefit, may sign acknowledge, swear to, deliver, file or record at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or desirable by the Assignee to carry out fully the provisions of this Agreement and the law, in accordance with the terms laid down hereunder. This power shall survive the death, dissolution or legal incapacity of the Assignor, and shall be valid for all obligations of the Assignor as laid down in this Agreement.”

• Remedy Provisions

A clause providing for an Injunctive relief/Specific relief or liquidated damages detailing the right of parties under certain conditions to approach the court of law can provide a boon in time of litigation as it would reduce the burden on the parties and reduce time for getting a court order at the time of breach of the Agreement. The Remedy Clause can be adjusted to provide for injunctive remedy as well as liquidated damages as per the finally negotiated remedies between the parties.

“Assignor agrees that any material breach of this Agreement or breach of [imp. Clauses can be added] would cause Assignee irreparable injury hence in addition to any other remedies under the law, Assignee shall have the right to bring to court a suit for specific performance of this Agreement.”

Conclusion

We are all living in the golden age of IP, with close to 3.3 billion patents being filed in the year 2019 alone, these patents would require suitable and adequate legal documentation in order to successfully commercialize and give any benefits to their owner because any innovation without adequate safeguards is a treasure trove for infringers which disrupts the genuine claims of the rightful owner of the IP and causes loss of value to the economy.

Hence, a clearly drafted agreement which leaves no room for misinterpretation is a must for every organisation as well as individuals who venture in the field of innovation and discovery as seen in the Marathon Case, because in the end it can prove to be the only shield for protecting rights worth millions.

---

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: