This article is written by Rishabh Pandey from Guru Gobind Singh Indraprastha University, New Delhi.
In the course of their employment, your employees may be required to, with the help of your resources, perform tasks by creating intellectual property for you. They may also come to know of the intellectual property your organisation has created and is already using, which may include codes, business plan, algorithms etc. Assuming that the ownership rights of intellectual property created by the employee rests with you, or what they learn about your business over which your have intellectual property rights is safe without a proper agreement enforceable by law, can cost you heftily.
Why Is It Important to Enter Into an Intellectual Property Rights Agreement With Your Employees
Being an employer, you make huge investments in your organisation. It is only fair that you want to have the ownership over the intellectual property created by your employees, especially when created using your resources.To avoid any future dispute, it is important that you enter into an agreement with your employee, clearly stating that you shall be the owner of the IP created by him during the course of his employment.
Ensuring that the agreement is carefully drafted and is enforceable by law is equally important, as otherwise, it would defeat the purpose of the agreement.
In a case of Stanford University, due to the shortcomings in drafting of the intellectual property assignment contract, Stanford University lost the case where three important patents were infringed by an outside lab.
Stanford’s research assistant, when sent to the outside lab to obtain some critical information regarding the development of HIV treatment and therapy, signed a Visitor’s Confidentiality Agreement with a language stating “I do hereby assign…”, and agreed to assign any rights and interest in the ideas and “inventions” consequential to the work he performed and observed at the lab. The patented intellectual property by Stanford University was devised as a result of the research done at the outside lab.
On the contrary, the “Copyright and Patent Agreement” he had entered into with Stanford University used the language, “I agree to assign…”, which the court observed to be merely a promise to assign. Therefore, court ruled the agreement entered into with the outside lab to be the correct Intellectual Property Assignment Agreement.
The Intellectual Property Assignment Agreement along with some other clauses and terms important to be included in the employment agreement or to be agreed upon by the employee separately have been discussed below.
What Kind of Intellectual Property Rights Agreements Should You Enter Into
1. Intellectual Property Assignment
An intellectual property assignment agreement transfers the intellectual property rights from the creator of the intellectual property to another person or organisation. Such agreement can be used to transfer the rights completely or partially. Generally, the organisations only require assignment of such Intellectual Property Rights which have been developed during the course of the employment and by using the resources of the organisations.
It is commonly seen and advisable as well, to pay the creator some reward, either in cash, stock consideration or in any other suitable manner, in exchange of the rights assigned.
The assignment agreement must be in conformity with the Indian Contract Act, 1872 and if required, must be duly stamped as per the provisions of the Indian Stamp Act, 1899 or any other State Stamp Act, as applicable.
● Assignment of Copyrights
The Copyright Act, 1957 governs the assignment of copyrights in India. Section 18 of the the Act enables the copyright holder to assign his copyrights to an assignee by the entering into an assignment agreement.
It is mandatory that the assignment agreement be in written form and signed by the assignor or his agent. An oral agreement is not valid in this case. The agreement must also specify the rights assigned and the period and territorial extent of assignment of the rights.
If the period is not stated, it is deemed to be five years from the date of assignment, and if the territorial extent is not stated, it is deemed to be whole of India. If the assignee fails to exercise any of the rights assigned to him within a period of one year since the date of assignment, the right lapses unless otherwise stated in the agreement.
Section 19A provides for the cases of dispute. It states that an assignor may apply for revocation of the assignment with the Copyright Board, subject to inquiry, if an assignee fails to sufficiently exercise the rights assigned to him and it cannot be attributed to any act or omission by the assignor. It further states that the the Copyright Board shall hear all the disputes and pass any order it deems fit. However, it cannot revoke the assignment unless it determines the terms are too harsh for the assignor, where assignor is the author, but no revocation can be made within a period of five years from the date of assignment.
Also, in the case of a registered trademark, the assignee has to apply for changes in particulars in the registration by submitting the Form V under Rule 16 of Copyright Rules, 1958, along with the attested copy of the assignment agreement.
● Assignment of Patents
Patents in India are governed by the Patents Act, 1970. Patents can be assigned completely or partially, exclusively or non exclusively. Section 68 of the Act provides that the agreement must be in writing and must further be reduced to the form of a document embodying all the terms and conditions governing the rights and obligations of the parties concerned. Thereafter, it is ought to be registered with the Controller.
There are three types of assignment of patents –
- Legal Assignment: Assignment of an existing patent.
- Equitable Assignment: Assignment of patent or a share of it, effective immediately. It gives the assignee a right to alter the ownership of the patent in law.
- Mortgages: Patents rights are transferred for money; the rights go back to the assignor after the money taken is re-payed to the assignee.
The controller is to be presented with every assignment and every other document giving effect to or being evidence of the transfer of a patent or affecting the proprietorship of the assignment or creating an interest therein as claimed in such application along with the application, accompanied by two copies of the assignment deed or other document certified to be true copies by the applicant or his agent. The Controller may further call for such other proof of title or written consent as he may require.
● Assignment of Trademark
Assignment of trademark is provided for by the Chapter V of the Trademark Act, 1999, from Section 37 to Section 45.
An assignment of a trademark should be in writing and with the consent and act of the parties concerned.A registered trademark is assignable and only the registered proprietor has the right to assign a trademark, subject to rights conferred to him by registration though an unregistered trademark may also be assigned or transmitted with or without the goodwill of the business concerned.
An assignment which vests exclusive rights in more than one person is not permissible. In fact, the exclusive rights of a trademark can also not be assigned to two different persons, for use in different parts of India.
If an assignment of a trademark is made without the goodwill of the business in which the mark has been or is used, the assignment does not take effect unless the assignee, not later than the expiration of six months from the date on which the assignment is made or within such extended period, if any, not exceeding three months in the aggregate, as the registrar may allow, applies to the registrar for directions with respect to the advertisement of the assignment, and advertises it in such form and manner and within such period as the registrar may direct.
An assignment of trademark is to be notified and entered into the Register of Trade Mark. Registration of trademark and notification of its assignment acts as a prima facie evidence of the existence of the trademark.
An application of trademark assignment can be made under Form TM-23 if made by the assignee alone, or under Form TM-24 if made co-jointly with the registered proprietor, accompanied by the assignment deed.
● Assignment of Design
Assignment of designs is regulated by Section 30 of the Designs Act, 2000. Section 30(1) of the act provides that a person can apply for registration of the title with the registrar, if he becomes entitled by assignments.
The assignment is valid only if it is in writing and the agreement between the parties concerned is reduced to the form of an instrument embodying all the terms and conditions governing their rights and obligation and the application for registration of title under such instrument is filed in the prescribed manner with the Controller within six months from the execution of the instrument, or within such further period not exceeding six months in the aggregate, as the Controller on the application made in the prescribed manner allows.The absolute right to assign rests with the registered proprietor.
For an application for entry of name of proprietor or part proprietor in the register for the purpose of Rule 33 of the Design Rules, 2001, i.e. for entry of subsequent proprietorship, Form 11 has to be filled and submitted. Every assignment, and every other document containing, giving effect to or being evidence of the transmission of copyright in a registered design or affecting the proprietorship thereof or creating an interest therein has to be presented to the Controller either in original, or notarially certified true copy together with the application.
● Assignment of Geographical Indications
Assignment of Geographical Indications is prohibited by Section 24 of the Geographical Indications of Goods Act, 1999 and can be transferred to any other person only after the death of the authorized user.
● Assignment of Semiconductor Integrated Circuits Layout Design
The assignment of a chip-design can be done by the designer by virtue of the Semiconductor Integrated Circuits Layout Design Act, 2000. The agreement is to be written and made between the parties concerned.
Some of the provisions in the aforementioned act regarding assignment are:
- The proprietor of the layout-design in the register has the power to assign the layout-design and to give effectual receipts for any consideration for such assignment.
- A registered layout-design is assignable with or without the goodwill of the business concerned.
- If the assignment is not done in the goodwill of the business, it does not take effect unless the assignee, not later than the expiration of six months from the date on which the assignment is made (or within such extended period, if any, not exceeding three months in the aggregate, as the registrar may allow), apply to the registrar for directions with respect to the advertisement of the assignment, and advertises it in such form and manner and within such period as the registrar has directed.
- An assignee must register the title with the registrar.
- If the matter is still before the registrar, or an appeal is pending from an order of the registrar, the assignee is prohibited from using the registration as a proof of title.
● Assignment of Plant Varieties
Assignment of plant varieties is permissible by the Protection of Plant Varieties and Farmers Rights Act, 2001. A plant breeder, if he creates a plant strain, may assign the ownership over it, to any other person for pecuniary gain. Section 16(c) of the Act allows any person being the assignee of the breeder of the variety in respect of the right to make such application, to make an application under Section 14 of the Act for registration to the registrar for registration of any variety:
(a) of such genera and species as specified under sub-section (2) of section 29 (specification of the genera or species for the purposes of registration, by the Central Government, of varieties other than extant varieties and farmers’ varieties under the Act, in the Official Gazette); or
(b) which is an extant variety; or
(c) which is a farmers’ variety.”
When an application for registration under Section 14 is made, a proof of right to make application is to be furnished at the time of making the application, or within the prescribed period of time. This verifies the validity of transfer of the IP.
● Assignment of Biological Resources
Though there are no specific provisions in the Biological Diversity Act, 2002 regarding assignment agreements, it can be said that they are not prohibited unless they are in contravention with any existing law. Section 4 of the Biological Diversity Act, 2002 requires for a previous approval of the National Biodiversity Authority before transferring the results of any research with respect to biological resources obtained in India, to any other person who is not a citizen or resident of India.
2. Confidentiality and Return of Materials
It is important to safeguard any information that falls under the meaning of intellectual property and is vital for the functioning of the organisation, including the trade secretes. These include business plan, codes, algorithms, manuals, etc.
In India, due to lack of a law that protects trade secrets, it is necessary to include a confidentiality clause in the contract the employee is governed by. Making and entering the employee into a separate Non Disclosure Agreement can also help your protect the confidentiality of your IP.
A clause mandating the employee to return all the materials that are confidential or contain confidential information at the end of his employment should also be inserted in the contract, as retention of these by a former employee may be detrimental to the organisation.
3. Prohibition of Use of Intellectual Property of a Former Employee/Third Party
If your organisation uses the IP of a third party or of a former employer of one of your employees, it may end up in a suit for infringement of IPR. To prevent such litigations, the contract should also contain a clause prohibiting the employee from using the IP of a third party or former employee without having rights over such IP.
4. List of Prior Work
It becomes difficult to understand what work the employee has done during the course of his employment and what work he had done prior to be employed by your organisation. If a dispute arises, he or she may claim to have created the work before working for you.
Therefore, it is recommended to annex a list of prior work done by the employee in the contract, which shall be referred to during the time of any dispute, to ascertain whether or not the IP was created during the course of his or her employment at your organisation.
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Stanford University v. Roche Molecular Systems, Inc., 563 U.S. 776 (2011)
 Section 19 of the Copyright Act, 1957
 Rule 91 of the Patent Rules, 2003
 Section 2(1)(b) of the Trademarks Act, 1999
 Section 38 of the Trademarks Act, 1999
 Section 37 of the Trademarks Act, 1999
 Section 39 of the Trademarks Act, 1999
 Section 40 of the Trademarks Act, 1999
 Section 41 of the Trademarks Act, 1999
 Section 42 of the Trademarks Act, 1999
 Section 43 of the Trademarks Act, 1999
 Section 44 of the Trademarks Act, 1999
 Section 6 of the Trademarks Act, 1999
 Section 31 of the Trademarks Act, 1999
 Rule 68 of the Trademark Rules, 2002
 Section 30(3) of the Designs Act, 2000
 Section 30(4) of the Designs Act, 2000
 Rule 35 of the Designs Rules, 2001
 Section 2(b) of the Semiconductor Integrated Circuits Layout Design Act, 2000
 Section 20 of the Semiconductor Integrated Circuits Layout Design Act, 2000
 Section 21 of the Semiconductor Integrated Circuits Layout Design Act, 2000
 Section 22 of the Semiconductor Integrated Circuits Layout Design Act, 2000
 Section 23 of the Semiconductor Integrated Circuits Layout Design Act, 2000
 Section 24 of the Semiconductor Integrated Circuits Layout Design Act, 2000