Assignment vs Licence: Transferring and Sharing Patent Rights in India
Two documents are used to move value out of a patent, and they do opposite things. An assignment transfers ownership: the assignee becomes the proprietor and the assignor walks away. A licence grants permission: the patentee keeps the patent and lets someone else do things that would otherwise infringe.
The words are used loosely in commercial conversation. People speak of assigning rights when they mean granting a licence, and of exclusive rights when they mean an exclusive licence. That looseness stops being harmless the moment there is a dispute over who can sue, who can grant further rights, or what happens when the deal ends.
Indian law adds two requirements that apply to both. Section 68 of the Patents Act, 1970 says an assignment, mortgage, licence or other interest in a patent is not valid unless it is in writing, with all the terms in one executed document. Section 69 deals with getting the interest onto the register, and there are real evidentiary consequences for a party that does not. This page compares the two instruments and sets out the formalities that decide whether either one actually works.
Side by side
| Question | Assignment | Licence |
|---|---|---|
| What moves | Ownership of the patent itself, in whole or in part. | Permission to do acts that would otherwise infringe. Ownership does not move. |
| Who is the proprietor afterwards | The assignee. The assignor no longer owns the patent. | The patentee, unchanged. The licensee is a permitted user. |
| Duration | Permanent, unless the document itself provides for reversion. | For the term agreed, and it can end by expiry, breach or termination. |
| Typical consideration | A lump sum, sometimes with deferred payments or milestones. | Royalties, running payments, minimum guarantees, or a fixed fee. |
| Who can enforce against infringers | The assignee, as the new patentee, once title is registered. | The patentee. An exclusive licensee has a statutory right to take infringement proceedings in its own name under the Act. |
| Can the recipient sub-license or transfer on | Yes, as owner, subject to anything agreed with the assignor. | Only if the licence expressly permits it. |
| Effect on renewal fees | The assignee becomes responsible for keeping the patent in force. | Usually stays with the patentee, though the agreement can shift the obligation. |
| Registration position | Title should be registered under section 69 so the assignee appears as proprietor in the register. | The interest can and should be entered on the register too, so the licence is on record. |
| Consequence of not registering | An unregistered document is not admitted in evidence to prove title in court, except where the court directs otherwise. | The same evidentiary problem arises, which matters most for an exclusive licensee who wants to sue. |
| Exclusivity | Inherently exclusive; there is one owner of what has been assigned. | Can be exclusive, sole or non-exclusive, and the difference decides who else may be granted rights. |
| What happens at the end | Nothing reverts automatically. The assignee keeps the patent for its remaining term. | Rights revert to the patentee, and the licensee must stop the licensed acts. |
| Restrictive terms | Less exposed, but competition law still applies to the wider transaction. | Section 140 makes certain restrictive conditions in patent licences void, so tie-ins and similar clauses need checking. |
What an assignment does
An assignment is a transfer of proprietary right. After it takes effect, the assignee stands where the patentee stood: it can work the invention, licence it to others, sue infringers, assign it again and, equally, must keep it alive by paying renewal fees.
Assignments do not have to be total. A patent can be assigned for a particular territory, or an undivided share can be assigned so that two parties hold the patent jointly. Joint ownership brings its own rules under the Act about what each co-owner may do without the other, and those rules matter, because they are not what most commercial parties assume.
Assignments also happen without a deal. Patents pass by operation of law on merger, on the death of an individual proprietor and on insolvency. Those transmissions raise the same registration question as a negotiated assignment.
What a licence does
A licence is permission. Without it, the licensee's activity would infringe. With it, the activity is authorised on the terms agreed. The patent stays with the patentee throughout, and at the end of the licence the position simply returns to what it was.
The commercially important distinction is between an exclusive licence, a sole licence and a non-exclusive licence. Under an exclusive licence the patentee itself is shut out along with everyone else. Under a sole licence the patentee may still work the invention but grants no one else a licence. Under a non-exclusive licence the patentee is free to licence as many others as it wishes.
This matters legally, not just commercially, because the Act gives an exclusive licensee a statutory right to take infringement proceedings. A non-exclusive licensee generally has no such standing and depends on the patentee to act.
Section 140 should be read before any licence is signed. It makes certain restrictive conditions void, including terms that tie the licensee into buying unpatented materials from the patentee or that restrict the use of articles not covered by the patent.
Section 68: why the paperwork is not optional
Section 68 is unusually blunt. An assignment, mortgage, licence or the creation of any other interest in a patent is not valid unless it is in writing and the agreement between the parties is reduced to a document embodying all the terms and conditions governing their rights and obligations, and duly executed.
Two consequences follow. First, an oral licence is not a licence for these purposes, whatever the parties intended. Second, a document that records only part of the bargain, with the rest left in emails or side conversations, is exposed, because the section asks for all the terms in the document.
This catches informal arrangements between group companies, between a founder and their own startup, and between research institutions and industry partners. The commercial relationship may be entirely genuine and still fail the statutory test.
Section 69: registration and the evidence problem
Once a person becomes entitled to a patent by assignment, transmission or operation of law, an application can be made to the Controller to register the title, and the Rules set out how the document is presented. Where a licence or other interest is created, that interest can likewise be entered in the register.
The sting is in the evidentiary rule. A document creating an interest in a patent is not admitted in evidence in any court in proof of title, unless it has been registered, subject to the court's power to direct otherwise. An assignee who never registered can therefore find itself unable to prove that it owns the patent it is trying to enforce.
There is a second, quieter benefit. The register is what third parties consult. A due diligence exercise, a lender's security review or a buyer's checklist works from the register, and a chain of title that is not recorded there slows or kills transactions.
Practical points that decide disputes
Define the grant clause with care. The scope of what is assigned or licensed should name the patent numbers and applications, and say whether improvements, divisionals and patents of addition are included. Families grow, and a grant clause written around a single number ages badly.
Deal with enforcement expressly. Say who may sue, who controls the proceedings, who funds them and how any recovery is shared. Even where an exclusive licensee has a statutory right to sue, the parties will want the commercial arrangement written down.
Deal with the end of the relationship. Say what happens to stock in hand, to sub-licences, to confidential information and to any improvements the licensee made. Where a patent ceases to be in force, the Act also contains a provision allowing certain contracts to be determined, which is worth understanding before it is needed.
Which one applies to you
Assignment
- The patent is being sold outright, or moves as part of a business, a merger or an insolvency.
- The buyer needs to appear as proprietor on the register for financing, due diligence or enforcement.
- The original owner has no continuing interest in working the invention.
- The value is being realised now as a capital sum rather than over time as royalties.
Licence
- The patentee wants to keep ownership and earn from the invention over the life of the patent.
- Different partners are needed for different territories, fields of use or product lines.
- The relationship needs to be capable of ending, on breach or on expiry, with rights returning.
- A research institution or university wants to see the invention commercialised without losing the underlying asset.
Where people go wrong
- Relying on an oral or email-only arrangement. Section 68 requires a written document embodying all the terms, duly executed, and an arrangement that fails this is not valid.
- Assigning a patent and never registering the title. An unregistered document is not admitted in evidence in proof of title, except where the court directs otherwise.
- Assuming any licensee can sue infringers. The Act gives an exclusive licensee a right to take proceedings; a non-exclusive licensee generally depends on the patentee.
- Treating sole and exclusive as the same word. Under an exclusive licence the patentee is shut out too; under a sole licence it is not.
- Signing a licence with tie-in or bundling clauses without checking section 140, which makes certain restrictive conditions void.
The licence that could not be proved
Read the following as a simplified illustration; the parties in it do not exist. Dr Nalini Prasad, a materials researcher in Thrissur, holds a patent on a heat-resistant coating. She agrees over a series of emails that Anantha Coatings Pvt Ltd may be her exclusive manufacturer for South India, with royalties settled quarterly. Nothing is signed. Payments run for two years. Anantha then discovers a firm in Hosur selling the same coating and starts an infringement action in its own name as exclusive licensee. Two problems appear at once. There is no single executed document embodying the terms, so the arrangement does not meet what section 68 requires. And nothing was entered on the register, so Anantha cannot readily prove the interest it says it holds. The commercial relationship was real and the royalties were genuinely paid, but the paperwork that would have let Anantha act on its own was never created.
Simplified illustration only. Actual outcomes depend on the facts.
Questions people ask
Does a patent licence in India have to be in writing?
Yes. Section 68 says an assignment, mortgage, licence or the creation of any other interest in a patent is not valid unless it is in writing and the agreement between the parties is reduced to a document embodying all the terms and conditions governing their rights and obligations, and duly executed. That means one document, containing the whole bargain, properly signed. Arrangements recorded across emails, invoices and conversations do not meet the test, however genuine the commercial relationship is.
What happens if I do not register an assignment?
The transfer may still be a valid contract between the parties, but you run into an evidentiary wall. A document creating an interest in a patent is not admitted in evidence in any court in proof of title unless it has been registered, subject to the court's power to direct otherwise. An assignee that never registered can therefore struggle to prove ownership in the very proceedings it started. Registration also puts the chain of title on the public register, which is what buyers, lenders and licensees actually check.
Can a licensee sue an infringer?
It depends on the kind of licence. The Act gives an exclusive licensee the right to take infringement proceedings, and that right is one of the main practical reasons parties negotiate for exclusivity rather than settling for a non-exclusive grant. A non-exclusive licensee generally has no independent standing and has to rely on the patentee to act, which is why licence agreements usually contain an enforcement clause setting out who sues, who pays and how any recovery is divided.
What is the difference between an exclusive and a sole licence?
Under an exclusive licence the patentee grants rights to one licensee and is itself excluded from working the invention in the licensed scope. Under a sole licence the patentee promises not to licence anyone else, but keeps the right to work the invention itself. Under a non-exclusive licence the patentee may licence as many parties as it likes. The distinction affects price, competitive position and, importantly, whether the licensee has standing to bring infringement proceedings in its own name.
Are there terms that cannot go into a patent licence in India?
Yes. Section 140 makes certain restrictive conditions in patent contracts void. The provision is aimed at terms that require the buyer or licensee to acquire unpatented articles or materials from the patentee or its nominee, to refrain from using articles supplied by others, or to accept similar tie-ins. Competition law can also apply to the wider arrangement. Standard clauses drafted for other jurisdictions frequently include terms of this kind, so a licence template imported from abroad should be reviewed before it is used in India.
Putting a patent assignment or licence in place?
MYCrave Consultancy reviews the grant clause, the section 68 formalities and the registration steps before the document is signed.