Section 101 of the Patents Act, 1970
Rights of third parties in respect of use of invention for purposes of Government
Stops private licence and assignment clauses from blocking or taxing government use, while letting assignors and exclusive licensees share the money paid.
Official legal text
The verbatim statutory text of this provision is reproduced from the official source and checked by our legal reviewer before it is published here. Until that check is complete for this page, read the exact wording directly from the official source linked below — it is the only version that governs.
Treat this page as a guide. The provision as officially published, along with the Gazette notifications that apply to it, remains the governing text and overrides any simplification here.
What this section says, in plain language
Section 101 answers a practical question that Section 100 leaves open. A patent is rarely held by one person acting alone. It may be assigned, licensed, sub-licensed or pledged, and those contracts usually contain clauses about who may make the product, in which territory, and what royalty is payable on every unit. If the Central Government steps in and uses the invention, do those private clauses still apply? Section 101 says that so far as they would restrict the government use or demand payment for it, they simply have no effect.
The result is that a contract cannot be used to defeat a statutory power. Suppose a patentee has granted an exclusive licence to a single manufacturer for all of India, with a clause forbidding anyone else from making the product. That clause does not stop the Central Government, or a manufacturer authorised by it in writing, from making the product for a government purpose. In the same way, a clause requiring a royalty on every unit produced under the patent cannot be enforced against the Government for units made under Section 100.
The section also removes a smaller obstacle. Government use often involves copying drawings, models, manuals and technical documents. Those documents may carry copyright separate from the patent. Reproducing or publishing them in connection with the government use is not treated as copyright infringement, so the State is not blocked by a second layer of rights over the same technical material.
Fairness runs in the other direction too. Many inventors do not hold their patents by the end. A researcher may assign a patent to a company in return for a running royalty, or an exclusive licensee may have paid a large sum for market rights. If government use wipes out their contractual royalty, they would lose everything while the registered patentee alone is compensated. Section 101 prevents that by treating the assignor, and in the appropriate case the exclusive licensee, as entitled to share in the amount the Government pays, in a proportion agreed between them or, failing agreement, decided by the High Court.
For anyone drafting patent contracts in India this section has a direct lesson. Government use cannot be contracted away, so the sensible course is to write a clause that says how any government compensation will be divided between the parties. That is permitted, and it avoids a later fight before the High Court.
Why this section matters
Assignors who sold a patent for running royalties, exclusive and non-exclusive licensees, financiers holding security over patents, and companies negotiating Indian patent contracts.
The moment the Central Government or its authorisee begins using the invention under Section 100, or the patentee works it on a Government order.
It makes restrictive and royalty clauses ineffective against government use, and creates a right in assignors and exclusive licensees to a share of the compensation.
Parties who never agree a sharing formula end up litigating the split in the High Court, and a licensee who sues the Government's authorised manufacturer on the strength of an exclusivity clause will lose.
How it works in practice
An exclusivity clause meets a Government order
Dr Ananya Rao, a scientist in Hyderabad, assigns her patent on a heat-stable vaccine stabiliser to Suvarna Biologics Ltd for a fixed sum plus five per cent of turnover. Suvarna then grants Nilgiri Pharma Pvt Ltd an exclusive licence to manufacture in India, with a clause stating that no other party may produce the compound anywhere in the country. The Central Government later authorises a public sector vaccine unit in writing to make the stabiliser for a national immunisation programme. Nilgiri Pharma sends a legal notice to the PSU relying on its exclusivity clause. That clause is of no effect against the government use, so the notice fails. Separately, Suvarna asks the PSU for its five per cent royalty on the government units; that royalty clause is equally ineffective. What Suvarna can do is negotiate compensation with the Central Government under Section 100. When that money arrives, Dr Rao points out that she assigned the patent for a share of returns. Section 101 lets her claim a portion of the compensation, and because the assignment deed is silent on the split, the High Court can decide the proportion.
Simplified illustration only. Actual legal outcomes depend on the facts.
Key points to remember
- Restrictions and royalty clauses in private patent contracts do not bite on use for the purposes of Government.
- An exclusive licensee cannot use its exclusivity to stop a manufacturer authorised in writing by the Central Government.
- Copying drawings, models and manuals for the government use is not treated as copyright infringement.
- A person who assigned the patent for royalties can claim a share of the compensation the Government pays.
- The share is decided by agreement, and by the High Court if the parties cannot agree.
- Contracts can and should state in advance how government compensation will be divided.
Common mistakes and misunderstandings
- Assuming a watertight exclusivity clause defeats the State. It defeats commercial competitors, not a use made under Section 100.
- Thinking only the person named in the Register can be paid. An assignor on a royalty basis, and in the right case an exclusive licensee, may claim a share.
- Believing copyright in the engineering drawings gives a second line of defence against government use.
- Leaving the assignment deed silent on government compensation and hoping the point never arises.
Connected provisions
- ActSection 100Power of Central Government to use inventions for purposes of Government
- ActSection 99Meaning of use of invention for purposes of Government
- ActSection 103Reference to High Court of disputes as to use for purposes of Government
- ActSection 68Assignments, etc., not to be valid unless in writing and duly executed
- ActSection 69Registration of assignments, transmissions, etc.
Sections and rules are different kinds of law. A section is enacted by Parliament, while a rule is made by the Central Government using powers the Act grants. Keeping them apart shows which text you are reading and which of the two is more likely to have been revised recently.
Forms, deadlines and fees
Any official fee connected with this provision is fixed by the First Schedule to the Patents Rules, not by the provision itself. The amount depends on who the applicant is and on whether the filing is made online or on paper, so no figures are reproduced here. How Indian patent fees work.
Related judgments
This part of the page is reserved for summaries of decided cases. They are added one at a time, after review by a person qualified to confirm that the summary matches the judgment. Nothing has been cleared for this provision so far, so there is nothing to show. How case notes are prepared.
Questions people ask about Section 101
My exclusive licence says nobody else can manufacture. Does that stop government use?
No. Section 101 makes such a clause ineffective to the extent it would restrict use for the purposes of Government. The Central Government, or a manufacturer it has authorised in writing under Section 100, can make the product for that purpose regardless of your exclusivity. Your commercial rights against ordinary competitors are untouched, and you can still sue anyone who makes the product for the open market. What you cannot do is treat the statutory power as an ordinary act of infringement.
I sold my patent for a running royalty. Do I get anything from government use?
You may. Section 101 recognises that an assignor whose consideration was measured by use of the invention would otherwise get nothing when the Government pays compensation to the current patentee. It allows the sum payable to be divided between the patentee and the assignor. The proportion is whatever the two of you agree. If you cannot agree, the High Court decides the split, taking the terms of your assignment and the commercial reality into account.
Can we write a clause about government compensation into our licence?
Yes, and it is good practice. Section 101 blocks clauses that would restrict government use or charge the Government for it, but it does not stop the private parties from agreeing between themselves how any compensation received from the Government will be shared. A short clause setting out the percentages, and who will conduct the negotiation with the Government, saves both sides from a High Court reference later. Have it drafted when the licence is signed, not after a notice arrives.
Who gets paid when the Government uses your licensed patent?
MYCrave reviews assignment and licence terms so that government compensation is shared the way you intended, not the way a court has to guess.
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