07 August 2014

Registration of license / assignment deed under the Patents Act - Mandatory or not?

by Vindhya S. Mani

A license agreement or an assignment deed is an agreement between a right holder and the licensee and/or assignee wherein the right holder permits the licensee and/or assignee to use rights owned by the right holder in exchange for a consideration, whether in the form of a one-time settlement or a periodic royalty.Generally an agreement may be in writing or oral but Section 68 the Patents Act, 1970 (the Act)  mandates that the license/assignment agreement shall not be valid unless the same is in writing embodying all the terms and conditions governing the rights and obligations of the parties and are duly executed. Further Section 69 of the Act embodies the procedure for registration of an assignment or license agreement. The questions that arise for discussion are - what is the importance of the registration of a document under Section 69 of the Act and what are the consequences that follow if such registration is not obtained. This issue was adjudicated by the Delhi High Court by order dated 16th April, 2014 in Sergi Transformer Explosion Prevention Technologies Pvt. Ltd. v. Kumar Pratap Anil & Ors. [I.A. No. 16042/2010 in CS (OS) No. 1610/2010].


Factual background

The Plaintiff, Sergi Transformer Technologies Pvt. Ltd. (Sergi Transformer) filed a suit seeking permanent injunction against the Defendants and Mr. Phillipe Magnier (proforma defendant-the patentee) from infringing the Indian Patent No. 189089 (the suit patent) in respect of a “Method and Device for Preventing / Protecting Electrical Transformer against Explosion and Fire”. Sergi Transformer claimed to be the exclusive licensee of the above-mentioned patent by virtue of a license agreement dated 1st August, 2006. Further, it was also averred in the plaint that Sergi Transformer had initiated the process of registration of the license agreement with the Patent Office in Kolkata on 15th March, 2010.

During the pendency of said suit, the Defendants filed an application under Order VII Rule 11 read with Section 151 of the Civil Procedure Code, 1908 (CPC) to dismiss the above-mentioned suit on the ground that the suit was not maintainable as the license agreement forming the basis of the said suit was not registered with the Patent office.

The primary ground raised by the Defendants was that the license agreement relied upon by the Plaintiff was not a valid legal document as it has not been duly executed and it was a back-dated document that had been created to file the said suit. More importantly it was argued that although the license agreement was signed on 1st August, 2006, with effect from 1st January, 2006; it was not until 15th March 2010, that Sergi Transformer took steps to register the license as required under the Act.

Sergi Transformer argued that the non-registration of a license deed does not render it void and it had written to the Controller of Patents under Section 69 of the Act to have the same registered. It was further argued that there is no bar under the provisions of Sections 109 and 69 of the Act to bring the suit against infringement and that post-amendment of the Act there is no time stipulation for filing the application before the patent office for registration of the license deed.


Delhi High Court on the  application under Order 7 Rule 11 CPC

The Delhi High Court, relying on judgment of Supreme Court in Liverpool & London S.P. & I Assn Ltd. v. M.V. Sea Success [(2004) 9 SCC 512], observed that at the stage of considering an application under Order 7 Rule 11 of the CPC, the court has to only examine the plaint averments and the list of documents filed along with the suit. The Court thus held that other pleas advanced by parties including pleadings in the written statement have no relevancy in deciding such an application.


Delhi High Court on registration of licenses under the Act

On perusing Sections 68 and 69 of the Act prior to and after the amendment in 2005, the Court observed that the un-amended Section 68 states that, a license or assignment agreement shall have effect from the date of execution, only on registration and an application for such registration has to be filed with the Controller within six months from the date of execution of document. In contrast, post-amendment under Section 69(5) of the Act, the validity of the license or assignment agreement as evidence is to be considered only after the document is registered in the office of the
Controller, unless the Controller or the Court direct otherwise with reasons recorded in writing. Further under Section 69 of the Act there is no time prescribed for filing such an application for registration.

The Court emphasized on a conjoint reading of Sections 68, 69, 109 and 110 of the Act. Although there exists no bar to file a suit for infringement by the exclusive licensee even if the license agreement is not registered under the Act,  in light of the wordings “unless the Controller or the Court....directs otherwise” under Section 69(5) of the Act, the Court clarified that the only case where an un-registered license or assignment agreement shall be admitted in evidence of the title of any person to a patent is if the Controller or the Court specifically directs in this regard in writing. In the instant case, though the Plaintiff had filed the license agreement before the patent office for registration, the Controller had not passed any specific order. Hence, the Court held that unless the agreement is registered or the court passes any such order, the license agreement is not to be considered in evidence by the Court.

With respect to the averments on the illegality of the license agreement of Sergi Transformer, the Court held that these issues would be considered by the Patent Office when it decides on Sergi Transformer's application to register the agreement.

Although the Court declined to dismiss the suit on the basis of lack of registration of Sergi Transformer's license agreement, the Court directed the Patent Office to decide on the registration of Sergi Transformer's license agreement within 6 months from the date of the order. Further, the Court also directed that all pending applications and suit proceedings in relation to the instant subject matter stand adjourned till the Patent Office passes an order on the registration of Sergi Transformer's agreement.



In the light of the above judgment, it seems that the courts are hesitant to grant any relief whether interim or final, pending registration of the patent license or assignment agreement under the Act. Thus, while it is mandatory to register the license or assignment agreement with the Patent Office, given the huge backlog of applications pending in the patent office for registration of licenses, the practice of staying proceedings pending the determination of registration of the license agreement is a matter of concern for a patentee/licensee.

[The author is an Associate, IPR Practice, Lakshmikumaran & Sridharan, New Delhi]

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