Intellectual Property Transactions

Technology Collaboration and Licensing

Patents Licensing

Trademark Licensing

Technical

India announced the new economic policy in 1991 with a view to liberalize its economy and allow inflow of foreign investment. The New Economic Policy envisages a structured and gradual opening up of Indian market. Accordingly the Government of India permitted foreign investment in various sectors of industry subject to certain conditions. Sectoral ceilings for investments in identified sectors of industries were prescribed. The Policy also clarified the foreign exchange and other regulatory approvals for technology collaborations. Certain sectors are completely opened up for foreign direct investment. Based on this rationale of gradual and structured opening up of the market, the Government of India constituted the Foreign Investment Promotion Board. A Secretariat of Industrial Assistance was also constituted in the Ministry of Commerce and Industries to provide single-window clearance for investments in India. While the Reserve Bank of India has been empowered to provide Automatic Approvals for foreign investments in certain categories thus dispensing with the requirements to have prior approvals, the FIPB is authorized to grant specific approval to investment proposals for transactions that do not fall under the Automatic Route.

There are a number of corporate routes that a foreign company could adopt to enter the Indian market. Licensing the use of trademarks and technical know-how is the most easy and indirect among these corporate routes. Ordinarily licensing involves two parts:

Licensing of technical know-how
Licensing of Intellectual Property Rights

Technical licensing between Indian Companies and foreign companies come under the Automatic Approval Route, if the payment terms satisfy the Government of India Guidelines. The following Press Note clarified the procedure in respect of foreign technology collaborations:

Procedure in respect of foreign technology agreements

[Press Note No.12 of 1991 Series dated 31.8. 1991]

Government tabled a Statement on Industrial Policy in both the Houses of Parliament 24.7.1991. The Statement has substantially liberalized the provisions and simplified the procedure governing Foreign Technology Agreements. The relevant portion of the Statement dealing with Foreign Technology Agreements is as follows:

39C. Foreign Technology Agreements

Automatic permission will be given for foreign technology agreements in high priority industries upto a lump sum payment of Rs. 1 Crore, 5 per cent royalty for domestic sales and 8 per cent for exports, subject to total payments of 8 per cent of sales over a 10- year period from the date of agreement or 7 years from commencement of production. The prescribed royalty rates are net of taxes and will be calculated according to standard procedures.
In respect of industries other than high priority industries, automatic permission will be given subject to the same guidelines as above if no free foreign exchange is required for any payments.
All other proposals will need specific approval under the general procedures in force.
No permission will be necessary for hiring of foreign technicians, foreign testing of indigenously developed technologies. Payment may be made from blanket permits or free foreign exchange according to RBI guidelines".

Press Note No. 10 of 1991 Series issued on 14.8.1991, set out the procedures for approval of foreign technology agreements, hiring of foreign technicians and foreign testing of indigenous raw materials and products and indigenously developed technologies. In that Press Note, it has been stated that applications for automatic approvals under paras 39C (i) and (ii) referred to above would be made to the Secretariat for Industrial Approvals (SIA) in the Department of Industrial Development. In the interests of entrepreneurs, this procedure has now been modified as below. Procedures relating to other matters, however, remain the same as in Press Note No.10.