Working of Patents: Public Notice Issued by Patent Office to Patentees and Licensees

The Controller General of Patents has issued a notice under Section 146 of the Patents Act, 1970 which empowers the Controller to issue a notice in writing requiring patentees or licensees (both exclusive and non-exclusive) to furnish information about commercial working of the invention within 2 months from the date of the notice or within such further time as the Controller may allow.

SpicyIP thanks Suresh Gupta for drawing our attention to this notice!

In the instant notice, the Controller has given time upto March 31, 2010. The information has to be submitted in accordance with Rule 131 which prescribes the appropriate form – Form 27.

This information is critical since it affects compulsory licensing provisions. Under Section 84(1)(c) of the Act, any person interested may apply to the Controller for grant of a compulsory license if the patented invention has not been worked in the territory of India.

Such representation under Section 84 may be made any time after the expiration of 3 years from the date of the grant of the patent. So the information under Section 146 has a public interest angle to it.

Earlier, Mr.Basheer had submitted a petition to the Controller General for greater transparency in the working of the Patent Office and increased accessibility to patent information, which touched on making public, information on working of the invention.

Since this notice revolves around working of the invention, it is important that we understand what constitutes working under the Act. Section 83 of the Act lists the general principles applicable to working of patented invention. The provision states that the powers conferred by Chapter XVI, which deals with working of patents and compulsory licenses, the following considerations shall be taken into account:

1.Patents are granted to encourage inventions and to secure their working in India on a commercial scale to the fullest extent reasonably practicable without undue delay; and
2.Patents are not granted merely to enable patentees to enjoy a monopoly for importation of the patented article.

The second point was further clarified by the Delhi High Court in Strix v. Maharaja Appliances.

Further, under Section 68 of the Act, a licensee must ensure that his interest in the patent has been duly given to him pursuant to an agreement of license in writing and duly executed. This is important because such licence is not valid unless it complies with Section 68. Mr.Basheer had earlier discussed this point with respect to the Roche v. Cipla case concerning the anti-cancer drug Tarceva.

There seems to be some ambiguity about Sections 68 and 69, and here we welcome the opinion of practitioners to help us understand the import of a combined reading of the two.

The title to Section 68 reads thus: Assignments, etc, not to be valid unless in writing and duly executed. The essence of this provision is that, any form of interest creation in a patent, be it an assignment or mortgage or licence, shall not be valid unless it is in writing and has been reduced to a document containing all the terms and conditions of the interest creation and has been duly executed.

It is important to note that the provision as it stands today is an amended one under the 2005 Amendment Act. Prior to the amendment, the Section read thus:

“68. Assignments, etc, not to be valid unless in writing and registered
An assignment of a patent or of a share in a patent, a mortgage, license or the creation of any other interest in a patent shall not be valid unless the same were in writing and the agreement between the parties concerned is reduced to the form of a document embodying all the terms and conditions governing their rights and obligations and the application for registration of such document is filed in the prescribed manner with the Controller within six months from the commencement of this Act or the execution of the document, whichever is later or within such further period not exceeding six months in the aggregate as the Controller on application made in the prescribed manner allows: Provided that the document shall, when registered, have effect from the date of its execution.”

The above unamended version was the subject matter of a judgment delivered by the Delhi High Court in NRDC v. ABS Plastics where the Court categorically held that unless the license agreement had been reduced to writing and registered, it was not enforceable. Section 69, prior to the amendment provided for the procedure of registration of the license agreement and this provision remains unamended till date.

The short question is, since after the 2005 amendment, Section 68 requires the license agreement to be reduced to writing and duly executed, but not registered, can we safely conclude that non-registration of the written and duly executed agreement does not affect its enforceability?

Section 69 which deals with registration of such agreements requires the assignee or licensee to apply in writing for registration. In fact, sub-section (1) states, he shall apply in writing. Sub-section (2) permits the assignor or the licensor to also apply for the same. Sub-section (3) speaks of registration of the agreement by the Controller upon an application made under sub-section (1) or (2). However, sub-section (5) is is of interest to us since it states thus:

“Except for the purposes of an application under sub- section (1) or of an application to rectify the register, a document in respect of which no entry has been made in the register under sub- section (3) shall not be admitted by the Controller or by any court as evidence of the title of any person to a patent or to a share or interest therein unless the Controller or the court, for reasons to be recorded in writing, otherwise directs.”

What this could mean is that a license agreement which is written and duly executed under Section 68 is rendered inadmissible owing to non-registration as per Section 69(5). But, does inadmissibility due to non-registration necessarily translate to invalidity, and hence unenforceability of the license agreement?

In other words, can it be said that the combined import of Section 68 and 69 remains the same despite the 2005 amendment to Section 68? If so, why was registration removed from Section 68 and replaced with duly executed?

Dr.Gopakumar Nair directed us to the “Notes on Clauses” and the “Clauses” in the Patents (Amendment) Act, 2005 (15 of 2005). Clause 49 of the Amendment Act specifically pertains to Section 68 and reads thus:

“This clause seeks to substitute section 68 of the Act, which relates to assignments, etc., not to be valid unless in writing and duly registered. The amendment is being proposed with a view to avoid repetition of the procedure for registration of assignment, which is already contained in section 69.”

It is clear from the above clause that the amendment to Section 68 was merely to remove repetition of the procedure of registration and does not in anyway affect the mandatory requirement of registration of the license agreement. Therefore, the position under Section 68 after the amendment is the same as before. In hindsight, this may be supported from Section 69(1) which states that the assignee or licensee shall apply for registration.

SpicyIP thanks Dr.Nair for promptly pointing us in the right direction.