The Indian Contract Act defines an agreement as every promise or set of promises between two parties. In other words, an agreement is a document containing the parties' understanding in respect of a particular subject matter. The Patents Act 1970 states that a patent owner may license or assign his rights to a third party. However, an assignment or license must be reduced in writing and registered for such rights to be valid. Therefore, it can be said that unless the parties enter into a patent license agreement or a patent assignment agreement, such license or assignment shall not be valid.
A licensing agreement is an agreement/ arrangement between a patent holder (i.e., the licensor) and a third party who is authorized to use the rights granted to a patentee (in part or whole) (i.e., the licensee) in exchange for a mutually agreed payment (i.e., a royalty). Patent licensing agreements may be of the following types: (i) an exclusive license agreement; or (ii) a non-exclusive license agreement.
An exclusive license is an agreement that excludes all other persons, including the patent holder, from exploiting the invention. Section 2(f) of the Act defines an exclusive license in similar terms.
Whereas a non-exclusive licensing agreement means an agreement where the licensee has the right to exploit such an invention but not to the exclusion of the others. The patent holder under this arrangement may exploit the invention himself or give such rights to various third parties.
An assignment agreement is an arrangement between the patent holder (the assignor), and a third party (the assignee) wherein the assignor sells or transfers his property (i.e., the patent) to the assignee for consideration.
A patentee may assign all or any part of its rights to the assignee. There are two kinds of assignments, namely (i) legal assignment; and (ii) equitable assignment. The assignment of an existing patent where the assignee's name is entered as the patent owner is legal. Whereas, when only certain rights are transferred to the assignee, such assignment is called an equitable assignment.
The differences between a Patent License Agreement and a Patent Assignment Agreement are as follows:
Type of Interest vested
Nature of Interest
Rights available under the Act
Under the Patents Act, the patentee has the right to commercialize the patent through an assignment or license. However, should make such a decision carefully weighing the advantages obtained via such arrangement.