Employee-Employer Patent Ownership Regime in India: Navigating the Complexities
Introduction
The recent case of JN Mangesh v. Paladin Paints[1] has brought to the forefront the intricate issue of patent ownership between employees and employers in India. This case has rekindled discussions on patent ownership, exposing notable deficiencies in the Indian Patents Act, of 1970, particularly in contrast to other legal systems. Contractual agreements have become increasingly important due to the absence of clear statutory guidance about patent ownership in employee-employer relationships, which frequently leaves both parties exposed. This article explores the legal landscape, worldwide comparisons, and potential solutions as it digs into the subtleties of this problem.
Current Practice in India
According to current practice in India, it is customary for employees to transfer their patent rights to their employer. Pre-assignment clauses in employment contracts and assignment agreements made after an invention are commonly used to enable this. The reasoning is simple: since businesses spend a lot of money on research and development (R&D), it makes sense that they should profit from the inventions made by their staff members. The Indian Patents Act, of 1970, which names the inventor as the "first owner" of the patent, does not, however, expressly support this practice. Because of this gap, employers generally use assignment agreements to guarantee that their names are registered on patents.
Comparative
Analysis: Copyright vs. Patents[2]
Interestingly, there is a notable distinction between the
Indian Copyrights Act and the Indian Patent Act, According to Section 17 of the
Copyright Act[3], If an employee in the course
of employment does an invention, the ownership of that invention will automatically
go to the employer. This type of provision is however absent in the Patents Act
making patent ownership ambiguous. Detailed analysis of the same is discussed
below.
Employer-Employee Patent Scenario
An equivocal and unambiguous formal statement from the
employee, known as an assignment agreement is needed in order to transfer the
ownership of a patent invention to the employer, unless this prerequisite is
not followed the employer cannot claim the right of ownership of the invention
legally, in absence of this type of agreement the right of ownership vests in
the hands of the employee completely.
Employer-Employee Copyright Scenario
In the case of copyrights as discussed the situation is
somewhat different. Generally, if a person produces anything that should be
protected by the Copyrights Act in the course of employment, the employer
automatically becomes its owner. However, to formally get the ownership, the
employer must apply for copyright registration, for which a ‘No Objection
Certificate’ is needed from the employee stating that it has no objection
concerning the transfer of ownership. So technically the consent of the
employee is also needed in case of copyright, although it is not a necessity.
Comparing Legal Instruments: No Objection Certificates vs. Assignment Deeds
Now the question arises whether the “No Objection
Certificate” in the case of copyrights and the “Assignment Deeds” in the case
of patents are similar legally or not. In copyrights, the right of the primary
ownership of the employee is preserved, even though the employer can claim
ownership of the invention. The prerequisite of getting this no-objection
certificate from the employee before copyright registration further uplifts
this right and makes sure that the employee acknowledges this transfer of rights.
In contrast, with patents, once the invention made by the
employee is assigned to the employer through a formal assignment agreement, the
inventor loses any claim to the patent. The employer gains full rights to the
invention and can proceed with the patent application without requiring further
consent from the inventor.
Implications for Employers and Employees
There are important implications for how employer-employee
relationships manage patents and copyrights differently. Employers must take
great care to get these agreements to safeguard their investments in invention,
as patents require official assignments and declarations. If something is
overlooked, the employee may still own the idea, which could result in legal
issues and possibly result in the loss of private technology, that was the
result of the employer’s resources.
Getting a certificate of no objection guarantees that the employee's rights are upheld in the case of copyrights, even though the process is made simpler by the employer's automatic vesting. By guaranteeing that the employer can register the copyright while still appreciating the employee's contribution, this provision strikes a balance between the interests of the two parties.
International
Perspectives on Patent Ownership[4]:
Several countries have addressed this issue more comprehensively than India. For instance:
United
Kingdom:
Section 39 of the UK Patents Act stipulates that inventions made by employees in the course of their normal duties belong to the employer.
Israel:
Section 132 of the Israeli Patents Act contains a similar provision.
China:
Section 6 of the Chinese Patent Act also codifies employer ownership of inventions made during employment.
These provisions are founded on the idea of the "duty to invent," which holds that an employer should be entitled to the patents that emerge from an employee's inventions if their job description involves inventing. This idea makes sure that employers, who give the tools and setting for innovation, don't lose out on the returns on their efforts.
The
Indian Legal Landscape:
As discussed above, the enforceability of patent assignment agreements becomes important, as the Indian Patents Act does not have a "deemed ownership" clause. Employers rely on these contracts to protect their ownership rights to inventions made by their workers. On the other hand, the absence of such agreements leads to issues. The employee keeps ownership of the patent in the absence of a pre-assignment or assignment agreement, giving the employer no legal means of claiming the innovation.
Judicial
Precedents:
Indian courts have grappled with this issue on several
occasions.
In Darius Rutton Kavasmaneck v. Gharda Chemicals Ltd.[5] (Bombay High Court 2015), the company's managing director possessed patents for an invention that his company used without paying royalties. Later, a derivative case was filed, alleging that the MD had improperly acquired the patents, which were the property of the company. Basically, two grounds were raised. First, the MD, who was the inventor and was receiving a sizable salary, had a fiduciary duty to register the patent under the business's name. Second, the patent should be registered in the company's name as the MD made use of the R&D facilities and resources. This case emphasizes the necessity of more precise legislative language or court rulings to steer future legal issues.
The
Shop-Right Principle:
The "shop-right" principle, which is popular in the US, is another idea to take into account in this situation. Even in the absence of a clear agreement, this theory gives employers a non-exclusive, non-transferable license to utilize an innovation made by an employee while they are employed. According to this theory, the employer is protected from royalties and can profit from the invention. The shop-right concept, which isn't applied in India, might offer a compromise by giving employers some control over inventions made by their staff members without giving them complete ownership.
Challenges
for Multinational Corporations:
The current regime poses a lot of challenges, particularly for multinational corporations conducting R&D in India. Before submitting a patent application overseas, Indian citizens must have approval from the Controller of Patents under Section 39 of the Indian Patents Act [6]. For businesses that employ Indian inventors, this clause makes the patenting procedure more difficult and may cause a delay in the filing and granting of patents. This procedure might be streamlined with the addition of a deemed ownership clause, giving multinational corporations speedier and more effective patenting, which in turn would lead to development.
Learning
from International Practices:
Even in the lack of clear legislative requirements, US legal precedents provide insightful guidance. The court highlighted in Goodyear Tyres and Rubber Company v. Miller that depriving businesses of the returns on their investments would deter them from supporting creative ideas. Indian courts should take cues from these cases to establish policies that safeguard employers' interests while honoring workers' contributions.
Conclusion:
After a thorough analysis, it can be very well concluded
that the current patent ownership regime in India places employers at risk of
losing control over inventions developed using their resources. This
unpredictability may discourage R&D spending, which would hinder
innovation. The employer-employee relationship may benefit greatly from some
much-needed clarity and balance if measures akin to those in the UK, Israel,
and China were adopted, or if concepts like shop rights are acknowledged. Even
in the absence of clear agreements, employers ought to have some rights to
patents created while they are employed. These changes would bring India's
patent system into line with international norms, promoting increased
investment in research and providing advantages to both companies and workers.
Author: Abdul Ahad, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing.
References
● Prakash, Kartikeya. “The Dilemma of Employer-Employee Patent Ownership in India.” spicy.com, 22 May 2021, https://spicyip.com/2021/05/the-dilemma-of-employer-employee-patent-ownership-in-india.html
● Basheer, Shamnad. “IP Ownership in an Employment Context: Patents vs Copyrights.” spicy.com, https://spicyip.com/2010/01/ip-ownership-in-employment-context.html.
● Byadwal, Yogesh. “JN Mangesh v. Paladin Paints (read Asian Paints): Who owns the Patent?” spicy.com, 8 July 2024, https://spicyip.com/2024/07/jn-mangesh-v-paladin-paints-read-asian-paints-who-owns-the-patent.html.
● Shefali, Soumya. “Employer-Employee Patent Ownership: A Dilemma.” Legal Service India, https://www.legalserviceindia.com/legal/article-16707-employer-employee-patent-ownership-a-dilemma.html.
● “Patent Ownership: Employer V. Employee – Who holds the key? - Patent, Trademark & Design Registration Service in India | Brainiac IP.” Brainiac IP Solutions, https://brainiac.co.in/patent-ownership-employer-v-employee-who-holds-the-key/.
[1] Shah,
Palak. “Inside Story Of A Massive Fight For 'Patents' Involving Asian Paints
Promoter.” BW Businessworld, 17 June
2024, https://businessworld.in/article/inside-story-of-a-massive-fight-for-patents-involving-asian-paints-promoter-523375.
[2] Basheer, Shamnad. “IP
Ownership in an Employment Context: Patents vs Copyrights.” spicy.com,
https://spicyip.com/2010/01/ip-ownership-in-employment-context.html.
[3] Section
17, The Copyright Act, 1957
[4] Prakash, Kartikeya. “The
Dilemma of Employer-Employee Patent Ownership in India.” spicy.com, 22 May 2021,
https://spicyip.com/2021/05/the-dilemma-of-employer-employee-patent-ownership-in-india.html
[5] Darius
Rutton Kavasmaneck v. Gharda Chemicals Ltd., (2015) 14 SCC 277.
[6] Section
39, The Patents Act, 1970.
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