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ABSTRACT
Licensing is the process of leasing a legally protected (that is, trademarked or copyrighted) entity a
name, likeness, logo, trademark, graphic design, slogan, signature, character, or a combination of
several of these elements. The entity, known as the property or intellectual property, is then used in
conjunction with a product. Many major companies and the media consider licensing a significant
marketing tool.
Licensing is a marketing and brand extension tool that is widely used by everyone from major
corporations to the smallest of small business. Entertainment, sports and fashion are the areas of
licensing that are most readily apparent to consumers, but the business reaches into the worlds of
corporate brands, art, publishing, colleges and universities and non-profit groups, to name a few.
Licensing can extend a corporate brand into new categories, areas of a store, or into new stores overall.
Licensing is a way to move a brand into new businesses without making a major investment in new
manufacturing processes, machinery or facilities.

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1. INTRODUCTION
The granting of permission to use intellectual property rights, such as trademarks, patents, or
technology, under defined conditions.

Under this method, the manufacturer enters into an agreement with a licensee in the foreign country and
this gives him the right to use the manufacturing process, a patent design or a trademark, technical
information or some facility in return for some fee or royalty. It is often the quickest way of entering
overseas markets - sometimes the only possible way as in centrally planned economies. It is clearly a
method that involves little expense, and avoids all distribution costs.




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1.1 TYPES




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1.2 LICENSOR OR BRAND OWNER
Builds and strengthens the brand image beyond traditional boundaries and builds brand value
Increases awareness of the brand and its core products amongst consumers who otherwise might
not be brand aware.
Helps to reinforce brand message and position in the marketplace.
Attracts new customers to the brand name
Allows consumers to acquire authorized rather than illegal or unauthorized products using the
brand name, marks and logo.
Enhances the importance of the brand name to existing customers
Allows entry to additional or new trade channels
Protects trademarks by broadening the trade use of marks
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Generates revenue beyond the normal revenue and profit stream of the brand owner
1.3 LICENSEE OR MANUFACTURER
Grows market share by associating it products with a brand name and image that transcend the
intrinsic retail value of the product manufactured
Builds competitive advantages over competitors with weaker or no brand awareness
Generates greater revenue without the start up costs associated with brand development and
promotion
1.4 LICENSEES OR MANUFACTURERS
Increases market share of core products through brand acceptance
Opens new retail channels by channeling channel appropriate brands to their proper niches.
Gains shelf space at retail by offering multiple valid alternative profit solutions to the retailer
Increases awareness of product offerings
Attracts new customers to existing products
Builds competitive advantage over companies who compete only on price
Increases sales through a wider assortment of products, giving reasons for additional space
Lends credibility to their products through brand association
Generates incremental revenues through the sale of licensed product over and above core non-
branded products.

1.5 FRANCHISING VS LICENSING
For a company looking to expand, franchising and licensing are often appealing business models.
In a franchising model, the franchisee uses another firm's successful business model and brand
name to operate what is effectively an independent branch of the company. The franchiser
maintains a considerable degree of control over the operations and processes used by the
franchisee, but also helps with things like branding and marketing support that aid the franchise.
The franchiser also typically ensures that branches do not cannibalize each other's revenues.
Under a licensing model, a company sells licenses to other (typically smaller) companies to use
intellectual property (IP), brand, design or business programs. These licenses are usually non-
exclusive, which means they can be sold to multiple competing companies serving the same
market. In this arrangement, the licensing company may exercise control over how its IP is used
but does not control the business operations of the licensee. Both models require that the
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franchisee/lincensee make payments to the original business that owns the brand or intellectual
property. There are laws that govern the franchising model and define what constitutes franchising;
some agreements end up being legally viewed as franchising even if they were originally drawn up
as licensing agreements.
Franchising Licensing
Governed by Securities law Contract law
Registration Required Not required
Territorial rights Offered to franchisee Not offered; licensee can sell similar
licenses and products in same area
Support and
training
Provided by franchiser Not provided
Royalty payments Yes Yes
Use of
trademark/logo
Logo and trademark retained by
franchiser and used by franchisee
Can be licensed
Examples McDonalds, Subway, 7-11, Dunkin
Donuts
Microsoft Office
control Franchiser exercise control over
franchisee.
licensor does not have control over
licensee

1.6 OBTAINING BUSINESS LICENSE IN INDIA
In order to start a business, you will need to obtain a business license in the nation or county or locality
where you intend to do business, even if you don't live in that area. These procedures vary greatly based
on location and these may also be time-consuming. You must start on this process as early as possible
and simultaneously work on your other requirements. In India, it may take at least three months to
obtain all permits necessary to obtaining a business license.

1. Obtain the Director Identification Number (DIN) on line, which is available on the Ministry of
Corporate Affairs 21st Century (MCA 21) portal under "resources." This may cost around 100 Indian
Rupees (INR). This is roughly U.S. $2 as of July 2010.

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2. Obtain a Digital Signature Certificate on line in order to use the new electronic filing system under
MCA 21. This may cost around INR 400 to INR 2650 (U.S. $8 to $56) as of July 2010.

3. Reserve the company name with the Registrar of Companies (ROC) on line. You can check the
availability of your desired name on the MCA 21 website. This process may cost around INR 500 (U.S.
$10) as of July 2010.

4. Stamp the company documents at the Superintendent's office or an authorized bank. Ensure that
these documents are unsigned and contain no written content. The rate of stamp duty varies based on
the Indian state where you seek a license. This may cost around INR 1300 (U.S. $28) or more as of July
2010.

5. Present the necessary documents, along with the registration fee, to the ROC in order to get the
Certificate of Incorporation. The fee is INR 15,823 (U.S. $339) as of July 2010. Ensure all the
documents are available and check them carefully.

6. Make a seal. Though this is not legally required, you will need the seal if you want to issue corporate
shares. This will cost around INR 350 (U.S. $7.50) as of July 2010.

7. Visit an authorized franchise or agent appointed by the National Securities Depository Services
Limited (NSDL) or Unit of India (UTI) Investors Services Ltd to get a Permanent Account Number
(PAN). This will cost INR 71 (U.S. $1.50). This is necessary to pay taxes.

8. Obtain a Tax Account Number (TAN) for income taxes deducted at the source from the Assessing
Office in the Mumbai Income Tax department. This will cost INR 55 (U.S. $1).

9. Register with the Office of Inspector, Mumbai Shops and Establishment Act. This will cost more
than INR 2000 (U.S. $43) as of July 2010.

10. Register for the Value-Added Tax (VAT) with the Sales Tax officer of the ward where you will
start your company. This will cost INR 5100 (U.S. $110) as of July 2010.

11. Register for the profession tax. This is free of charge. The registration authority for the Mumbai
Area is situated at Vikarikar Bhavan, Mazgaon in Mumbai.

12. Register your company with the Employees' Provident Fund Organization by contacting their
regional branch. This is free of charge.


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2. KEY LICENSING ISSUES IN INDIA

Licensing is the ideal way to tap into the potential of the booming Indian subcontinent. It opens up
trade opportunities while also shielding foreign interests from some the complexities of the jurisdiction

The Indian economy is awakening. What was initially perceived as an obstacle a surging population
today looks set to be the catalyst for explosive growth in GDP and a boom in consumption.
Understandably, business interests in the country are flourishing, encouraged by investment-friendly
government policies and the confidence engendered by a progressive judiciary.
As a result, foreign direct investment is pouring into the country: the first quarter of the 2007-08
financial year saw inflows of US$4.9 billion, as against US$1.7 billion in the same period the previous
year. While the potential that India represents is enticing, doing business in the country is still
characterised by some complexities. These stem partly from the fact that the country is ruled by a
coalition government, but also from diversities of culture and language, divergences in policy between
the state and central governments, and even the intricacies of choosing the right business partner.

2.1 LICENSING AND FRANCHISING AS A BUSINESS MODEL
One of the main issues of doing business in India is choosing the appropriate route to do so. Should a
foreign business set up a fully owned company? A subsidiary? A joint venture? Or should it leverage
its IP rights through franchising and licensing? Given the pros and cons of doing business in India,
franchising and licensing appear particularly appropriate channels.
They not only allow for effective participation of foreign interests in Indian trade and commerce, but
also shield such interests from the complexities of the system. A second issue that must be considered
is which business sectors to target. This issue is even more relevant for diversified businesses, as the
government has opened up some sectors to automatic foreign participation, while in others approval is
needed; and equity participation is capped in certain sectors.
These factors must be considered when structuring the agreement and adequately defining the scope of
the goods, services, territories and the like covered under the agreement. In this context, Indian law as
interpreted by the courts holds that the nature of an agreement which constitutes a licence or
assignment will be determined not by the terms used therein, but rather by the intent of the parties as
manifested in the agreement. Thus, an agreement does not qualify as a licence agreement simply
because of the terminology used therein.
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2.2 LICENCE CONSTITUTES
For an agreement to be regarded as a licence, the relevant factor for consideration is whether it provides
for the exercise of quality control over the licensee. Previously there was much debate as to what
constituted a licensing agreement, with the relevant factors cited ranging from recordal of the licence
with the Trademark Office as a registered user agreement to the transactional nature of the agreement.
This debate was finally resolved by a landmark decision of the Apex Court of India, which confirmed
the modern trend of recognizing common law licences as long as there is de facto quality control. Thus,
what is relevant is whether quality control exists, and not the extent of such control.
If there is no quality control and other checks, the courts may consider the agreement to be a naked
licence. This is a licence which grants permission to use the mark without other provisions pertaining
to quality and other forms of control. A naked licence may be regarded as an inference of abandonment,
as the lack of checks could result in the public being misled, in which case the trademark will have
ceased to function as an informational device. The quantum of quality control has not been defined or
prescribed in guidelines or through legal decisions. Based on interpretations of agreements and judicial
findings, however, it may be inferred through diverse factors such as an effective audit mechanism, the
training of personnel, the provisions of samples, a right of inspection, financial and managerial
controls, and the nature of the relationship between licensor and licensee (eg, subsidiary/affiliate/group
company). Further, many licensing agreements contain specific quality requirements that are either
included in the agreement or attached to the schedule. These quality requirements are usually technical
in nature and not only specify the licensors control over activities under the agreement, but can also
spill over to cover other activities such as manufacturing processes, marketing and advertising, sales,
discounts, exchange policies and after-sales guarantees.
Pre-licensing preparations
At the negotiation stage, it is advisable for the licensor to protect its know-how, including trademarks,
trade secrets and other proprietary information, by entering into a non-disclosure agreement or
memorandum of understanding with the prospective licensee. When drafting such agreements, it is
imperative to ensure their enforceability under Indian contract law and the relevant intellectual property
statutes, and to ensure they are watertight. It may also be wise to seek to enter into such agreements
with employees and other third parties or consultants of the licensee who might also come across the
protected information.
Applicable legislation
The keys laws that come into play when trademarks are licensed are as follows:
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The Indian Contract Act 1872.
The Competition Act 2002.
The Trademarks Act 1999.
The Consumer Protection Act 1986.
Labour laws.
Taxation laws.
The Foreign Exchange Management Act 2000.

Their impact on licensing agreements is explored below.

2.3 LICENSING AND CONTRACT LAW
Section 27 of the Indian Contract Act 1872 provides: Every agreement by which anyone is restrained
from exercising a lawful profession, trade or business of any kind is to that extent void. The exception
to this clause states:
One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a
similar business, within specified local limits, so long as the buyer, or any person deriving title to the
goodwill from the buyer, carries on a like business therein; provided that such limits appear to the
Court reasonable, regard having had to the nature of business. Therefore, a provision that restricts the
licensee from operating or participating in a competitive business for the duration of the agreement is
valid; but if the restraint continues to operate after the expiry of the agreement, it is illegal and therefore
void.
In interpreting such conditions, the Indian courts will apply the test of reasonableness that is, they
will consider whether:
The contract is reasonable between the parties.
The contract accords with the public interest.
Notably, a licensee can be restricted from divulging confidential information and trade secrets both
during and after the termination of a franchise agreement.

Competition Law And Licensing
The Competition Act 2002 (pending notification) aims to prevent practices that have an adverse effect
on competition, to promote and sustain competition in the markets, to protect the interests of consumers
and to ensure freedom of trade. Predominantly, the act focuses on activities and agreements that hinder
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competition or unnecessarily hamper the functioning of the market forces which are essential to healthy
competition. It imposes strict bans on anti-competitive agreements and cartels that have or are likely to
have an appreciable adverse effect on the economy. Therefore, when the licensee is the only seller in
the market and the licence agreement allows it unilaterally to change the price of the product, this is
considered illegal as it amounts to abuse of a dominant position. Further, if a group of licensors enter
into a combination that may be detrimental to competition, this will be void. However, this does not
extend to share subscriptions or financing facility or any acquisition, by a public financial institution,
foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan
agreement or investment agreement.
The act aims to safeguard the intellectual property rights of the licensor: Section 5(3) allows the
licensor to impose reasonable restrictions required to protect its IP rights.
Consumer Protection And Related Laws
The Consumer Protection Act 1986 aims to provide relief to consumers who have been or are likely to
be affected by detrimental products sold to them by a seller. Especially in cases where the licence
agreement involves a licence to manufacture the product along with use of the brand, the courts will
carefully scrutinise the quality control provisions of the agreement to ascertain liability. It is thus
essential that the applicable indemnity clauses be drafted with extreme caution and foresight to provide
for such contingencies.
In cases of food adulteration, the courts have explicitly stated that the act of adulteration is dangerous
and that liability cannot be avoided due to lack of knowledge and good faith of the seller. In such cases,
liability is imposed the licensor, licensee and in some cases the vendor. As such matters might involve
press attention and may affect the goodwill and reputation of the business, it is imperative that utmost
care be taken to ensure compliance with the standards established by the Indian government.
Trademark Law
The law on trademarks has been suitably modified to reflect modern business trends. A licensee falls
under the definition of a permitted user, where permitted use covers use of a registered trademark
not only by a registered user, but also by another authorised third party that is not a registered user.
The Trademarks Act is silent on the licensing of unregistered trademarks, but the courts have endorsed
this as common law licensing. In Gujarat Bottling Co Lt v Coca Cola Co AIR 1995 SC 2372, it was
held that the licensing of trademarks is governed by common law which is also statutorily permitted,
provided that:
The licensing does not cause confusion or deception among the public.
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It does not destroy the distinctiveness of the trademark.
A connection in the course of trade consistent with the definition of the trademark continues to exist
between the goods and the proprietor of the mark.
However, only the registered user may institute infringement proceedings in its own name. It can also
implead the licensor as a defendant in proceedings, but in such cases the licensor is liable for costs only
if it enters an appearance and participates in the proceedings.
Any use of the trademark by the registered user or a common law licensee will be deemed to be use by
the proprietor, and not by a party other than the proprietor, for the purposes of removal from the
register and the imposition of limitations on grounds of non-use. In such cases, it is important that there
be a real trade connection between licensor and licensee.
As long as this trade connection continues in the form of quality controls, regular financial dealing and
other forms of audit, the connecting link between the licensors trademark and the licensee is bona fide.
Under these circumstances, use by a sublicensee may also inure to the benefit of the licensor. As stated
above, such use can be used as a defence in all legal proceedings alleging non-use of the licensors
trademarks.
The courts have also held that a licensee, by entering into the licensing agreement, affirms the
licensors ownership and is therefore estopped from contesting the validity of the trademarks that form
the subject matter of the agreement.


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3. INDUSTRIAL LICENSING
3.1 INDUSTRIAL LICENSING: NORMS AND POLICY
For the organized growth and development of industrial India, Parliament has enacted the Industrial
(Development and Regulation) Act, 1951. The IDR Act provisions apply to industrial undertakings,
which means an undertaking pertaining to a scheduled industry carried on in one or more factories by
any person or authority. Chapter III of the Act pertaining to the regulation of scheduled industries
makes it mandatory for every existing industrial undertaking to seek registration with the Central
Government. Also, every new industrial undertaking has been mandated to obtain a license by the
Central Government. Moreover, a registered or a licensed industrial undertaking is restricted from
manufacturing a new article unless the license for new article has been obtained or prior license has
been amended to include the article, as the case may be. The rules regarding the granting of registration
certificates and licenses are provided under The Registration and Licensing of Industrial Undertaking
Rules, 1952 and Notification 477(E) dated July 25, 1991, of the Department of Industrial Policy and
Promotion. Presently, an industrial license is required for industries retained under compulsory
licensing, the manufacturing of items reserved for the small scale sector by larger units, and when the
proposed location attracts restrictions.
The industries requiring compulsory licensing are:
Distillation and brewing of alcoholic drinks
Cigars and cigarettes of tobacco and manufactured tobacco substitutes
Electronics
Aerospace and defense equipment
Industrial explosives -including detonating fuses, safety fuses, gun powder, nitrocellulose and
matches
Hazardous chemicals including items hazardous to human safety and health and thus fall for
mandatory licensing
The government has reserved certain items for exclusive manufacturing in the small-scale sector. Non-
small-scale units can undertake the manufacturing of items reserved for the small scale sector only after
obtaining an industrial license. In such cases, the non-small-scale unit is required to undertake an
obligation to export 50 percent of the production of small-scale industry (SSI) reserved items. This has
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been done to protect indigenous manufacturers from competitive exotic substitutes so as to ensure a
level playing field for domestic manufacturers.
With regards to locational limitations, industrial undertakings are free to select the location of their
projects. Industrial licenses, however, are required if the proposed location is within 25 kilometers of
the standard urban area limits of 23 Indian cities having a population of at least 1 million. The
locational restrictions, however, do not apply in the case of electronics, computer software and printing
and any other industry which may be classified in the future as a non-polluting industry. The location
of industrial units is subject to the applicable local zoning and land use regulations and environmental
regulations so as to maintain ecological discipline.
The application for registration has to be made to the Secretary of Industrial Assistance, Central
Government. After due consideration, the government then issues the Certificate of Registration.
Similarly, an application (Form IL-FC) for obtaining a license by a new undertaking has to be made to
the Central Government along with the fee, after which the Ministry issues a license. Industrial licenses
are granted by the Secretarial of Industrial Assistance (SIA) on the recommendation of the Licensing
Committee.
After a an industrial undertaking has obtained a license or permission as above, it becomes eligible to
the allotment of controlled commodities and for the issuance of an import license for goods required for
the construction and operation of the industrial undertaking.
De-licensed industries
These are industries which do not require compulsory licensing, do not fall under locational
restrictions, and are not reserved for small-scale industries. There is no exhaustive list specified by the
Department of Industrial Policy and Promotion. As a process of liberalization of industrial policy, many
items have been exempted from compulsory licensing and attention is reserved only for those which are
vital for public health, safety and national security. Industries exempted from the provisions of
industrial licensing are required to file an Industrial Entrepreneurs Memorandum along with a fee.
The Governments liberalization and economic reforms program aims at rapid and substantial
economic growth, and integration with the global economy in a harmonized manner. The industrial
policy reforms have reduced the industrial licensing requirements, removed restrictions on investment
and expansion, and facilitated easy access to foreign technology and foreign direct investment.
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3.2 INDUSTRIES FOR WHICH INDUSTRIAL LICENSING IS COMPULSORY
Industrial licensing is compulsory for following industries

1. For Large and Medium Industries: Items reserved for the Small Scale Sector

2. For All Industries:

a) All items of electronic aerospace and defence equipment, whether specifically mentioned or not in
this list.
b) All items related to the production or use of atomic energy including the carrying out of any process,
preparatory or ancillary to such production or use, under the Atomic Energy Act, 1962.

Comprehensive list for which industrial licensing is compulsory:
Coal and Lignite
Petroleum (other than crude) and its distillation products
Distillation and brewing of alcoholic drinks
Sugar
Animal fats and oils
Cigars and cigarettes of tobacco and manufactured tobacco substitutes
Asbestos and asbestos-based products
Plywood, decorative veneers, and other wood-based products such as particle board, medium
density fiber board, and black-board
Tanned or dressed furskins
Paper and Newsprint except bagasse-based units.(i.e. except units based on minimum 75% pulp
from agricultural residues, bagasse and other non conventional raw materials)
Electronic aerospace and defence equipment: all types
Industrial explosives, including detonating fuses, safety fuses, gun powder, nitrocellulose and
matches
Hazardous chemicals & Entertainment electronics (VCR's, color TV's, CD players)
Drugs and Pharmaceuticals (according to Drug Policy)
Chamois Leather
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4. LICENSING INTELLECTUAL PROPERTY UNDER INDIAN LAWS
The management and licensing of intellectual property rights (patents, copyrights, trademarks, design,
geographical indications and know-how, collectively referred to as "IP") is very crucial for all business
organizations especially, the ones which focuses on technology sectors. In fact, the management and
licensing of IP drives the profitability of businesses and consequently encourages and incentivizes
innovation. "Licensing" is a legal mechanism that gives opportunities to use or re-use IP, which is
already protected. This, of course would bring about the debate on factors which would help the
"licensor" and "licensee" to determine why one might license and why one might not license. These
factors inter aliainclude, sharing the risk of manufacturing/production; expenses and costs of research
and development; saving time instead of re-inventing the wheel; market penetration; collaboration of
new ideas and products. Therefore, every decision of taking or granting license of intellectual property
should be based on an objective assessment of these factors and business needs of the parties involved.
First step towards Licensing:
As licensing agreements opens up the spectrum of opportunities to both the licensor and licensee, the
first step which a licensor should necessarily do is to enter in to a confidentiality/non-disclosure
agreement with the licensee before disclosing information relating to IP. A confidentiality/non-
disclosure agreement is an important tool which protects the IP of the discloser by imposing obligations
of care on the recipient while handling the IP. From the perspective of licensee, it is pertinent to
conduct a due diligence on the ownership of the IP and also have a realistic estimate of the commercial
benefits of IP prior to entering in to any IP licensing agreement.
License terms under licensing agreements:
It is pertinent to lay down the important terms and conditions of license under the relevant license
agreement. Some of the important aspects which have to be understood and negotiated by the licensor
and licensee include:
Exclusive or non-exclusive license.
Sub-licensing. If yes, any specific restrictions or commercial considerations on sub-licensing.
Commercial terms pertaining to license such as lump sum fee; periodical fees; royalty fees on
sales; escalations etc.
Specific restrictions or limitations on use of IP. For eg. Whether license is restricted to any
particular field?
Incorporating a part or whole of the IP in to another work or combine the use of the IP with
another product or work.
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Ownership to the improvements made to the IP.
Warranty or restrictions on use of IP. For eg. IP to be used only on a particular platform.
Duration of license, i.e. whether license to be perpetual or time-bound. For eg. a patent cannot
be licensed perpetually; however a trademark can be licensed perpetually provided the same is
periodically renewed by the licensor. On a general note, parties cannot agree upon the duration
of license beyond what is specified under the specific statute.
Circumstances under which license is terminated.
Business continuity plan if licensor or licensee is not able to conduct business including terms
of source code escrow etc.
Change of control of the licensee for eg. Licensor would not be interested to continue the
license if the licensee is acquired by one of Licensor's competitor.
Rights and obligations post termination of the license especially those pertaining to
confidentiality.
Applicable governing laws.
Mechanism for resolving disputes.
In addition to the aforesaid aspects, there should be appropriate consideration on clauses pertaining to
limitation of liability; warranties; insurances; security measures and compliances of storing and using
IP. A good licensing agreement would take in to account the aforesaid considerations and an ample
dose of the same would go in to drafting of the license terms and conditions. However, the
aforementioned pointers are only an indicative list and the parties to the licensing agreement are free to
adapt these terms to their convenience within the legal framework. It is pertinent that the aforesaid
terms and conditions are carefully considered and agreed upon by the licensor and licensee prior to
executing a licensing agreement. This prevents any ambiguity in the understanding of the parties
involved and lessens the possibilities of potential disputes.
Licensing agreements and Competition Law:
There are three main concepts which form the basis of anti-trust laws across various jurisdictions and
they are: (i) Cartels and other anti-competitive agreements and practices (ii) Merger control and (iii)
Abuse of a dominant position. With the enactment of Competition Act, 2002 ("Competition Act" or
"Act"), the impact of these concepts are evident in Indian industry sectors as well. Of course, there
would be commensurate influence of the new Competition Act on M&A activities; intra-group
mergers, demergers and acquisitions; joint ventures; agreements and arrangements with competitors
and agreements and arrangements with suppliers, distributors, exclusivity arrangements, agreements for
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sale and other commercial agreements. The Competition Act, in effect, prohibits anti-competitive
agreements (section 3), abuse of dominant position (section 4) and regulates mergers, amalgamations
and acquisitions (sections 5 & 6).
It is also pertinent to note that, agreements amongst enterprises or persons at different stages or levels
of the production chain in different markets, including (a) tie-in arrangement; (b) exclusive supply
agreement; (c) exclusive distribution agreement; (d) refusal to deal; (e) re-sale price maintenance are
considered void, if they cause, or are likely to cause, an appreciable adverse effect on competition in
India.
The Competition Act has clarified that 'reasonable conditions' may be imposed for protection of
recognized intellectual property rights under Intellectual property laws, i.e. the Copyright Act, 1957,
the Patents Act, 1970, the Trade Marks Act, 1999, the Geographical Indications of Goods (Registration
and Protection) Act, 1999, the Designs Act, 2000, the Semi-conductor Integrated Circuits Layout-
Design Act, 2000. It may be noted that the said Intellectual property laws do not have an 'overriding
effect' over Competition Act, and the exemption provided applies only to the extent that the
"intellectual property right holder" imposes reasonable conditions necessary for protecting his/her
rights.
In the light of the above, it is pertinent to explore as to what is permissible under the Competition Act
and what are the practices which may be construed to be abuse of IP having an adverse effect on
competition. The intent of the Competition Act is very clear, the licensing agreements must not in any
manner restrict or hamper competition and trade. In the event of any unreasonable restrictions which
are per se anti-competitive, then such licensing agreements would raise concerns under the Competition
Act. In short, though conceptually there is no conflict between the protections granted under the various
intellectual property statutes in India and the Competition Act, the question is to how to balance both
while entering in to a licensing agreement. As the Competition Act is at its nascent stage in India, the
scrutiny of licensing agreements has, in many instances, not attracted the attention of the Competition
Commission of India. Going forward, this situation may go for a dynamic change. Keeping this in
mind, it would be most advisable to draft licensing agreements within legal parameters in
harmonization with the Competition Act.
Stamp Duty:
The stamp duty payable for licensing agreement would be as per applicable stamp act of the concerned
state in India.

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5. LICENSING OF BANKING COMPANIES
(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a
license issued in that behalf by the Reserve Bank and any such license may be issued subject to such
conditions as the Reserve Bank may think fit to impose.] .
(2) Every banking company in existence on the commencement of this Act, before the expiry of six
months from such commencement, and every other company before commencing banking business 11
[in India], shall apply in writing to the Reserve Bank for a license under this section:
PROVIDED that in the case of a banking company in existence on the commencement of this Act,
nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business
until it is granted a license in pursuance of 55[this section] or is by notice in writing informed by the
Reserve Bank that a license cannot be granted to it:
PROVIDED FURTHER that the Reserve Bank shall not give a notice as aforesaid to be a banking
company in existence on the commencement of this Act before the expiry of the three years referred to
in sub-section (1) of section 11 or of such further period as the Reserve Bank may under that sub-
section think fit to allow.
(3) Before granting any license under this section, the Reserve Bank may require to be satisfied by an
inspection of the books of the company or otherwise that 56[***] the following conditions are fulfilled,
namely:-
(a) that the company is or will be in a position to pay its present or future depositors in full as
their claims accrue;
(b) that the affairs of the company are not being, or are not likely to be, conducted in a manner
detrimental to the interests of its present or future depositors;
(c) that the general character of the proposed management of the company will not be
prejudicial to the public interest of its present or future depositors;
(d) that the company has adequate capital structure and earning prospects;
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(e) that the public interest will be served by the grant of a license to the company to carry on
banking business in India;
(f) that having regard to the banking facilities available in the proposed principal area of
operations of the company, the potential scope for expansion of banks already in existence in
the area and other relevant factors the grant of the license would not be prejudicial to the
operation and consolidation of the banking system consistent with monetary stability and
economic growth;
(g) any other condition, the fulfillment of which would, in the opinion of the Reserve Bank, be
necessary to ensure that the carrying on of banking business in India by the company will not be
prejudicial to the public interest or the interests of the depositors.]
(3A) Before granting any license under this section to a company incorporated outside India, the
Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise
that the conditions specified in sub-section (3) are fulfilled and that the carrying on of banking business
by such company in India will be in the public interest and that the government or law of the country in
which it is incorporated does not discriminate in any way against banking companies registered in India
and that the company complies with all the provisions of this Act applicable to banking companies
incorporated outside India.]
(4) The Reserve Bank may cancel a license granted to a banking company under this section:
(i) if the company ceases to carry on banking business in India; or
(ii) if the company at any time fails to comply with any of the conditions imposed upon it under
sub-section (1); or
(iii) if at any time, any of the conditions referred to in sub-section (3) 15 [and sub-section (3A)]
is not fulfilled:
PROVIDED that before canceling a license under clause (ii) or clause (iii) of this sub-section on the
ground that the banking company has failed to comply with or has failed to fulfill any of the conditions
referred to therein, the Reserve Bank, unless it is of opinion that the delay will be prejudicial to the
21
interests of the companys depositors or the public, shall grant to the company on such terms as it may
specify, and opportunity of taking the necessary steps for complying with or fulfilling such condition.
(5) Any banking company aggrieved by the decision of the Reserve Bank canceling a license under this
section may, within thirty days from the date on which such decision is communicated to it, appeal to
the Central Government.
(6) The decision of the Central Government where an appeal has been preferred to it under sub-section
(5) or of the Reserve Bank where no such appeal has been preferred shall be final.


22
6. COMPULSORY LICENSING AND THE LEGAL FRAMEWORK IN
PHARMACEUTICAL INDUSTRY
A compulsory licence provides that the owner of a patent licenses the use of their rights in return for
payment either set by law or determined through some form of arbitration. The Agreement on Trade-
Related Aspects of Intellectual Property Rights (TRIPS) sets out specific provisions that shall be
followed if a compulsory licence is issued, and the requirements of such licences. All significant patent
systems comply with the requirements of TRIPS. Specific situations in which compulsory licences
may be issued are set out in the legislation of each patent system and vary between systems. TRIPS
provides that the requirements for a compulsory licence may be waived in certain situations, in
particular cases of national emergency or extreme urgency or in cases of public non-commercial use.
Article 31(f) of TRIPS requires that compulsory licences be used "predominantly" for local markets, a
requirement that complicates the ability of countries to import pharmaceutical products manufactured
overseas.
This issue of compulsory licensing of pharmaceuticals treating serious diseases was addressed by the
Doha Declaration. In May 2006 the European Commission's official journal published Regulation
816/2006 which brought into force the provisions of the Doha Declaration, having legal effect in the
European Union, and allowing compulsory licences to be issued in developed countries for the
manufacture of patented drugs, provided they are exported to certain countries (principally, those on the
United Nation's list of least-developed countries and certain other countries having per-capita incomes
of less than US$745 a year).
The situation in India
For many decades India did not recognise pharmaceutical patents, but the patent law has been
overhauled to comply with the requirements of the World Trade Organisation (WTO) which India
joined in 1995. In 2005, Indias legislators revised the patent law to protect innovative molecules
discovered after 1995.
In many countries around the world, compulsory licences can only be issued by national government
authorities. However, in India the situation is somewhat different and generic companies can
themselves request such licences from the independent patent controller. In March 2012, India granted
its first compulsory licence to the Indian generic drug manufacturer Natco Pharma Ltd for Sorafenib
23
tosylate (Nexavar), an anti-cancer drug patented and marketed by Bayer. Although non-governmental
groups reportedly welcomed the decision, western innovative pharmaceutical companies viewed the
decision with caution and unease.
Under the terms of the compulsory licence, Natco shall provide the drug for free to at least 600 patients
requiring treatment per year and sell the drug at no more than 8,880 Indian rupees (about US$178) for a
pack of 120 tablets to other patients. Natco is also prohibited from outsourcing the manufacturing of
the medicine. In March 2013, India's Intellectual Property Appellate Board (IPAB) dismissed Bayer's
appeal against the compulsory licence. However, the IPAB has raised the royalty payable to Bayer by
Natco from 6% to 7%. At the time of writing (August 2013), Bayer has stated that it will pursue the
case at High Court in Mumbai.
Indias controversial patent law also possesses a contentious clause aimed at preventing the ever-
greening of patents when minor changes to a molecule or drug formulation are used to extend or renew
key patents. It is of concern for many companies that India will serve as a catalyst for emerging
markets to amend their intellectual property laws in order to make it more difficult to register or extend
patents, or that other countries may follow Indias example and issue compulsory licences.
The situation in China
When the revised version of the Measures for Compulsory Licensing Implementation, issued by the
State Intellectual Property Office (SIPO) came into effect in May 2012, many media sources declared
that compulsory licences would now be used in China and that the country had broken the patent
barrier on drugs. Indeed, many commentators linked events in India with the changes to the Chinese
legislation and speculation was rife that China was following in Indias footsteps. Such headlines were
not, however, truly accurate. The revised legislation simply strengthened the compulsory licensing
framework and implemented detailed procedures regarding application and defence against applications
and expanded the scope for compulsory licensing to include any matters of public health. Even prior
to the new measures, a compulsory licence could have been granted under Chinese patent law if a
company or entity was unable to obtain a licence within a reasonable timeframe on reasonable terms
and conditions.
Whilst both markets hold huge potential for western pharmaceutical companies, it is clear that China
and India are at very different stage of economic development. The Chinese authorities have made
24
much of their desire and intent to protect their international reputation concerning intellectual property
and to create and foster an environment conducive to research and innovation. There have been many
proclamations concerning the importance of upholding intellectual property rights and the future
growth of the economy, and several important revisions to Chinese intellectual property legislation
have taken place.
China has never granted a compulsory licence, not even during the SARS outbreak. Indeed, in a well
publicised example from 2003, a Chinese company applied for a compulsory licence to produce a
version of Roches Tamiflu, but the application was refused. Several commentators have observed that
they do not envisage China issuing any compulsory licences in the next five years, save in the situation
of a national pandemic or emergency.
Looking to the future
While the research-based pharmaceutical industry is clearly supportive of the objective of improving
access to innovative medicines, compulsory licensing will not solve larger problems regarding access to
medicines and healthcare. The challenge for courts in the developing world is to balance intellectual
property rights against the need for affordable medicines for an ever increasing number of patients.
Although there is no clear sign that they will do so, if developing countries begin to routinely use
compulsory licences, we may witness a race to the bottom in which governments in the developing
world fail to support research and innovation in public health and science. In the absence of the
investment made by innovative industries, and the resulting R&D, there would be no generic medicines
for the worlds patients. It can be argued that the responsibility to promote the development of new
drugs lies with all countries, not solely those in the west.

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7. LICENSING OF PATENTED TECHNOLOGIES IN INDIA
The journey of an invention from lab to the market is a long and winding one with many hurdles and
may pass through bridges such as licensing and assignment before its end. In todays commercial arena
licensing policy hold its own importance as a tool of business and marketing. A license under Indian
law is a right that is given to a person to do something, which otherwise is unauthorized and illegal. In
IPR parlance, licensing is becoming an increasing phenomenon whereby the patentee grants license of
his patent rights to another person, subject to the terms and conditions of the contract. Many emerging
growth companies face patent licensing issues. Patent licensing raises a host of critical legal and
business issues that the company will need to address appropriately in order to ensure it has the right
level of protections as it approaches the marketplace. Today, be it music, machines or software, most
creators consider licensing as the next step for their creation. Thus, licensing is being looked as one of
the most rewarding aspects of intellectual property creation.

Case Law
National Research Development Corporation V/S. ABS Plastics Limited.
In this case the Honble Delhi High Court has held that where a right under Patent is assigned or a
license is accorded in favour of someone, the same is not valid unless the same is in writing between
the parties and it has been filed in a prescribed manner with the Controller of Patents. The Honble
Court has further held that a license agreement for patents can be valid only during the currency of the
Patent.
The facts of the present case are:
A process for the manufacture of Terpolymers of Acrylonitrile Butadine using what was known as
emulsion technology got patented vide patent Nos. 110090 and 118359 and was assigned in favour of
the plaintiff by a deed of assignment. The assignment was duly registered with the Controller of Patents
and Designs.
The plaintiff entered into a deed of license with the defendant in respect of the above patent. By this
license deed, the defendant acquired a non- exclusive license for a term of eight years with effect from
1st February, 1974 for using the knowhow of the two chemical processes covered by the two patents
aforestated. As per the agreement a royalty of 1 per cent on the net ex factory sale price of the material
manufactured by the defendant in accordance with the said invention. The defendant was liable to pay
interest @ 12 per cent per annum in the event of default. The royalty was payable for a minimum
period of eight years from the date of start of manufacture. Same was not done by the defendant and
hence, the plaintiff has filed than present suit for recovery of Rs. 25,34,964.62 as royalty amount under
26
license agreement between the parties and interest accrued thereon as well as for rendition of account.
Subsequently, the defendant has filed written statement and took the stand that there was no jural
relation between the parties. The deed of license entered into between the parties was illegal and void
document and it did not confer any right on the plaintiff. The said deed was not enforceable under law.
It was claimed that under Chapter XIII of the Patents Act, any license in respect of Patent was not
valid license unless the same was in writing and an application for its registration under section 68 of
the said Act is filed with the Controller in terms of the said section.

The obligations and restrictions imposed on foreign companies that license their patented
technologies to Indian companies.
The goals of a licensing agreement are basically three-fold: to define each party's rights under the
agreement, to define each party's obligations under the agreement and the remedies available to each
party if the obligations are not met.
An international Licensing arrangement between an Indian resident and a nonresident would have to
comply with the Foreign Exchange Management Act, 1999 (FEMA) and the rules framed there
under which deals with legal regulation and management of foreign exchange in India. India has one of
the most liberal policy regimes in regard to technology agreements. Technology licensing agreement
focuses on the licensing of patent and design rights and the manufacturing and marketing of the
invention. There is no specific law pertaining to Licensing in India, Fundamentally, every licensing
relationship is a contractual relationship and therefore, the Indian Contract Act, 1872 (Contract Act)
would be applicable to all Licensing arrangements. Under the Contract Act, a contract is an
agreement enforceable by law.8
The following Elements are required to constitute a contract:
(a) an agreement, i.e. an offer and an acceptance of the offer;
(b) Lawful consideration for the agreement;
(c) Lawful object and purpose of the agreement;
(d) Free consent of the parties to the agreement; and
(e) Capacity of the parties to enter into an agreement.
Every Licensing agreement would have to necessarily meet the above five criteria in order to be legally
enforceable. While the Contract Act does not stipulate that a contract has to be in writing, it is advisable
to have a formal and written agreement to precisely lay down the rights and validity of the obligations
27
of the Licensor and the Licensee. This would assist in resolving any future deadlocks and disputes. All
such licensing must confirm to the particular intellectual property legislations in India.

The Indian governments policy for Indian companies that obtain licenses for patented
technologies from foreign companies
Exponential Growth of Technology in India has played a significant role in all round development and
growth of economy in our country. Technology can either be developed through own research and
development or it can be purchased or licensed through indigenous or imported sources. India has opted
for a judicious mix of indigenous and imported technology. Indian government however has no policy
(subsidies, tax reductions, etc.) for Indian companies that obtain licenses for patented technologies from
foreign companies.
However, The Special Economic Zones (SEZ) and technology Parks has been an important initiative by
the Government to promote exports. Since the SEZ policy does not refer to any specific target
industries, Special Economic Zones can be set up in any of the areas which are not otherwise banned
under the existing Industrial Policy. Special Economic Zones (SEZs) are designated dutyfree enclaves
with developed industrial infrastructure. These zones are regarded as foreign territory for the purpose of
duties and taxes, and are excluded from the domain of the custom authorities to enjoy full freedom for
the in and outflow of goods.

Advice to Japanese companies that grant licenses for patented technologies to Indian companies
A license is a written contract and may include whatever provisions the parties agree upon, including
the payment of fees whether one time or royalties. It is a way for commercialization of a patent. The
objective of licensing a patent is to evidence the application of the technology and benefits by reducing
human efforts and solving a problem and there by monetizing the invention. It is noteworthy how the IP
licensing process has evolved into a well-recognized source of national income. Several companies
such as IBM and Microsoft, and Universities around the world generate large amounts of revenue via
patent licensing.
Several parameters should be considered by Japanese Companies before licensing a patented
technology across nations such as
Revenue Generation and business model developments
Scope for further efforts in development of technology on the subject
Trade policy changes between nations
28
Government policies and regulations
Uncertainty and risks involved in licensing a patent; where further developments would bypass the
existing patents.
It would be advisable that Japanese companies who wish to enter the Indian market must stipulate
covenants to protect the intellectual property and confidential information. The license agreement
should be well drafted and various legal and commercial aspects should be carefully considered by
Licensor before licensing of technology to the Licensee.

29
8. EXAMPLES OF LICENSING IN INDIA
8.1 YASH RAJ FILMS SIGNS BIG LICENSING DEALS WITH MATTEL, PEPSICO, ETC.
FOR DHOOM 3
Dhoom 3 mark possibly the most-ambitious licensing merchandise programme yet mounted on an
Indian film as Yash Raj Films plans to bet big on the licensing market with the third instalment of the
popular Dhoom series.
Yash Raj Films (YRF) has signed licensing deals with a number of companies including Mattel Toys
and PepsiCo for Dhoom 3 and more than 100 items ranging from games and toys to gadgets and
apparel are set to hit the markets in time for the year-end release of the film.
"Licensing is on the cusp of experiencing a major breakthrough in the Indian market," Danny Simon,
consultant to YRF and a 'guru' in this field, having headed Fox Licensing and managed licensing
programmes of Hollywood franchises such as Rambo and Terminator, said.
"There is an increase of disposable income, the growing influence of media and the development of
multiple-store chains," he told ET, speaking from Los Angeles. YRF has developed of a fullservice
licensing division to maximize the financial and marketing returns that can be derived not only from
their own properties, but also through the representation of third-party intellectual material.
"Dhoom 3 has a list of licensees that include companies such as Mattel Toys (D3 Barbie, Hot Wheels
toy products), Pepsi (D3 Drink) to name a few," Simon said.
The merchandise would include biker games partnered with Microsoft, funky fashion accessories for
men, Ice X Electronics' Dhoom branded phones and tablets with content from the movie, Mattel's
collector's edition dolls of Aamir and Katrina, Hot Wheel bikes, race track sets, UNO cards and kids
apparel.
This is the first time Mattel has signed a licensing deal for a Bollywood movie. The worldwide
licensing merchandise market is estimated at $123 billion, although it has yet to take off in a big way in
India.
Rohit Sobti, vice president at YRF Licensing, said that while there have been few examples of
successful movie merchandise sales in India like Chhota Bheem and royalties range between 5-15% in
this business, Simon helped YRF change its perspective on the potential of licensing with some
meticulous research and planning over the last year.
"India is a tough market, but I see a big spike in the next three to five years," Sobti said, adding that he
expects a minimum of Rs 20 crore in sales within the first year of operations of YRF Licensing from
Dhoom 3 merchandise alone. YRF also plans to use licensing as the means to monetise other company
30
assets. In the past two years, it has licensed a significant number of products ranging from lifestyle
merchandise to social expression products within India and in various international markets.
After launching Diva'ni, India's first Bollywood-inspired fashion label, YRF launched musical cards
with tunes from their film library, and next on the anvil is branded hospitality rooms as well as cafes.
After Dhoom 3, the firm's immediate plans include leveraging on 1,000 weeks that Dilwale Dulhaniya
Le Jayenge (DDLJ) is expected to complete in 2015.
"The plan is five fold," Sobti said. They include products for age groups ranging from 12-40; launch of
more brands like Diva'ni for cinema inspired fashion; gaming beginning with Dhoom films; TV
animation for kids in 52 episodes with Dhoom 3 as well as films such as Hum Tum; and then,
hospitality, rooms, cafes and perhaps even a theme park, he said. Sobti estimates the vertical to grow to
a value of Rs 50 crore in the next three years.
8.2 FORD INDIA TREADS THE MERCHANDISING ROAD THROUGH BRAND LICENSING
Ford has decided to take up a secondary route for revenue in India -- merchandising. The company now
plans to sell commodities across various categories with its trademarks.
For this purpose, The Beanstalk Group, Omnicom Groups brand licensing and consultancy -- which
handles Fords brand licensing globally -- has tied up with License India, an Indian licensing solution
provider, in a strategic and commercial representation agreement.
Ford runs a global brand licensing programme, an initiative taken up in the US. License India would be
extending a number of Ford brands -- including the iconic Ford blue oval, Mustang and Build Ford
Tough marks -- to merchandise in a wide range of product categories, including clothing, headwear,
toys, home-ware and decorative vehicle accessories.
Talking to afaqs!, Gaurav Marya, president, License India, reveals that with Ford, corporate brand
licensing is being seriously considered for the first time ever. Corporate licensing is about Rs 500 crore
in India. Until now, this area is dominated by character licensing, such as Chacha Chowdhury or Felix
The Cat; or sports licensing, for example, Indian cricketer Harbhajan Singh lending himself for
Harbhajan Da Dhaaba. Character licensing still is a major chunk, and forms about 70 per cent of all
the licensing that takes place as of now, states Marya.
31
Film licensing, he adds, is also an area of growing interest in India. One can recollect the girl-boy
characters of the movie, Hum Tum. However, Indian films have still to leverage film licensing the way
Hollywood does, with merchandise for properties such as Spiderman, Batman or Harry Potter hitting
the shelves much before the movie hits screens; and thus, fuelling excitement for the movie at the time
of release.
With the emergence of organized retail in India -- estimated at close to US$ 30 billion out of a total
market size of over US$ 300 billion, and projected to grow at 40 per cent per annum -- Marya feels that
the retail industry has set the pace for new collaborations between international licensing companies
and Indian business houses.
As per Mark Bentley, manager, Ford Global Brand Licensing, Fords global licensing programme has
already witnessed major success in markets, including the USA, Europe and Australia. Given the
phenomenal popularity of Ford and Mustang merchandise globally, we expect to replicate this trend in
India. Rising disposable incomes in India have fuelled a consumption boom, presenting a lucrative
opportunity for international brands like Ford. This considered, Ford Motor Company has expanded
into India, in partnership with The Beanstalk Group and License India, to unlock the limitless potential
of the Indian market.
The Ford licensing programme generated over $1.5 billion in retail sales in 2008 with over 350
licensees in the program, reveals Bentley. It continues to expand the lifestyle focus of the brand and
its vehicles, he adds.
Apart from India, Ford is taking its licensing programme this year to China and Latin America as well.
Among others, License India has Pepsi and Santa Barbara Polo as its clients, as well as characters such
as Chacha Chowdhury and Felix The Cat. The company also looks after sports licensing for Harbhajan
Singh and others.

8.4 REVOKED LICENSES ARE THE LATEST FALLOUT FROM INDIAS 2G TELECOM SCAM
In the wake of Indias $40 billion 2G telecom scam, the countrys Supreme Court issued an order on
February 2 revoking 122 licenses granted to eight telecom operators. The licenses were issued by
former telecom minister A. Raja on a controversial first-come-first-served basis. According to the
Comptroller and Auditor General (CAG), this had led to the gargantuan multi-billion-dollar loss to the
32
exchequer. The court said that the licenses were awarded in a wholly arbitrary and unconstitutional
manner.
The companies in affected include Uninor (22 licenses), Videocon (21), Loop Telecom (21), Sistema
(21), Etisalat DB (15), Idea Cellular (13), S Tel (6), and Tata Teleservices (3). Uninor is a joint venture
between realty firm Unitech and Telenor of Norway, Sistema Shyam TeleServices (SSTL) is a joint
venture between Shyam Telecom and Sistema of Russia. Etisalat DB is a joint venture between DB
Realty and Etisalat of the United Arab Emirates.
The Supreme Court noted in its decision that the original license holders have sold at very high prices.
This implies the license fee was too low, leading to the loss to the exchequer. Swan Telecom (now
Etisalat DB Telecom) paid a license fee around $350 million. It offloaded around 45% equity in favor
of Etisalat for over $700 million, a move that values the company which, at the time of the
transaction, was nothing more than the license at $1.55 billion. Unitech, which had paid a similar
amount for its license, brought in Telenor of Norway as a 60% equity holder by issuing fresh shares of
$1.2 billion. The valuation of the company jumped to $2 billion.
The affected companies are planning to fight the courts decision. We have been penalized for faults
the court has found in the government process, Uninor officials said in a statement. A statement from
SSTL noted that being a law-abiding organization, [Sistema] reserves the right to protect its interests
by using all available judicial remedies. Etisalat, too, has been talking about its right to a review of
the Supreme Courts decision.
The telecom trio is moving into top gear to lobby for its cause and influence public opinion. Some
media outlets have noted that the decision could create significant implications for India as a whole.
[The Supreme Court ruling] is likely to impact around 10,000 jobs in the telecom sector, The Times
of India reported. Adds The Economic Times: The Supreme Court ruling on the 2G scam [is] unfair
and a setback to Indias image.
According to newsmagazine India Today, the Norwegian government has stepped in to bail out
Telenor, noting that the country is likely to invoke clauses from the India-Norway Bilateral
Investment Treaty (BIT) to protect Telenors investments in India. Telenor officials said the firm has
invested nearly $3 billion in equity and corporate guarantees for the telecom joint venture. Sistema-
Shyam says its outlay so far has been $2.5 billion.
33
Media reports also claim that the ruling will impact foreign direct investment in India. But there are two
sides to that coin: When the recent Supreme Court verdict in the Vodafone tax case went in favor of the
U.K.-based telecom major, the decision was hailed by some in the West as a triumph for the rule of law
in India. The same Supreme Court has now struck a blow against corruption, but that ruling is being
held up as potentially unfriendly to foreign investors.
Following the Supreme Courts decision, the government has asked the Telecom Regulatory Authority
of India (TRAI) to make its recommendations on the license issue. Though it has four months to do
this, TRAI has indicated that it prefers the auction route. Based on amounts received for the 3G auction,
back-of-the-envelope calculations show that the license essentially the spectrum will have a base
price of $2 billion. (There are some procedural complications here as the country may be moving to a
regime in which the license is de-linked from the spectrum allocation. The license will have a fixed fee,
while the spectrum will be auctioned.)
The companies that have been stripped off their licenses by the Supreme Court can participate in this
action. But those firms will probably have to pay $2 billion-plus instead of the $350 million they spent
the first time, a prospect that many will likely find unattractive.
8.5 INDIA MOVES TOWARD OPEN E&P LICENSING
India is moving toward open licensing for exploration and production rights.
The country now negotiates production-sharing agreements with operators after holding bidding rounds
under a program it calls New Exploration Licensing Policy (NELP). It has held nine NELP rounds
since 1999.
Indian Minister of State for Petroleum and Natural Gas Shri R.P.N. Singh recently responded to
criticism of NELP licensing for its failure to attract widespread participation by large international oil
and gas operators (OGJ Online, Aug. 17, 2012).
On Aug. 28, Singh told the upper house of the Indian Parliament that the government has begun work
on an open acreage licensing policy (OALP).
34
He also said the Directorate General of Hydrocarbons has started work on a national data repository as
a prerequisite of formulation the OALP.
DGH is examining the possibilities of gathering data bases of national oil companies and private
companies and linking them to a common data base, Singh said.
8.6 INDIA'S NEXAVAR LICENSING CREATES A GLOBAL DEBATE
Nexavar, the brand name of the blockbuster anti-liver cancer drug, sorafenib, sold by Bayer in India in
tiny quantities was an unknown commodity. An Indian patient with advanced liver cancer paid
280,000 for a dose of 120 tablets he has to take in a month or spend close to 35 lakh in a year for the
drug which could extend life by six-to-10 months. It is not difficult to guess how many of India's
estimated 29,000 liver cancer patients could afford to benefit from this biotech wonder drug, developed
by a small company, Onyx Pharmaceuticals, in Emeryville, California. Bayer bought the key protein
invented by Onyx and developed it into the liver cancer drug. Nexavar became a blockbuster with $1
billion in sales in 2011 for Bayer. The revenue growth was seven percent over the 2010 sales of $934
million.
But all that changed on March 13, 2012, when India's Patent Office granted a request from Hyderabad-
based Natco Pharma to compulsorily make Bayer's patented drug and make it available at 97 percent
discounted price of 8,800 for a month's dose. Of course, Bayer will get a six percent royalty on
Nexavar's sales by Natco.
Predictably, the pharma industry around the world has raised a storm of protest. The US government
officially expressed its displeasure at the Indian Patent Office's decision on Nexavar. Is intellectual
property safe in India? was the headline in a US pharma magazine. India's biotech industry
association, ABLE, too has issued a strong protest against the government's move, saying the
compulsory licensing of Nexavar will hit innovation in the country.
There are over 600,000 people with the advanced condition of liver cancer who can benefit from
Nexavar treatment. Bayer's sales figures for 2011 indicate that with differentiated lower prices in some
patients, just a tenth of the potential beneficiaries actually had access to the drug.
Globally and in India, the biotech industry has been championing the cause of affordable drugs through
innovation. And the biotech industry has always projected the image of a patient-friendly sector
striving to help patients in need all over the world. And this image has earned the industry a high public
profile.
35
So, is the compulsory licensing of Nexavar a bad idea? After all, the Indian government has only used
an option available to it under the global trade provisions. If governments such as India can't use these
provisions to increase availability of a key medical product, what is the use of such a facility, ask many
health activists.
There is a fear that India may set a trend and the Nexavar decision will be followed by more such
compulsory licensing of other drugs patented in the country since 2005. There is no evidence to show
that such a trend may be set. After all, this is the first case of compulsory licensing by the country after
adopting the new intellectual property regime.
It will certainly help if India's health administrators explain the rationale for the decision on Nexavar
and also present the plight of these 29,000 liver cancer patients in the country that convinced the
government to take such a decision. Such a step will certainly help calm the industry and also provide
some clues to the future decisions on several applications for compulsory licensing pending with Indian
Patent office. The biotech industry should demand a position paper on Nexavar and compulsory
licensing from the government immediately.
BAYER APPEALS FORCED LICENSING IN INDIA
Bayer is appealing an India Patent Office ruling that requires the company to license its cancer drug
Nexavar to the Indian drugmaker Natco Pharma, a case that highlights growing U.S. concerns in what
has become a notable illustration of U.S. concerns over insufficient intellectual property protections in
the country.
The compulsory license, ordered in March, has legal grounding in the international trade agreement
TRIPS, but has raised concern among Western drugmakers about the possibility that governments in
other developing nations may begin to override patents for costly, life-saving therapies they deem
essential to national health.
Bayer has filed its appeal against the order with India's Intellectual Property Appellate Board, claiming
that such forced licensing damages the international patent system and endangers pharmaceutical
research. The company is also arguing for the importance of market exclusivity as a key factor in
allowing innovator companies to recover costs associated with research and development.

Meanwhile, the Indian drugmaker Cipla has announced that it will slash prices for its cancer drug line-
up, including a reduction by 76 percent in the price of its own generic competitor to Nexavar, a move
that Cipla chairman and managing director Y.K. Hamied called a humanitarian approach by Cipla to
support cancer patients. Bayer filed suit in India against Cipla in 2010 alleging patent infringement
36
after the Drug Controller General of India granted the company approval to market a generic version of
Nexavar, The Economic Times reported.
But while the developments are positive for Indian cancer patients, the compulsory licensing issue has
served to exacerbate the sometimes-rocky trade relations between India in the United States. The
United States will closely monitor developments concerning compulsory licensing of patents in India,
writes U.S. Ambassador Ronald Kirk, author of a recent annual government report which again placed
India on a Priority Watch List of U.S. trading partners presenting the most significant concerns
regarding insufficient intellectual property rights protection.
Inclusion of India on the watch list has been called unilateral, unfortunate and unjustified, by Indian
Commerce and Industry Minister Anand Sharma according to The Economic Times. The IP regime in
India will continue to be responsive to our country's needs, Sharma reportedly wrote in a letter to Kirk.
Whether compulsory licensing in India and other developing nations remains the rarely used tool it is
today or becomes the patent-breaking nightmare Big Pharma worries it could become remains to be
seen. But it is rapidly becoming a more important trade issue as pressures grow on governments to cuts
costs and companies to maximize revenue.
8.7 INDIA SUSPENDS KINGFISHER AIRLINES' LICENCE
Kingfisher Airline's (KING.NS) licence was suspended on October, 2012 after it failed to address the
Indian regulator's concerns about its operations, forcing the debt-laden carrier to stop taking bookings.
Controlled by Vijay Mallya - the self-styled "King of Good Times" - and seven months behind on
salary payments among other missed bills, Kingfisher's fleet has been grounded since the start of the
month when a staff protest turned violent.
The airline, which has never made a profit since being founded in 2004 and reeling under $1.4 billion
of debt, will have its licence reinstated if it provides a plan that satisfies the Directorate General of Civil
Aviation (DGCA).
A complete cancellation of the licence was unlikely, said a government source, who declined to be
named as he is not permitted to speak to the media. The company's steep decline has underlined the
problems of operating in India's airline sector, where players grappling with rising fuel costs face
aggressive pricing caused by overcapacity. The suspension signaled the regulator's lack of patience
37
with Kingfisher after months of cancelled flights and staff walkouts, and marked a rare tough stance by
the government against a high-profile corporate.
"The actual position is not changed because of this order," Kingfisher said in a statement. "We have, in
any case, always maintained that once the issues with the employees are resolved, we will first present
our resumption plan to DGCA for review, before resuming operations". Kingfisher, which had
previously suspended all bookings before November 6, said it would cease taking any reservations until
operations resumed. Mallya, a liquor baron who owns a Formula 1 motor-racing team, is famous for
lavish parties at his $16 million beachside villa in Goa and also his company's annual swimsuit
calendar. The licence suspension, until further notice, was announced by Arun Mishra, director general
at the DGCA.
The move had been widely expected after Kingfisher failed to respond properly to queries from the
regulator regarding its ability to provide a "safe, efficient and reliable service". "The suspension of
Kingfisher's licence is unfortunate but not unexpected," Amber Dubey, director, aerospace and defence
at KPMG India, said in a statement. "Kingfisher's ability to bounce back from this situation appears
challenging."
Kingfisher's woes will likely help rivals such as Indigo and SpiceJet (SPJT.BO) by lowering capacity
on key routes. The airline had said on Friday it expected to begin flying again on November 6 if the
government approved its plan to resume operations. The Centre for Asia Pacific Aviation has said a
fully funded turnaround for Kingfisher would cost at least $1 billion.

38
CONCLUSION
Licensing has always been associated with a steady revenue stream for the licensor. However, the
marketing and advertisement benefits generated from licensing have an impact on the brand equity and
return on investment which significantly increases the scope of revenue. In emerging economies, a
licensing agreement can be of great importance and have far-reaching consequences. Therefore, the
drafting and implementation processes require careful attention to each and every detail.

As licensing arrangements offer major commercial benefits to business organizations and inventors, it
is essential that careful attention needs to be given to the details which goes in to the licensing
agreement. Furthermore, in the light of the above, it is imperative to comply with all the applicable
laws pertaining to licensing regime.

39
BIBLIOGRAPHY
Industrial licensing: norms and policy
http://www.india-briefing.com/news/industrial-licensing-norms-policy-5473.html/
Types of Licensing
http://www.bradfordlicenseindia.com/type_of_licensing.php
Franchising Vs Licensing
http://www.diffen.com/difference/Franchising_vs_Licensing
Obtaining Business License in India
http://www.ehow.com/how_6789574_business-license-india.html#ixzz2vGxBHaWi
Licensing Intellectual Property under Indian Laws
http://www.mondaq.com/india/x/205176/Trademark/Licensing+Intellectual+Property+Under+India
n+Laws
Licensing of Banking Companies
http://www.advocatekhoj.com/library/bareacts/bankingregulation/22.php?Title=Banking+Regulatio
n+Act,+1949&STitle=Licensing+of+banking+companies
Compulsory Licensing and the Legal Framework in Pharmaceutical Industry
http://www.lexology.com/library/detail.aspx?g=c74e553c-4659-49cf-b133-f6da0543a002
Yash Raj Films Signs Big Licensing Deals with Mattel, Pepsico, etc. for dhoom 3
http://articles.economictimes.indiatimes.com/2013-11-12/news/43980945_1_dhoom-3-rohit-sobti-
yash-raj-films
Ford India Treads the Merchandising Road through Brand Licensing
http://www.afaqs.com/news/story/25117_Ford-India-treads-the-merchandising-road-through-brand-
licensing
Revoked Licenses are the Latest Fallout from Indias 2G Telecom Scam
http://knowledge.wharton.upenn.edu/article/revoked-licenses-are-the-latest-fallout-from-indias-2g-
telecom-scam/
India moves toward open E&P licensing
http://www.ogj.com/articles/2012/08/india-moves-toward-open-ep-licensing.html
Bayer appeals forced licensing in India
http://www.burrillreport.com/article-4562.html
India suspends kingfisher airlines' License
http://www.reuters.com/article/2012/10/20/us-kingfisherairlines-licence-idusbre89j05920121020