Diwan Advocates

Licensing, Technology Transfer and TMT Services Law

An Indian software company has built a product that a US enterprise wants to license for distribution across Southeast Asia. The licensing agreement needs to address IP ownership of customisations, the scope of the territory, the royalty structure, the source code escrow arrangement for business continuity, the liability cap, and what happens if the US company is acquired. Each of those provisions has legal consequences that extend beyond the contract itself into patent law, copyright, competition law, and taxation.

A foreign technology company wants to transfer manufacturing know-how to an Indian joint venture partner. The know-how is not patented. It is embedded in processes, training materials, and technical documentation. The technology transfer agreement needs to define what is being transferred, how the confidentiality obligation survives if the JV ends, whether the Indian partner can develop improvements, and who owns those improvements. Getting this wrong means giving away value that cannot be recovered.

Technology and media law (TMT) sits at the intersection of intellectual property, commercial contracts, data regulation, and competition law. At Diwan Advocates, we draft and negotiate technology licensing agreements, know-how transfer agreements, software development contracts, SaaS agreements, content licensing deals, and media distribution arrangements. We also handle the disputes when these agreements break down.

Technology Licensing: The Core Framework

What Is Being Licensed

A technology licence grants the licensee the right to use specific intellectual property owned by the licensor. The IP may include patents under the Patents Act, 1970, software protected as a literary work under the Copyright Act, 1957, trade marks, trade secrets, or technical know-how. Each category of IP has different registration requirements, different duration, and different rules about what can be licensed and on what terms.

Exclusive, Sole, and Non-Exclusive Licences

An exclusive licence gives the licensee the only right to use the IP in the defined scope: no one else, including the licensor, can exercise the licensed rights. A sole licence allows the licensor to also use the IP alongside the licensee but grants no rights to other third parties. A non-exclusive licence can be granted to multiple licensees simultaneously. The choice between these structures determines the commercial value of the licence and must match what both parties actually intend.

Improvements and Ownership of Derivative Work

Where the licensee will use the licensed technology to develop new products or improvements, the agreement must address who owns those developments. Grant-back clauses requiring the licensee to license improvements back to the licensor are common in technology transfer agreements but must be carefully drafted to avoid competition law concerns. A mandatory exclusive grant-back can restrict the licensee's ability to commercialise its own innovations and may violate Section 3 of the Competition Act.

Technology Transfer Agreements

A technology transfer agreement goes beyond a licence. It involves the actual transmission of technical knowledge, processes, formulations, or methods from the transferor to the transferee. The transferred knowledge may not be patented. Its value lies in its confidentiality. The agreement must therefore address confidentiality obligations that are enforceable not only during the term but for a reasonable period after the agreement ends.

Know-How and Trade Secrets

India does not have a standalone trade secrets statute. Protection of unpatented know-how relies on contractual confidentiality obligations, the law of breach of confidence as developed by Indian courts, and in some cases the Bharatiya Nyaya Sanhita provisions on criminal breach of trust. We draft confidentiality and non-disclosure provisions that are specific enough to be enforceable and broad enough to actually protect the information that matters.

FEMA and Royalty Payments

Royalty payments from an Indian licensee to a foreign licensor are current account transactions under FEMA, 1999. There is no longer a government cap on royalty rates following the liberalisation of the automatic route, but the payments must be through banking channels and reported correctly. Withholding tax under Section 195 of the Income Tax Act must be deducted by the Indian payer at the applicable rate before remittance. The rate depends on whether a DTAA applies and whether the payment qualifies as royalty or fees for technical services under the treaty. Mischaracterisation of the payment can result in the Indian company facing a demand for the shortfall in withholding tax.

Software Licensing and SaaS

Software licensing agreements in India range from a simple click-wrap agreement for a consumer product to a multi-year enterprise licence for mission-critical infrastructure. The key issues in any software licence are the scope of the usage rights (number of users, devices, or instances), the restrictions on copying or modification, the source code escrow arrangement for business continuity, the service level commitments and remedies for downtime, and the data ownership and portability provisions.

A SaaS agreement raises additional questions specific to cloud delivery: where is the data stored, what security certifications does the provider hold, can the customer audit the provider's systems, what happens to the customer's data on termination, and does the arrangement comply with any applicable data localisation requirements. For SaaS services used by regulated entities in financial services or healthcare, sector-specific RBI or IRDAI guidelines on cloud outsourcing also apply.

Content and Media Licensing

Content licensing in the media and entertainment industry involves film rights, music sync licences, broadcast rights, format rights, and digital distribution agreements. Each type of content licence must address the scope of rights granted, the territory, the medium or platform, the term, and the holdback obligations that prevent the licensor from licensing the same content to competing platforms simultaneously.

The 2012 amendment to the Copyright Act, 1957 introduced a provision that authors and composers cannot assign away their right to receive royalties from secondary exploitation of their work in new formats or technologies not in existence at the time of the assignment. This provision, which cannot be contracted out of, is relevant to every content licensing agreement that purports to cover future platforms and media.

Open Source Compliance

Open-source software licences range from permissive licences, such as MIT and BSD, that impose few restrictions on use and distribution, to copyleft licences, such as GPL, that require any derivative work to be released under the same licence. A company that incorporates GPL-licensed code into a proprietary commercial product and distributes it without complying with the GPL's requirements is infringing the copyright in that code. Open-source compliance audits are essential in technology M&A transactions and for any company that distributes software products.

Why Diwan Advocates for Licensing and TMT?

Legislative Reference Index

Technology agreements create rights and obligations that last for years.

Getting them right at the drafting stage costs a fraction of resolving them in dispute.

Diwan Advocates gets them right.

Diwan Advocates  |  Delhi, India