IP Assignment in India: Employee & Founder IP, Formalities, Stamp Duty & GST

An IP assignment is the outright transfer of ownership of intellectual property from one party to another – as distinct from a licence, which only permits use. In India it arises in three recurring settings: employee-, founder- and contractor-created IP (making sure the business actually owns what its people make); commercial deals (sale of a brand or technology, an asset purchase, an investment round); and group reorganisations. The mechanics turn on the right statute for each right – the Trade Marks Act 1999, the Patents Act 1970 and the Copyright Act 1957 – and India has distinctive, mandatory formalities that catch people out. A patent assignment must be in writing and executed to be valid (s. 68), with the assignee’s title registered with the Controller (s. 69); a trademark can be assigned with or without goodwill (with an advertisement step for assignments without goodwill); and a copyright assignment must be in writing with statutory terms and is subject to defaults and a lapse rule. Two points matter most. First, for patents India has no statutory rule vesting employee inventions in the employer – absent an assignment, the inventor owns – so employment and consultancy contracts must assign IP expressly. Second, moral rights and the authors’ royalty right cannot be assigned away, and stamp duty (state-specific) and GST apply to the transfer. Confirm the current position before relying on it.

A guide to transferring ownership of intellectual property in India – employee, founder and contractor IP, the assignment formalities for each right, stamp duty and GST, assignment in deals and reorganisations, and the cross-border picture.

At a glance

• Assignment = transfer of ownership; a licence only permits use (see our Licensing page)
• Three settings: employee/founder/contractor IP, commercial deals (sale, asset purchase, investment), group reorganisations
• Patent (s. 68/69): assignment must be in writing and executed to be valid; register the assignee’s title with the Controller (advisable, for third-party effect)
• Trademark (ss. 38–45): assignable with or without goodwill; an assignment without goodwill needs the Registrar’s advertisement direction; record the assignment (s. 45) to be entered as proprietor
• Copyright (s. 19): must be in writing, identify the work and specify rights, duration, territory and royalty; defaults apply (5-year term, India) and rights lapse if not exercised within a year
• Employee inventions: no statutory employer vesting for patents – the inventor owns absent an assignment, so contracts must assign expressly (the opposite of many other jurisdictions)
• Cannot be assigned away: the author’s moral rights (s. 57) and the authors’ royalty right in film/music
• Costs: stamp duty is state-specific (broadly ~3–7% of consideration; copyright assignment is exempt); permanent transfer of IP attracts 18% GST

1. Assignment versus licence

The starting distinction is between an assignment and a licence. An assignment transfers ownership of the IP – the assignee becomes the new proprietor and the assignor keeps nothing (unless the deal says otherwise). A licence leaves ownership where it is and merely grants permission to use the right on agreed terms; the owner can take it back when the licence ends (see our Licensing page). The two are not interchangeable: a company that needs to own what its staff and contractors create, or a buyer paying for a brand or technology, needs an assignment, not a licence. An assignment can be partial (limited to particular rights, classes, fields or territories) or whole, and outright or by way of security. Because an assignment is permanent and, in India, subject to mandatory statutory formalities, stamp duty and tax, the scope, the formalities and the warranties matter more than in almost any other IP arrangement – which is why the rest of this page focuses on getting them right.

2. The legal building blocks

India has no single “assignment” statute – each type of IP is assigned under its own law, with its own formalities, and two cross-cutting levies (stamp duty and GST) apply to the transfer. Trademarks are governed by the Trade Marks Act 1999, under which a registered or unregistered mark can be assigned with or without goodwill and the assignment recorded with the Registrar. Patents, and the rights in them, are governed by the Patents Act 1970: an assignment must be in writing and duly executed to be valid (s. 68), and the assignee must apply to register title with the Controller (s. 69). Copyright (including software, a literary work) is governed by the Copyright Act 1957: the assignment must be in writing and signed, and must identify the work and specify the rights, duration, territory and royalty (s. 19) – but the author’s moral rights (s. 57) are not assignable. Designs are assigned under the Designs Act 2000, with the assignment registrable with the Designs Office. Pure know-how and trade secrets, having no register, are “assigned” by contract. Cutting across all of these, stamp duty (a state subject – broadly 3–7% of consideration, though copyright assignments are exempt) makes a properly stamped instrument essential for admissibility, and the permanent transfer of IP attracts GST at 18%. The recurring theme is that each right carries its own formalities, and an assignment that ignores them may be invalid, unrecordable or inadmissible.

3. Employee-created IP

For most businesses the first and most important assignment question is whether the company owns what its own people create – and here India differs sharply from many jurisdictions. For copyright, the position is broadly favourable to employers: under s. 17 of the Copyright Act, where a work is made by an author in the course of employment under a contract of service, the employer is the first owner of the copyright in the absence of any agreement to the contrary (a specific rule also applies to works made for newspapers and magazines). But for patents, India has no equivalent statutory rule – the Patents Act contains no provision vesting an employee’s inventions in the employer. The consequence is significant: absent an express assignment, the inventor (the employee) is the first owner of the invention and the right to apply for the patent, even where the invention was made using the employer’s time and resources. This is the opposite of the position in jurisdictions (such as the UAE) where employee inventions vest in the employer by statute. The practical answer is the same in every case: every employment contract should contain a present assignment of all IP (including future inventions and works) created in the course of employment, together with a duty to assist with patent filings and recordals and an acknowledgment of the employer’s ownership. Two cautions: the author’s moral rights remain with the individual whatever the contract says, and an over-broad assignment of an employee’s personal future creations unrelated to the employment may be vulnerable, so the clause should be tied to the employment.

4. Founder, contractor and commissioned IP

The position for founders, independent contractors and agencies is where ownership is most often lost – and it is the issue that surfaces, painfully, in startup due diligence. For founders, the IP developed before or around incorporation (code, designs, brand) frequently sits with the individuals, not the company, unless it has been assigned in; investors will expect to see founder IP-assignment agreements vesting everything in the company. For contractors and agencies, the default is unfavourable to the customer: outside a contract of service, the creator generally owns what they make – a software developer, design agency or consultant retains the copyright in the deliverable unless there is an express written assignment (the narrow commissioned-work exceptions in s. 17, such as certain photographs, portraits and films made for valuable consideration, do not cover most software or design work). A company that cannot show a clean chain of written assignments from its founders, employees and contractors may find it cannot register, enforce, sell or license the very assets it paid to build – and the gap typically emerges at the worst moment, in a financing or acquisition. The remedy is standard and should be non-negotiable: present assignments of all IP in every founder, employment, consultancy and development agreement, with further-assurance obligations to complete any later recordals, backed by confidentiality terms – the points developed on our Technology Transfer and Commercial Contracts pages.

5. Executing and recording the assignment – by right

Because each right has its own formalities, an assignment has to be executed and recorded right-by-right. For a trademark, the Trade Marks Act allows assignment with or without the goodwill of the business; an assignment without goodwill of a registered mark is effective only if the assignee applies to the Registrar for directions on advertising the assignment and advertises it as directed (within a window the Registrar sets), and in all cases the assignment should be recorded under s. 45 so the assignee is entered as the subsequent proprietor – until recorded, the assignee’s title is not established on the register. For a patent, the assignment must be in writing and executed with all terms reduced to the document (s. 68 – an oral assignment is invalid), and the assignee should register title with the Controller (s. 69); while registration is not, since 2005, a condition of validity, an unregistered assignment leaves the assignee exposed on title and third-party effect, so recordal should be treated as part of completing the deal. For copyright, the assignment must be in writing and signed and must identify the work and specify the rights, duration, territory and royalty (s. 19); if the term is not stated it defaults to five years, if the territory is not stated it defaults to India, and if the assignee does not exercise the assigned rights within one year the assignment of those rights is deemed to lapse – so silence on these points can defeat the deal. The authors’ royalty right in works used in films and sound recordings, and the author’s moral rights (s. 57), survive the assignment and cannot be stripped out. Designs are assigned in writing and registered with the Designs Office within the prescribed time.

6. Stamp duty, GST and tax

Two levies and a tax point complete the formalities. Stamp duty is a state subject, so the rate and rules depend on the state where the assignment deed is executed (and where the IP/assignor is located); rates broadly range from about 3% to 7% of the consideration, and an insufficiently stamped instrument is inadmissible in evidence until the duty (and any penalty) is paid – a frequent and avoidable problem. Usefully, copyright assignments are generally exempt from stamp duty, but trademark, patent and design assignments are not. GST applies to the transfer: the permanent transfer (assignment) of IP rights is treated as a supply of goods and is taxed at 18% (a licence, by contrast, is a supply of services). On income tax, a gain on the sale of IP is generally a capital gain (the IP being a capital asset), and an intra-group assignment is a related-party transaction subject to transfer-pricing discipline at arm’s length with documentation. None of this is merely administrative: the stamping, recordal and tax steps determine whether the assignment is enforceable, registrable and efficient, and they should be planned as part of the transaction, not after it. Detailed tax treatment is handled with our corporate-tax colleagues.

7. Assignment in M&A and group reorganisations

IP assignment is central to transactions. In an asset sale (or a slump sale of a business undertaking), the IP must be expressly identified and assigned, down to the registration numbers of the trademarks, patents and designs, plus the unregistered rights (copyright, know-how, software, domain names) – and each assignment then stamped and recorded in its own register. In a share sale, the IP stays inside the target company and does not need assigning, but due diligence must confirm the company owns and has recorded its rights – which is exactly where the founder, employee and contractor gaps in sections 3–4 come to light. Standalone brand or technology sales, investment rounds (where founders assign personal IP into the company), and group reorganisations (consolidating IP in a single Indian holding entity) all turn on clean, recorded assignments. A well-drafted assignment in a deal sets out the rights transferred, the consideration, warranties of ownership and non-infringement, an indemnity, further-assurance obligations (so the buyer can complete recordals), and the allocation of stamp duty, GST and recordal costs. Because the firm’s deals are frequently cross-border, an assignment often has to transfer Indian and UAE rights together, each recorded under its own system – so the deal documents must address both jurisdictions.

8. Drafting and the cross-border picture

A sound IP assignment ties these threads together. It identifies the rights precisely – registered rights by number and class, unregistered rights by description – and states clearly that it is an assignment, not a licence. It captures present and future rights where relevant (employment, founder and development contexts), sets the consideration and the effective date, and includes the statutory terms each right requires (the s. 19 particulars for copyright; writing and execution for patents). It includes warranties of ownership and non-infringement, an indemnity, and a further-assurance clause obliging the assignor to sign whatever the recordals, advertisements and registrations require. It deals with moral rights and the authors’ royalty right to the extent the law allows (a waiver of the practical exercise of moral rights, recognising they cannot be assigned), and it allocates responsibility for stamp duty, GST and recordal. Because most of the firm’s assignments are cross-border, the Indian transfer usually has to be coordinated with a UAE assignment – each recorded under its own regime, each with its own stamp, tax and exchange-control implications. IP assignment therefore connects to the rest of the cluster – Licensing (the alternative to assignment), Technology Transfer (assignments inside larger technology deals), and Franchising – and to Commercial Contracts and Cross-Border Structures on the corporate side.

Key points at a glance

Frequently asked questions