IP Licensing in India: Trademark, Patent, Copyright, Software & Compulsory Licensing

A licence lets one party use another’s intellectual property without transferring ownership – the engine of most commercial IP exploitation, from a brand licence to a software subscription. In India the rules differ by IP type and carry features that have no real counterpart in the UAE. A trademark licence is governed by the Trade Marks Act 1999, where the licensee can be recorded as a “registered user” and quality control is essential. Patents are licensed under the Patents Act 1970 – but India also has a compulsory-licensing regime (s. 84, and ss. 92/92A) under which a third party can obtain a licence against the patentee’s wishes, as in the landmark Natco v Bayer decision, and patentees must report the working of their patents. Copyright and software are licensed under the Copyright Act 1957, which adds statutory and compulsory licences (including s. 31D for broadcasting) and an inalienable author-royalty right for music and film. Licence restraints are tested under the Competition Act 2002, which exempts only “reasonable” conditions necessary to protect IP. And the cross-border tax position turns on a key point: following Engineering Analysis (Supreme Court, 2021), payments for shrink-wrap/EULA software are not “royalty” and so are not subject to withholding. Confirm the current position before relying on it.

A guide to licensing intellectual property in India – trademark, patent, copyright and software licences, the compulsory- and statutory-licensing regimes, the competition-law overlay, and the cross-border tax and FEMA position.

At a glance

• Licence = use, not ownership – distinct from an assignment (a transfer of the right itself)
• Trademark licences (Trade Marks Act 1999): record the licensee as a “registered user” (advisable, not mandatory); quality control essential
• Patent licences (Patents Act 1970): exclusive or non-exclusive; record the licence; but note the compulsory-licensing regime (s. 84 after 3 years; s. 92/92A) and the working-of-patents reporting obligation
• Copyright & software (Copyright Act 1957): licence in writing (s. 30); statutory/compulsory licences (s. 31, s. 31D broadcasting); software is a literary work; author royalty rights for film/music cannot be assigned away
• Streaming: the s. 31D statutory licence is confined to linear radio/TV broadcasting – internet streaming needs a voluntary licence (Tips Industries v Wynk)
• Competition (s. 3(5) Competition Act): only reasonable conditions necessary to protect IP are exempt; unreasonable restraints (some tie-ins, no-challenge, exclusivity) can be challenged
• Cross-border tax: royalties to non-residents bear 20% withholding (before treaty relief – India–UAE 10%); software payments are not royalty post-Engineering Analysis; GST applies (reverse charge on imports); royalties remit under the FEMA automatic route

1. What licensing is – and how it differs from assignment

A licence is a permission to use intellectual property on agreed terms, while the owner keeps the underlying right; an assignment, by contrast, transfers ownership outright (covered on our IP Assignment page). Licensing is how most IP earns its keep: a brand owner licenses a franchisee or distributor, a technology company licenses its patents and software, a content owner licenses its copyright works. As in most systems, the legal treatment in India is not uniform across IP types – trademarks, patents and copyright each have their own statute and their own formalities – so the first step in any Indian licensing exercise is to identify which rights are being licensed and therefore which rules apply. What makes India distinctive is the extent to which the State can override a rights-holder’s licensing choices in the public interest – through patent compulsory licensing and copyright statutory licensing – and the way competition law and tax shape the terms. The sections below take each IP type in turn, then turn to the licence architecture and the competition and tax overlay that apply across all of them.

2. Trademark licensing

A licence to use a registered trademark in India is governed by the Trade Marks Act 1999. The Act recognises licensing through the concept of the “registered user”: a licensee can be recorded with the Trade Marks Registry, and while recordal is not mandatory for a licence to be valid, recording the registered user is advisable – it puts the permitted use on the public record, supports the licensee’s ability to act against infringers, and evidences the controlled use that keeps the mark valid. The other essential feature is quality control: the licensor must retain and exercise control over the quality of the goods or services offered under the mark, because the licensed use must reflect a connection in the course of trade with the proprietor; uncontrolled “naked” licensing can weaken or jeopardise the mark. A trademark licence should therefore define the permitted goods/services, the territory, the term, the quality standards and the licensor’s audit rights, address sub-licensing, and deal with what happens to the licensee’s use of the mark on termination. Brand royalties paid abroad also carry the tax and FEMA consequences in section 8.

3. Patent and industrial-property licensing

Patents are licensed under the Patents Act 1970. A patent may be licensed on an exclusive or non-exclusive basis, and a licence should be in writing and recorded with the Patent Office to be effective and enforceable against third parties. A patent licence raises issues a brand licence does not: the scope of the licensed claims, field-of-use restrictions, improvements (who owns and may use enhancements), sub-licensing, and the technical know-how that usually accompanies the patent (which shades into a technology-transfer arrangement – see that page). What sets India sharply apart, however, is the compulsory-licensing regime. Under s. 84, any interested person may apply – at any time after three years from grant – for a compulsory licence on the grounds that the reasonable requirements of the public have not been satisfied, that the invention is not available at a reasonably affordable price, or that it is not worked in the territory of India. India’s first such licence, in Natco Pharma v Bayer (2012), was granted over the cancer drug Nexavar on all three grounds. Two further provisions matter: s. 92 allows the Central Government to enable compulsory licensing in a national emergency, extreme urgency or for public non-commercial use (without prior negotiation), and s. 92A permits compulsory licensing for the export of patented pharmaceuticals to countries with insufficient manufacturing capacity. Patentees are also expected to report the working of their patents to the Patent Office, and persistent non-working can support a compulsory-licence application. A licensing strategy for India therefore has to weigh not only the commercial terms but the price, availability and local-working dimension that the compulsory-licence grounds reflect. Designs are licensed under the Designs Act 2000, with licences recordable with the Designs Office.

4. Copyright and software licensing

Copyright works – software, literary, musical, artistic and audiovisual works – are licensed under the Copyright Act 1957. A voluntary licence must be in writing and signed (s. 30) and should define the rights, the term and the territory; importantly, the mandatory-terms and default rules that govern copyright assignments (a defined term, a defined territory, and lapse if rights are not exercised) inform copyright dealings generally and are covered on our IP Assignment page. India layers two distinctive features on top. First, statutory and compulsory licences: the Act allows compulsory licences where a work is withheld from the public (s. 31) and provides a statutory licence for broadcasting literary and musical works and sound recordings (s. 31D) on prior notice and payment of royalties fixed by the prescribed authority. Crucially, the courts have held that s. 31D is confined to traditional, linear radio and television broadcasting – in Tips Industries v Wynk, the Bombay High Court held (and a division bench later reaffirmed) that internet/on-demand streaming is not covered, so a streaming platform needs a voluntary licence from the rights-holder. Second, the author’s royalty right: following the 2012 amendments, authors of literary and musical works included in films and sound recordings retain an inalienable right to royalties (shared with the assignee) for most non-cinema-hall uses, typically administered through registered copyright societies – a right a licensee or assignee cannot strip out. Software is protected as a literary work, and is licensed across the usual spectrum – EULAs and enterprise licences, SaaS/cloud subscriptions, and open-source components whose conditions must be tracked – with the important tax point (section 8) that licence payments for software are generally not treated as royalty.

5. The licence architecture – exclusivity, field, territory and term

Across all IP types, the commercial architecture of a licence is built from a common set of levers. Exclusivity is the first: a licence may be exclusive (only the licensee may use the right in the defined scope, excluding even the licensor), sole (the licensee and the licensor, but no one else), or non-exclusive (the licensor may license others too). The field of use narrows the licence to particular products or applications; the territory confines it geographically; and the term fixes its duration and renewal. Sub-licensing – whether the licensee may grant rights onward, and on what terms – must be addressed expressly, as it is not assumed. For copyright licences there is a drafting trap to watch: where a copyright dealing does not specify the period or territory, the Act supplies defaults (a five-year term and Indian territory under the assignment provisions), so the licence should state both expressly to avoid an unintended limit. Getting the scope precisely defined is what prevents the most common licensing disputes – over whether a particular use was permitted – and it interacts with the competition-law analysis in section 7, since the breadth of exclusivity and territorial restraints is exactly what the Competition Act assesses.

6. Royalties, payment and quality control

A licence is usually a revenue arrangement, and the royalty structure is central: an upfront or lump-sum fee, running royalties (a percentage of net sales or a per-unit amount), minimum guarantees, milestone payments, or a combination. The agreement should define the royalty base precisely (what counts as net sales, what deductions are allowed), the reporting and payment cadence, and the licensor’s audit rights to verify the figures, since under-reporting is a frequent source of dispute. Quality control runs alongside payment as the other recurring obligation – most acutely for trademark licences (to protect the brand and the mark’s validity), but also for patent and software licences where standards and compliance matter. India adds a specific wrinkle for music and film: because the author-royalty right (section 4) is inalienable and is usually collected through a copyright society, a licence that exploits such works must account for the authors’ share as well as the producer’s or label’s – it cannot all be bought out. A well-drafted licence ties these together: the licensee pays for the right to use the IP and undertakes to use it to the licensor’s standards, with reporting, audit and termination remedies if either obligation is breached.

7. Competition law and the IPR exemption

Licence terms are vertical restraints and are tested under s. 3(4) of the Competition Act 2002, but IP licensing has a special carve-out. Section 3(5)(i) provides that the prohibition on anti-competitive agreements does not restrain a rights-holder from imposing “reasonable conditions as may be necessary for protecting” its IP. The key word is reasonable: the exemption protects conditions that genuinely safeguard the IP, but not restraints that go beyond what protection requires. So terms such as field-of-use, territory and quality conditions usually sit comfortably within the exemption, whereas no-challenge clauses, certain tie-ins and grant-backs, exclusive-dealing and pricing restraints can fall outside it and be assessed for an appreciable adverse effect on competition – and the reasonableness test itself remains unsettled, which counsels caution. The practical approach in India is to keep licence restraints tethered to a genuine IP-protection rationale, to avoid blanket no-challenge or resale-price terms, and to be ready to justify exclusivity and territorial limits commercially. This is a live area – the CCI’s treatment of IP-related conduct continues to develop – so licence terms should be drafted with the exemption’s limits in mind rather than assumed to be immune.

8. Cross-border tax, FEMA and drafting

For the firm’s clients the licence is usually cross-border, and the tax and exchange-control overlay is decisive. On exchange control, royalties and licence fees are current-account transactions that may be remitted under the FEMA automatic route (no prior RBI approval and no statutory cap), through an authorised-dealer bank. On tax, royalties paid to a non-resident licensor are subject to withholding tax at 20% (plus surcharge and cess) under the Income-tax Act 2025, before any lower treaty rate – the India–UAE treaty caps royalty at 10%, available with a valid tax-residency certificate and on meeting the treaty conditions. But the single most important Indian development for technology licences is Engineering Analysis Centre of Excellence v CIT (Supreme Court, 2021), which held that payments by Indian end-users and distributors to non-resident software suppliers under EULAs and distribution agreements are not “royalty” – so such payments are generally not subject to withholding tax in India. The characterisation (royalty vs business income vs sale) therefore has to be analysed carefully for any software or technology licence. GST applies to the licensing of IP, with the Indian licensee usually accounting for GST on reverse charge where the licence is imported from abroad. A sound Indian licence pulls all of this together – the right IP-type formalities (registered user; patent recordal; written copyright licence), the architecture (exclusivity, field, territory, term, sub-licensing), the royalty, reporting and quality-control regime, the competition-law discipline, and the tax/FEMA mechanics – and chooses the governing law and forum deliberately. For India–UAE clients the position must be coordinated with the UAE treatment, so licensing connects to IP Assignment, Technology Transfer and Franchising in this cluster, and to Commercial Contracts on the corporate side.

Key points at a glance

Frequently asked questions