# Technology licence agreement in India: the clauses a company must get right

URL: https://zernyxhub.com/blog/technology-licence-agreement
Author: Sahil Sheikh, Regd. Patent & Trademark Agent, cRTTP
Published: 2026-10-19
Category: Licensing

> The clauses that matter in a technology licence agreement in India: scope, payments, know-how, warranties, Section 140 limits and registering the licence.

**Short answer:** A technology licence agreement in India should define exactly what is licensed (patents, know-how, field, territory and exclusivity), how you pay, what support the licensor gives, who maintains and enforces the patents, the warranties, and how the deal ends. Under Section 68 of the Patents Act a patent licence must be in writing with all its terms, and you should register it with the Patent Office under Section 69 using Form 16.

You have found a university or lab technology that fits your product, the inventors are keen and the term sheet is agreed. Now someone has to turn it into a contract. This is where many Indian licensing deals go wrong, not because the parties disagree, but because the agreement is silent on something that matters two years later.

This guide walks through the clauses a company should insist on, clause by clause, from the licensee's side of the table. It assumes you have already done your checks on the patent. If not, start with our [patent due diligence checklist](https://zernyxhub.com/blog/patent-due-diligence).

## What the law requires before anything else

Two sections of the Patents Act, 1970 shape every patent licence in India.

- **Section 68: writing.** An assignment, licence or mortgage of a patent, or of a share in it, is not valid unless it is in writing, in a document that sets out all the terms and conditions, and duly executed. A handshake, an email chain or an MoU that says "terms to be agreed" is not enough.
- **Section 69: registration.** A licensee should apply to the Controller to register its interest in the patent. The application is made on **Form 16**. The official fee is **₹1,600 per patent** when filed online by a natural person, startup, small entity or educational institution, and **₹8,000 per patent** for any other applicant, such as a larger company. Physical filing costs a little more. Check the current First Schedule on the IP India site before you file.

Registration matters in practice. An unregistered document is generally not admitted as evidence of your title in court unless the court directs otherwise, so an unregistered licensee may struggle to enforce or rely on its rights.

## The core clauses, in the order you will negotiate them

### 1. Definitions and the licensed technology

List the licensed patents and applications by number, title and country in a schedule. Then define "know-how" separately: lab notebooks, process parameters, formulations, drawings, software code, test data. Most of the real value in a university technology sits in know-how that is not in the patent text. If the schedule only lists patents, that is all you have licensed.

Add a clause covering improvements. Say whether improvements made by the inventors after signing are included, offered to you on first refusal, or excluded.

### 2. Grant: field, territory and exclusivity

The grant clause is the heart of the deal. Spell out:

- **Field of use**, in product terms ("water treatment membranes for industrial effluent"), not in vague technology terms.
- **Territory**: India only, named countries, or worldwide. Remember the licensor can only license patents it holds in those countries.
- **Exclusivity**: exclusive, sole or non-exclusive. Our guide to [exclusive and non-exclusive licences](https://zernyxhub.com/blog/exclusive-licence) explains the trade-off.
- **Sublicensing**: whether you can sublicense to manufacturers, distributors or group companies, and whether the licensor must approve each one.

### 3. Payments

Most Indian technology licences combine some of these:

- An **upfront fee** on signing or on transfer of know-how.
- **Milestone payments** tied to events you control and can prove, such as a pilot batch or regulatory approval.
- A **running royalty** on net sales, with "net sales" defined so it excludes taxes, freight and returns.
- A **minimum annual royalty** in exclusive deals, so the licensor is protected if you sit on the technology.

Our post on [fair royalty rates](https://zernyxhub.com/blog/royalty-rates) covers what moves the numbers. In the contract, also fix the reporting period, the audit right and the currency. Royalty payments attract GST and tax deduction at source. The TDS provisions were renumbered under the Income-tax Act, 2025, which applies from 1 April 2026, so confirm current rates and sections with your tax adviser and say in the contract who bears which tax.

### 4. Technology transfer and support

Write the handover as a schedule with dates: documents to be delivered, samples, a number of training days, named inventor contacts and response times. State who pays for travel and consumables. A licence that grants rights but promises no help is often worth far less than its price.

### 5. Patent maintenance, prosecution and enforcement

Decide who pays renewal fees, who controls pending applications and responses to examination reports, and what happens if the owner wants to abandon a patent. In an exclusive licence, ask for the right to take over a patent the owner plans to drop.

For enforcement, agree who may sue an infringer, who pays, who controls the case and how damages are shared. Also agree who files the statement of working on **Form 27**, now due once for every three financial years. See our [Form 27 guide](https://zernyxhub.com/blog/form-27-working-statement).

### 6. Warranties and indemnities

Ask the licensor to warrant that it owns the patents, that all inventors have assigned their rights, that co-owners have consented, and that no conflicting licence exists. Universities often refuse to warrant validity or freedom to operate, which is normal. Push instead for honest disclosure of what they know, and for limits on your own indemnity to them.

### 7. Confidentiality and publication

Universities must publish. Agree a review window before any publication by the inventors so you can ask for a filing first or for confidential know-how to be removed. Keep the window short and specific so both sides can live with it.

### 8. Term, termination and what survives

The licence usually runs until the last licensed patent expires, which is 20 years from its filing date, or for a fixed term for know-how. List the grounds for termination: non-payment, insolvency, failure to commercialise by an agreed date. Then say what happens on exit: sell-off of stock, return of documents, and which clauses survive.

### 9. Disputes and governing law

Choose Indian law and a seat of arbitration, and add a short escalation step between senior people first. Many deals are rescued by a phone call between a vice chancellor and a managing director.

**From agreed term sheet to a registered licence**
1. Term sheet signed: Field, territory, exclusivity, payments
2. Full agreement drafted: Patents and know-how listed in schedules
3. Section 140 review: Remove conditions the Act makes void
4. Signed in writing: All terms in one document (Section 68)
5. Form 16 filed: Register the licence under Section 69

## Conditions the Patents Act makes void

Section 140 of the Patents Act makes certain restrictive conditions in a patent licence void. Broadly, a licensor cannot use the licence to:

- force you to buy articles other than the patented article from the licensor or its nominees,
- stop you from using articles or processes not supplied or owned by the licensor,
- require an exclusive grant back of your improvements,
- prevent you from challenging the validity of the patent, or
- force a coercive package licence, where you must take unwanted patents to get the one you need.

Licensors copy clauses from foreign templates that include exactly these terms. A void clause does not usually sink the whole agreement, but it creates arguments you do not need. Strike them out at draft stage. Read the full text of Section 140 on the IP India site, or ask your patent agent to check the draft against it.

## Common mistakes companies make

- **Licensing the patent but not the know-how.** The patent tells you what is protected, not how to make it at scale.
- **A field of use that is too narrow.** You discover a second application a year later and have to renegotiate from a weak position.
- **No registration.** The licence sits in a drawer. When an infringer appears, your standing is questioned.
- **Milestones you do not control**, such as "on regulatory approval" with no allowance for regulator delays.
- **Silence on abandonment.** The university stops paying renewals and the patent lapses without you knowing.

**A thin licence vs a workable licence**
Thin licence:
- Patents only, no know-how schedule
- No handover plan or support
- Renewal duty not assigned
- Never registered
Workable licence:
- Patents and know-how both scheduled
- Dated handover with named contacts
- Clear renewal and abandonment rules
- Form 16 filed under Section 69

## Before you sign: a short checklist

1. Every licensed patent and application listed by number.
2. Know-how described and delivered on a dated schedule.
3. Field, territory, exclusivity and sublicensing written in product terms.
4. Payments, reporting, audit and tax responsibilities clear.
5. Maintenance, prosecution, enforcement and Form 27 duties assigned.
6. Ownership warranties and co-owner consents attached.
7. No conditions that Section 140 makes void.
8. A calendar entry to file Form 16 after signing.

The contract is easier to get right when the technology choice was right. Zernyx Hub indexes about 6.5 lakh technologies from the last ten years, and its AI gives business insight on each one, including its commercial applications, so you can shortlist a technology that fits before lawyers start drafting.

## FAQ

### Is it compulsory to register a patent licence in India?

Section 69 says the licensee shall apply to register its interest, and an unregistered document is generally not admitted as evidence of title in court unless the court directs otherwise. In practice, register every licence you may need to rely on.

### What is the fee to register a patent licence?

Form 16 costs ₹1,600 per patent online for natural persons, startups, small entities and educational institutions, and ₹8,000 per patent for other applicants. Check the current IP India fee schedule before filing.

### Can a licence stop me from challenging the patent's validity?

No. Section 140 of the Patents Act makes a condition that prevents the licensee from challenging validity void.

### Should the licence cover know-how as well as the patent?

Yes, for almost every university or lab technology. List the know-how in a schedule and tie the handover to dates and named people.

### Who pays the patent renewal fees under a licence?

Whoever the agreement says. If it is silent, the owner usually pays, which leaves you exposed if the owner stops. Write it down, with a right to take over a patent the owner plans to abandon.

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