Intellectual Property Agreement

Your brand, your code, your patent, your designs — these are the assets investors actually buy. And almost every Series A diligence question that derails a term sheet traces back to the same gap: an IP asset the company is using, but does not legally own. The fix is not a one-page "IP belongs to the company" line buried in a Founders Agreement. The fix is a properly drafted, properly stamped, properly recorded Intellectual Property Agreement for each meaningful asset.

Whether you are assigning founder code into a freshly incorporated Pvt Ltd, licensing a foreign brand into India, hiring a design agency, or issuing sweat equity for a patent contribution — the statutory form, the tax structure, and the FEMA route all change. This page walks you through what an IP agreement actually does in FY 2026-27, where founders typically go wrong, and how we put each piece on Registry record.

At a Glance

• Who needs this: Founders at incorporation, startups hiring contractors or agencies, companies licensing brands or patents in or out of India, employers issuing sweat equity for IP, and anyone whose product depends on third-party-created IP.
• Governing law: Trade Marks Act 1999, Patents Act 1970, Copyright Act 1957, Designs Act 2000, Indian Contract Act 1872, Stamp Act of the relevant State, FEMA Master Directions, and Sections 9(1)(vi), 195 and 115A of the Income Tax Act.
• Typical drafting time: 2-4 weeks for negotiation and execution; 30-60 days for statutory recordal at the relevant Registry.
• Statutory hooks: Section 38/49 TM Act for assignment and registered user; Section 68 Patents Act for licence recordal; Section 18-19 Copyright Act for written assignment; Section 30 for licensing.
• Cross-border anchor: FEMA Master Direction on Other Remittances, Section 195 TDS, Form 10F (mandatory e-filing), Form 15CA/15CB, and DTAA-based concessional rate where TRC is held.
• Stamp duty: Levied per the State Stamp Schedule where the deed is executed; commonly 0.1% to 7% depending on whether it is a licence, an assignment, or a deemed conveyance.

What's New for FY 2026-27

A few procedural and tax-side updates have shifted how IP agreements are drafted, stamped, and routed this year.

• Form 10F is fully e-filing only: Foreign IP owners claiming DTAA benefit on royalty must e-file Form 10F on the Income Tax portal. A scanned paper Form 10F is no longer accepted by AOs or banks for outward remittance.
• TCS-LRS interplay for individual licensors: Where royalty is paid to an Indian resident individual licensor who is sending money abroad under LRS, the ₹10 lakh TCS threshold applies. This now flows into the licensee's TDS coordination.
• TM Registry recordal portal stabilised: Section 49 registered-user applications are filed end-to-end online via the IP India portal, with digital signing of the assignment deed extract.
• DPDP Act compliance baked into IP licences: Where the licensed IP enables processing of user data — SaaS marks, analytics platforms, AI models — the licence must allocate data fiduciary roles under the DPDP Act 2023.
• Patent Form 27 working statement reform: The working statement regime continues post-2024 amendments; licensees should be obliged contractually to share working data so the patentee's annual filing is accurate.
• GST on royalty clarified: Royalty for use of IP is a taxable supply under Schedule II of the CGST Act; reverse charge applies on royalty paid to a foreign licensor, and ITC eligibility is now standard.

Why a Founders Agreement Clause Is Not Enough

Investors do not reject companies because the founders are dishonest. They reject them because the paper trail does not match the asset.

• Statutory form requirement: Copyright assignment must be in writing and signed by the assignor (Section 19). Patent assignment must be in writing and registered (Section 68). TM assignment is governed by Section 38. A clause in a multi-purpose agreement rarely satisfies all three forms cleanly.
• Pre-incorporation IP problem: Code written before the company was incorporated belongs to the individual founder, not the company. Without an express assignment deed dated on or after incorporation, the company is using IP it does not own.
• DD-grade audit trail: Investor counsel asks for a separate, signed, stamped IP Assignment Deed per asset class. Stitching one out of a Founders Agreement at diligence stage is expensive, slow, and sometimes blocked by a former co-founder.
• Standing to sue: If your TM or patent is infringed, your standing depends on being the recorded owner. The Registry will not look at a Founders Agreement.
• Tax characterisation: An assignment is a capital transfer in the founder's hands; a licence is a recurring revenue stream. Without a dedicated deed, the IT department can re-characterise the transaction at scrutiny.

Pre-incorporation IP is the single most common diligence break. Fix it on day one of the Pvt Ltd, not on the eve of a term sheet.

How It Actually Works

We follow a structured six-stage path so the deed is enforceable in court, accepted by the Registry, and clean for tax and FEMA.

Step 1: Brief and IP Mapping

We start by listing every meaningful IP asset — registered marks, pending applications, source code, design files, copyrights, trade secrets, domain names, and brand guidelines. For each, we identify the legal owner today and where you need ownership or rights to sit.

Parties, jurisdictions, exclusivity, territory, term, royalty model, and field of use are mapped in a one-page deal sheet. This is the single document we hand to the drafter and to your CFO.

Step 2: Choosing the Right Instrument

Assignment, exclusive licence, non-exclusive licence, work-for-hire, sweat-equity-for-IP, or cross-border in-licence — each is a different document with different stamp duty, different tax treatment, and different Registry forms.

We pick the instrument that delivers your commercial goal at the lowest tax and stamp cost, then build a draft around it.

Step 3: Drafting the Operative Clauses

The deed covers grant or assignment, royalty mechanics, quality-control obligations, indemnities, warranties of title and non-infringement, audit rights, term and termination, post-termination usage, and dispute resolution.

For cross-border deals, we layer in Section 195 TDS gross-up language, Form 10F and TRC obligations on the foreign party, and a FEMA-compliant payment route.

Step 4: Stamp Duty and Execution

Stamp duty rates differ widely by State and by the nature of the deed. A Maharashtra IP assignment can attract a different rate than a Karnataka one, and a licence is stamped lower than an assignment in most schedules.

We compute the duty, prepare e-stamp paper or franked stamping, and coordinate signature with counterpart exchange. Foreign-executed deeds are apostilled or consularised before adjudication.

Step 5: Statutory Recordal

TM assignments are recorded under Section 45 and registered users under Section 49 via the IP India portal. Patent assignments and licences are filed on Form 16 under Section 68. Copyright assignments can be deposited with the Copyright Office or the relevant Society.

Recordal is what makes the new owner or licensee enforceable against third parties — without it, the deed binds only the signing parties.

Step 6: Tax and FEMA Filings

Quarterly TDS returns in Form 27Q for non-resident payments, Form 26Q for resident payments. Form 15CA and 15CB before each outward royalty remittance. Annual Form 3CEB if the parties are associated enterprises.

GST invoicing, reverse charge calculation, and ITC claim are coordinated so royalty cash flow is clean from the first payment cycle.

A Real Example: Foreign Brand Licensed into an Indian Subsidiary

A US parent licenses its brand and SaaS platform to its Indian subsidiary for use across India and Sri Lanka. Royalty is 5% of net revenue, paid quarterly.

• Deal sheet: Exclusive licence to use, 5-year term, sub-licensing not permitted, quality-control inspections twice a year, governing law England and Wales, arbitration seat Singapore.
• Stamp duty: Executed in Karnataka, licence stamped at the rate applicable to a licence deed under the Karnataka Stamp Act schedule.
• TDS structure: Royalty is taxable in India under Section 9(1)(vi). Under the India-US DTAA, royalty is taxable at 15%. The US parent furnishes a Tax Residency Certificate, files Form 10F electronically, and signs a no-PE declaration.
• Remittance: ₹4 crore royalty for the quarter. TDS at 15% = ₹60 lakh. Net remittance ₹3.4 crore routed via the AD Category-I bank with Form 15CA Part C and a 15CB certificate from a CA.
• GST: The Indian subsidiary pays IGST under reverse charge on the gross royalty and claims input tax credit on the same return.
• Recordal: The US parent is recorded as the proprietor and the Indian subsidiary is recorded as the registered user of the TM under Section 49.

End state — the licence is enforceable, tax is paid correctly, FEMA is satisfied, GST flows through ITC, and the TM Registry shows the licensee on public record.

Sweat Equity and Work-for-Hire

Two structures account for most contractor and contributor IP, and both must be papered before the IP is used commercially.

• Work-for-hire for contractors: An agency, freelance developer, or designer is not an employee. Copyright vests with them by default under Section 17 of the Copyright Act. The agreement must expressly assign all outputs to the client, with consideration, and ideally on delivery rather than on full payment.
• Employee IP: Employees create IP in the course of employment, but the employment contract should still contain an express assignment clause covering future inventions, code, and creative output.
• Sweat equity for IP contributors: A non-employee who contributes IP — say a technology co-founder or a brand advisor — can be issued sweat equity shares under Section 54 of the Companies Act 2013. The IP must be valued under Rule 11UA, and a separate IP Assignment Deed transfers the asset to the company against the share allotment.
• Section 56(2)(x) angle: If the IP is undervalued, the company may face deemed-income consequences. A registered valuer's report supports the FMV.
• Vesting and clawback: For founder IP assignments, we add a clawback or vesting condition so the IP and the equity are aligned over time.

An assignment deed without a registered valuer report invites both Companies Act and Income Tax scrutiny — value the IP before papering the equity.

Where It Goes Wrong

Most IP disputes we see did not start with bad faith — they started with a missing clause or a missing form.

• Pre-incorporation code never assigned: Founder writes the MVP before the company exists, the code is later "contributed" informally, and at Series A the investor sees the company is using IP that legally belongs to a former co-founder.
• Contractor agreement says "licence" not "assignment": Standard online templates often grant the client a usage licence, leaving ownership with the contractor. On exit, the buyer discovers it cannot freely modify or sub-licence the deliverable.
• Stamp duty under-paid: Deeds stamped at the lower licence rate when the substance is assignment are challenged by the Registry, by the buyer's counsel, or by the Collector of Stamps under Section 33.
• Form 10F filed on paper: The remitter's bank refuses to process the 15CA upload because the foreign payee's Form 10F is not in the e-filed format mandated by the IT portal.
• No quality control in TM licence: A TM licence without quality-control obligations can be challenged as a naked licence and the mark held abandoned.
• GST reverse charge missed: The Indian licensee pays foreign royalty without booking RCM GST, then discovers the gap during a GST audit two years later.
• Copyright assignment without consideration recital: An unpaid, ambiguous assignment can be set aside under Section 19 of the Copyright Act.
• No Section 68 patent recordal: An unrecorded patent licence cannot be enforced against a third-party infringer by the licensee on its own.

What You Receive at the End

• Executed and stamped Intellectual Property Agreement, in counterpart originals
• Schedule of IP assets with ownership chain mapped, signed by both parties
• Registered valuer report where the deed is consideration-based or against equity
• TM Section 49 registered-user application acknowledgement from IP India portal
• Patent Section 68 Form 16 recordal acknowledgement, where applicable
• Copyright Office or Society notice, where the asset is a literary, musical, or artistic work
• Form 15CA and 15CB pack for the first outward royalty remittance
• Form 10F e-filing acknowledgement of the foreign party, with TRC on file
• Board resolution and shareholder approval pack where Section 188 related-party rules apply
• Compliance calendar with quarterly TDS, GST RCM, and annual Form 3CEB dates

How to Get Started

Share a one-page brief — what IP, which parties, what commercial outcome you want, and any deadline (closing date, board meeting, remittance window). We respond within one working day with the right instrument, an indicative stamp duty estimate, and a draft timeline.

From that point, the workflow is structured into the six stages above with named owners on your side and ours. Most assignments and licences close in 2-4 weeks; statutory recordal continues in the background and is complete within 30-60 days.