Where’s the Board’s IP Committee?

Ritvik M. Kulkarni, III BSL LLB, ILS Law College, Pune 

The Companies Act, 2013 (the Act) has brought many a change to Indian company law and its functioning. One such change is the introduction of new board committees with the intent to improve corporate governance. The following committees of the Board are now required to be set up under the Act:

  1. Audit Committee;
  1. Stakeholder Relationship Committee (earlier known as the Investor Service Committee);
  1. Business Operations and Finance Committee (earlier known as the Finance Committee);
  1. Nomination and Remuneration Committee (earlier known as the Remuneration Committee) and;
  1. Corporate Social Responsibility Committee (newly introduced)

The requirement to constitute any of these companies is based on various factors; therefore not all companies are required to form all the committees. Each such committee has a specific set of functions; often based on a policy developed and set up by a company. A company has to adopt these policies, set up the committees and appoint members of the committees through board resolutions.

The question therefore remains as to why there are no provisions in the Act for setting up an IP committee. The main reason for making such provisions is to ensure the formation of a comprehensive IP policy for the company. I understand that IP does not play a major part in all companies. To that extent such provisions should be made applicable to companies operating in certain industries such as the pharmaceutical, IT, FMCG and entertainment sectors. Since these industries earn a considerable share of their revenue from IP licensing and monetization, it is pertinent that their activities be regulated and monitored in a focused manner.

It is submitted that the Act should make room for an IP Committee based on the formulation of an IP policy. Like any other committee, the IP Committee may also be governed by set principles and functions. Some of its possible functions are as follows:

  • To review the Company’s R&D costs, expenses and revenue on a regular basis (whether monthly or quarterly). Among other things, this will compel the company to keep accurate records of their R&D activities; which may be shared with the RoC and other relevant authorities for the purpose of assessment.
  • To conduct regular IP audits in collaboration with the Audit Committee
  • To make a comprehensive and accurate valuation. This will help the company AND its investors to get a fair idea of where the company’s IP portfolio stands in the market.
  • To strategize and formulate new and innovative methods to reduce costs involved in IP related and other transactions.
  • (most importantly) to set up and hire professionals to ensure a strong and efficient IP management.
  • To assemble a team of skilled IP lawyers to aid in IP filings, negotiating licensing and technology transfer agreements, dispute resolution and other legal proceedings. Furthermore, the company may set up an IP Enforcement department to keep a stringent check upon developments with the Patent Office, Trademark Registry and Design Registry to check for infringement.
  • To infuse into the company’s personnel, especially those working in R&D and marketing, a sense of understanding the dynamics of intellectual property with a view to facilitate IP commercialization

I came across IP Committees of a couple of US corporations; view the IP policy of Unwired Planet Inc here and that of the Redpoint Bio Corporation here.

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2 thoughts on “Where’s the Board’s IP Committee?

  1. On a slightly different note, do we need a sectoral regulator for intellectual property or are the various intellectual property laws and the competition act enough to regulate these rights?

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    1. In my opinion, yes it is required. The most important reason being the present ability of corporations to mask their revenue generated from IP monetization and to inflate their R&D expenditure.

      These activities may hamper the imposition and collection of tax from IP based companies; (even more so because it is difficult to establish the situs of IP). In the face of such occurrences, I believe that an IP Audit (and related disclosures) would really help.

      However, if a regulator may seem to intrusive, we can at least make room for a Monitoring Body.

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