Best Licence, Royalty and Technology Transfer Disputes in Arbitration Lawyer

Licences let one business use another's intellectual property: a brand on its products, a patented process in its factory, software in its systems, or a recipe and know-how in its kitchens. They usually come with royalties, quality standards, territorial limits and confidentiality obligations. When a licensee underreports sales, sub-licenses without permission, sells outside its territory or keeps using the brand after the licence ends, or when a licensor terminates without cause, the dispute often goes to arbitration under the licence agreement.

This page is for licensors and licensees of trademarks, patents, copyright, software, designs and know-how. In short: contractual disputes under a licence, such as royalties, scope and termination, can be arbitrated; questions that bind the world at large, such as the grant or validity of a registered patent or trademark, cannot; urgent orders can stop use after termination or protect confidential information; and royalty disputes are usually won or lost on audit evidence.

Licences often last for years. Record every royalty statement, audit and quality report, so that a later dispute can be decided on the documents.

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Common IP licence disputes

What can and cannot be arbitrated

In Vidya Drolia v Durga Trading Corporation (2020), the Supreme Court explained that the grant and issue of patents and registration of trademarks are exclusive matters of the sovereign and are not arbitrable, because they create rights good against everyone. But disputes arising from contracts, such as licences and assignments, are rights in personam and can be arbitrated. The Bombay High Court in Eros International v Telemax Links (2016) had earlier held that copyright and trademark disputes arising out of a contract are arbitrable.

So, a tribunal can decide whether a licensee owes royalties, whether it used the brand beyond the licence, whether termination was valid, and what damages are payable. It cannot cancel a trademark registration or revoke a patent, which only the Registrar, the Controller or a court can do. Where a licensee argues that the patent is invalid as a defence to a royalty claim, the tribunal may consider the effect of any no-challenge clause and the contract, but a decision binding the world on validity requires the statutory forum.

How we handle IP licence disputes

Time and typical cost range

Our fees are agreed in writing at the start, stage by stage, and are not linked to the outcome.

Documents needed

Arbitrable and non-arbitrable issues

Royalty disputes and audits

Royalty is usually calculated on net sales, a fixed amount per unit, or a percentage of revenue, with defined deductions such as taxes, returns and trade discounts. Disputes arise when licensees deduct items not allowed, sell through related parties at low prices, bundle licensed products with unlicensed ones, or simply underreport. Most licences give the licensor a right to audit the licensee's books, often once a year, with the licensee paying the cost if the audit finds underpayment above a threshold.

Exercise audit rights in the way the licence requires, with notice and through an independent auditor. The audit report is often the key evidence in arbitration. For licensees, keep records that clearly link royalty statements to sales data, and challenge audit findings that apply the wrong royalty base.

Post-termination use and urgent relief

When a licence ends, the former licensee must stop using the licensed IP, subject to any sell-off period for existing stock that the licence allows. Continued use of a trademark after termination is infringement under the Trade Marks Act, and use of confidential know-how may be a breach of confidence.

The licensor can seek urgent relief in two ways. It can apply under Section 9 of the Arbitration Act for an interim injunction pending arbitration, or it can file an infringement suit in a commercial court. Courts have sometimes held that an infringement claim against a former licensee is a statutory claim that does not need to be arbitrated, while others have referred such disputes to arbitration where they arise from the licence. The choice depends on the facts and the wording of the arbitration clause. In either route, act quickly, since delay weakens a claim for interim relief.

Laws that apply

How we work

We are a litigation and advisory practice led by Advocate BK Singh, with offices in Dwarka (New Delhi) and Vaishali (Ghaziabad). This is what you can expect:

• Arbitrability check: contractual issues separated from statutory ones.
• Audit-led claims: royalty disputes built on audit and sales data.
• Fast protection: injunctions against post-termination use.
• Coordinated strategy: arbitration and infringement remedies planned together.
• Written fee terms: agreed stage by stage, never linked to the outcome.

Mistakes in IP licence disputes

Technology transfer and know-how agreements

Technology transfer agreements often involve unpatented know-how: manufacturing processes, formulas, designs, software and training. Unlike patents, know-how has no registration; its value depends on keeping it confidential. The agreement should define the know-how, limit its use to the licensed purpose, require confidentiality during and after the term, and require return or destruction of materials on termination.

When a licensee misuses know-how after termination, for example by setting up its own production using the licensor's process, the claim is for breach of the confidentiality obligations and of confidence. Indian courts protect confidential information through injunctions, even without a specific statute on trade secrets. Evidence of what was disclosed, through training records, transfer documents and drawings, is essential to show that the licensee's process came from the licensor.

Brand licences and quality control

Trademark licences for consumer products and franchises usually require the licensee to meet the licensor's quality standards, use approved suppliers, and allow inspections. Quality control is not just a commercial matter; a licensor that does not control the quality of goods under its mark risks weakening the mark itself. Licensors should exercise and document their inspection rights.

Disputes arise when a licensor terminates for quality breaches, and the licensee argues that the standards were not clearly communicated or were applied unfairly. Clear written standards, inspection reports, notice of the breach, and a cure period where the licence provides one, make a quality-based termination much easier to defend.

Software licences and SaaS

Software licences limit the number of users, devices, cores or installations, and the purposes for which the software may be used. Disputes about scope often arise during audits or at renewal. Where the licence is for internal use only, use for the benefit of group companies or customers may be outside the licence. Where the software is licensed per user, indirect access through other systems may or may not count. See IT and software contracts.

Ownership of IP created during the relationship

Licences and collaboration agreements often raise questions about IP created during the relationship: improvements to licensed technology, new designs, or software developed by the licensee. Many licences contain a grant-back clause, requiring the licensee to license or assign improvements to the licensor. Others leave improvements with the party that made them. Where the agreement is silent, the general law applies: under the Copyright Act, the author is generally the first owner, subject to contracts of service and specific provisions; under the Patents Act, the inventor or their assignee may apply for a patent.

Ownership disputes between the parties to the agreement are arbitrable as contractual questions. But if a patent has been granted to one party and the other claims it, the statutory remedies, such as rectification or a claim before the Controller, may also be needed.

Cross-border licences

Many licences involve a foreign licensor and an Indian licensee, with foreign governing law and an international seat. Royalty payments abroad are now largely permitted under India's current account rules without prior approval, subject to withholding tax under the Income-tax Act and any tax treaty. Disputes about withholding, gross-up clauses and tax credits are common.

Awards from foreign-seated arbitrations under such licences are enforceable in India under Part II of the Arbitration Act. An Indian licensor with a foreign licensee may need to enforce abroad, where the New York Convention also usually applies. Plan enforcement where the counterparty's assets are.

Infringement suits and arbitration together

Sometimes a dispute has both a contractual side, which belongs in arbitration, and an infringement side involving third parties, which belongs in court. For example, a former licensee may be selling counterfeit products through distributors who are not parties to the licence. The licensor can arbitrate against the licensee and sue the distributors for infringement.

Courts have discussed whether an infringement suit against a former licensee should be referred to arbitration under Section 8. The answer often depends on whether the claim arises from the licence, such as use after termination, or is an independent statutory claim. Plan the forums together, so that the evidence and arguments are consistent and the client is not fighting the same battle twice.

Drafting licences that hold up

Most licence disputes trace back to unclear drafting. A well-drafted licence defines the licensed IP precisely, with registration numbers; states the licensed products, field of use and territory, and whether the licence is exclusive; sets the royalty base, rate, minimum guarantee and the deductions allowed; gives audit rights with a cost-shifting threshold; sets quality standards and inspection rights; defines events of termination, cure periods and the sell-off period; deals with improvements and grant-backs; and contains a dispute clause that covers both contractual and related infringement claims between the parties, with a clear seat and rules.

For licences with foreign parties, it should also deal with withholding tax, currency, and the governing law. Reviewing existing licences against this checklist often shows gaps that can be fixed at renewal.

Minimum guarantees and exclusivity

Exclusive licences often require the licensee to pay a minimum guaranteed royalty each year, whatever its sales, so that the licensor is not locked into an exclusive arrangement that earns little. Disputes arise when sales fall and the licensee refuses to pay the minimum, arguing market conditions or the licensor's own failures. Most minimum guarantee clauses are enforced as written between commercial parties.

Some licences give the licensor the option to convert an exclusive licence to non-exclusive, or to terminate, if the minimum is not met. Choosing between enforcing the minimum and converting the licence is a commercial decision; a licensor that wants to keep the relationship may prefer conversion and a new licensee in the territory.

Evidence of use and sales

In licence disputes about scope or royalties, the evidence often lies with the licensee: sales data, product lists, marketing materials and distribution records. Licensors should collect market evidence independently, such as test purchases, online listings, trade fair materials and distributor catalogues, showing the products sold and their branding. Tribunals can order production of documents from the licensee, but independent evidence makes the claim stronger and helps frame the requests.