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We are an US-based company and propose to enter into a technology
licence agreement with an Indian company. Can we continue to charge
royalty after the term of the licence?
Under current regulations, technology licence
payments are approved by the Reserve Bank of India to be made over
a period of 10 years, and you can charge royalties for a maximum
period of seven years from the date of commencement of production
by the Indian licensee company using the technology licensed by
your company or 10 years from the date of the technology license
agreement, whichever is earlier. However, you can request an extension
of royalty payments beyond the seven-year period prior to expiry.
The Secretariat for Industrial Assistance usually grants such extension
where the licensed technology is sophisticated, if multiple products
are involved, or if rapid technological improvements are made. Therefore,
if you can show that your technology is sophisticated or multiple
products are involved, an extension of seven years may be considered
for running royalties to be paid, but it may be possible that lumpsum
fees will not be allowed. Also, if you can show that technological
improvements or rates of obsolescence of licensed technology will
be rapid, as seen in hi-tech industries, you may be permitted to
have an open-ended technology agreement.
Further, royalty would not be payable beyond
the period of your technology licence agreement if the orders for
which the technology had been licensed had not been executed during
the period of the agreement. However, if a chartered accountant
certifies that the orders have been firmly booked and execution
began during the period of agreement and the licensed technology
was available on a continuous basis even after the period of the
agreement, then royalty can be paid.
Can anti-dumping investigations be initiated
against a product imported into India by a single Indian manufacturer
at its own volition without support from other Indian manufacturers
engaged in the same field?
According to Rule 5 of the Customs Tariff (Identification,
Assessment and Collection of Anti-Dumping Duty on Dumped Articles
and for Determination of Injury) Rules, 1995 Rules, anti-dumping
investigations cannot be initiated unless the investigating authority
designated by the Central government determines that the application
for investigation has been made on behalf of the ''domestic industry''.
Under the Rules, a single Indian manufacturer cannot be termed as
''domestic industry'', which is otherwise an aggregate of domestic
producers as a whole engaged in the manufacture of an article similar
to the alleged dumped article, or those producers whose collective
output of the concerned article constitutes a major proportion of
the total domestic production of that article, except where such
producers are related to the exporters or importers of the alleged
dumped article, or are themselves importers of such article. The
designated authority will need to examine whether the domestic producers
as a whole are engaged in the same field as the concerned product
to determine the degree of support for the investigation application.
The term ''domestic producers'' is clearly meant to be construed
as in the plural and, therefore, a single applicant cannot be held
to be ''domestic producers'', no matter how high a share that producer
has of the domestic market. Further, under the proviso to Rule 5(3)(a)
of the Rules, an investigation cannot be initiated if the domestic
producers in support of the application for investigation account
for less than 25 per cent of the total production of a similar article
by the domestic industry. It is, therefore, unlikely that an application
for investigation into alleged dumping made by a single manufacturer,
even if accepted, will be further acted upon by the Ministry of
Commerce.
The views expressed here should not be construed
as legal opinion and are for reference only. Business Today and/or
the author will not be responsible for any decision taken by readers
on the basis of these views. Please send in your queries to Legal.bt@intoday.com
or Going By The Book, c/o Business Today, Videocon Tower, 5th Floor,
E-1, Jhandewalan Extn., New Delhi-110055.
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