Boosting foreign technology transfers and brand licensing

Recent changes to rules on foreign investment should make it easier for companies to conclude technology transfer and licensing agreements, say Nirupam Lodha and Kshitij Sharma.

Foreign direct investment (FDI) in India is principally governed by the Foreign Exchange Management Act, 1999 (FEMA), alongside FDI policy issued by India’s government from time to time. In addition, the Department of Industrial Policy and Promotion (DIPP) issues various press notes from time to time, modifying the sectoral limits on FDI and specifying additional conditions for FDI in India.

The first hint of liberalisation of the IP regulatory framework came in November 2006, prior to which the regulatory rules required the Reserve Bank of India’s (RBI’s) approval for the purchase of a trademark or franchise.

This restriction was removed and the RBI took a step towards liberalisation with a November 28, 2006 circular allowing an Indian entity to draw foreign exchange and freely pay for the purchase of trademarks and franchises in India without prior approval of the RBI.