The Bombay High Court recently decided on the issue of ownership of patents. The suit was filed by a minority shareholder against the company, its managing director and other directors because the patents devised using the R & D of the company was in the name of the director and not the company itself. At the outset, it seemed like a straight-forward case, however on reading the judgment, it was interesting to see how the Court took into consideration a number of other factors (which would otherwise not be relevant) in deciding on the ownership of patents.

Ownership of Patents


The plaintiff brought a derivative action (suit by a shareholder on behalf of an association of members of the company against the company for any injuries) against the defendant company, its managing director and 3 other directors of the defendant company. The primary issue of the plaintiff was that the patents created using the R&D of the company were filed and granted in the name of the managing director and not the company itself.

This suit was filed by the plaintiff after contesting two unsuccessful cases before the Company Law Board in respect of the same issue on the grounds of oppression and mismanagement of the company.

The object behind filing the suit was to ensure that the managing director doesn’t assign, license or transfer any of the right relating to the patent to a Section 25 company (companies which are formed for the sole purpose of promoting commerce, art, science, religion, charity or any other useful objects) founded by him and his wife (who is also a director of the said company).


  1. Whether the derivative suit is maintainable
  2. Further, whether the patents of the managing director belong to the company or have rightfully been filed and granted by him.

Case of the Plaintiff:

According to the counsel for plaintiffs, they were required to only show that there is a prima facie case in order to obtain an injunction and that the final order would be passed after a full-fledged trial. However, the Court did not concur with this argument of the plaintiff and stated that if the injunction is in fact granted, it will be final relief as prayed for and therefore the question of deciding on a temporary injunction doesn’t arise.

Case of the Defendants:

The defendants basically argued on the following lines:

  1. That a derivative action is generally bona fide and in the interest of the company, however, since the plaintiffs has been repeatedly filing suits against the defendants, it’s a clear reflection that this suit is a frivolous one.
  1. Further, that of the two previous cases that were filed, the plaintiff withdrew from one of them after there was allegation that he was trying to sell his shares to a competitor company. In the second suit, the court did not rule in favour of the plaintiffs because they were of the opinion that many pertinent facts were concealed from the Court during the course of trial. Lastly, though the Special Leave Petition filed by the plaintiff was admitted, no stay was granted and therefore this suit is a last resort for the plaintiff.
  1. That there was a Board resolution passed in respect of the renewal of the appointment of the managing director clearly stating that the patents are owned by the managing director and not by the company. The plaintiff at that point did not raise any objections and that this suit has been filed solely with the intention of harassing the company.
  1. That the managing director has granted royalty free license to the company in respect of all his patents and therefore the company stands to benefit even though the managing director did not use any of the resources of the company to devise these patents.
  2. That the plaintiff had remedies under the Patent Act – pre-grant opposition, post-grant opposition and revocation; however the plaintiff did not exhaust any of the remedies.
  1. Furthermore, the defendants also revealed that the plaintiff had engaged with a competitor for manufacture of a particularly product that was also manufactured by the defendant company. This suggested that the plaintiff had come to the court with unclean hands and that the plaintiff’s suit should therefore not be maintainable.
Ruling of the Court:

Maintainability of the Derivative Suit

On this point, the court was of the opinion that a derivative suit should be in a representative form wherein one of the persons represents the interests of other shareholders. In this case, the plaintiff owned 12% of the shares and the remaining minority shareholders holding 13% of the shares were against the suit. Therefore, the suit was not maintainable. They also remarked that the suit is clearly one with an ulterior motive and is not in line with the purpose of a derivative suit.

Suit to be bonafide and in the interest of the Company

With reference to this, the Court held that if the patent is infact revoked, then the defendant will no longer have royalty free license to the patents and this will in no way benefit the company.

Whether patents belonged to the Managing Director

Lastly the Court held that even if the Court were to accept the pleadings of the plaintiff that the managing director had in fact used the resources, research and development facilities of the company, since the suit itself was not maintainable, no relief can be granted.


In the present case, the plaintiff was also partly at fault for constantly engaging the company in litigation. However, in an ordinary case, if the patent was devised by an employee or director using the resources of the company, then it should ideally be in the name of the company, unless ofcourse the employment agreement of that person states otherwise. This is to ensure that even after termination of employment, the company still stands to benefit from the patents since they have been devised using the resources of the company, without which it wouldn’t have been possible in the first place.

This article has been authored by Nikita, an IP Law practitioner.