SPECIFIC GUIDELINES FOR DOING BUSINESS IN INDIA
Any entity, establishing a business in India must believe in one cardinal principle as a good business strategy i.e. believe in writing, meaning thereby enter into strong and elaborate contracts, formalize your relationship and communication with Indian counterparts. If the entity is strong in written communication, they can expect an effective and quick judicial redressal of their grievances in case any need arises. It has been often observed that one of the basic reasons of the problems faced by entities is the ambiguity in their communications and contracts.
Some of the suggestions to the foreign entities for a successful business venture in India are:-
Believe in writing;
Be specific and avoid ambiguity;
Before starting relationship prefer to enter in to non disclosure agreements (NDA)
Enter into an elaborate contract;
Envisage situations and make provisions for termination/revocation of the contract;
Preserve your correspondence including emails, as emails are admissible as evidence in the Indian Courts;
Prefer Alternative dispute resolution i.e. Arbitration, mediation and Conciliation;
It is important to carefully choose the location of the registered office of the foreign entity in India, which may be different from the operational offices in India. The registered office of the foreign entity should be at a strategic location providing all facilities, e.g. New Delhi, as most Courts and judicial forums, Central Government offices are situated and seated in New Delhi;
Choose the place of arbitration and jurisdiction of courts carefully;
Prefer to choose the jurisdiction of the court and place of arbitration, where your office is situated. Indian law allows choice of place of arbitration and jurisdiction of courts;
To protect your IPR, it is advisable to have an exit clause i.e. a clause to clearly define procedure for terminating the relationship and conduct thereafter, regarding IPR including all post termination IPR issues, which may include restriction on the use of the name of the foreign company as part of the name of the Indian company, Trademark, non disclosure of secret and confidential business and technical information provided during the course of the business relationship etc. in case of breach of the contract or failure of the venture for any reason;
The aspect of Technology Transfer in India has to be dealt with the elaborate drafting of agreements otherwise such agreements for technology transfer may prove to be self-destructing. It has been observed that most of the problems relating to technology transfer relate to secrecy in case of a non-patented technology, transfer, exclusivity, non-compete and termination in case of any dispute. All these issues, as already stated can be effectively addressed by comprehensive and elaborate agreements;
A typical exit clause, i.e. a clause to clearly define procedure for terminating the relationship and conduct thereafter, on termination of a license with respect to technology transfer, Intellectual Property rights including trademark (and for technology startups, even the copyright) may be as follows:-
1. the Licensee shall immediately cease, upon termination and thereafter, any further direct or indirect use of any Technical Information and/or Confidential Information received from the Licensor;
2. the Licensee shall immediately cease, upon termination and thereafter, any further direct or indirect use of the Licensed (...mention IPR details..), and shall dispose in such manner as the Licensor may reasonably direct, of any ready stock of goods, price lists, advertising materials, manuals, packaging or other materials in its possession, power or control that bear or otherwise use the Licensed (...mention IPR details..);
3. the Licensee shall immediately return to the Licensor all documents, original technical data and technology related to the Technical Information for the manufacturing and design of the Licensed Products and/or the Licensed Components, and all Confidential Information (and any and all copies thereof) placed at its disposal by the Licensor;
4. the Licensee shall permanently delete any and all the Technical Information and/or Confidential Information placed at its disposal by the Licensor from any electronic device in its or its representatives’ possession, custody or control;
5. the Licensee shall destroy all copies of any notes, analysis, studies or other documents prepared by or on behalf of itself or by or on behalf of its representatives containing or reflecting any of the Technical Information and/or Confidential Information; and
6. the Licensee shall not do anything that might jeopardize the exclusive right of the Licensor in and to the Licensed (...mention IPR details..), or any variation thereof, or use any other word or mark capable of causing confusion therewith or deceptively similar thereto, whether as part of its trade, business or corporate name;
and with respect to this clause, the Licensee shall confirm in writing to the Licensor, that it has done so.”
Some other miscellaneous points as follows also need to be considered:
Define the Technology which is to be transferred, in specific terms;
Define the statutory rights, if any, over the Technology;
Define all other intellectual property rights which are part of the agreement, whether registered or unregistered;
Special care should be taken to identify the data, if any;
An undertaking should be taken from the transferee/licensee that the transferee/licensee acknowledges your rights over the Technology in definite and unambiguous terms, and the ownership over the Technology will not be challenged by the transferee/licensee;
Further an undertaking should be procured from the transferee/licensee that the transferee/licensee will not obtain any statutory right over any of the subject matter of the agreement in its own name;
It is advisable to incorporate appropriate terms in the agreement for handling and use of the information provided under the agreement;
Provision should also be made for handling of the subject matter after the termination of the agreement, which may include return, destruction, erasure of the data from the electronic media or any other medium;
A specific bar should be placed on the use of the Technology or Intellectual Property or data etc., after the termination of the agreement, except as may be provided in the agreement;
It is advisable to have specific clauses for transfer of the improvements in the Technology and data generated during the course of the use of the Technology under the agreement, to the transferor/licensor without any additional cost;
Care should be taken to prohibit sub-licensing of the Technology to any third party;
The Technology transfer agreement, generally should be non exclusive, until and unless otherwise provided;
Wherever possible care should be taken to give a notice as to the ownership of the copyright in the format as provided under the Article III(1) of the Universal Copyright Convention
It has been generally observed that if suitable provisions have been made in the agreement relating to transfer/licensing of the Technology, it becomes comparatively easier to enforce through the courts any violation of the terms of the agreement or misuse of the rights granted under the agreement.
NON DISCLOSURE AGREEMENT (NDA)
The protection of a unique idea or model is indispensable to every business. In order to secure your business secrets and keep them from being disclosed by your employees or another party, Non-disclosure Agreement (NDA) is a necessity. Non Disclosure Agreement or Confidentiality Agreement is a legal contract intended to protect information that is proprietary or confidential. In India, Nondisclosure agreements are very important as they can protect any type of trade secret or confidential information, providing a competitive advantage to the Company. They also act as a deterrent and provide an advantage in case of a violation before a court of law, as an NDA is enforceable in Indian courts of law.
THIS AGREEMENT (the “Agreement”), made and entered into as of this (date, month and year) (the “Effective Date”)
By and between
ABC Company, with its principal place of business at (Address), (hereinafter called FIRST PARTY) which expression shall mean and include unless repugnant to the context, its successors and permitted assigns);
XYZ Company, with its principal place of business at (Address) (hereinafter called SECOND PARTY) which expression shall mean and include unless repugnant to the context, its successors and permitted assigns).
WHEREAS the expressions (FIRST PARTY) and (SECOND PARTY) shall be collectively referred to as the “Parties” and each a “Party”.
WHEREAS it is the intention of the Parties hereto to make mutual disclosure of Confidential Information (as defined below) for the purpose of discussing the business alliance with respect to (name of the Project) herein after referred to as (the “Project”); and
WHEREAS the Parties desire to maintain their respective rights in their Confidential Information and to prevent its unauthorized use or disclosure.
NOW therefore in consideration of the mutual protection of Information herein by the parties hereto and such additional promises and understandings as are hereinafter set forth, the parties agree as follows:
“Confidential Information” for the purpose of this agreement shall mean and include any and all information in written, representational, electronic, verbal or other form relating directly or indirectly to the present or potential business, operation or financial condition of or relating to the disclosing party (including, but not limited to, information identified as being proprietary and/or confidential or pertaining to, pricing, marketing plans or strategy, services rendered, customers and suppliers lists, financial or technical data or know-how, including, but not limited to, information which relates to data, research or development activities and plans, manufacturing, product plans, products, services, markets, computer programs, source code, developments, inventions, processes, designs, technical specifications, drawings, engineering, hardware configuration information, systems, methods, formulae, devices, manufacturing and/or test specifications, patents, patent applications, trade secrets, trademarks, patentable inventions, copyrightable information, or service matters or data, personal or sensitive data and any information which might reasonably be presumed to be proprietary or confidential in nature, excluding any such information which is known to the public or lawfully acquired from a third party or known to the receiving party prior to its disclosure under this Agreement or required to be disclosed by government or court.
The receiving party shall use the same degree of care and protection to protect the Confidential Information received by it from the disclosing party as it uses to protect its own Confidential Information of a like nature, and in no event such degree of care and protection shall be of less than a reasonable degree of care. Furthermore, the Recipient shall not disclose to any third party the Confidential Information disclosed by the Discloser, except as approved in writing in advance by the Discloser, and shall not use the Confidential Information for any purpose other than the Project. Notwithstanding the foregoing, the Recipient may disclose the Confidential Information of the Discloser to its directors, employees or agents (collectively, the “Representatives”) only if such Representatives are subject to confidentiality obligations at least as restrictive as those contained herein. It is further agreed that either Party may, by obtaining prior written consent of the other Party, disclose the Confidential Information on “need to know basis” to a third party to the extent necessary to subcontract or delegate to such third party all or any part of the works for the Project. In such a case, such Party shall impose on such third party the same obligations that it is obligated to perform under this Agreement.
Each party and each signer of this agreement individually, represents and warrants that the respective person signing on behalf of the Party has the authority and is duly authorized to do so.
This Agreement shall remain valid for a period of three (3) years from the date of execution of this Agreement which term may be extended by mutual consent in writing of both the parties. This Agreement may be terminated by either party by giving thirty (30) days notice in writing to the other party without assigning any reason whatsoever. The obligations of each party hereunder will continue and be binding irrespective of whether the discussion between the parties materializes into a specific understanding/business relationship or not.
Upon termination or expiration of the Agreement, or upon a written request of the Discloser, the Recipient shall cease to use the Confidential Information, and return to the Discloser or destroy such Confidential Information and all copies, notes or extracts thereof within seven (7) business days of such termination, expiration or request.
Nothing herein shall obligate any party to proceed with any transaction or disclose any Confidential Information, and each party reserves the right to terminate the discussions contemplated by this Agreement at any time.
The parties hereto acknowledge and agree that in the event of a breach or threatened breach by the other of the provisions of this Agreement, the party not in breach will have no adequate remedy in money or damages and accordingly the party not in breach shall be entitled to injunctive relief against such breach or threatened breach by the party in breach.
Neither party shall use the Confidential Information in a manner that will jeopardize or adversely affect in any manner future strategies, plans, business activities, methods, processes, information, and/or competitive and strategic advantage of the disclosing party.
Each party acknowledges that neither the party nor any of their respective representatives have made any express or implied representation or warranty as to the accuracy, completeness, fitness for a particular purpose of any Confidential Information.
Nothing contained herein shall constitute or be construed to create a joint venture, partnership, contract agreement or other formal business relationship or entity of any kind between the Parties. Each Party will act as an independent contractor and not as an agent of the other Party for any purpose.
The Parties acknowledge and agree that nothing contained in this Agreement shall be construed as granting any property rights, by license or otherwise, to any Confidential Information of the Discloser disclosed pursuant to this Agreement. The Recipient shall not make, use or sell for any purpose any product or other item using, incorporating or derived from any Confidential Information of the Discloser.
The parties agree to indemnify and keep indemnified each other against all loss and damage, which the disclosing party may suffer as a result of any breach of this Agreement by the receiving party.
No failure or delay by either party in exercising or enforcing any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise or enforcement of any right, remedy or power preclude any further exercise or enforcement thereof or the exercise of enforcement of any other right, remedy or power.
Each party will bear its own costs in connection with the activities undertaken in connection with this Agreement.
Nothing in this Agreement is intended to confer any rights/remedies under or by reason of this Agreement on any third party.
If any term or provision of this Agreement shall be determined to be invalid or unenforceable for any reason, such term or provision shall be limited or eliminated to the minimum extent necessary so that all other terms and provisions of this Agreement shall nevertheless remain in full force and effective, and shall be enforced to the fullest extent permitted by applicable law.
The parties agree that any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be settled by the arbitration by a sole Arbitrator at Delhi. The language of arbitration shall be English.
The Parties agree that the courts in Delhi shall have the exclusive jurisdiction and venue of the first instance for actions arising out of or related to the subject matter in this Agreement, and the same shall be to the exclusion of all other courts or forums in India.
This Agreement shall be governed by and construed in accordance with the laws of India.
This Agreement supersedes all prior discussions and writings with respect to the Confidential Information and constitutes the entire Agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Parties hereto have caused this AGREEMENT to be executed in duplicate by their duly authorized representatives as of the Effective Date and each shall keep one of the executed copies.
Date of Execution:
End of Sample NDA
By Siddharth Dalmia, the Startup Sherpa