INVESTMENT IN INDIA
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.
Te 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. Tis 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.
Te next and arguably more substantial step came recently concerning the remittance of royalty and lump sum payments associated with technical collaboration or the use of trademarks and brand names. Te Foreign Exchange Management (Current Account Transaction) Rules, 2000, until recently, allowed technical collaboration agreements to be entered into without prior government approval if:
(i) Any lump sum payable did not exceed $2 million
(ii) Any royalties payable did not exceed five percent for domestic sales and eight percent for exports (applicable regardless of the duration of royalty payment)
www.worldipreview.com
World Intellectual Property Review March/April 2010
27
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