Who Owns The IP A GCC Creates? Drafting, Assignments, Transfer Pricing And Protection Strategy For Global Capability Centres In India

Many multinational groups now run a good part of their research and development from a global capability centre (GCC) in India. The engineering work gets done, the product gets built, and then a simple question comes up that nobody had planned for: who actually owns the intellectual property (IP)? In my experience advising on such structures, this question is usually asked late, often during a funding round, an audit or a dispute. By then, fixing the paper trail is expensive.

The difficulty is that Indian law does not treat IP as one single bucket. Copyright in an employee’s work vests in the employer by statute, but an employee’s invention stays with the inventor unless it is assigned in writing. The way each type of IP moves from one entity to another is also different. A group planning to set up a GCC should therefore settle its IP strategy first, keeping in mind the role and value of the IP to the group, and making sure the arrangement is tax compliant and efficient. This article looks at IP ownership in GCCs in India with a focus on copyright and patents, since these are the rights most likely to arise in a GCC’s day-to-day work. The principles are largely the same for other forms of IP and for other jurisdictions.

Three ways to structure IP ownership in a GCC

Stakeholders usually agree in principle on one of three positions. The IP created by the GCC will be owned (i) by the GCC, (ii) by the Multinational Group from the very beginning, or (iii) by the GCC at first and transferred to the Multinational Group later. Because each type of IP is governed by a different statute, how creation and ownership are documented, including with employees and consultants, becomes critical. A commercial understanding that is not backed by the correct legal steps is only an intention, not title.

Copyright: why an onward assignment is almost always needed

Under Section 17(c) of the Copyright Act, 1957, copyright in a work created by a GCC’s employees in the course of their service vests in the GCC. This means the Multinational Group cannot own that copyright from inception, unless the work can be treated as a commissioned work, which will not always be possible. An onward transfer from the GCC to the group is therefore necessary.

Section 19 of the Copyright Act sets out what a valid assignment must contain. It should identify the work, specify the rights assigned, the duration, the territorial extent, and the royalty or other consideration payable. Three points deserve attention while drafting:

1. Duration and territory. If these are not stated, Sections 19(5) and 19(6) limit the assignment to five years and to India. For a group that wants worldwide, long-term rights, this default is a trap.
2. Lapse for non-use. Under Section 19(4), an assignment is deemed to lapse for rights not exercised within one year, unless the assignment provides otherwise. The agreement should address this expressly.
3. Moral rights. Authors retain the rights of paternity and integrity under Section 57. Employment, consultancy and vendor agreements of the GCC should contain an express waiver to reduce the risk of future claims.

Patents: no equivalent of Section 17(c)

Patents work very differently. Section 6 of the Patents Act, 1970 does not deem an employer to be the owner of an employee’s invention, and there is no provision similar to Section 17(c) of the Copyright Act. Section 68 requires a patent assignment to be in writing and duly executed. An informal arrangement, or an assumption that “the company owns whatever the engineer builds”, does not transfer title.

Employment agreements for inventive roles should therefore contain a clause assigning future inventions, followed by an executed deed of assignment once an invention is actually made. The deed should be registered with the Controller under Section 69, because Section 69(5) restricts the use of an unrecorded instrument as evidence of title without the leave of the Controller or a court.

The Intercompany Agreement between the Multinational Group and the GCC should also set out the steps to follow each time a GCC employee makes an invention: disclosure, the employee’s sign-off, filing of the application and the deed of assignment. The Multinational Group may be named as the applicant directly if it holds a valid assignment or a right to apply before filing, subject to the first filing rule in Section 39 of the Patents Act, discussed next.

The Section 39 first filing rule

Section 39 operates independently of ownership, and this is where many groups get caught. No person resident in India may apply for a patent abroad without the Controller’s written permit, unless an application for the same invention was made in India at least six weeks earlier and no direction under Section 35 subsists. The trigger is the inventor’s residence, not who owns the invention, so it applies even where the Multinational Group is to be the owner. The exception in Section 39(3), for inventions first filed abroad by a person resident outside India, will rarely help a GCC whose inventors are local engineers or scientists.

Other jurisdictions have similar rules. Singapore and the United Kingdom have first filing rules with waiting periods of two months and six weeks respectively. Where research and development involves cross-border teams, or the group intends to file outside India first, these rules can conflict. The first filing rules of each jurisdiction should be mapped and sequenced in advance. Ownership and filing sequence are two separate obligations, and both must be met.

Where GCC personnel co-create with the Multinational Group, rights may vest jointly. The Intercompany Agreement should set out the steps needed to achieve the commercial intent while complying with the applicable IP statutes.

At a glance: how each type of IP moves

Chain of title: the link from creator to GCC

An assignment from the GCC to the Multinational Group is only as good as the GCC’s own title. Whatever the Intercompany Agreement says, if the GCC did not obtain valid rights from the employee, consultant or vendor who created the work, it has nothing to assign onward. This is the point I see overlooked most often in IP due diligence.

Section 17(c) of the Copyright Act applies only to employees under a contract of service. It does not extend to consultants, contractors or vendors, whose copyright remains with them unless it is assigned in accordance with Section 19. Many GCCs rely heavily on third-party developers and agencies, so every such engagement needs express assignment language.

Assignment also secures ownership, but not know-how. Know-how stays in the head of the employee. Section 27 of the Indian Contract Act, 1872 voids agreements in restraint of trade, so a post-employment non-compete is unenforceable. Protection lies instead in the non-solicitation, garden leave and confidentiality provisions of the employment contract. These must be in place from the date of engagement, since they cannot be introduced once an employee has resigned.

Licence back or licence out: how the IP will be used

Ownership also decides how the IP can be used, and the documentation differs accordingly.

1. Where the Multinational Group owns the IP, the GCC needs a licence back that sets out the permitted uses and the negative covenants. Usually no royalty is payable by the GCC, as the licence is granted under the Intercompany Agreement to enable the GCC to provide its services.
2. Where the GCC retains ownership, and licenses the IP to the Multinational Group, the group needs to document the flexibility it requires, which affiliate or associate entity may do what with the IP and, most importantly, the royalty or licence fee, including transfer pricing considerations.

There is one more check that sits outside the IP and tax analysis. Where the IP relates to controlled technology, a licence, assignment or electronic transfer may require prior clearance under India’s export control regime, such as the SCOMET list under the Foreign Trade Policy. This trade compliance review must be done independently.

Transfer pricing considerations for GCC IP

Cross-border arrangements between a GCC and its Multinational Group fall within India’s transfer pricing regime. From 1 April 2026, this regime is set out in Sections 161 to 173 of the Income Tax Act, 2025, which replaced Sections 92 to 92F of the Income Tax Act, 1961 and retains the arm’s length principle. Circulars issued under the repealed Act continue in force under Section 536(2)(j) of the Income Tax Act, 2025, to the extent they are consistent with it. Circular No. 6/2013 of the Central Board of Direct Taxes (CBDT), which contains guidelines for identifying a contract research and development provider bearing insignificant risk, therefore remains relevant.

A GCC is usually meant to be such a contract R&D provider. The guidelines can be subjective, and one of them relates to ownership of the IP, so they should be kept in mind while drafting and implementing the Intercompany Agreement. If the agreement and the way the parties actually operate do not match, the tax authorities can disregard the characterisation in the agreement. The paper and the practice must tell the same story.

Two further points need attention:

1. A transfer of IP to a non-resident associated enterprise must be priced at arm’s length, and where an existing asset is assigned abroad, the price should be supported by an independent valuation.
2. The consideration must be repatriated to India through authorised banking channels within the period prescribed under the Foreign Exchange Management Act, 1999 and the Reserve Bank of India’s export regulations.

A practical protection strategy across the GCC lifecycle

IP agreements are not a one-time checklist. As a GCC takes on more advanced work, its contracts must be updated to match the reality on the ground. The following steps, in my view, form the backbone of a sound protection strategy:

1. Draft by category of IP. Documentation should follow the type of IP a role is likely to generate. A clause drafted with software in mind could leave patentable inventions unassigned.
2. Build disclosure and power of attorney into inventive roles. Contracts should require prompt disclosure of inventions and include a deemed power of attorney in favour of the GCC or the Multinational Group.
3. Close the loop on every invention. Each disclosure should lead to a recorded deed of assignment and a Section 39 check under the Patents Act before any filing is made outside India.
4. Use express assignment for consultants and vendors. Do not assume they fall within Section 17(c).
5. Maintain an IP register. Record what has been created, by whom and under which documents.
6. Protect trade secrets actively. Know-how and trade secrets are not protected by statute in India. Limit access to those who need it, and sign confidentiality agreements with employees, consultants and vendors before access is given. On an employee’s exit, or the end of a consultant’s or vendor’s contract, revoke access, secure the return of all confidential material, and document the entire process formally.

Conclusion

A GCC needs three things to hold its IP together: a clear chain of title, pricing that matches how the work is actually done, and active protection for trade secrets. Groups that deal with these at the time of setting up the GCC save themselves a great deal of trouble later, whether the trigger is an IPO, an acquisition, a licensing deal or a tax audit. If you are planning a GCC in India, or reviewing an existing one, an early IP and transfer pricing health check is time well spent.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.