IP ownership in GCCs: Drafting, assignments, transfer pricing considerations and protection strategy

Where a global capability centre (“GCC”) undertakes research and development for the multinational group that owns it (“Multinational Group”), ownership of the resulting intellectual property (“IP”) needs to be structured carefully, as the law does not treat all IP as a single category, nor in the same manner in all jurisdictions. For example, in India copyright in an employee’s work vests in the employer by statute, but an employee’s invention remains with the inventor unless assigned in writing. The procedure for transferring each type of IP may also differ. This, along with the intended role and value of the IP to the Multinational Group, should be considered so that the IP is secured, ownership suits the group’s operations, and the arrangement is tax compliant and efficient. A group planning to set up a GCC should settle its IP strategy first. While this article focuses on IP in India, the principles are largely universal. We have dealt mainly with copyright and patents, as these are most likely to arise in a GCC’s work, though the same approach applies to other IP.

Stakeholders may agree in principle that a GCC-created IP will be owned (i) by the GCC, (ii) by the Multinational Group from inception, or (iii) by the GCC initially, to be transferred to the Multinational Group later. Since each type of IP is governed by different legislation, how creation and ownership are documented, including with employees and consultants, is critical.

Section 17(c) of the Copyright Act, 1957 (“Copyright Act”) vests copyright in a work created by a GCC’s employees in the course of their service in the GCC, so the Multinational Group cannot own that copyright from inception unless it can be treated as a commissioned work, which may not always be possible. An onward transfer is therefore necessary. Section 19 requires the assignment to identify the work and specify the rights assigned, the duration, the territorial extent and the royalty or other consideration payable. If duration and territory are not stated, Sections 19(5) and 19(6) limit them to five years and India. Section 19(4) deems an assignment to have lapsed for rights not exercised within one year, unless the assignment provides otherwise. Authors also retain moral rights of paternity and integrity under Section 57, so the GCC’s employment, consultancy and vendor agreements should expressly waive these to reduce the risk of future claims.

Section 68 of the Patents Act, 1970 (“Patents Act”) requires a patent assignment to be in writing and duly executed. The intercompany agreement between the Multinational Group and the GCC (“Intercompany Agreement”) should 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 applicant directly if it holds a valid assignment or right to apply before filing, subject to the first filing rule in Section 39 of the Patents Act which is discussed below. Singapore and the United Kingdom have similar first filing rules, with two-month and six-week waiting periods respectively. Where research and development involves cross-border teams, or the Multinational Group intends to file outside India first, these rules can conflict, so the first filing rules of each jurisdiction should be mapped and sequenced in advance.

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

Ownership also affects how the IP can be used. Where the Multinational Group owns the IP, the GCC will need a licence back setting out the permitted uses and 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. Where the GCC retains ownership and licenses the IP to the Multinational Group, the Multinational Group needs to document what flexibility it requires in terms of IP usage, which affiliate or associate entity is permitted to do what with the IP and most importantly factor in royalty payments/license fees, including transfer pricing considerations. 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 check must be evaluated independently from the IP and tax analysis.

The link from the individual creator to the GCC is governed separately. 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 assigned in accordance with Section 19.

The Patents Act has no equivalent of Section 17(c) of the Copyright Act. Under Section 6, nothing deems an employer to own an employee’s invention. Employment agreements for inventive roles therefore need a clause assigning future inventions, followed by an executed deed once an invention is made, as an informal assignment does not transfer title under Section 68. The deed should be registered with the Controller under Section 69, since Section 69(5) restricts the use of an unrecorded instrument as evidence of title without leave of the Controller or a court.

Assignment secures ownership but not know-how, which stays with 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, which must be in place from the date of engagement as they cannot be introduced once an employee has resigned.

To add to complexity, Section 39 of the Patents Act operates independently of ownership. 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. This is triggered by the inventor’s residence, not ownership, 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. Ownership and filing sequence are separate obligations.

An assignment from the GCC to the Multinational Group is only as effective 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.

Cross-border arrangements between the GCC and the Multinational Group fall within India’s transfer pricing regime, set out from April 1, 2026 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 under the repealed Act continue in force under Section 536(2)(j) of the Income Tax Act, 2025, to the extent consistent with it. Circular No. 6/2013 of the Central Board of Direct Taxes, which sets out guidelines for identifying a contract research and development provider bearing insignificant risk, therefore remains relevant.

The GCC is usually meant to be such a provider. As the guidelines can be subjective, and one of them relates to ownership, they should be considered when drafting and implementing the Intercompany Agreement. If the agreement and its implementation do not match, the tax authorities can disregard its characterisation.

A transfer of IP to a non-resident associated enterprise must also be priced at arm’s length, supported by an independent valuation where an existing asset is assigned abroad. 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.

Documentation should follow the category of IP a role is likely to generate, as a clause drafted with software in mind could leave patentable inventions unassigned. Contracts for inventive roles should also require prompt disclosure and include a deemed power of attorney in favour of the GCC or Multinational Group. Each disclosure should lead to a recorded deed of assignment and a Section 39 check under the Patents Act before making any filing outside India. Consultants and vendors creating copyright need express assignment language. The GCC should keep a register of what has been created, by whom and under which documents.

Know-how and trade secrets are not protected by statute in India. Access should be limited to those who need it, and confidentiality agreements should be signed 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, access should be revoked and all confidential material returned, and this entire process should be formally documented.

A GCC therefore needs a clear chain of title, pricing that matches how the work is actually done, and active protection for trade secrets. IP agreements are not a one-time checklist. As a GCC takes on more advanced work, its contracts need to be updated simultaneously to match the ground reality

About the authors: Siddhi Ghatlia is a Partner and Riya Punamiya is an Associate at ALMT Legal.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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