Intellectual Property Licence Agreement (Pakistan)
INTELLECTUAL PROPERTY LICENCE AGREEMENT
Governed by the Patents Ordinance 2000 | Trade Marks Ordinance 2001 | Copyright Ordinance 1962
Contract Act 1872 | Income Tax Ordinance 2001 (Pakistan)
This Intellectual Property Licence Agreement ("Agreement") is entered into on [Agreement Date] between:
LICENSOR:
[Licensor Name], country of residence/incorporation: [Licensor Country], having address at [Licensor Address], represented by [Licensor Rep Name] ("Licensor"); AND
LICENSEE:
[Licensee Name], SECP/CNIC No.: [Licensee SECP], NTN: [Licensee NTN], having address at [Licensee Address], represented by [Licensee Rep Name] ("Licensee").
1. GRANT OF LICENCE
1.1 The Licensor hereby grants to the Licensee a [Licence Type] to use the following intellectual property:
Type: [IP Type]
Description: [IP Description]
1.2 Territory: [Licence Territory]
1.3 Field of Use: [Field Of Use]
1.4 Sublicensing: [Sublicensing Right].
1.5 The Licensor retains full ownership of the licensed IP throughout the term of this Agreement. This Agreement does not transfer any ownership of the IP to the Licensee.
2. ROYALTIES AND WITHHOLDING TAX
2.1 Royalty Structure: [Royalty Structure].
2.2 Royalty Rate / Amount: [Royalty Rate].
2.3 Withholding Tax: The Licensee shall withhold income tax on royalty payments at the rate of [Withholding Tax Royalty] and deposit with FBR within seven days of month-end. The Licensee shall provide the Licensor with a withholding tax certificate for each deduction. The Licensor shall provide a valid tax residency certificate to claim any applicable double taxation treaty rate.
2.4 Royalty Reports: The Licensee shall provide quarterly royalty reports showing sales of licensed products, royalty calculations, and amounts paid. The Licensor has the right to audit the Licensee's sales records once per year upon thirty days' written notice.
3. QUALITY CONTROL (TRADEMARK LICENCES)
3.1 Quality Obligation: [Quality Control Obligation]. For trademark licences, the Licensee shall ensure all goods and services bearing the licensed trademark meet the quality standards specified by the Licensor. The Licensor has the right to inspect the Licensee's premises, products, and marketing materials at any time on reasonable notice to verify compliance.
3.2 Marketing Materials: All use of the licensed trademark by the Licensee in packaging, advertising, and promotional materials requires the Licensor's prior written approval.
4. IP OWNERSHIP AND IMPROVEMENTS
4.1 The Licensor retains all ownership of the licensed IP. Any improvements, modifications, or derivative works created by the Licensee using or based on the licensed IP shall be promptly disclosed to the Licensor. The parties shall negotiate in good faith regarding the ownership and licencing of any such improvements.
4.2 The Licensee shall promptly notify the Licensor of any actual or suspected infringement of the licensed IP by third parties in the territory.
5. TERM AND TERMINATION
5.1 Term: This Agreement commences on [Agreement Date] and continues for [Licence Term], unless earlier terminated.
5.2 Termination for Cause: Either party may terminate immediately upon written notice if the other party: (a) commits a material breach and fails to remedy it within thirty days of written notice; (b) becomes insolvent or enters winding-up proceedings under the Companies Act 2017; or (c) ceases to carry on business.
5.3 Post-Termination: Upon termination, the Licensee shall immediately cease all use of the licensed IP, destroy or return all materials incorporating the licensed IP, and confirm compliance in writing. Royalties accrued to the date of termination remain payable.
6. GOVERNING LAW AND DISPUTE RESOLUTION
This Agreement is governed by the laws of Pakistan including the Patents Ordinance 2000, Trade Marks Ordinance 2001, Copyright Ordinance 1962, and the Contract Act 1872. Disputes shall be resolved by arbitration under the Arbitration Act 1940 before the Intellectual Property Tribunal under the Intellectual Property Organization of Pakistan Act 2012, or before the courts of competent jurisdiction in Pakistan.
EXECUTED on [Agreement Date]
LICENSOR: [Licensor Name]
Signed: _________________________ Name: [Licensor Rep Name]
LICENSEE: [Licensee Name]
Signed: _________________________ Name: [Licensee Rep Name]
SECP/CNIC No.: [Licensee SECP] NTN: [Licensee NTN]
Licensor (IP Owner)
________________
Signature
Licensee
________________
Signature
What Is a Intellectual Property Licence Agreement (Pakistan)?
An Intellectual Property Licence Agreement in Pakistan governs the use of the rights granted, fixing the royalties payable and the conditions attached to the licence.
The Patents Ordinance 2000 (President's Ordinance No. XC of 2000) governs patent licences in Pakistan. Section 47 of the Patents Ordinance 2000 permits voluntary licences between patent holders and licensees, and provides for compulsory licences in specified circumstances — including where the patent has not been worked in Pakistan within a defined period, where the demand for the patented product is not being met at reasonable prices, or in the interest of public health (particularly relevant for pharmaceutical patents under TRIPS Agreement flexibilities). Patent licences in Pakistan can be registered with IPO-Pakistan's Patent Wing — registration provides the licensee with protection against subsequent transferees of the patent who take with notice of the registered licence.
The Copyright Ordinance 1962 governs copyright licences in Pakistan. Section 52 of the Copyright Ordinance 1962 permits the assignment and licensing of copyright. Under Pakistani copyright law, a copyright licence may be exclusive (only the licensee can exercise the licensed rights) or non-exclusive (the licensor can grant the same rights to multiple licensees). Section 14 of the Copyright Ordinance 1962 provides that copyright in works made by an employee in the course of employment vests in the employer — an important distinction when licensing software, creative content, or other works that may be created by employees of either party.
The Trade Marks Ordinance 2001 governs trademark licences in Pakistan. Section 69 of the Trade Marks Ordinance 2001 permits the proprietor of a registered trademark to licence its use — licences may be registered with IPO-Pakistan's Trade Marks Registry as Registered User agreements. Quality control provisions are essential in trademark licences — under the doctrine of naked licensing, a trademark proprietor who licences their mark without maintaining quality control over the licensee's goods or services may lose trademark rights through invalidation proceedings before IPO-Pakistan.
The Federal Board of Revenue (FBR) treats royalty payments under IP Licence Agreements as income subject to withholding tax. Under Section 6 and Section 155A of the Income Tax Ordinance 2001, royalties paid to non-resident licensors are subject to withholding tax at 15% (unless reduced by an applicable double taxation treaty between Pakistan and the licensor's country of residence). Royalties paid to resident Pakistani licensors are subject to withholding tax under Section 153 of the Income Tax Ordinance 2001. Technology transfer payments may also be subject to FBR scrutiny under transfer pricing provisions if the licensor and licensee are related parties under the Income Tax Ordinance 2001 definition.
Pakistan's membership in the World Trade Organization (WTO) and its obligations under the TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights) require Pakistan to maintain minimum standards of IP protection and enforcement — including effective remedies for IP licence infringement — which directly affect the enforceability of IP Licence Agreements before Pakistani courts.
When Do You Need a Intellectual Property Licence Agreement (Pakistan)?
An Intellectual Property Licence Agreement in Pakistan is needed whenever the owner of intellectual property wants to authorise another party to use those rights commercially without transferring ownership — generating royalty income while retaining the underlying IP rights for use in other territories or fields.
An IP Licence Agreement is needed when a multinational company with patents, trademarks, or proprietary technology wants to enter the Pakistani market by licensing a local manufacturer or distributor to produce or sell products using the company's IP. Rather than establishing a wholly-owned subsidiary, the multinational generates royalty income from the Pakistani licensee. This structure is common in the pharmaceutical, consumer goods, technology, food and beverage, and automotive sectors.
An IP Licence Agreement is required when a Pakistani technology company, software developer, or content creator wants to licence their software, mobile application, digital content, or proprietary algorithm to other businesses in Pakistan or internationally. The Copyright Ordinance 1962 protects software as a literary work, and a licence agreement defines what the licensee can do with the software — number of users, permitted modifications, sublicensing rights, and support obligations.
An IP Licence Agreement is needed when a franchise arrangement involves the use of a brand's registered trademark and associated know-how. In Pakistan's growing franchise sector — covering food and beverage brands (local and international), retail chains, and service franchises — a Trademark Licence Agreement (often combined with a Franchise Agreement) governs the franchisee's right to use the franchisor's trademark, operational manuals, and brand standards.
An IP Licence Agreement is required when a pharmaceutical manufacturer in Pakistan wants to manufacture and sell a patented drug under a voluntary licence from the patent holder — particularly relevant for essential medicines where the Ministry of National Health Services, Regulations and Coordination (NHSRC) has an interest in confirming affordable access. Section 47 of the Patents Ordinance 2000 provides for voluntary licensing of pharmaceutical patents.
An IP Licence Agreement is needed when a Pakistani educational institution, media company, publishing house, or digital platform wants to licence copyright content — textbooks, academic journals, music, films, photographs, or database content — from Pakistani or international content owners for reproduction, broadcast, or distribution in Pakistan.
An IP Licence Agreement is required when a Pakistani startup or technology company is seeking investment and the investor requires that all IP used by the company is properly licenced — particularly where the founders developed IP before forming the company and have not yet assigned it to the company, or where third-party IP is used under verbal arrangements that need to be formalised before investment completion.
What to Include in Your Intellectual Property Licence Agreement (Pakistan)
A thorough Intellectual Property Licence Agreement in Pakistan under the applicable IP statutes and the Contract Act 1872 must contain the following essential elements to clearly define the licence, protect both parties, and comply with FBR tax withholding requirements and SECP/IPO-Pakistan registration procedures.
Party Identification: Full legal names, addresses, NTNs (National Tax Numbers from FBR), and company registration numbers (from SECP under the Companies Act 2017) of the licensor and licensee. For foreign licensors, passport details and country of residence (relevant for withholding tax treatment under Pakistan's double tax treaties). For licences involving registered IP, the relevant IPO-Pakistan registration numbers should be stated.
Licensed IP Description: A precise identification of the intellectual property being licensed — patent registration numbers under the Patents Ordinance 2000; trademark registration numbers and classes under the Trade Marks Ordinance 2001; copyright registration details (if registered) or description of the work with creation date and first publication details under the Copyright Ordinance 1962; design registration numbers under the Registered Designs Ordinance 2000; and for trade secrets and know-how, a description sufficient to identify the information without disclosing it in the agreement itself (with a separate confidential schedule if necessary).
Licence Scope — Exclusivity: Whether the licence is exclusive (only the licensee may exercise the licensed rights, to the exclusion of the licensor and all third parties), sole (the licensor and the licensee but no third parties), or non-exclusive (the licensor may grant the same rights to other licensees). The exclusivity scope may differ by territory, field of use, or channel of distribution.
Territory: The geographic area in which the licensee is permitted to exercise the licensed rights — Pakistan only; specific provinces (Punjab, Sindh, KPK, Balochistan); or specific cities. For international licences, the territory list should correspond to the countries where the licensor holds valid registered rights.
Field of Use: The specific applications, industries, or product categories in which the licensee may use the licensed IP. Restricting the field of use allows the licensor to licence different fields to different licensees — for example, licencing a pharmaceutical patent for manufacturing generic tablets but not for use in injectable formulations.
Royalties and Fees: The financial consideration for the licence — a running royalty (percentage of net sales of licensed products, typically 2% to 10% for technology licences, higher for branded consumer goods), a fixed annual licence fee, a combination of both, or a lump-sum payment. Royalty calculation basis (net sales, gross sales, units sold) and audit rights over the licensee's sales records must be defined. Minimum annual royalties protect the licensor against a licensee who fails to commercialise the IP.
Withholding Tax on Royalties: For royalties paid to non-resident licensors, the licensee must withhold income tax at 15% under Section 6/155A of the Income Tax Ordinance 2001 (reduced to 10% or lower under applicable double tax treaties — Pakistan has treaties with the UAE, UK, USA, China, Saudi Arabia, Germany, and other countries). For resident licensors, withholding under Section 153 applies. The agreement should specify which party bears the withholding tax burden.
Quality Control (for trademark licences): The licensor's right to inspect, approve, and control the quality of the licensee's goods or services bearing the licensed trademark. Without quality control provisions, the trademark licence may constitute naked licensing, which could invalidate the trademark registration before IPO-Pakistan.
IP Ownership and Improvements: Confirmation that the licensor retains ownership of the licensed IP throughout the licence term; the treatment of improvements or modifications made by the licensee (whether owned by the licensor, licensee, or jointly); and a grant-back licence (if the licensor requires the licensee to licence any improvements back to the licensor).
IPO-Pakistan Registration: For trademark licences, Section 69 of the Trade Marks Ordinance 2001 allows registration of a Registered User agreement with the Trade Marks Registry. For patent licences, Section 47 of the Patents Ordinance 2000 permits registration. Registration provides the licensee with third-party effect and protects against the licensor's insolvency.
Term and Termination: The duration of the licence (fixed term or perpetual); rights to renew; grounds for early termination (breach, insolvency, change of control, non-payment of royalties); and post-termination obligations (cessation of use of licensed IP, destruction of licensed materials, return of confidential information).
Forms-legal.com provides this Intellectual Property Licence Agreement (Pakistan) template as a practical starting point. Given the IP statute-specific provisions, transfer pricing implications for related-party licences, and the importance of IPO-Pakistan registration, parties should engage an Advocate specialising in IP law or a patent/trademark attorney registered with IPO-Pakistan under the Intellectual Property Organization of Pakistan Act 2012.
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Frequently Asked Questions
An IP licence and an IP assignment are fundamentally different transactions under Pakistani intellectual property law. An assignment is a permanent transfer of ownership of the intellectual property from the assignor to the assignee — after assignment, the assignor no longer owns the IP and has no rights in it unless specifically retained in the assignment deed. An assignment of a registered patent must be in writing and recorded with IPO-Pakistan under the Patents Ordinance 2000; assignment of a registered trademark must be recorded at the Trade Marks Registry under the Trade Marks Ordinance 2001. A licence, by contrast, is a permission to use the IP — ownership remains with the licensor at all times, and the IP reverts to the licensor's exclusive control at the end of the licence term. Licences may be exclusive (giving the licensee rights equivalent to ownership for the licence period and territory) or non-exclusive (allowing multiple licensees to use the same IP simultaneously). For tax purposes, assignment proceeds are typically treated as capital gains under Section 37 of the Income Tax Ordinance 2001, while licence royalties are treated as business income or other source income taxable under the Income Tax Ordinance 2001. The choice between assignment and licensing depends on the commercial relationship, the licensor's desire to retain long-term rights, and the applicable tax treatment.
Royalties under Intellectual Property Licence Agreements in Pakistan are subject to income tax withholding under the Income Tax Ordinance 2001, with the applicable rate depending on the residence status of the licensor. For royalties paid to non-resident licensors (foreign IP owners licencing their IP to Pakistani licensees), the withholding tax rate is 15% under Section 6 read with the First Schedule to the Income Tax Ordinance 2001, unless a lower rate applies under a double taxation avoidance agreement (DTA) between Pakistan and the licensor's country of residence. Pakistan has DTAs with over 40 countries — including the UAE (reducing withholding to 12%), the UK (reducing to 12.5%), China (reducing to 12.5%), Germany (reducing to 10%), and the USA (reducing to 12%). The non-resident licensor must provide documentation of their tax residence to claim treaty benefits. For royalties paid to resident Pakistani licensors, withholding tax under Section 153 of the Income Tax Ordinance 2001 applies at the applicable rate for services. The licensor includes royalty income in their annual income tax return and pays tax at their applicable rate, with credit for withheld amounts. Transfer pricing rules under the Income Tax (Rules and Procedures) Regulations apply to royalties between related parties — FBR may challenge royalty rates that exceed arm's length pricing determined by comparable uncontrolled transactions in the market.
Whether a Pakistani licensee can sublicence intellectual property received from a foreign licensor depends entirely on what the IP Licence Agreement permits. By default — in the absence of express permission — a licensee cannot sublicence the licensed IP to third parties, as a licence is a personal right and does not inherently include the right to further delegation. The IP Licence Agreement must expressly grant sublicensing rights if the Pakistani licensee intends to sub-licence to its subsidiaries, affiliates, distributors, or other third parties. Sublicensing rights in Pakistan are subject to significant considerations: the sublicence cannot exceed the scope of the head licence (the licensee cannot grant greater rights than it holds); the licensor typically requires the right to approve sublicensees (particularly for trademark licences where quality control is essential under the Trade Marks Ordinance 2001); sublicence royalties may need to be shared with or disclosed to the licensor; and in the event of termination of the head licence, the sublicences may terminate automatically unless specifically preserved. For multinational franchises and technology companies with Pakistani distributor or manufacturing licensees, sublicensing to local sub-distributors is a common structure — but requires careful drafting in both the head licence and sublicence agreements to ensure the entire chain of rights is clear and enforceable under Pakistani law.
Quality control provisions in trademark licences are critically important in Pakistan under the Trade Marks Ordinance 2001, because a trademark proprietor who licences their trademark without maintaining meaningful quality control over the goods or services produced by the licensee risks the invalidity of the trademark through a doctrine known as naked licensing. A naked licence — one where the trademark owner exercises no control over the nature and quality of the goods or services sold under the mark — can result in the mark losing its distinctiveness and becoming invalid, on the basis that it no longer reliably indicates a single trade source. To avoid naked licensing under the Trade Marks Ordinance 2001, the trademark licence should include: an express quality standard to which the licensee must conform (specifications, minimum quality grades, PSQCA standards, or the licensor's own brand standards); the licensor's right to conduct inspections of the licensee's premises, manufacturing processes, and finished goods; a right of the licensor to review and approve all marketing materials, packaging, and labelling bearing the trademark before use; periodic reporting by the licensee on sales volumes and quality complaints; and the right of the licensor to terminate the licence if quality standards are not maintained. In the restaurant and food franchise sector, quality control provisions are particularly detailed — covering ingredients, preparation methods, hygiene standards meeting PSQCA/HACCP requirements, and customer service standards.
A party who suffers a breach of an Intellectual Property Licence Agreement in Pakistan has remedies under the Contract Act 1872, the applicable IP statute, and the general civil law of Pakistan. For breach by the licensee — including use of the licensed IP outside the agreed scope, territory, or field; failure to pay royalties; breach of quality control obligations; or sublicensing without permission — the licensor can: terminate the licence agreement by giving the notice specified in the agreement; bring a civil suit for damages (compensation for lost royalties, market harm, and brand damage) before the relevant civil court or the Intellectual Property Tribunal under the Intellectual Property Organization of Pakistan Act 2012; apply for an injunction to restrain continued unauthorised use of the IP; and seek an account of profits made by the licensee from the unauthorised use. For breach by the licensor — including purporting to revoke a valid licence, licensing the same IP to a competitor in breach of an exclusivity clause, or failing to maintain the registered IP rights — the licensee can claim damages for breach of the exclusivity covenant, seek specific performance of the licensor's obligations if damages are inadequate under Section 21 of the Specific Relief Act 1877, or claim an indemnity for costs incurred in relying on the licence.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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