Section 18 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sub-sections (5) to (8) of section 18 protect people who deal in chips without knowing that a registered layout-design is inside them, people who buy from such dealers, people who act with the proprietor's consent or sell chips the proprietor put on the market, and people who independently create an identical layout. They are the limits on the infringement rule for importers, distributors and sellers in section 18(1)(b), and a distributor holding stock should consider an IP watch and enforcement review once any notice arrives.
This article reflects the Act as amended up to 3 October 2026 (the Act has not been amended since it was enacted in 2000). Check sicldr.gov.in for later notifications. Section 18 has been in force since 1 May 2011.
A person who imports, sells or distributes chips without knowledge, and with no reasonable ground to know, that they incorporate a registered layout-design is not an infringer. After receiving notice of the knowledge, the person may continue only for stock on hand or ordered before the notice, and must pay the proprietor a royalty, set by negotiation or by the Appellate Board. Later purchasers get the same immunity. Acts done with the proprietor's written consent, or on goods put on the market by or with the proprietor's consent, are not infringement. Independent creation of an identical layout is not infringement.
Section 18(5): the innocent dealer and royalty
Section 18(5) operates "notwithstanding anything contained in clause (b) of sub-section (1)". It covers a person who performs, or directs to be performed, the acts in clause (b) (importing, selling or otherwise distributing for commercial purposes) in respect of a chip, or an article containing a chip, that incorporates a registered layout-design, where the person "does not possess any knowledge or has no reasonable ground to know" while doing so that it incorporated a registered layout-design.
The protection has two stages.
- Before notice. The act is not regarded as infringement under clause (b).
- After notice. After the time when the person "has received notice of such knowledge", the person "may continue to perform or directing to be performed such act in respect of the stock on hand or ordered before such time". The person "shall be liable to pay the proprietor of the registered layout-design a sum by way of royalty".
The royalty is "to be determined by negotiation between registered proprietor of the registered layout-design and that person or by the Appellate Board having regard to the benefit accrued to such person" from the act in respect of the chip or article. So the parties negotiate first, and the Act names the Board as the determining body when they do not agree.
Section 40 lets the registered proprietor apply to the Board for determination of royalty under section 18(5). No notification bringing sections 32 to 53 (and 55) into force was found in the India Code record or on the Registry's notifications page (checked 3 October 2026); check the current position before relying on them. The Act names no other body to fix royalty. See sections 40 to 44.
Three points are not in the text. It does not say how a notice must be served, nor what counts as "reasonable ground to know". It does not set a rate for the royalty. And it limits continued dealing to stock "on hand or ordered before" the notice; new orders after notice are outside the protection.
| Stage | Position of the innocent dealer |
|---|---|
| Before knowledge or notice | Acts are not infringement under clause (b) |
| After notice of knowledge | May continue only for stock on hand or ordered before the notice |
| Payment | Royalty to the proprietor, negotiated or, per the text, determined by the Board |
| New orders after notice | Not covered by the protection |
Section 18(6): later purchasers
If another person buys such a chip or article from a person described in sub-section (5), that other person "shall be entitled to the immunity from infringement in respect of that semiconductor integrated circuit or article, as the case may be, to the extent and in the manner as if the word 'person' referred in that sub-section includes the word any other person referred in this sub-section." The practical result is that a downstream buyer, for example a board maker who buys the chips from an innocent distributor, stands in the same position.
Section 18(7): consent and exhaustion
Nothing in clause (b) is an act of infringement where a person does any of the acts in that clause:
- "with the written consent of the registered proprietor" or "within the control of the person obtaining such consent"; or
- in respect of a layout-design, chip or article "that has been put on the market by or with the consent of the registered proprietor".
The first limb needs written consent. The second concerns goods the proprietor or a consenting person has already placed on the market, so resale of genuine chips is not infringement. The section speaks of "put on the market"; it does not say in which country. The text is silent on that, so it should not be read either way without legal advice.
Section 18(8): independent creation
"Notwithstanding anything contained in this Act, where any person by application of independent intellect has created a layout-design which is identical to a registered layout-design, then, any act of such person in respect of the layout-design so created shall not be the infringement of the registered layout-design."
This is a defence for a creator who made the same layout without copying. The Act does not say who must prove independent creation, or how. Records of the design process (notes, tool logs, dated files) are the obvious evidence, but the section itself lays down no evidence rule.
A worked example
A distributor in Mumbai buys a batch of motor-control chips from an overseas seller and sells them to appliance makers. It has no knowledge that the chips incorporate a layout registered in India. Under 18(5) the sales are not infringement. Later it receives a letter from the registered proprietor identifying the layout. It still holds a stock of the chips and has an open purchase order placed before the letter. Under 18(5) it may continue for that stock on hand or ordered before the notice, and must pay royalty to the proprietor, set by negotiation. An appliance maker that had bought chips from the distributor can rely on 18(6). If the proprietor had itself sold the chips in the market, 18(7) would apply and no royalty would arise.
Need help with a notice about chips you stock?
If you have received a notice that chips you import or sell incorporate a registered layout-design, our IP watch and enforcement team can review the facts, the stock position and the protections in section 18(5) to (8).
Key takeaways
- An innocent dealer with no knowledge or reasonable ground to know is protected under clause (b).
- After notice, only stock on hand or ordered before the notice is covered, and royalty is payable.
- Royalty is fixed by negotiation or by the Appellate Board; no commencement notification was found for the Board.
- Later purchasers get the same immunity.
- Written consent, goods put on the market with consent, and independent creation are not infringement.
Read next
- Section 18(1) to (4): the infringement rule
- Sections 40 to 44: royalty applications to the Board
- Sections 56 to 59: penalties
Disclaimer: Based on the Semiconductor Integrated Circuits Layout-Design Act, 2000 (never amended; commencement as notified in 2004, 2011 and 2014) and the Semiconductor Integrated Circuits Layout-Design Rules, 2001 as amended by G.S.R. 689(E) of 14 September 2012, as consulted on 3 October 2026. Check sicldr.gov.in for later notifications and current forms and fees. This article is general information, not legal advice; check the official text before acting.