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Intellectual Property Rights protection for Startups

Intellectual Property Rights (IPRs) are intangible assets which usually gives the inventor an exclusive right to protect his/her inventions for a certain period of time.

In the rapid globalised economy, Intellectual capital is one of the key drivers to achieve growth and success in future. However, IP rights vary from one to another and are territorial in nature. Every country defines it laws and treaties which regulate IP rights and ensure enforcement to protect and reward the innovators.

As a part of Start-up India, Stand Up India’ initiative, the government has announced the slew of measures to protect the innovations of new-age entrepreneurs and expedite the patent examination process.  The initiative envisaged promoting intellectual property and facilitating startups to protect their IP from potential infringers.

The main objective of the plan was to raise awareness of IPR among startups and assist them in protection and commercialization of innovative and emerging technologies. The program was designed to help startups in understanding different types of IPRs, filing and disposal of IP applications related to patents, trademarks, etc.

IPThe new-age entrepreneurs’ needs to understand how to create, manage, and protect their intellectual property which can be one of the wealthy drivers in future.  Every startup has a brand name, logo, designs, and products, inventions that are to be protected through IP rights.  Prior to the launch of a product or any invention, the startup has to ensure that the invention doesn’t infringe any third party intellectual property that can lead to unwarranted litigation and thwart its business activities.

Moreover, the entrepreneurs need to be proactive in developing and protecting their intellectual property for such reasons as increasing valuation, gaining competitive advantage, goodwill, and using the valuable asset for generating revenue streams through licensing and cross-licensing. However, lack of incentives and long registration process has led to startups filing patents abroad in countries such as the US, the UK, and Singapore. As on November 2015, there are 2, 46,495 patent applications and 5, 32,682 trademark applications have been pending with the government.

Intellectual Property is pivotal for any new-age venture which is defined as follows:

Trademarks – A trademark can be obtained for any words, logos, slogans, design that identifies particular goods or services. The goods or services have to be distinguished of one from another including shape of goods, packaging and combination of colors. This also includes non-conventional marks like color marks, sound marks, etc. Under the TM Act, the ‘mark’ includes a device, brand, heading, name, signature, word, shape of goods, or any combination.

Any startup using any mark in the business should be different from the other to qualify as a trademark. Therefore, an entrepreneur needs to conduct a due diligence while selecting a trade name, business, domain name, and logo so that it does not violate any IP rights.  The trademarks can further be classified into generic, descriptive, suggestive, arbitrary, and invented. While adopting any mark, the startup has to ensure the mark is not used by any third party in India or abroad and should be aware of the concept/principle of “Well-known Trademark” and “Trans-border Reputation”.

Patents – A patent is granted to an inventor for his invention for a period of 20 years. During this period, the inventor can exploit the invention through commercialization and prevent others to make, use, sell or produce the product in the market. To obtain a patent, the invention has to be novel and inventive and capable of industrial application can be patented in India. Thus includes the following:

  1. Any art, process, method or manner of manufacture
  2. machine, apparatus or other article

Before using any invention/technology, the startup should check that it does not violate any third party IP rights of the patentee. In a case of any infringement, the proceeding can only be started post the grant of a patent and should include a claim retrospectively from the date of publication for the grant of the patent. The infringement case include unauthorized selling, making, using, offer to sale any patented invention.

Copyright – includes an artistic work comprising a drawing in the form of map, chart, plan, diagram, a photograph, work of architecture, dramatic work, literary work, musical work, sound recording, and film. The duration of the copyrights is lifetime of the author while the works of the government and international organizations are protected for 60 years from the date of publication.

The registration of copyright is not mandatory as it is a mere fact. However, it is advisable to register the copyright and obtain the certificate as a proof of ownership that can be acted upon later. Any startup using the product of another entity without obtaining any license infringes the rights of others. This not only leads to civil remedies but also regarded as an offense punishable by imprisonment for a period not less than 6 months.

Industrial Designs – As per the section 2(d) of the Designs Act, features of shape, configuration, pattern, ornament, or colors applied to an article can be registered. However, the functional aspects of designs cannot be protected as they are the subject matter of patents. The registered designs are valid for 15 years.  The design of the article is not registered in India, if it is not new or original or has been disclosed in public in India or abroad.

Trade Secrets – This includes any confidential information relevant to business which provides a competitive edge over competitors.  Trade secrets involves industrial or commercial secrets, design, pattern, formula, commercial method, which is unknown by competition.

IP Strategies for Startups

Startups need to understand the advantage of IPR protection available under the Start Up India action plan. The primary step for any startup is to evaluate its IP and prioritize various forms of IP involved in business.  Any failure to prioritize types of IP involved will create problems for business in future related to valuations or negotiations pertaining to business. Sometimes intellectual property is the only valuable asset for business at the time selling the entity.

Thus, it is important for startups to understand the IP rights and register the same in order to claim protection and commercialization. As IP rights are valuable, the new-age startups should register their intellectual property rights such as patents, trademarks with the necessary PTO so that they can be enforced at the time of litigation and generate revenue streams. Startups should also conduct due diligence of prior using of any technology so that it does not infringe third party rights, or else, it can lead to unwarranted litigation against the business.

Therefore, startups should decide carefully while using IP of any third party or obtain a license before using the technology or invention. For any startup to achieve long-term growth and success, it is necessary to lay clear and effective IP policies that will be created or acquired in future by the management. The aim of such policies is to ensure there is no dispute between the business and promoters which can lead to failure of the venture. Startups need to implement IP strategies that can make business not only grow by leaps and bounds but also exploit IP for licensing or cross-licensing in future.

Guest Authors: 

Karan Bhutani is an Assistant Manager at Effectual Services, a leading Intellectual Property (IP) management advisory firm offering IP support solutions to Fortune 500 companies, law firms, research institutes and universities, and venture capital firms/PE firms.

Jatinder Batra is also a Manager of IP Support Services at Effectual Services.

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