Propelled by special packages and tax exemptions announced by the Government of India, a swarm of Startups, claiming to provide innovative solutions and products to the customer, are being incorporated. According to the Start IP India initiative by Department of Industrial Policy & Promotion (DIPP), 6096 entities have been recognized as Startups. In a recent DIPP notification, the period for claiming the "Startup" status has been increased from 5 years to 7 years and for a Startup in the field of Biotechnology, the said period is up to 10 years. Further, the DIPP has removed the requirement of a recommendation letter from an incubator or industry association for registration as a Startup.
Nineteen State Governments in India have implemented Startup policies with the objective to promote ease-of-business environment amongst new entrepreneurs in the country. Incubation centres are being set up under Atal Innovation Mission wherein necessary infrastructure, training and guidance would be provided to Startups. The Government is also setting up Research Parks, Bio-Clusters, Bio- Incubators, Technology Transfer Centres and Startup-Assist Centre to encourage entrepreneurs to venture into Startup space.
As in case of any business, Startups are governed by sales, marketing initiatives, revenue cycles, business development, funding, logistics and HR management. However, one of the key differentiators for a Startup is "innovation" as it needs to compete with established or bigger businesses in its respective field. A market-disrupting solution makes a Startup stand out from the crowd. The initial days for any Startup organization are critical in terms of modulating their products or services as per client needs and to make an effort of continued innovation. Equally important is to maintain their exclusivity over the said innovative approach or product by way of protecting their IP rights.
One of the main reasons for a Startup to protect its IP is because attaining IP rights over a product or service to the exclusion of others is well recognized in financial lifecycle of the company, which extraordinarily increases the credibility of the startup; hence, attracting investments.
The present article does not educate about what is IP and what does different IP mean, rather, we have focussed on why it is important for a startup to protect their IP. Based on our interactions with entrepreneurs, we have listed issues / challenges often faced by startups.
- How aggressively to identify IP: It is undisputable that IP is important but as the saying goes "excess of anything is bad", one should be careful while considering several IPs for registrations. The decision to define the important or prime IP should be made in terms of startup's identity and branding, i.e., trademark of company and prime products/processes, innovation, the layouts and designs created by the company.
- Best time to protect IP: By the rule of thumb, IP must be protected right from its birth. Therefore, the prime IP should be protected as soon as possible. Further, in case of patents and designs, the IP should be applied for protections right at the time of inception of the invention or the company i.e. the best time is at the time of creation. Other IPs can be planned in a systematic manner and protected in phases.
- Best IP to protect: For a startup the IPs of prime importance are trademarks, patents and designs. The choice of IP protection and extent can sometimes be difficult. For example, a product can have various IP protections, for example, unique shape of a product. . A design or a shape of a product can be a subject matter of trademark, copyright or design. There are provisions under the respective statutes to define when a particular shape would be considered as which kind of IP. Therefore, while all IP types are important, the entrepreneur needs to consult before prioritizing IP protections.
- Search for existing IP before filing: IP rights are exclusionary monopolistic rights to an entity/individual and hence a search or lookout for previously residing right or existence of IP in public domain must be considered. It may prove to be highly detrimental if the startup does not search before establishing a business and more importantly identifying existing IP in the field. There are umpteen ways to search for already protected IP - through the patent archives, trademark and company registers, designs register and the like.
- Not to disclose before launch: In India, 'first to file' system is applicable for patent protection. Therefore, before launching or even discussing with prospective investors, it is highly advisable to file a patent application claiming protection over the innovative product or process.
In addition to the above, the Government of India has given several exemptions in the fees for IP protections for qualifying startups under the Startup India scheme of DIPP. For patent protection the fees for start-ups is brought down by 80%, for trademarks the fee reduction is by 50%. Further, a startup can avail expedited examination facility at the Patent Office wherein the patent application can get disposedoff within 12-18 months from the date of filing. Hence, for a startup, IP protection is not as costly as it would be for non-startup companies. What is most important for Indian Startups is that they should continuously work on creating and identifying IP and at the same time consciously work towards 'innovating and protecting' for excelling in their respective businesses.
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.