Legal

Why IP Protection is Important for Every Start-up

It is important for start-ups to secure all their legal aspects
Why IP Protection is Important for Every Start-up
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Founding Partner & Senior Associate of Singh & Associates
4 min read
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A start-up is a new business venture that aims to meet a marketplace’s need, want or solve problems by developing a viable business model around products, services, processes or platform. It goes without saying that almost every tech start-up has an idea that’s probably worth protecting. An idea is nothing but an intellectual property (IP). An idea can take form of codes, algorithms, research findings etc. A start-up that relies on IPR must ensure that their IP is fairly protected. Unfortunately, this area remains neglected in the race of giving best products or services to satisfy clients. As a result, an IP on which a start-up actually relies is not sustained longer. The question looms that “do they really know about the legal rights while protecting IP?”

It is important for start-ups to secure all their legal aspects and have a clear vision on how to proceed with their idea. For example, as soon as you find a perfect name for your business, you need to protect it using a trademark, thereby preventing its usage by others. Understanding legal rights would help start-ups avoid IP disputes which can incur hefty fine, litigation cost or even closure. The most important IP rights under which a start-up could protect its intangible assets and amass financial benefit from their usage are patents, trademarks and designs. Patent is considered ‘the gold standard’ of IP protection and can act as a ring fencing that introduces a new way of doing something. It is the most effective way of encouraging constant innovation and improvement of products, processes, and services to ensure innovators get due credit for their work. Trademarks, on the other hand, are distinctive signs to identify particular services and goods.

Words, phrases, numbers, logos, designs, 3D shapes can all become registered trademarks. The idea is that through trademark one can express the quality, history, individuality of their work under a legally registered mark, which sets their work apart from competitors. Designs can protect the aesthetic aspects of a product. The protection covers aesthetic aspects only and takes no account of functionality or features of the items.

As a part of Start-up India initiative, the government envisaged a scheme in January 2016, for protection of innovative ideas. In this scheme, a start-up has been provided 50-80 percent reduction in the official fees, expedite examination procedure for early disposal of application and assistance from registered facilitators without any charges.

Most start-ups have informal working atmosphere since they majorly constitutes friends, colleagues and relatives. Such start-ups may face problems in the long run especially if certain formal requirements are not fulfilled. Legal agreements in the form of non-disclosure agreements, among the founders, employees and vendors are extremely important in order to protect the intangible assets of an organization from infringement and to protect trade secret. During commercialization, a start-up should always keep in mind the disclosure of the inventive product or process before the registration because IP rights would be of no use without prior disclosure. Accordingly, founders must take expert opinions regarding product commercialisation and process disclosure before patenting or applying for industrial design. Once these aspects have been strategized, and required measures are taken, the product may be launched into the public domain.

Another aspect which is of utmost importance for any start-up is ‘thorough analysis’ or prior search before commencing an idea. This is important since your idea or innovation might be stale and someone might have already filed for its protection. So a thorough research is important to ensure no infringement activity is done on other’s IP rights. Taking an assistance from IP Attorney would be beneficial in this case. Further, a start-up should decide with proper agreements being framed while using IP of any third party or obtaining a license thereof. The agreement must include description of the licensed product or process, distribution of royalties and nature of license (partial or complete). In case of infringement or passing off, a start-up may approach the IP authorities.

IP is an interesting area of law and is extremely relevant for start-ups and entrepreneurs. Knowing just the benefits of IP are not enough, start-ups also need to know their legal rights, since a small mistake might end up costing them millions.

(This article was first published in the October issue of Entrepreneur Magazine. To subscribe, click here)

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