Why Startups Need to Protect Their Innovative Assets
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Propelled by special packages and tax exemptions announced by the Government of India, there has been a swarm of Startups being incorporated, claiming to provide innovative solutions and products to the customer. According to the Start IP India initiative by Department of Industrial Policy & Promotion (DIPP), 6096 entities have been recognized as Startups. In of a recent DIPP notification, the period for claiming “Startup” status has been increased from 5 years to 7 years and a for a Startup in the field of Biotechnology, the said period is up to 10 years. Further, the DIPP has removed the requirement of recommendation letter from an incubator or industry association for registration as a Startup.
Startup Policies of the Various States and The Central Government
Nineteen State governments in India have implemented Startup policies with an objective to promote ease-of-business environment amongst new entrepreneurs in the country. Incubation centres are being set up under the Atal Innovation Mission whereby 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 they need to compete with established or bigger businesses in respective fields. 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 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 as to why a Startup shall protect its IP is because attaining IP rights over a product or service to the exclusion of others is well recognized in the financial lifecycle of the company, which extraordinarily increases the credibility of the Startup and hence attracting investments.
The present article does not educate about what is IP and what does different IP mean, rather, we try to focus on why is it important for a Startup to protect their IP. Based on our interaction with Entrepreneurs, we come across below questions/challenges often faced by a Startup.
➢ How aggressively to identify IP: It is indisputable that IP is important but as goes the saying “excess of anything is bad”, one should be careful in drawing the line while considering several IPs for registrations. The decision to define the important or prime IP shall be made in terms of Startup’s identity and branding, i.e., a trademark of the company and prime products/processes, innovation, the layouts and designs created by the Company.
➢ Best time to protect IP: By the Thumb-Rule, IP must be protected right from the birth. Therefore, the prime IP shall be protected as soon as possible. Further, in case of patents and designs, the IP shall be applied for protections right at the time of inception and the inventor/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 pristine importance are the trademark, patents, and designs. The choice of IP protection and extent can sometimes be a difficult problem. For example, a product can have various IP protections, for example, the 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 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 the 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 reasons to search the patent archives, trademark and company registers, designs register for already protected IP.
➢ 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 qualified Startups under the Startup India scheme of DIPP. For patent protection, the fees for start-ups is brought down by 80 per cent, for trademarks the fee reduction is by 50%. Further, a Startup can avail expedite examination facility at the Patent Office wherein the patent application can get disposed-off within 12-18 months from the date of filing. Hence, for a Startup, IP protection is not as costly an affair as 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’ motto for excelling in their respective businesses.