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Start up Knowledge Series - Intellectual property

Ten Facts You Might Not Know About Stamp Duty

In this edition we will look at Intellectual property and its significance for Startups. Startups base their entire business model on an idea - that is unique, workable and has the potential to be a game changer. Their “Idea/Creation” is their intellectual property, which needs to be protected correctly for their model to sustain and to reap the reward of their efforts and conviction.

There has been a surge of interest on Intellectual capital, contributed greatly by a rapid growth in information technology and global business. Intellectual Property (IP) rights are being fiercely protected. Further, with increasing cross border transactions, it becomes imperative to ascertain the nature of protection afforded to IPR in each jurisdiction. Intellectual Property Rights (IPR) are country specific and thus it would help to be abreast of cross border protection and rights, in case a startup has a global outreach.

The different types of Intellectual Property Rights that a startup should consider to leverage its intellectual property include Patents, Copyright, Designs, Trademarks etc. We will take a look at the key ones below:

Patents

This deals with protection of workable ideas, creations that would qualify as invention. India grants patent on first to apply basis. The application can be made by either the inventor or the legal representative of the inventor. On submission of appropriate documents and the requisite verifications, patent may be granted to the inventor and published in the patent journal.

In the event someone uses the above patented creation/invention without permissions from the patent owner, then the patent owner can approach the court for remedies.

Copyrights

Copyright protects any original literary, dramatic, musical, artistic work or cinematographic films or sound recordings. The Copyright Act, 1957 along with Copyright Rules, 2013 is the governing law for copyright protection in India.

In India, registering a copyright is not mandatory. Copyright gets created when work is created in material form and is proved to be original. There are no special privileges either for a registered copyright, but it can be admissible as evidence in court of law in case of dispute regarding ownership.

Trademarks

Startups could invoke this Act to protect any mark that is used to identify and/or associate with their business. The definition of mark is inclusive and defined in the Trade Marks Act, 1999 along with Trade Marks Rules, 2002.

Indian courts take action against infringement actions of a registered trademark and also award damages along with injunctions.

Key Points to note for a startup in relation to IPR

  • Whether the idea/creation/technology needs to be protected under Intellectual Property? If a start up is banking its entire operation on a special technology and expects to be known in business through its brand, then it would be advisable to opt for the appropriate intellectual property protection. For instance, if a startup is established to market and promote any specific drug formulation, then the business would not have long term standing unless it is appropriately patented.
  • Who should be the owner of Intellectual Property? In most cases, it is advisable to take the IPR in the name of a company rather than an individual, especially if the company is looking for long term growth and valuation. This ensures the perpetuity of the IPR for the Company.
    If the IPR is existing in the name of an individual and a startup is incorporated to undertake business on the IPR, then appropriate agreements need to be drawn to ensure that the intellectual property is assigned to the startup. Many forms of intellectual property need to be specifically assigned and typically a ‘confidentiality and invention assignment’ may need to be worked out.
  • How to protect IPR externally? Once a startup registers its IPR, periodic monitoring needs to be undertaken to ensure the validity of the IPR and accordingly take appropriate action for renewal.
    Also, the startup has to stay abreast of competition and related / similar products in the market through regular search and monitoring. In case any infringement is observed, appropriate recourse can be taken, which may also include judicial relief.
  • How to prevent internal misuse of IPR? Startup will have to lay appropriate policies/agreements with employees who deal with intellectual property in the company. They have to be made to adhere to confidentiality guidelines.

IPR protects a startups identity and its intellectual capital. In this global age, with companies expanding the frontiers, a start up will have to ensure that it takes adequate measures as per cross border regulations as well. In short, startups should leverage IPR developed by it as it could be the keystone to its valuation. It needs to develop systems to ensure adequate protection of its intellectual property. This could be facilitated by regular IPR audits to ensure that the intellectual property it has developed does not go unprotected. The audits could be expanded to cover and ensure protection rights in countries across borders as well where its products are exported or wherefrom it anticipates competition.

This article is authored by A. Loganathan, representing India Business Solutions (IBS) which is a boutique advisory firm helping a lot of Start ups in India and Singapore in fulfilling their aspirations. Loganathan is heading the Singapore operations of IBS and can be reached on
loganathan.a@consultibs.in.
Website: www.consultibs.in