Startups are generally built around an idea, an innovation, which attributes value to the business and facilitates revenue and funding. However, if this technology enables the idea to materialise and is replicated or stolen by competitors, its uniqueness diminishes, thereby reducing its commercial viability. Hence, safeguarding intellectual property (‘IP’) that brings these ideas to life becomes imperative.
Intellectual Property Rights (‘IPR’) protects the technology from unauthorised replication by a competitor. IPRs serve multiple benefits to the entrepreneur, including the monopoly over the innovation for a limited period of time, thereby protecting the innovation from being replicated.
By equipping startups with the knowledge and tools to protect their innovations, this insight aims to foster an environment where creativity and originality can flourish, ensuring that startups can reap the full benefits of their inventive efforts. Through a thorough examination of IPR principles and their application in the startup context, this article seeks to empower entrepreneurs to safeguard their innovations, contributing to the overall growth and resilience of the startup ecosystem.
Introduction
An incorporated or registered entity may be recognised as a startup on fulfilment of certain conditions as laid down[i] by the Department for Promotion of Industry and Internal Trade (‘DPIIT’) of the Ministry of Commerce and Trade. Certain benefits have been granted to startup entities to increase competition, remove entry and exit barriers, and catalyse innovation. An entity may avail itself of the benefits available to the startups for a period of 10 years from the date of its incorporation/registration.
Startup registration is granted only to entities engaged in developing or improving products, processes, or services. Essentially, an entity working towards finding a solution to an existing problem through innovation may register as a startup. However, if competitors replicate the innovative idea or the technology that materialises it, the startup entity may lose its uniqueness.
Given this scenario, protecting innovations through IPR becomes critical. IPR serves as a safeguard, ensuring that the unique ideas and technologies developed by startups are legally protected from unauthorised use or imitation. By securing patents, trademarks ('TMs'), copyrights, and trade secrets, startups can maintain their competitive edge and continue to innovate without fearing losing their proprietary advantages. This protection is not merely a legal formality but a strategic necessity essential for sustaining the innovation-driven growth of startups.
How to Protect the IPRs and How Do Such IPRs Protect Startups?
IP is the product of an individual's intellect; it is an intangible property required to be protected. IP can be protected by obtaining exclusive yet transferable rights over the property and enforcing the associated rights under the IPR regime. Thus, IPR can be defined as territorial rights given to persons over the creation of their minds.
How IPRs can be protected and, in turn, the protection that such IPRs provide to startups is discussed herein below:
1. Patents – A patent can be registered under the Indian Patents Act, 1970. A patent can be granted for a ‘novel’[ii] invention for a maximum period of 20 years[iii], thereby providing a monopoly over the invention during this time. However, the invention is released into the public domain either at the expiry of the 20-year term or at the patent’s expiry, whichever is earlier, allowing any other company to replicate it legally.
India is a signatory to the Patent Cooperation Treaty (‘PCT’)[iv], allowing any inventor to seek protection in over 122 countries by filing a patent application with the Indian Patent Office.
Patents are crucial for protecting novel inventions and technological advancements developed by startups. A startup can gain exclusive rights to its invention by obtaining a patent and preventing others from making, using, or selling the patented technology without permission. This exclusivity can provide a significant period for the startup to commercialise its invention and achieve a return on investment. Additionally, patents can be a valuable asset in attracting investors, as they signify a startup’s commitment to innovation and potential for future growth.
2. TMs – They can be registered under the Trademarks Act, 1999 ('TM Act'). Protection can be granted to any identification mark, sign, design or phrase which may be unique to a business. It is in the nature of legal protection provided by the legislature to the identity of a business. Infringement of any registered mark or slogan may attract proceedings under the TM Act. TMs are valid for 10 years[v] from their registration date; however, TMs can be further renewed.
A registered TM grants the startup exclusive rights to use these identifiers in connection with its products or services. This protection helps prevent competitors from using similar marks that could confuse consumers or dilute the startup’s brand. A strong TM portfolio can enhance brand recognition, customer loyalty, and overall market presence. Moreover, TMs can be licensed to generate additional revenue streams or used as collateral for securing funding.
3. Copyrights – Copyright, as governed by the Copyright Act, 1957, protects a work or expression of an idea rather than the idea itself. It becomes eligible for copyright as soon as it is materialised in a tangible form. Registering a work[vi] under this law not only provides legal protection but also establishes the author’s economic rights to reproduce, distribute, and derive financial benefit from their creation. It also safeguards the author’s or performer’s moral rights[vii], including the right to attribution and integrity, ensuring recognition and protection of their connection with the work. Copyright protection typically lasts for the lifetime of the author plus an additional 60 years[viii].
For startups in the tech or creative industries, copyrights are vital for safeguarding the expression of their ideas and ensuring they retain control over how their work is used and distributed. As stated above, copyright protection is automatic upon creation and lasts for the life of the author plus 60 years, providing long-term security. By enforcing copyrights, startups can prevent unauthorised copying, modification, or distribution of their creative works.
4. Industrial designs – Industrial designs can be protected under the Designs Act, 2000. Any figure, shape or blueprint can be protected under the Designs Act. Designs are protected for a period of 10 years and can be extended for an additional 5 years[ix] upon the payment of prescribed fees.
Design rights can be invaluable for startups in industries where product appearance is a key differentiator. Registered design rights provide exclusive protection for a product's visual design, preventing others from creating similar designs. This protection enhances the market appeal of the startup’s products and can be a critical factor in establishing a strong brand identity.
5. Geographical Indications (‘GI’) – Any goods can be protected under the Geographical Indications of Goods (Registration and Protection) Act, 1999, provided that the quality, reputation, or other characteristics of such goods are attributable to their geographical origin. GI protection is not granted exclusively to an individual but to an organisation[x] of manufacturers in a specific geographical area. Initially, GI protection is granted for a period of 10 years[xi]. However, this protection can be renewed for subsequent periods of 10 years each.
Obtaining a GI can be crucial for startups producing goods closely tied to a particular region. GIs prevent unauthorised entities from misusing the regional name, thereby protecting the product’s reputation and authenticity. This not only helps preserve the cultural heritage and traditional knowledge associated with the product but also enhances its marketability and consumer trust.
6. Plant Variety Rights (‘PVRs’) – PVRs can be protected under the Protection of Plant Varieties and Farmers’ Rights Act, 2001. This Act protects new plant varieties developed by the farmers to accelerate growth in the agricultural sector. Plant varieties can be protected for a period ranging between 15 and 18 years, depending on the type of plant[xii].
For startups involved in agriculture, horticulture, or biotechnology, PVRs can safeguard their investments in breeding new plant varieties. By securing PVRs, startups can gain exclusive rights to produce, sell, and distribute protected plant varieties. This exclusivity can incentivise further innovation in plant breeding and ensure that startups reap the financial benefits of their research and development efforts.
7. Trade Secrets – Trade secrets are not protected under Indian laws. However, a company can protect its secret formulations via non-disclosure agreements. A company may choose not to register a patent if it is confident that reverse engineering cannot replicate the invention or formulation. However, protection is only possible till the invention is ‘secret’, and if it falls into the public domain, it may no longer remain a secret and can be replicated by competitors; therefore, companies prefer to obtain patents.
One of the significant advantages of trade secrets is their indefinite duration of protection, provided the information remains confidential. Unlike patents, which have a finite term, trade secrets can protect valuable business information for as long as confidentiality is maintained. This long-term protection can be particularly beneficial for startups, allowing them to capitalise on their innovative ideas and processes without the concern of losing exclusivity after a certain period. Moreover, trade secrets can be a strategic tool in negotiations and collaborations. When entering into partnerships or seeking investment, a startup’s well-protected trade secrets can enhance its attractiveness to potential partners and investors. Ensuring that critical information is securely guarded can foster trust and facilitate more favourable terms in business dealings.
Advantages of IPR Protection
IPR protection offers numerous advantages to startups, both commercially and legally. By securing IPR, startups can safeguard their innovations, enhance their market position, and attract investment, ultimately contributing to their long-term success and sustainability. This section elaborates on the key benefits of IPR protection.
Competitive Advantage
Securing IPR grants startups a competitive edge by providing exclusive rights to their inventions, brand identities, and creative works. Patents protect novel technologies and processes, preventing competitors from using similar innovations without authorisation. This exclusivity allows startups to commercialise their inventions without the immediate threat of imitation, giving them a head start in the market. TMs safeguard brand elements, ensuring that consumers can distinguish the startup’s products and services from those of its rivals. A strong TM helps build brand loyalty and customer trust, which are essential for long-term success. Copyrights protect creative outputs, such as software, marketing materials, and product designs, ensuring control over their use and distribution. By maintaining exclusivity over these assets, startups can prevent competitors from diluting their brand or profiting from their intellectual efforts.
Increased Market Value
IPRs are valuable intangible assets that significantly enhance a startup’s market valuation. A robust IPR portfolio can attract investors by demonstrating the startup’s commitment to innovation and potential for generating future revenue. For instance, patents can be licensed to other companies, providing a steady stream of income. TMs and copyrights can be monetised through licensing agreements, sales, or strategic partnerships. This not only generates additional revenue streams but also enhances the overall value of the startup. The recognition of IPR as a valuable asset during mergers and acquisitions can lead to more favourable terms and higher transaction values, as buyers and investors are willing to pay a premium for legally protected and unique innovations.
Enhanced Credibility and Trust
Protecting intellectual property enhances a startup's credibility and trustworthiness in the eyes of customers, investors, and partners. A well-protected brand signifies a startup’s dedication to maintaining high standards and protecting its unique offerings. This trust can translate into increased customer loyalty, higher sales, and a stronger market presence. For investors and partners, a startup’s commitment to IPR protection indicates sound business practices and reduces the risk associated with intellectual property disputes. This assurance is crucial for building strong, long-term relationships with key stakeholders and can significantly impact the startup’s growth trajectory.
Attraction of Investment
Investors are more likely to invest in startups that have secured their intellectual property. IPR protection reduces the risk of infringement and legal disputes, making the startup a more attractive investment opportunity. Patents, in particular, can serve as proof of the startup’s innovative capabilities and market potential. The assurance that a startup’s innovations are legally protected can be a decisive factor in attracting venture capital and other forms of investment. Furthermore, IPR can be used as collateral to secure financing, providing startups access to the capital needed for growth and expansion. This financial stability is crucial for scaling operations and achieving long-term success.
Facilitation of Strategic Partnerships
IPR protection facilitates the formation of strategic partnerships and collaborations. Startups with a strong IPR portfolio can confidently engage in licensing agreements, joint ventures, and other collaborative efforts. These partnerships can provide startups access to new markets, technologies, and expertise, driving further innovation and growth. For instance, a startup with patented technology can collaborate with larger firms to bring its innovations to a broader audience, leveraging the partner’s distribution networks and market reach. Securely sharing and leveraging intellectual property can enhance such collaborations' overall value and success, creating win-win situations for all parties involved.
Legal Protection and Enforcement
IPR protection provides startups with a legal framework to enforce their rights against unauthorised use or infringement. Startups can seek injunctions, damages, and other legal remedies to address intellectual property violations. This legal protection acts as a deterrent to potential infringers, ensuring that the startup’s intellectual assets remain secure. Enforcing IPR is crucial for maintaining the startup’s competitive advantage and market position. Additionally, well-documented IPR can simplify legal proceedings, providing clear evidence of dispute ownership and rights. This legal clarity can save time and resources, allowing startups to focus on growth and innovation.
Encouragement of Innovation
The protection offered by IPR incentivises startups to invest in research and development. Knowing their innovations will be legally protected encourages startups to pursue new ideas and technologies, driving continuous improvement and growth. This culture of innovation not only benefits the individual startup but also contributes to the broader economic landscape by fostering creativity and technological advancement. Ensuring that their intellectual efforts are safeguarded allows entrepreneurs to take risks and explore novel solutions, leading to breakthrough innovations that can disrupt industries and create new markets.
Long-term Sustainability
IPR protection contributes to the long-term sustainability of startups by securing their intellectual assets. TMs and copyrights provide enduring protection that can last for decades, while patents offer long-term exclusivity for technological innovations. Trade secrets can be protected indefinitely as long as confidentiality is maintained. This sustained protection ensures that startups can continue capitalising on their intellectual property well into the future, supporting ongoing business operations and growth. By building a strong IPR portfolio, startups can create a foundation for lasting success, ensuring their innovations remain protected and their market position secure for years.
Key Challenges Faced by Startups In IPR Protection
While IPRs offer substantial benefits, startups often encounter significant challenges in securing and maintaining these protections. Understanding and addressing these challenges is crucial for startups to safeguard their innovations and leverage their intellectual assets effectively. This section details the key challenges startups face in IPR protection and potential strategies to overcome them.
High Costs of IPR Registration and Maintenance
One of the primary challenges for startups is the high cost associated with obtaining and maintaining IPR. Filing patents, TMs, and copyrights can be expensive, with costs varying widely depending on the jurisdiction and the complexity of the application. Additionally, the maintenance fees for patents and TMs over their respective protection periods can add to the financial burden. These costs can be prohibitive for a startup with limited resources, potentially leading to incomplete or inadequate intellectual property protection.
To mitigate this challenge, startups can explore funding options such as government grants, subsidies, and programs specifically designed to support IPR activities relevant to the sector in which the startup is developing its product. Engaging with investors who understand the value of IPR and are willing to finance these efforts can also be beneficial. Additionally, startups should prioritise their most critical intellectual assets and seek phased protection, focusing on core innovations before expanding their IPR portfolio.
Complexity of the IPR System
The IPR system is inherently complex, involving intricate legal and procedural requirements that vary across jurisdictions. Navigating this complexity requires specialised knowledge and expertise, which many startups may lack. Without proper legal assistance, drafting and filing patent applications, conducting TM searches, and ensuring compliance with copyright regulations can be daunting.
To address this challenge, startups should consider engaging with IP lawyers who can provide guidance and support throughout the IPR lifecycle. These professionals can help conduct thorough prior art searches, draft robust applications, and ensure compliance with legal requirements. Startups can also leverage resources and training programs offered by intellectual property offices and industry associations to build internal capabilities.
Risk of Infringement and Litigation
The risk of IPR infringement and the potential for costly litigation pose significant challenges for startups. Despite robust IPR protection, competitors may infringe on a startup’s intellectual property, leading to disputes and legal battles. Litigation can be financially draining and time-consuming, diverting valuable resources from core business activities.
To mitigate this risk, startups should implement proactive monitoring and enforcement strategies. This includes regularly monitoring the market for potential infringements and swiftly addressing violations. Establishing clear enforcement policies and working with legal experts to develop litigation strategies can help startups navigate disputes effectively.
Global IPR Protection Challenges
Startups aiming for international expansion face additional challenges in securing IPR protection across multiple jurisdictions. Each country has its own set of rules, procedures, and enforcement mechanisms, making global IPR protection a complex and resource-intensive endeavour. The lack of harmonisation in international IPR laws can result in inconsistencies and gaps in protection.
To overcome this challenge, startups should develop a comprehensive international IPR strategy prioritising key markets and regions. Utilising international treaties and agreements, such as the PCT for patents and the Madrid Protocol for TMs, can streamline the application process and provide broader protection. Working with international IPR experts and leveraging local legal counsel in target markets can also ensure effective protection and enforcement.
Limited Awareness and Understanding of IPR
Many startups, particularly in their early stages, may lack awareness and understanding of the importance of IPR and the mechanisms available for protection. This can result in missed opportunities to secure valuable intellectual assets and vulnerabilities to infringement.
To address this challenge, startups should invest in IPR education and training for their teams. This includes understanding the different types of IPR, the benefits of securing protection, and the steps involved in the application process. Engaging with industry associations, attending workshops and seminars, and leveraging online resources can enhance the startup’s IPR knowledge base. Additionally, fostering a culture of innovation and emphasising the importance of IPR within the organisation can drive proactive protection efforts.
Difficulty in Proving Infringement and Damages
Proving infringement and quantifying damages in IPR disputes can be challenging for startups. Establishing that an infringement has occurred often requires substantial evidence and technical expertise. Additionally, calculating the financial impact of the infringement on the startup’s business can be complex and may require expert testimony.
Startups should maintain detailed records of their IPR assets, including documentation of development processes, usage, and commercialisation efforts, to strengthen their position in potential infringement cases. Engaging forensic experts and economists specialising in IPR can help gather and present evidence effectively. Developing robust internal processes for tracking and documenting the use of intellectual property can also facilitate the enforcement process.
Scalability of IPR Strategies
As startups grow and expand their operations, their IPR strategies must scale accordingly. This includes managing an expanding portfolio of patents, TMs, and copyrights and ensuring consistent protection across new markets and product lines. Scaling IPR strategies can be resource-intensive and may require additional expertise and infrastructure.
To manage this challenge, startups should adopt a scalable IPR management framework that includes regular portfolio reviews, strategic planning, and efficient administration processes. Utilising IPR management software and tools can streamline the tracking and maintenance of IPR assets. Collaborating with IPR professionals who can provide ongoing support and strategic advice is crucial for ensuring that the startup’s IPR strategies evolve in line with its business growth.
Thus, by understanding these challenges and implementing proactive strategies, startups can effectively safeguard their intellectual assets and leverage IPR for competitive advantage. Engaging with experienced IPR professionals, investing in education and training, and developing scalable IPR management frameworks are essential to overcome these hurdles. Through diligent and informed efforts, startups can navigate the complexities of the IPR landscape and secure the benefits of robust IPR protection.
Government Initiatives for Startups - SIPP Scheme
Startup Intellectual Property Protection (‘SIPP’) is a scheme launched by DPIIT to facilitate the protection of patents, TMs, and designs of startups involved in innovation. SIPP has been launched to promote awareness about the IPR mechanism and assist Startups in obtaining IPRs for their businesses.
Patents
Startups can benefit from fast-tracking patent applications to expedite the realisation of their IPRs. A panel of facilitators is available to assist startups in filing their IP applications under the SIPP scheme. The Central Government covers all the fees for these facilitators, allowing startups to focus solely on the statutory fees for any number of patents, TMs, or designs they may file. Furthermore, Startups can receive an 80% rebate on patent filing fees compared to other companies, thereby providing additional benefits to Startups.
TMs
Under the SIPP scheme, the central government pays the statutory fee for filing a TM on behalf of the startup. Further, the Trademark Rules, 2017, were recently amended to provide a 50% rebate on the TM filing fee to startups.
Industrial Designs
Under the SIPP scheme, the central government pays the statutory fee for filing a design application on behalf of the startup, protecting any design produced by the startup.
Conclusion
In the ever-evolving landscape of innovation and entrepreneurship, IPRs play a pivotal role in startups' success and sustainability. By securing IPR protection, startups can safeguard their unique ideas, inventions, and brand identities, ensuring a competitive edge in the marketplace. The benefits of IPR protection are manifold, ranging from enhanced market value and increased investor confidence to facilitating strategic partnerships and encouraging ongoing innovation.
However, the journey to effective IPR protection is fraught with challenges. Startups must overcome significant hurdles, including the high costs associated with registration and maintenance, the complexity of navigating the IPR system, the risks of infringement and litigation, and the difficulties in securing global protection. Additionally, limited awareness and understanding of IPR, challenges in proving infringement and damages, and the need for scalable IPR strategies further complicate the landscape.
To address these challenges, startups must adopt a proactive and informed approach. This includes engaging with experienced IPR professionals, investing in education and training, and developing robust internal processes for managing and enforcing IPR. Leveraging available resources such as government grants, international treaties, and industry associations can also provide valuable support. By prioritising the protection of their most critical intellectual assets and implementing phased strategies for broader IPR coverage, startups can effectively manage costs and resources.
The strategic use of IPR is not merely a defensive measure but a powerful tool for business growth and development. It enhances credibility, attracts investment, and opens doors to new market opportunities. Moreover, it provides a legal framework for enforcing rights and deterring potential infringers, ensuring that startups can capitalise on their innovations and maintain their market position.
While the challenges of securing and maintaining IPR protection are substantial, they are not insurmountable. Through diligent and strategic efforts, startups can navigate the complexities of the IPR landscape and unlock the full potential of their intellectual assets. The long-term benefits of robust IPR protection far outweigh the initial hurdles, providing startups with the foundation for sustained innovation, growth, and success in the competitive business environment. As such, incorporating a comprehensive IPR strategy should be a fundamental component of any startup’s business plan, ensuring that their innovations remain protected and their future secured.
End Notes
[i] G.S.R. 127(E) dated 19.02.2019.
[ii] S.6 of the Patents Act, 1970.
[iii] S.53 of the Patents Act, 1970.
[iv] S.7 of the Patents Act, 1970.
[v] S.25 of the Trademarks Act, 1999.
[vi] S. 2(y) of the Copyright Act defines ‘work’ means any of the following works, namely: — (i) a literary, dramatic, musical or artistic work; (ii) a cinematograph film; (iii) a sound recording.
[vii] S.38B of the Copyright Act, 1957.
[viii] S.22 of the Copyright Act, 1957.
[ix] S.11 of the Designs Act, 2000.
[x] S.11 of the Geographical Indications of Goods (Registration and Protection) Act, 1999.
[xi] S.18 of the Geographical Indications of Goods (Registration and Protection) Act, 1999.
[xii] S. 24 of the Protection of Plant Varieties and Farmers’ Rights Act, 2001.
Authored by Rosy Gupta, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion