IMPORTANCE OF INTELLECTUAL PROPERTY RIGHTS FOR START-UPS

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INTELLECTUAL PROPERTY : CRUCIAL FOR START-UPS

In general a start-up will only succeed against larger rivals is by patenting its inventions, trademarking their name and copyrighting their ideas (fixated in as tangible form). Patents level the playing field between startups and incumbents by ensuring those who innovate are adequately rewarded.

When a startup seeks valuation for its inventions or technology, it increases its possibility to attract more investors. This is because investors are more likely to acquire a startup whose IP rights are protected. A lot of tech start-ups have failed because they didn’t patent their inventions or protect their technology under IP laws. Similarly, it is important for start-ups to obtain trademark in order to protect their reputation from being tarnished by unfair usage of their mark by other companies or illegal entities.

IP protection guarantees that the start-up can take commercial advantage of its patentable ideas, trademarked name etc. This allows a startup to create a unique product that would identify their name and also create services that have a good chance of success, thereby increasing profits.

If a startup’s intellectual property rights aren’t protected, competitors can replicate them and grab market share. When a competitor copies an unpatented idea, the competitor might patent the idea, making it hard for the original creator to profit from it. As a result, patentable ideas are critical to a company’s success. Intellectual property rights are a major factor for the huge amount of innovation that we see all around us. By patenting concepts, disruptive firms are posing a threat to incumbents. Intellectual property rights are another crucial factor in the Indian startup ecosystem’s success. IPR enables a company that has invented a novel device to compete successfully against huge corporations after patenting its invention. If a startup has a unique unpatented invention, larger rivals can easily copy, manufacture, and market it, effectively negating the startup’s effort to create its invention. Hence, patents also protect smaller startups against larger rivals that have far greater resources.

INTELLECTUAL PROPERTY RIGHTS :  CREATING WEALTH

Intellectual property rights include patents, trademarks, copyrights, and trade secrets. IPR cements the integrity of brands and is at the heart of a modern economy. Without IPRs, consumers couldn’t be sure whether a product marked with a particular logo was genuine. Thanks to IPRs, startups and other companies are incentivised to develop new and better technologies because bringing them to market increases their revenues.

POINTS TO CONSIDER WHILE ADOPTING A TRADEMARK

Any start-up needs to be heedful in selecting its trade name, brands, logos, packaging for products, domain names and any other mark which it proposes to use. The start-up must do a proper due diligence before adopting a trademark. The trademarks, can be broadly classified into following 5 categories:

  1. Generic
  2. Suggestive
  3. Arbitrary
  4. Invented/Coined
  5. Descriptive

Generic marks means using the name of the product for the product, like “Salt” for salt.

Descriptive marks means the mark describing the characteristic of the products, like using the mark “Fair” for the fairness creams. Suggestive marks means the mark suggesting the characteristic of the products, like “Habitat” for home furnishings products.
Arbitrary marks, such as “Blackberry” for phones, exist in common lexicon but have no logical relationship to the goods or services for which they are used.

The invented/ coined marks means coining a new word which has no dictionary meaning, like “Adidas”. The strongest marks, and thus the easiest to protect, are invented or arbitrary marks. The weaker marks are descriptive or suggestive marks which are very hard to protect. The weakest marks are generic marks which can never function as trademarks.

The term “invented/ coined mark” refers to the creation of a new word that has no dictionary definition, such as “Adidas.” Invented or arbitrary marks seem to be the most effective and thus the easiest to preserve. The weaker marks are descriptive or suggestive in nature and are difficult to protect. Generic marks are the weakest, as they can never be used as trademarks. For trademark registration in India, the NICE Classification of Goods and Services is used. The NICE Classification groups products into 45 classes (classes 1-34 include goods and classes 35-45 include services). The NICE Classification is recognized in majority of the countries and makes applying for trademarks internationally a streamlined process. Every startup, seeking to trademark a good or service, has to choose from the appropriate classes, out of the 45 classes.

When choosing a mark, the startup should keep in mind and double-check that the mark is not being used by anybody else in India or elsewhere, especially if it is well-known.

It’s worth noting that India understands the concept of a “well-known trademark” and the concept of “trans-border reputation.” Google, Tata, Yahoo, Pepsi, Reliance, and other well-known trademarks are examples. Furthermore, under the idea of “Trans-border Reputation,” India has granted trademark protection to companies such as Apple, Gillette, Whirlpool, and Volvo, despite the fact that they have no physical presence in India.

STRATEGIES FOR PROTECTION AND EXPLOITATION OF IPR FOR START-UPS

  1. Make Intellectual Property protection a priority:
    Start-ups are unable to afford the full protection provided by the intellectual property regime. The first step for any startup is to assess and prioritise the IP Rights that are relevant to its operations. IP Rights play a significant role depending on the type of industry engaged. Failure to recognise or prioritise IP Rights is likely to cause complications for a startup’s business, particularly when negotiating with potential investors or quitting the company. In some cases, a startup’s IP Rights are the sole asset accessible.
  2. Register Intellectual Property Rights
    It’s worth noting that certain IP Rights, such as patents and designs, must be registered before they can be protected by the relevant statutes. Certain IP Rights, such as trademarks and copyrights, on the other hand, do not need to be registered in order to be protected under the law. A registered IP Right, on the other hand, has a higher value and serves as proof of usage of the IP Rights before courts and enforcement agencies.
  3. Due Diligence of IP Rights:
    Any startup must ensure that it does not infringe on the intellectual property rights of others. This will protect the company from unjustified lawsuit or legal action that could stymie its operations. This emphasises the importance of companies making cautious IP decisions early on and conducting thorough due diligence on IP Rights that they are utilising or intend to utilise.
  4. Implement clear and effective policies and strategies for protection of IP Rights:
    It is in startups’ long-term interests to have an Intellectual Property Policy in place for the management of various IP rights that they may currently own, produce, or acquire in the future. The aim of such a policy is to ensure that there are no inter-se dispute between the promoters of the startups, which remains till date to be one of the main concerns for failure of startups.
  5. Agreements related to Intellectual Property:
    It’s important to remember that having adequate documentation in the form of non-disclosure agreements, agreements with workers, and agreements with independent contractors can mean the difference between a start-up’s success and failure. Intellectual property is usually generated by the company’s founders, a significant employee, or a third party. The start-up’s intellectual property must be protected by a proper agreement between the founders, a key employee, or a third party, as the case may be. If the agreement between the founders, employees, or a third party under which an innovative idea was/is generated is neglected, it may be a barrier to the success of such ideas.

Accordingly, the start-ups need to ensure that anything created on behalf of the start-up, belongs to the start-up and not the Employee or a third party. Further, it is advisable to enter into elaborate assignments, licensing or user agreements, and care should be taken to make provisions for all post termination IP Right issues.

START-UPS & MSMES: GOVERNMENT’S EFFORTS

Over the last 18 months, the Indian government has introduced a variety of startup kits and startup funds to help entrepreneurs in the country. Furthermore, under the DIPP’s Startup India scheme, the Indian government has waived numerous IP protection payments for qualified firms. Patent protection expenses for startups have been reduced by 80%, while trademark protection prices have been reduced by 50%. Furthermore, a startup can take use of the Patent Office’s expedited examination service, which allows for the disposal of a patent application within 12-18 months of submission. As a result, IP protection for a startup is less expensive than it would be for a larger corporation. What is most important to Indian Startups is that they should focus on creating and identifying IP while working towards innovation and protection to excel in their respective businesses.