With India witnessing the burgeoning of the startup space, it makes it corollary the rise of IPR infringement cases in India, wherein nearly 50% of all Intellectual Property (IP) cases being trademark infringement cases. Startups will collapse if they do not protect their Intellectual Property Rights (IPR), as it gives them the legal right to prevent companies from stealing the intangible assets that is the core of their businesses affecting its success and failure. India is home to over 73,000 start-ups, these startups contribute substantially to India’s economy. With over 35 unicorn startup companies, India is home to the third largest startup ecosystem, behind only the US and China. By 2025, India could be home to over 100,000 startups, employing over 4 million people and have over 100 unicorns with a total market value of $500 billion.
The above numbers are the reason for India to have a strong intellectual property system in place. But that is not the case with India, as it was placed 36th out of 50 shortlisted countries in the International Intellectual Property Index, scoring a low of 16.22 out of 45 identifiers. The indian government is therefore making an effort to spread awareness about the importance of IPR amongst the startups by offering incentives for startups to protect their IPR rights such as giving tax rebates. With its new National IPR policy, it aims to push IPRs as marketable financial assets, promote innovation and entrepreneurship, while protecting public interest. This policy helps in promoting technologies in startup culture.Intellectual Property Rights are reasons for fast innovation especially in the Tech startup industry.
The ministry of commerce and industry, for the purpose of ease of doing business, has stated that the businesses now have to get a certificate of recognition from DIPP which will be sufficient to avail all benefits pertaining to IPR provided by the Startup India programme. It is a welcome move as earlier startups had to go through an elaborate and lengthy process of approaching inter-ministerial boards to get the IP benefits. Start-ups are now eligible for expedited examination of patent applications. To avail benefits startups need to get a certificate of recognition from DIPP, the process which has been simplified for those who have applied for a patent.
As part of its policy, the Indian government in its “Scheme for facilitating Start-Ups Intellectual Property Protection (SIPP), is meant to nurture and mentor innovative and emerging technologies and assist them in protecting and commercialising it by providing them the access to high quality IP services and resources.
Your “intellectual property or asset” will be your competitive edge that will get revenue and drive profits for you.
Intellectual Property Rights and Startups
The asset of a startup is its innovation, its unique idea or its business model. It becomes imperative to protect the “intellectual assets”- that differentiates from your competitors. It is your Unique Selling Proposition (USP), in front of your prospective clients, customers. Your “intellectual property or asset” will be your competitive edge that will get revenue and drive profits for you. It needs to be protected in the form of patents, copyrights, trademarks, design rights. The three basic types of intellectual property that startups need to know are:
Not all startups need to invest its resources in building a patent portfolio, but it requires to know the role of IPR not only to protect its innovation but also to have the knowledge of the risk involved in not protecting its assets. Knowledge of IPR and its role is critical to avoid risk of being exposed to assertions of IPR infringement by competitors.
This is where the root of all problems lie- lack of education when it comes to IPR practices. Startups are busy in growing their company that failure to exercise IP rights often leads to the persistent problem of trademark infringement. Not filing for its intellectual property for trademark, copyrights or patents at the right time will results in giving birth to copycats imitating company’s trade name or a variant of it, cyber/domain squatting, widespread confusion about the actual service provider, and facing the music targeted at a copycat. Established entities like Sony, Apple, Tesla, Samsung among many others therefore spend a fortune on their Intellectual Property Rights. A significant portion of their budget goes into protecting their products; they have spent billions in its R&D.
Recently, many trademark infringement cases have set precedents for startups. Flipkart, has been bitten twice in the Intellectual Property Rights infringement cases- One from Electric appliance manufacturer Marc Enterprises, accusing the e-commerce marketplace of naming its private label MarQ, that sounds similar to the later’s brand name. Earlier, Metro shoes filed a trademark infringement case against the unicorn startup of its private label Metronaut. Delhi High court fined Policybazaar of Rs 1 million in a Intellectual Property Rights infringement case by Acko resurfaced. Hyderabad based startup GrabOn won a trademark infringement case against it by Bangalore based rental platform GrabOnRent, in a case wherein the former accused the rental company of using its goodwill for its own profit and even targeting the branded keywords on Google Adwords.
Need for Intellectual Property Strategy
The challenge for founders of startups is that resources both financial and physical are mostly limited, and so, hard decisions need to be made about how to allocate them. This makes it crucial that startups link their IP strategy starting early and be smart to keep their costs down. For instance, by keeping their details of their innovation confidential, an inventor can p[rotect it as a trade secret, and so defer the costs of applying for a patent until the startup is funded. By checking the assignment provisions in their agreements with consultants, a founder can ensure that the business owns the IP rights in the materials it pays for. It doesn’t mean that if you pay for something to be developed does not mean one owns it. Formulating a clear and practical strategy to manage and protect your IP and aligning this with your business plan is key.
A well thought out IP strategy is based on the needs not only of the business in the present, but also provides a framework for protecting the business as it grows. It will put simple processes in place to identify a business’s IP as it is created, then capture it and finally protect it. It will also help a startup business in taking measures to check and make sure that it isnt infringing on someone else’s IP. Protecting IP will mean different things to different businesses. It could mean protecting software, or AI technology, designs, or brands logos. It may involve preserving copyright and trade secrets, or perhaps registering patents, designs, domain names or trademarks.
Many startups will not have the resources to apply and protect all of their potentially registrable IP rights at the outset. Financial constraints will mean that difficult decisions will need to be made regarding which IP right or rights to prioritize. This is where a clear strategy comes handy as it enables a startup to plan step by step, and budget sequentially. When the budget is low or insufficient and hard decisions need to be made, so long as this is recognised at an early stage, strategies can be employed to limit, or delay. So the lesson learnt is spent until the business develops.
Therefore, developing a diligent and an intelligent IP strategy at an early stage is imperative.
Hire a IP law firm or General Counsel
The law firm or a General Counsel will help the startup to consider their general strategies relating to six IP concerns commonly encountered by start-ups. They are:
Choosing outside IP counsel
Protecting company’s innovations
Copyrights and the internet
Protecting company’s brand name
Enforcing its IP rights
Startups should beware of over-reliance on “fair use” because the exception is narrow.
The best starting point is to find a boutique IP law firm, or a law firm that has an excellent IP team. Look for firms with industry or sector focuses that align with your business. Since many startups revolve around innovative technology, the more experienced the firm is in your technology the better. Consider hiring different firms for different matters with sensible pricing structures. Patent law is niche even outside IP law, so hire a dedicated patent attorney in the company’s particular industry sector.
Not every invention qualifies for a patent, even if it does, startups may not want to pursue patent protection for every invention. The patent application process is expensive and time consuming, so outside counsel should be hired to conduct searches on the relevant field of invention to know what other patents exist, to monitor the competitive landscape, to file the patent application.
How do startups protect trade secrets?
Trade secret protection is very different from acquiring a patent or a trademark. Companies do not apply for or register trade secrets, they formulate Non disclosure agreements and labeling documents “confidential” or “trade secrets”. Therefore, general counsels help the company carefully develop contract documents with employees that will maintain reasonable and effective safeguards for its confidential information.
When using works copyrighted by others, the marketing team should identify what copyrighted works you need in your everyday basis so that the IP counsel or law firm hired can acquire necessary permissions and attributing authorship. Startups should beware of overreliance on “fair use” because the exception is narrow. Just because an image, article or content is available on the internet does not mean that it is free for all to use. GCs should enter into a strong licencing agreement for the company’s own copyrighted works and educate the team on why they should be seeking copyright protection for works they create.
Trademarks – your brand name and symbol gain significant recognition with time and resources spent on the same. Telling the marketing team the scope of trademarks protection you want to achieve, is vital. As with patents, startups may want to consider hiring outside trademark counsel that has expertise in its market and can provide strategic advice on which marks to file for and how to prioritise them, advice on designing an effective trademark strategy.
Start-ups should register domain names as soon as they are identified including prior to applying for a trademark—to ensure that they are available.
There are many options to enforcing IP rights besides filing a lawsuit that may be more effective in certain circumstances. The first step is to assess the potential costs of an IP dispute. Costs of IP litigation can quickly escalate and drag on for years. It can also have unexpected repercussions on a company’s public image.
A startup GC is well advised to assess all options with outside counsel before taking action that includes doing due diligence to make sure the company is not violating someone else’s rights. In-house counsel must educate their management about litigation costs, monetary, and non-monetary. IP infringement lawsuits should be initiated with careful deliberation because in some cases, a cease and desist letter or licensing agreement can be a cost effective alternative.
There certainly are additional IP considerations that GCs at startups will need to consider which may include joint development agreements, IP strategy development. But in terms of getting started, making sure the six core aspects of IP are addressed early gives a startup the best chance of avoiding costly IP related missteps in the company’s formation period.