Innovation has led to enormous technological advancement, resulting in an exponential growth of the world economy. It’s not only large businesses that invest in research and development, start-ups also bring innovation and promote economic growth with new business ideas, capital formation and employment generation. Generally, most of the start-up businesses are based on some creative idea, therefore basic awareness to protect innovations (i.e. patents) and brand reputation (i.e. trademarks) is extremely critical. Intellectual Property Rights ergo play an important role in facilitating the process of taking innovative technology to the marketplace and enhancing competitiveness of technology-based enterprises.
Aids of IPR
- A preliminary search for Intellectual Property (IP) assets such as patents, trademarks, copyrights and designs can give entrepreneurs an idea about the chances of success for their start-up and its underlying business model. In cases where, if a similar patent, trademark, or design, which forms the key basis of the business model already, the entrepreneur here is in a better position to evaluate the business model and ascertain whether any modification is required to maintain the echt and avoid future conflicts. They can then decide on the amount of investment to be made, or whether to go ahead with it at all.
- Apart from being a compliance or protection, IP also works as an asset as well. IP is amongst the largest asset class held by any business. There are several avenues for monetizing IP, such as selling, licensing, franchising or earning royalties from IP assets for budding enterprises. Moreover, for an entrepreneur founder intending to expand the business later, IP rights like patents, trademarks, and copyrights can be licensed, which generate a future revenue stream for the founder.
- Customer/client base and good-will is backbone for success of any business. ‘Business name’ gives any firm or commercial venture its very recognition. To nurture this recognition, the Trademark laws of any country work to protect them. To ensure that Start-ups do not need to get into the hassle of changing names at a later stage, as it would mean loss of recognition and recall value of the brand, they must conduct a thorough trademark search to determine whether the trade name, trademark or tag-line is currently being used or would be confusingly similar to another business. This exercises also saves the business from trademark infringement, otherwise small businesses face heavy losses paying compensation to big established businesses in case a suit gets filed in the court for infringement. In absence of any similar existing mark, their mark is registered and gets an identity. This gives a legal right to the entity to sue any other company infringing the mark in their practises.
For start-ups having an international footprint, that the trademark protection is geography-based and registration of the trademark gives a start-up business exclusive rights in the countries or regions in which they have obtained registrations. Therefore, start-up businesses may consider filing trademark applications in each country or region in which they intend to do business.
- The surest way a start- up can succeed against larger rivals is by patenting its inventions and ideas. These are licence conferring a right or title for a set period, especially the sole right to exclude others from making, using, or selling one’s invention. Patents level the playing field between start- ups and incumbents by ensuring those who innovate are adequately rewarded. Upon patenting its ideas, the start-up is the only entity that can take commercial advantage of its patentable ideas. This allows a start- up to create unique products and services that have a good chance of success, thereby increasing profits. Unless a start-up protects its intellectual property rights, its rivals can copy them and steal market share. An unpatented idea, when copied by a rival entity, can also be patented by its rival making it impossible for the originator of the idea to benefit from it. Hence, patentable ideas are vital to the success of a company.
IPR allows a start-up that has developed an innovative device to compete effectively against large companies after patenting its invention and creating its recognition. If a start-up has a unique unpatented invention, larger rivals can easily copy, manufacture, and market it, effectively negating the start-up’s effort to create its invention. Hence, patents also protect smaller start-ups against larger rivals that have far greater resources and trademarks ensure its eternal existence.
FDI inflow and efforts of the Indian Government
When a start-up patents its ideas, its valuation increases and is likely to attract more investors. This is because investors are more likely to acquire a start-up whose intellectual property rights are protected. A study by OECD (Organisation for Economic Co-operation and Development) (2003) found that patent rights have a positive relation with Foreign Direct Investment (FDI) and with trade. IPR is an essential part of the infrastructure for economic growth through increased trade and FDI.
However, start-up innovators refrain from utilising IPR tools due to high financial cost and administrative work of patenting, lack of knowledge about IP’s relevance and other information deficit. To promote start-ups’ growth, provide them a supportive and robust ecosystem and encourage protection of Intellectual Property Rights (IPR), the Indian government has introduced many significant measures. The Government launched several initiatives and programmes such as Make in India, Digital India and Start-Up India, which are interlinked with the vision of the IPR Policy. Key steps were taken in 2016 with the launch of Start-Up India initiative, formation of the National Intellectual Rights (IPR) policy and Patent (Amendment) Rules. This policy lays down the roadmap for India’s future in the realm of IPRs and strives to “…spur creativity and stimulate innovation…” by establishing an “…ecosystem in the country conducive to innovation and creativity not only in terms of IP awareness and creation, but also commercialization and enforcement…”
Moreover, the amendments in the Trade Marks Rules, brought into force since 6thMarch 2017, have simplified trademark procedures and removed redundant provisions so as to make registration of trademark easy and user-friendly by reduction of number of Forms from 74 to 8. One application Form for all types of trademark applications, concessions in fees to Start-ups, individuals and small enterprises, video-conferencing for hearings, e-communication and expedited processing for the entire trademark prosecution procedure has been provided under new rules. The improvement in IP administration during last two years along with amendments of Patents and Trademarks Rules, digital reforms and reengineering of IP procedures has resulted in improved performance, decreased pendency and higher rates of disposal of IP applications.
Even in existence of laws and other IP protection mechanisms, in a highly competitive market, start-ups are more vulnerable and the importance of protecting IP in the initial stages is much higher and should be prioritized right from the inception of the business. Though the cost of protecting IP may seem like an optional expenditure, underestimating the need for it could hurt the business in the long run. While the government’s initiatives appear to have taken care of the cost concerns to a great extent, the responsibility to exploit and maintain the existing IP assets remains with the enterprises itself. There is a greater need for spreading awareness in this regard and this responsibility falls on government bodies, established entrepreneurs, stakeholders, legal practitioners and innovators.