Of late, there has been a substantial upsurge in the number of startups being launched in India. With the increase in startups, increase in the awareness about importance of protecting the intellectual property rights has become a talking point as well. The nascent days of a startup is nothing short of a tumultuous process for novice entrepreneurs who have a huge responsibility of building up the company, formulating market strategies, securing investments etc. Hence, amid all this, matters pertaining to intellectual property rights take a back seat.
Identifying and protecting a startup’s intangible assets from the start is sound business practice. It’s important not only to protect IP, but also to exercise caution when using others’ work. With the increase in startups in the country, the idea of protecting their intellectual property has become an important priority and the central government has taken numerous initiatives to help the startups protect their trademarks, patents and designs and one such initiative is in the form of Prime Minister Narendra Modi’s Startup India Action Plan. This article will focus on how a startup can protect their intellectual property from infringement and also the initiatives taken by the government to foster a better environment for the thriving startup ecosystem in the country.
Protecting Intellectual Property: Tips
In the age of innovative startups, especially in India, it is important that the founders of the company secure their intellectual property in the early stages of the company. You may find many articles about intellectual property written by experts including experienced attorneys. But most of them focus more on the educational and theoretical aspect of it and not practical. This article will emphasize on six important reasons why it is important not only to protect one’s intellectual property, but also to exercise caution when using others’ work.
General Tips (Applicable For Patents/Copyrights/Trademarks etc)
- Setting The Foundation Right
It is important for a startup founder to know all forms of Intellectual Property. The IP owners must think of their employees, customers, partners as part of their strategy. Internal documents between the members of the company that help in idea formation like contracts/agreements, mail communication (both online and offline) should not be overlooked or it could end up being a contentious point post success of the concerned idea. Hence, creating proper documentation explaining things explicitly in contract/agreements or any form of communication about the matters related to roles and responsibilities, ownership of the product etc is essential in protecting a nascent startup’s interests.
- Public Disclosure Of An Invention
Enabling Public Disclosure or EPD, is a term meaning one publicly discloses substantial information about their product/service which might help others with the same level of knowledge and capacity in the industry to copy the product and use it for their own benefit. Hence, if the product is in the development phase, it is advised not to divulge much information in public forums because chances are, it might impact the founder’s ability to patent the product at a later point in time. For example, if an unpatented product is discussed on a blog or the prototype is displayed at a trade show, the idea can be used by anyone who has the access to such forums be it online or offline.
- Importance Of Dates
Keeping record of the dates of creation of the invention is important not only is the founder is asserting their IP rights, but also when they are defending an IP infringement accusation. This is because time plays a pivotal role when it comes to proving ‘who invented the product first’.
- Trade Secrets vs. Patents: Which Is The Best Alternative?
Trade secrets can be an alternative to patents albeit a risky one. Major Fortune 500 companies like Coca-Cola and KFC never patented their product/recipe. Instead they kept their ‘recipe’ a ‘secret’ or legally speaking ‘trade secret’. This form of protection comes with its own set of cons. If they are properly protected, their business is safe otherwise the ramifications of its leak could be catastrophical for the company. Trade Secrets are a more stringent form of protection than patents and is the fourth arm of IPR apart from copyright, trademark and of course patents. There is no designated authority either in India where the trade secret(s) can be registered. Therefore, a startup may opt for protecting their invention through trade secret if it feels they can protect their invention for a long period of time otherwise patent is always there as a ‘safer’ option than the former.
- Place Of Registration
If an Intellectual Property is registered in India, that’s where IP protection will be granted. If the inventor intends to introduce the product in a foreign market, he/she would require registering it separately. One not knowing the same could suffer from a financial disaster. Also, if the inventor makes a public disclosure about the product, after patenting the product, in India, cannot register the same outside the country for obvious reasons. Hence, it is important that the inventor properly times its public disclosure and patent filings if it at all is intending to make a disclosure publicly.
- Protecting A Trademark
Just registering a trademark is not enough. It is important the owner uses it as well so as to protect it.
In India, trademark has to be renewed in every 10 years by paying the requisite fee. By paying the fee, the owner becomes authorized to use the ‘trademark’ sign/logo after its trademark name.
Although it is not necessary for the owner company to use the trademark sign/logo every time it becomes important to use the same, especially in prominent public places, both online and offline, so that people who are aware of trademarks know the displayed brand/product is trademarked.
- Policing Your Trademark
Registering a trademark is simply not enough. It is important that the trademarked brand/product’s owner-company monitor non-usage of the brand/product’s usage elsewhere without permission. If not done, this will not only benefit the brand/product infringer’s business but also cause a loss to the real owner, especially when the brand is misused to create a bad name of the brand’s owner.
So, how can an entity protect its trademark? There is no hard and fast rule for the protection of a brand as such. The owner has to keep its eyes open, if it’s a small business, and be alert as to who is using its brand name.
Indian Copyright Act, 1957 vs. International Conventions
Under Copyright Act of 1957, copyright can be done in all original, unpublished literary/artistic works etc. Copyright comes into existence once the ‘exclusive’ work is created and no formality is required to be done for acquiring copyright protection. However, it is advisable to apply for registration as it has an evidentiary value in the court of law.
There are international conventions with respect to copyrights as well. Berne Convention of 1886, WIPO Copyright Treaty, Rome Convention of 1961 and Universal Copyright Convention of 1951 are the major copyright conventions internationally. Although India is not a member of Rome Convention, WIPO Convention Treaty (WCT), but the recent amendments in 2012 made the present Act compliant with it.
Should A Startup Register For Copyright(s)?
The product/industry on which the startup is working on determines whether a copyright protection is needed or not. For instance, if it’s a software company, it is essential that the developer/management assesses whether it is susceptible copyright infringement or not. Also, whether the copyrighted software/product has a long shelf life or not has to be determined. The answers to the aforementioned can help decide whether it is plausible to copyright the software or not. Although obtaining a copyright is not a costly affair, but it is always advisable to copyright the product if there is a threat to the commercial exploitation of the same.
Protecting Domain Name/Content Of The Website
In the present era, the number of startups is on the rise. Most of the startups are directly/indirectly connected to Information Technology/ITes and the content of their websites are the face of their service. This is an important aspect involved to it because these startups put in abundance creativity in producing an attractive website which involves investment of both labour and costs. Hence, it is advisable that the website design is copyrighted to protect the exclusive nature of the website. Copyrighting the same comes at a very affordable cost and hence, is a must for those involved in IT business.
When it comes to domain name, a company can protect its domain name or brand/product by registering all the similar domain names for a meager cost. For instance, in the case of Facebook.com, a popular social networking website, the company registered the domain names which was even remotely similar to ‘facebook.com’. This is done so that no entity/company/individual can unduly benefit from the brand of the company (Facebook).
If the company concerned is not in the favour of registering similar domain names, there is an alternative to it as well. It can put a disclaimer on its website that it ‘does not own any other domain name’.
Being Cautious In Using Others’ Work
This is an important aspect to be understood when it comes to ‘how could one prevent from getting sued’. When someone is working on materials for their business, it is important the person working on it gives a disclaimer stating it is not created by him/her and credit is given to the author (if it’s a copyrighted material). Even if the item is not marked copyrighted, does not mean it’s not legally protected.
Intellectual Property Assignment Agreement: Why Is It Important?
‘Intellectual Property Assignments’ are agreements pertaining to the transfer of intellectual property rights from the owner of the Intellectual Property to another individual or organization/institution. An Intellectual Property Assignment Agreement is a written and enforceable contract that formalizes an agreement between two parties for the sale and purchase of IP rights. The intellectual property being purchased can consist of trademarks, copyrights and/or patents.
For the owner who sells the IP rights to the other party, it is important that he/she makes a proper ‘sale document’ in the form of the ‘Assignment Agreement’ and for the person who buys the rights, it is all the more important for him to make this document so that they are not sued for IP infringement with a ‘mala fide’ intention at a later stage by the person who sells it. This document protects the buyer/assignee from any kind of IP infringement case.
It is important not to confuse between ‘Assignment Agreements’ and ‘License Agreements’ because both the agreements are different from each other. An assignment agreement actually ‘transfers the ownership of the IP rights from the assignor to the assignee whereas a license agreement only grants permission to the licensee to use the intellectual property for a given period of time for a consideration’.
IP In India: Scheme For Facilitating Startups Intellectual Property Rights (SIPP)
Launched by the Department of Industrial Policy and Promotion (DIPP), SIPP is an initiative of the Startup India Action Plan with an aim to promote awareness and encourage IP protection amongst Startups. The scheme reads –
“Startups, with limited resources and manpower, can sustain in this highly competitive world only through continuous growth and development oriented innovations; for this, it is equally crucial that they protect their IPRs.”
Eligibility Of Startups For Benefits Under SIPP
The moot question is – are all startups eligible for benefits under this initiative? Technically, they are, provided they fulfill the eligibility criteria mentioned in the scheme. The term ‘startup’ has so far not been defined in any of the statutes. Therefore, the government has come up with criteria for an entity to be deemed as a startup which are mentioned below –
- A startup is an entity incorporated as a ‘private limited company’ under the Companies Act, 2013; a ‘limited liability partnership’ (LLP) under the Limited Liability Partnership Act, 2008, or a ‘registered partnership’ under the Indian Partnership Act, 1932.
- An entity to be qualified as a startup should not be more than five years old since the time of its incorporation and the turnover should not be more than INR 25 crores in any preceding financial year.
- The entity must not be a result of a reconstruction, splitting up or a business already in existence and work towards innovation, development and commercialization of a new product/service/process.
Once the aforementioned criteria are met, the concerned startup is granted a certification from the Startup Certification Board to avail the benefits falling under SIPP.
A startup should also be supported by a recommendation with regard to the innovative nature of business, in a specified format prescribed by the DIPP by either of the following institutions –
- A central government recognized incubator.
- A post-graduate institute run incubator.
- An Angel Fund/PE Fund/Incubation Fund duly registered with the Securities and Exchange Board of India that recommends the innovative nature of business.
- Have a patent granted by the Patent and Trademark Office in the field affiliated with the nature of business being promoted.
Facilitators For IP Protection Of Startups
The scheme has a provision stating, the Controller General of Patents, Designs and Trademark would empanel ‘facilitators’, consisting of patent agents and IP lawyers, who will provide advice and mentor startups on the protection and promotion of IPRs in India and abroad as well. Their functions shall also include assisting the startups in filing and disposal of IP applications related to trademarks, patents and designs; drafting specifications for inventions; drafting and filing of filing responses to notices, letters or examination reports by the IP office; appearing as a counsel on behalf of the Startups at the hearings, contesting judgments and ensuring final disposal of IP applications.
It is important to understand whether the ‘facilitators’ would charge a fee for the services mentioned above? Interestingly, the answer is, the central government shall bear the entire fee of the facilitators for any number of patents/trademarks/designs a startup would file. The startups will just have to bear the cost of the statutory fees as prescribed.
SIPP Scheme: An Optimistic Start
SIPP initiative by the government seems to be an optimistic move towards making India a better place for innovation. But the contention remains, whether all startups benefit from this scheme?
If strictly adhered to the definition of Startups under the scheme, only those startups with an innovative product/ service or an improvised version of an existing product or service will be termed as ‘startup’ eligible for the benefits offered under the SIPP scheme.
Also, the process to get recognition from the Startup Recognition Board as a ‘startup’ and getting a recommendation from any of the concerned bodies as aforementioned, the process seems to be quite cumbersome for a newly established entity and it might take a while before the first few startups benefit from this scheme. Nevertheless, this is a substantial move by the government to help the promising startups protect their Intellectual Property and in turn give back to the nation by creating employment.