Innovation and patent protection for startups

By Pankaj Musyuni, LexOrbis

Protecting innovations at every stage of their life-cycle is of utmost importance for all startups. Patents are one way to do this. Patents are exclusive intellectual property rights (IPR) that can effectively prevent others from making, using, offering for sale, selling or importing a patented technology. As intangible property, patents supplement good reputation and credibility and build authenticity and authority in the marketplace.

Pankaj MusyuniManaging associateLexOrbis
Pankaj Musyuni
Managing associate

Patents may also help startups: (i) identify investors and convince them to invest in innovation; (ii) develop an attitude conducive to defending IPR; (iii) generate revenue through licensing; (iv) ensure their freedom to operate; (v) increase the market value of products and technologies; (vi) strategically align with potential market leaders; and (vii) develop partnerships for research and development.

Strategies for adopting and creating a patent portfolio will vary based on the nature of the company and the financial resources available. While large companies may have separate and significant budget resources to procure and maintain patents, small companies can also strategically maintain a cost-effective and valuable patent portfolio, which will eventually help in generating licensing revenues. In view of cost constraints, the initial focus can be on developing a few patents covering essential products and technologies in line with the company’s business objectives.

A patent portfolio can help innovators safeguard their research and development efforts and reach agreements for settlements and value proposition. For startups, the concern is to keep a balanced approach within the limited budget, to innovate, to meet public demand rapidly and also to ensure growth in the satisfied customer database. An effective IPR protection strategy is crucial to support the business goals of a company whose importance may be defined by its intellectual property.

Any strategy involves various phases such as expansion, working around and arrangement. The expansion phase includes determining whether technologies can be exploited without infringing the IPR of others (freedom to operate), patentability search and preliminary market research. For startups this phase is important for assessing the long-term benefits of a patent portfolio and for identifying business perspectives.

The working around phase includes analysis of how the technology aligns with market requirements, and evaluation of the need for improvement of the innovation. In this regard, whether to continue developing aspects of the product or process involving possibility for protection will also be considered. This phase is an opportunity to re-examine and re-evaluate patent protection on a regular basis and simultaneously new efforts can be filed as a provisional application or patent of addition.

The arrangement phase includes a competitive economic analysis, licensing and sometimes litigation of patents, providing a long-term element to the patent portfolio.

India has become the fastest growing hub for startups worldwide and many more ventures are continuously emerging. While protection of novelty and innovation plays an important role for the generation of creativity, it also attracts valuable investments. The Indian government’s scheme for facilitating startup intellectual property protection (SIPP) enables innovators to protect their IPR by filing patents, trademarks and designs.

SIPP gives more domestic and foreign startups access to the fast-track mechanism and introduces a liberal definition of benefits to the patent framework. The patent filing benefits meant for startups are also available to a foreign entity that fulfils the criteria for turnover and period of incorporation or registration as per the Startup India initiative. The government is also providing a rebate of 80% of the statutory fee for the filing of patent applications along with legal advice through a panel of facilitators.

Such initiatives have contributed to a rise of approximately 10% in patent filing. They are also facilitating the fast-tracking of startups’ patent applications, which enables applicants to realize the value of their registered and protected IPR. Having a good product or process which is commercially viable and protected through patents is desirable for a startup. As the government has taken welcome steps to promote innovation, it is good for startups to evaluate and focus on portfolio generation for patent protection.

On a separate note, a cost-sensitive idea that can be adapted by startups is to initially file a provisional application and simultaneously study and evaluate the market potential and accordingly decide whether to take the patent protection further. Based on the results, a well-researched portfolio can be maintained to attract investors and subsequently increase the commercial value.

Pankaj Musyuni is a managing associate at LexOrbis.

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