Protecting IP assets key to success of startups

By Ritika Agarwal, LexOrbis

Recent efforts by the government, investors and innovators have helped facilitate the growth of budding businesses in India. While the initial plans for any business involve indispensable demands and priorities, protection of intellectual property (IP) is often overlooked, mostly due to the costs involved. However, IP may prove to be a crucial asset for a startup on its road to success.

intellectual property protection
Ritika Agarwal

A preliminary search for IP assets such as patents, trademarks, copyrights and designs can give entrepreneurs an idea about the chance of success for their startup and its underlying business model. For example, if a similar patent, trademark, or design, which forms the key basis of the business model already exists, the entrepreneur is in a better position to evaluate the business model and ascertain whether a modification is required to avoid future conflicts. They can then decide on the amount of investment to be made, or whether to go ahead with it at all.

The protection of IP assets may also save a startup from future conflicts and litigation, creating legal security for its business and allowing it to channel its resources towards business development. Entrepreneurs often ask IP attorneys about protecting their “business ideas”, which is not possible. However, a well-planned IP protection strategy may be one way to successfully protect their business models from being copied.

Apart from the legal aspects, IP is a valuable (intangible) asset that can be monetized and act as a safety net during challenging times. There are several avenues for monetizing IP, such as selling, licensing, franchising or earning royalties from IP assets for budding enterprises. Strong IP protection puts startups in a better position with regards to pricing their products and services and gives them an edge in a competitive market. Even while raising funds, investor decisions are influenced by the strength of a startup’s IP portfolio.

The Indian government has also, of late, focused on creating a favourable and encouraging environment for startups, especially with regards to helping startups protect their IP. The Scheme for Facilitating Startups’ Intellectual Property Protection (SIPP) under the “Startup India” initiative of the government is a key reform in this direction.

Under the SIPP scheme, any startup would be eligible for certification from the Startup Certification Board if: 1) it has an innovative business model; 2) its incorporation or the registration in India is not more than seven years old (in the case of biotechnology startups, the period shall be up to ten years); 3) it has an annual turnover not exceeding 250 million (US$3.6 million) in any financial year.

Once an entity has been certified by the Startup Certification Board, it is eligible for the following benefits:

  1. Complete assistance from registered facilitators, who are responsible for providing general advisory, filing and complete prosecution of applications related to patents, trademarks and designs with the IP office.
  2. Provision of fast-track examination of patent applications.
  3. Preferential government fee structure for IP application for the startup (80% rebate in case of patents, about 50% in case of trademarks and designs).
  4. The facilitators’ fee, as has been fixed under this scheme, will be borne by the IP Office (the professional fee involved in engaging an IP attorney becomes practically zero).

In a highly competitive market, startups 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.

Ritika Agarwal is an associate with LexOrbis.

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