Significance of Intellectual Property Rights for Start-ups in India
Every Start-up, during the process of its inception, comes up with an idea, a pitch, design of its product and/ or services, how it works and how to enter the market. This being said, every Start-up will face a major hurdle i.e., competition. Every other entity/ company in the market will take that unique idea and make it better with their own immense resources and that the said entities would steal/ imitate the distinctive brand name/ trademark which is created by intellectual ingenuity. Start-ups, to protect their interests, have to protect and defend their ideas and products and that can be achieved only through Intellectual Property Rights.
Intellectual Property Rights, in short known as IPR, are rights that protect and provide exclusivity towards intangible creations of human intellect. Before we delve into the significance of IPR for the Start-ups, we shall look at three of the prominent types of IPRs.
A patent is an right provided to the owner of an invention to exclude others from exploiting the said invention, and the patent is granted for a specific field in a defined country for a period of 20 years; in return for a full disclosure of the said invention pertaining to its technical details.
A trademark is a sign or symbol used to distinguish the products and/ or services of an enterprise, which can be filed for registration with a competent authority (Trademark Registry) for the purpose of its protection. A trademark confers to its owner exclusivity of exploitation of the said trademark for a period of 10 years, which can be renewed.
Copyright: A copyright is a right given to creators of their original literary, musical, or artistic works which allows them to reproduce their work and refrain others from copying. Copyrights are granted for sculptures, architectural works, drawings, computer software, sound recordings, TV & radio broadcast, photographs, and films.
Significance of IPR for Start-ups: Intellectual Property Rights prevent competitors, bigger establishments/ companies from stealing/ copying idea, invention, brand name/ trademark, which in turn provides start-ups to expand and make profits with exclusivity for a set period. Further, there is always a high likelihood of providing confidence to investors, clients and other stack holders, for start-ups who have patented their core inventions and registered their brand name/ trademark; since it reflects high standards and “viability study” conducted by the Start-ups.
Start-ups, due to their limited resources, cannot opt to avail the overall IPR protection. Therefore, the start-ups, depending upon their businesses and industry, must evaluate and prioritize their Intellectual Property Rights, wherein such IP Rights play a vital role and sometimes happen to be the only available assets with a start-up. Failure to do so, might create hindrance to the smooth functioning of the business especially between the founders of the Start-up, promoters, negotiations with the current and future investors or while existing the business.
It is pertinent to note that, certain types of IPR for instance, patents have to be registered before exercising any form of protection as prescribed under the relevant statutes. However, IP Rights such as Trademark and copyright does not require a mandatory registration pertaining to their claim and protection. A registered IP Right always has an advantage has they can showcase the use of such IPR and provides a greater value and weightage, as the relevant statutes facilitate such registered IPR owner to effectively enforce his/her rights before the Courts, in case any infringements.
Every Start-up should formulate and implement an Intellectual Property Rights Policy to manage their IP Rights which they currently possess and which they intend to apply/ acquire in future. The main agenda behind such an IPR Policy is to ensure that there exists no dispute between the founders and promoters which has in fact led to failure of start-ups in general.
Every Start-up at its very beginning itself should conduct proper due diligence of its IP Rights which is in current use and the ones it intends to use in future. For all the start-ups, such due diligence should be made mandatory, so that unintentionally they do not infringe other person and/ or entities’ IP rights, leading to litigations or legal actions which are highly detrimental to any start-up business.
Smooth functioning without discrepancies is the most important factor for any start-up, which can be streamlined through proper documentation process, by executing certain agreements such as, non-disclosure agreements, independent contractor/s agreement and similar agreements which would protect the Start-up’s IP Rights. Further, having clear ownership and/ or title over the IP Rights and its management is especially important and crucial for any start-up. Usually, with every start-up, the founder/s and/ or the key employee/s would have come up and created the novel idea for their product/ business. Such an aspect should be captured in an agreement, that has to be executed between them, so that in future, if such an agreement is not executed, would create several uncertainties between the founder/s, key employee/s, current and future investors, by adversely affecting the start-up and its business. Every start-up should execute such agreement/s which ensure that the IP Rights are retained solely with the Start-up to protect its interests and IP Rights.
Start-ups who are protecting their IP Rights can have a Unique Selling Preposition (USP) towards their products and/ or services which in fact, gives an edge over its competitors, acknowledgment by consumers and public in the course of trade.
Author: Venkata Raghavan, Proprietor, Escalade Legal Services
Co-Author: Veeresh Sangolli, Senior Associate, Escalade Legal Services
