Intellectual Property Rights And Startups In India: Challenges And Opportunities

The startup ecosystem is one of the key drivers of innovation in the Indian economy with more than 1,15,000 recognised startups as of December 31, 2023. 

Startup owners must understand how to protect and market their intellectual property. 

However, with limited resources in terms of finances and manpower, most startups often overlook the significance of protecting their intellectual property while focussing on their business idea.

Intellectual Property Rights

New inventions are protected by patents, which guarantee exclusivity and forbid unapproved use or duplication. Startups should file their patent applications as soon as possible to protect their priority rights and prevent any losses from possible prior disclosure. 

For startups planning an international expansion, international patent protection is crucial for safeguarding their innovations in foreign markets.  

For startups producing creative works like software code, designs, books, and artwork, copyright protection is crucial. While copyright protection is in place from the moment of creation, voluntary registration adds another layer of proof of ownership. 

Since they act as brand identifiers and set their products or services apart from those of their rivals, trademarks are crucial assets for startups. 

For the intended brand to be unique and exclusive, extensive search and trademark registration are necessary. A trademark’s registration offers legal defence against unauthorised use and damage to Goodwill.  

Design protection helps to keep a product’s distinctive visual components safe, which improves the product’s appearance and marketability. 

Key Challenges

Protecting Intellectual Property Assets And Avoiding Infringement: Startups need to be prepared in advance on which intellectual property assets to protect, how to leverage their intellectual property for expansion and generation of more revenue and how to mitigate the risk of potential abuse or infringement.

Identifying And Entering New Markets: A startup needs to carry out country-specific clearance searches to determine their availability or freedom to operate in those markets. Moreover, it is also imperative to identify which geographies are first-to-use and which are first-to-file to prioritise the filing requirements. 

Disclosure Of Information And Trade Secrets: One of the easiest yet often overlooked issues faced by a startup is to prevent the public disclosure of confidential information. It is extremely vital to understand how and what information is to be shared internally and externally. 

Any confidential information such as business strategies, customer lists, etc. are valuable assets for an early-age startup. While there is no statutory protection available to trade secrets in India, startups must protect themselves and avoid spilling of such confidential information by signing non-disclosure agreements, restricting access to sensitive data, training employees etc. 

Startups need to strike a balance between disclosing enough information to describe the invention without revealing trade secrets. 

Lack Of Knowledge: Most startups are unaware of the importance of intellectual property rights (IPR) and how to protect their IPR. As a result, there are low levels of patent, trademark, and copyright registration.

Weak Enforcement: The enforcement system in India is thought to have a weak framework for IPR safety, and its enforcement measures are insufficient. This has led to extreme levels of IPR infringement, counterfeiting, and piracy, particularly in the software, pharmaceutical, and entertainment sectors.

Slow And Complicated Legal Processes: In India, the enforcement systems’ methods for obtaining and enforcing intellectual property rights are often slow and convoluted, which causes delays and disproportionate costs for individuals and organisations trying to protect their intellectual property.

Key Opportunities

Competitive Advantage: Protection of intellectual property allows a startup to gain exclusive rights in their products or services, which in turn provides them with an edge over their competitors and blocks third parties from misappropriating their intellectual property. Moreover, several well-funded startups also acquire third-party intellectual property portfolios to increase their competitive advantage or invest in research and development for the generation of new intellectual property.

Leveraging Intellectual Property For Growth And Expansion: Intellectual property enables startups to derive value from their innovation. For example, intellectual property can be licensed in exchange for payment of royalty. 

A strong intellectual property valuation also enables a startup to lure potential investors at the time of exit, i.e., either at the time of sale or acquisition of a startup or at the time of going public.

Protection Against Infringement: Adequately securing intellectual property protects a startup from inadvertently infringing third-party intellectual property rights of others. 

While registering intellectual property, conducting clearance searches of trademarks and Freedom-To-Operate (FTO) searches of patents helps a startup in identifying intellectual property similar to theirs and ensuring that their business is not affected due to intellectual property disputes. 

Strong Brand Identity: Intellectual property also helps startups build and protect their brand identity. Creating a strong brand identity helps startups to build a loyal customer base and exclusive market position and avoid competitors from misusing the same. 

Benefits Of Government Initiatives: The Government of India launched the Scheme for Facilitating Startups Intellectual Property Protection (SIPP) in 2016 to nurture innovation, startups and encourage investments in the startup ecosystem of the country. 

The scheme provides access to intellectual property services and resources to startups for the protection of their intellectual property through empanelled facilitators. 

Further, startups are also entitled to significant exemptions in government fees when applying for protection of intellectual property. The goal of initiatives like Atmanirbhar Bharat and Startup India is to create a climate that is conducive to innovation and intellectual property rights protection.

In Conclusion

The benefits of strong intellectual property protection far outweigh the potential challenges. Startups must appreciate the value of their business and recognise the importance and necessity of intellectual property in nurturing the same, particularly in light of new barriers to intellectual property that have been brought about by the development of new technologies and advancements in the digital sphere.