The startup culture in India has been growing at a quick pace over the past few years. It is important now more than ever to accord intellectual property rights (IPR) protection to startups attempting to do business with innovative technologies. It levels the playing field to compete effectively with the already established players in the market and increases startups’ valuation, thereby attracting more investments.
Startups need to get IPR protection as it gives them the freedom to sell, license, or assign a patent or trademark or make commercial use of their patent without being worried about remedies in case of encroachment. This protection is granted for 20 years in the case of patents and 10 years in the case of trademarks, which can be renewed perpetually.
However, IPR protection often takes a back seat due either to high financial costs or the lack of awareness of the procedures of transforming their invention into IP.
The government has taken various measures to promote IPR such as the National IPR policy of 2016 which aims to create synergies among all forms of IP. In January 2016, the government started the Scheme for Facilitating Start-Ups Intellectual Property Protection (SIPP).
The SIPP scheme
The scheme was designed to protect IP rights of the startup owners by providing them free legal assistance and guidance from the facilitators, or “IP Mitras”, for filing and disposing of patent, trademark and design applications whose fee is borne by the Office of the Controller General of Patents, Designs and Trademarks (CGPDTM).
Additionally, the scheme provides incentives to the facilitators for filing and processing IP applications. This scheme was aimed at helping startups save money and time, while simultaneously helping them protect their IP rights.
The scheme has three broad objectives: to make the startups aware of their IP rights and help them in acquiring IPRs; to cultivate and guide innovative technologies emerging through startups; and to assist startups in protecting and commercialising IPRs by providing access to IP services and resources.
The scheme was initially run on a pilot basis for a year, until March 2017. It was then extended by three years, to March 2020. Subsequently, the Department of Promotion of Industry and Internal Trade (DPIIT) extended it for another three years to March 31, 2023, as the government felt the scheme was proving to be helpful to startups.
The scheme’s positive effects
The scheme is proving to be beneficial as it is encouraging startups to seek IP protection. Not only does it give incentives to startups but it also provides them with all the required legal and technical assistance in one place so that they do not have to run from pillar to post.
For instance, startups usually don’t have enough financial resources. So, the scheme provides them with an 80% fee rebate in filing patent applications and a 50% fee rebate in filing a trademark application. Further, there are provisions for fast-track examination of patent applications. The government also revised the fee structure from November last year, which will augment the filing of IP applications by startups with the help of IP facilitators.
Because of these incentives, there has been a significant increase in IP activities by startups in the last six years. Patent applications filed by startups have increased from 179 in 2016-17 to 1,500 in 2021-22, government data show. Trademark applications filed by startups have increased from just four in 2016-17 to 8,649 in 2021-22. A total of 7,430 patent applications and 28,749 trade mark applications were filed by startups from 2016-17 to October 2022.
The scheme’s shortcomings
While the scheme has helped starts in seeking IP protection, it also has certain shortcomings.
Facilitators refusing to help startups: The scheme clearly states that the facilitators would be reimbursed by the CGPDTM office and the startups have to pay only the statutory fees prescribed by the IP offices for filing. However, many startups have faced hardship while dealing with the facilitators, as there were instances reported to CGPDTM offices against the facilitators asking for money from the startups or refusing to work on a particular application.
Distrust amongst startups: The implication of the above point would be a sense of distrust among startups against the facilitators. Moreover, if startups willingly do not avail of facilitation services, then this would not serve the basic purpose of this scheme and might as well lead to its failure. So, instead of making the process of filing easy, this ends up making it more cumbersome for the startups.
Lack of awareness: Another problem is the lack of awareness amongst the startups regarding the SIPP scheme and its benefits. Since many startups are unaware of such services, they are hesitant to go for IPR protection as the process involves a lot of documentation. Some startups are not aware of the facilitation services while others find these less useful as guidance related to international filing under the Patent Cooperation Treat (PCT) or any other is not covered under the scheme. The startups that expressed their intention of going for a PCT application mentioned that they have been deferring it due to the cost and complexity involved.
A study released in December 2019 by the CUTS Institute for Regulation and Competition (CIRC), titled ‘Technology Startups and IP Protection in India’, observed that a very large proportion of tech startups were active in copyright and trademark protection but less than half were active in patent filing and a meagre 18% were involved in industrial design.
Delay in reimbursement to the facilitators: The fees of the facilitators for this work is kept minimal under this scheme, but a delay in reimbursement of this payment will lead to the refusal of work and improper assistance by the facilitators to the startups. The payment should be on a par with the services provided by them. This would encourage them to come forward and make this scheme a success.
How to improve the scheme
There are a few suggestions that will help increase the efficiency of the scheme to combat the issue of facilitators not supporting startups, though the CGPDTM has cautioned facilitators to avoid such practices. However, there might be many unreported cases by startups and abandonment of such applications for filing due to such hardships. Thus, stringent measures should be in place to keep regular checks on the working of the facilitator.
The lack of awareness amongst startups is a major problem. The scheme’s effectiveness would increase if these measures and initiatives are adopted at the institutional levels so that every budding entrepreneur is well aware of it and can seek facilitation.
The government should, under the scheme or otherwise, make provisions for mandatory pro-bono services which the patent agents and firms have to offer. This would give a push to the startups and will start a practice amongst the firms to help them as a part of their services.
The SIPP scheme came into existence to help and create awareness amongst startups in protecting their intellectual property. Many startups underestimate the importance of patents and consider them a means of creating a barrier. Startups generally do not consider the probability of infringing someone else’s patent and its legal and financial implications.
Patent filing requires expertise, so most startups are not in a position to apply it themselves. They either reach out to government-empanelled facilitation centres or hire a private law firm for filing. This scheme had certain positive effects and has led to an increase in the number of filings of patent applications, and if extended could help raise awareness amongst startups as well as encourage them for IP protection.
However, the scheme should be reformed continuously to address the concerns of the startups and the facilitators as the challenges discussed might create a hurdle in its effective enforcement.
Nilanshu Shekhar is partner while Akanksha Anand works as associate at law firm KAnalysis. Views are personal.