Protecting IP

Recently, California-based car API start-up Smartcar accused its competitor, Israeli firm Otonomo, of having plagiarised its intellectual property (IP). A while ago, VoxWeb had accused Facebook of lifting its speaking pictures feature, while Snapchat had accused Facebook of stealing its stories feature.

Innovation is key to start-ups as it significantly enhances valuation. But protecting innovation assumes even greater importance. Experts say start-ups in India have been filing more and more patent applications in recent times. As per data by the Department of Industrial Policy & Promotions (DIPP), about 753 patent applications were filed by Indian start-ups in 2018-19, up from 564 applications in fiscal 2017-18.

"And the extent of IP violation in the Indian start-up ecosystem is high. This is mainly due to lack of IP awareness and to some extent less regard for the IP held by others," says Kalyan Kankanala, senior partner, BananaIP Counsels.

According to the Global Intellectual Property Centre (GIPC), against six IP categories such as trade secrets, market access, patents, copyrights, etc., India has a score of only 8.75 out of 35. While countries like the USA and the UK score 32.62 and 32.39 respectively.

According to Aishwarya Todalbagi, IP Specialist, Spice Route Legal, IP violation is more common than it should be as many start-ups tend to ignore the importance of IP and neglect protecting the same until it is too late. “As a result of the lax in protective measures, start-ups tend to take it easy and go ahead and violate other start-ups' IP. It must be noted though that such violation is not always explicit and it is often in the form of indirect ways to pursue a fairly established start-up's customer base.”

Whatever be the intent of the violation, it does prove to be a costly affair for start-ups. Experts say the cost of acquiring a robust patent in India can be as much as Rs 3 lakh and takes about three to five years to acquire. Moreover, post the grant of a patent, the patentee is required to pay a renewal fee of up to Rs 40, 000 per year till the expiry which is 20 years. 

“Hence, protecting IP is crucial. And this process starts right at the beginning when a start-up is looking to create an IP,” state experts.

Says Raghavendra Varma, chief technology officer, Obopay, “Failing to implement standard IP practices in businesses is the most risky proposition in scaling up. Entrepreneurs must find out if some other start-up has an IP for a similar idea that they are working on. IP is always a unique selling proposition as it helps in creating a sustainable differentiation for the company and also helps in convincing potential investors about the viability of the business idea.”

Adds Kankanala, “Taking steps like freedom to operate (FTO) analysis, trademark clearance search, IP infringement analysis can help a start-up understand if any third party holds IP rights with respect to its products/services and take necessary steps to prevent IP violations.”

Start-ups can protect IP through multiple ways. Todalbagi says one way is through a government scheme, the department for promotion of industry and internal trade, ministry of commerce and industry has a scheme for facilitating Start-ups' Intellectual Property Protection (SIPP). “This allows registered start-ups to avail discounted rates to register their trademarks and get easy access to general advisory, assistance in filing and disposal of patent and design applications and registrations.''

According to Varma, signing a non-disclosure agreement before negotiations with any potential investor or a prospective business partner is another good way of protecting the IP from being violated. “In case of a violation, start-ups can file an infringement suit against the infringer. We believe that investors and VC funds should start providing funds to start-ups to create, file and protect a strong IP.”