In recent years, India has tremendously grown its startup ecosystem.
Policies such as The Science, Technology, and Innovation Policy (STIP) of 2013, The National Intellectual Property Rights Policy of 2016, and The Patent (Amendment) Rules of 2017, coupled with schemes like Startup India, Make in India, Startups Intellectual Property Protection (SIPP), and 'Creative India; Innovative India', have all significantly contributed towards this burgeoning growth.
In spite of many initiatives from the Government of India to nurture the growth of start-ups, various challenges still exist on the road, such as bureaucracy, labour, taxes, and research and development. Out of these, research and development play a significant role in the innovation of products or services provided by a start-up. Further protection of innovation is mandatory to survive market competition.
However, despite the vitality and vibrancy that startups bring, the reality is that a large proportion of them need help to sustain themselves and ultimately fail.
That is how the concept of patents comes into play. But how exactly can patents bolster the startup ecosystem?
This article explores the complex relationship between the startup ecosystem and the patent world in India. We explore how the latter can be an invaluable tool to empower the former
Decoding Patents and IPR
Intellectual Property Rights (IPR) represent creations of the mind — these could be inventions, literary works, names, symbols, and images used in commerce. Patents are a critical part of IPR because they protect inventions, granting the owners of these creations an exclusive right to use and assign usage rights to others.
Although a good number of tech startups understand the relevance of trademarks and copyright, many of them overlook the importance of patents. Patents play a pivotal role in safeguarding technological innovations and are often the lifeline of tech startups. Yet, as per a recent survey, only 44% of respondents could accurately identify items protected by patents.
The Indian Startup Ecosystem
India’s startup ecosystem has emerged as a powerful force for innovation and entrepreneurship over the past few years, making India Asia’s leading startup nation.
Notably, in 2016–17, India ranked 37th out of 125 countries in global startup ecosystems, making a name for itself alongside China. The country's startup base is thriving, with Bangalore, Delhi, and Mumbai making it to the top 40 global startup cities.
As per the 2018 Nasscom Startup Report, India currently boasts the third-largest startup ecosystem globally, with the United States and the United Kingdom only ahead of it.
India's startup scene is thriving, witnessing a remarkable growth rate of 12–15% in 2018. The market has seen the entry of over 1,200 new startups.
Investments in the startup sector surged from $2 billion in 2017 to $4.2 billion in 2018, with eight startups like Oyo, Swiggy, Paytmall, and Byju becoming unicorns. Despite this growth, a gap exists in understanding and utilising Intellectual Property Rights (IPR) and patents among Indian startups.
Why Should Startups Care About Patents?
Patents can serve as invaluable assets in a startup environment characterized by competition and rapid innovation. They provide startups with an exclusive right to their inventions, ensuring they have a competitive edge.
Patents are not just certificates of innovation but strategic business tools that can be leveraged for market exclusivity, revenue through licensing, and attracting investment. Startups, particularly in the technology sector, thrive on innovative solutions. Patents protect these solutions, preventing competitors from replicating or using them for commercial purposes.
This protection is crucial for startups to maintain their unique market proposition. In the investment landscape, a robust patent portfolio can significantly enhance a startup's appeal to investors.
It serves as evidence of the startup's innovative capabilities and provides a certain level of risk mitigation against competitive market forces. Hence, patents can directly contribute to a startup's valuation and its potential for growth and success.
What are the Risks of Not Patenting Your Invention?
Loss of Exclusive Rights
The most immediate risk is the loss of exclusive rights to your invention. Without a patent, competitors can legally replicate your invention, leading to a loss of market share and possibly undermining your brand's uniqueness and value. A patent provides 20-year of exclusive rights, preventing others from copying, selling, or importing your invention without your permission.
Difficulty in Securing Investment
Investors often seek security when investing in startups, and patents can provide that assurance. A patent signals that a startup has something unique, which can potentially be a source of significant future revenue. Without it, convincing investors to back your venture could be challenging.
In 2023, the Indian government announced that patents could be used as collateral to obtain loans from financial institutions. Which, in turn, helps researchers and entrepreneurs obtain financial support for their innovations
Decreased Opportunities for Licensing or Selling
Patents can be a source of revenue through licensing or selling to other businesses. Without a patent, these opportunities for additional income can be severely limited.
No Legal Recourse
If a competitor replicates your invention without a patent, you will have no legal recourse. With a patent, you could take legal action for patent infringement, potentially resulting in financial compensation.
Loss of Market Position
In a world where consumers are always on the lookout for the "next big thing," marketing with innovative ideas can take you to the top. However, without patent protection, competitors can quickly copy and sell your idea.
Bridging the Gap: Patents and Startups
The relationship between startups and patents is clear, yet many startups need to pay more attention to the value of patents due to misconceptions or a lack of understanding.
Bridging this gap calls for greater patent awareness and education among startups. The founders needed to understand that in the early Indian system, obtaining a license could be an integral part of their business process, not just a legal one.
Making the patent registration process more accessible and entrepreneur-friendly can also play a pivotal role. Reducing the bureaucracy, costs, and time associated with patent filing can encourage more startups to seek patent protection.
Furthermore, providing guidance and support to navigate the patent landscape, including patent search, application drafting, and prosecution, can empower startups to effectively leverage patents for their growth and sustainability.
Conclusion
In the burgeoning world of startups, the race for innovation and a unique market position is relentless. Patents serve as a strategic instrument in this race, offering startups an exclusive right to their innovations and an advantage in a highly competitive landscape. The value of patents extends beyond the mere protection of an invention. They act as a beacon for attracting investors, enhancing the startup's market credibility, and creating potential revenue streams through licensing or selling of patented technology. As such, patents can be pivotal in improving a startup's sustainability and success in the long run. However, despite the significant benefits patents offer, their adoption among startups remains suboptimal, largely due to a need for more awareness and understanding of patent processes and benefits. Therefore, encouraging greater patent literacy and creating a supportive infrastructure for patent registration is imperative. The dynamic Indian startup ecosystem, backed by supportive government policies, is a fertile ground for such a shift. As startups begin to recognize the strategic value of patents and integrate them into their business planning, they will inevitably foster an environment of well-protected and sustainable innovation.
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