There is a huge brand value associated with the company IP. It gives investors, clients, and other stakeholders a tremendous confidence upon the company. Each type of IPR carries its own significance for the startup companies as shown below.
Today, almost one-third of all funded technology companies have a patent application filed, whereas almost 19% of these startups filed for a patent even before they were funded. There are several examples that show how intellectual property has played a crucial role in some businesses. The recent Canadian drug maker Valeant Pharmaceuticals acquisition of Sprout Pharmaceuticals was majorly based on the single drug patent (FLIBANSERIN) by Sprout Pharmaceuticals. It was Just days after FDA approval Valeant Pharmaceuticals paid jackpot of $1 billion in cash to buy Sprout Pharmaceuticals.
A startup’s negligence in securing the invention could end up as an expensive lesson for their business. For example, Xerox PARC did not patented their computer mouse and graphic user interface and later on companies like Apple Computer Inc. basically built their companies based on their innovative technologies, without paying any single penny to Xerox.
Roadblock for the startup company in investing IP
The major roadblock faced by startup company in investing IP is: lengthy judicial processes and weak IP enforcement mechanism in India. The delayed processing of applications and other actions in the IP offices is one of the major reasons for short enjoyment of patent rights by patent holders in India. It takes 6-7 years to receive a grant for a patent cutting short the life of a patent drastically. Considering that the patent term limitation for 20 years from the filing date of the patent application irrespective of any processing delay, this greatly reduces the patent term and puts the applicants at a loss. Though Indian Patent Office has taken initiatives by modernizing infrastructure and boost e- filing in the recent past, all the efforts will be of little help if the registration process is not completed in a timely.
In addition to that an equally strong enforcement mechanism is required to support strong IP laws. A weak enforcement of IP rights fails to provide relief against imitators and free riders, thereby acting as a major barrier to trade, investment in R&D and overall growth of a country’s economy. On contrary, a fair, strong and non-discriminatory IPR enforcement creates economic incentives that encourage innovation as well as helps attract new investment. Indian IP policy despite being in compliance with the International standards provided by the TRIPS Agreement is often alleged to be weak and ineffective, particularly with regard to patent protection. As per latest GIPC Index released by the US Chamber of Commerce in 2015, India ranks second last position in the rank. “Enforcement of patent laws in India is very disappointing and its harming India’s global image as an investment climate”.
Recently the concept of patent protection has garnered a flurry of attention by the announcement of Indian Government Start up action plan which also acknowledged the IPR role. “India’s future lies in innovation and creativity.” India Prime Minister Narendra Modi said while addressing at the Start-up India event. To encourage start ups new rules have been introduced to accelerate innovations including fast track examination, appointment of legal facilitator, IPR & patent funding and reduction in patent fees. Indian Government has also taken initiatives to enhance bilateral co-operation with other countries to improve the efficiency of Indian patent office. This initiative might enthuse Indian investors and creators to create IP assets in India and utilize them in manufacturing but having said that, a start up cannot avail the reap the benefit from IPR by merely creating intellectual assets.
How to Combat the Weak IP Enforcement?
Some of the recommendations could be:
Fast-track judicial process
IP specialized training for Judges, Customs and Police officials
Expanding the number of IPR cells that prioritize enforcement
Increase the number of independent IPR investigations
Adopt statutory damages in civil case
Giving political priority to IPR crimes
Creating awareness: It is important to create IP awareness amongst the stakeholders and public at large regarding IP rights and their enforcement. It would not only help the IP holders to enjoy their rights fully but also encourage others to create more and deter the infringers from violating the rights of others.
An invention or creation of an entrepreneur has value only if it is properly protected and safeguarded. Then only foreign companies will only be encouraged to invest their IP-protected inventions and establish their manufacturing, R&D and outsourcing bases in India. Startup India is a welcome step to foster innovation and credibility in Global markets but if India wants to project itself as Global Superpower we should not only modernize Patent Offices but also have a fair, strong and non-discriminatory IPR enforcement mechanism.