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  • Commercial Law Advisors

Intellectual Property Issues to be taken into consideration for Start-ups

Starting a new company is as hard a task as any. Building an enterprise from scratch is akin to scaling a mountain from the base. In such an ascent, one of the key issues that companies face is protection and dominion over the work they produce. Profit making from a successful enterprise is the focal point of any business undertaking. Businesses need to capitalize on outputs of all forms, to generate revenue and achieve sustainability. This is impossible without understanding the coverage and application of Intellectual Property Rights (IPR) in the specific sector and operations they are engaging in.

Terms such as copyright, patent, trademark, etc. hold importance because of the right of commercial exploitation they grant the holders. One of the first concerns start-ups need to be wary about is the assignment of IPR over the work of their employees. It is important to keep a track of their performance without infringing their rights. In certain situations, it helps to make the employee a joint-holder of IPR so as to prevent them from taking their idea elsewhere.

Start-ups need to monetise their assets and liabilities from the perspective of intellectual property rights. This entails evaluating the product and assessing obligations arising out of the company’s ventures by determining the following:

● Is the venture money-making due to company’s IP protection over it?

● Does the IP Protection have the potential of revenue generation if the company

acquires it?

● Does the company needs to dispense IPR-related liabilities? This would entail a


Employment contracts must be defined unambiguously so as to maintain the start-ups air- tight ownership over all intellectual property created in the course of the employment. Non- confidentiality and non-compete clauses in the contract must have sufficient restraining power to prevent loss of trade secrets, while also safeguarding the terminated employee’s livelihood. Similar contractual obligation must be extended to consultants as well. Proper due-diligence needs to be done to avoid any overlap with existing IPR-holders or owners of related craft and/or names. Nomenclature must be undertaken with utmost care to prevent ambiguity as far as possible.

Patent registration is a very crucial aspect of securing ones’ work-product. Start-ups must ensure accuracy in documenting, registration, appearances, etc. either through in-house counsel or by engaging experts and firms who specialise in patent law. Provisional filing for patents must be done by administering careful industry-wide research on specifications that have been achieved by competitors in the same field. The seat of registration is of paramount importance. Irrespective of where the company headquarters are based, start-ups must ensure registration in the domestic jurisdiction where manufacturing and trading units are located.

Global patent strategies are in vogue these days, owing to the rise of manufacturing hubs like China and south-east Asia. Patent infringement insurances must be subscribed to and applied for as needed.

Since litigation is a cumbersome and lengthy process, start-ups must opt for alternate forums such as arbitration and/or mediation to resolve IPR disputes. Preserving liquidity is of paramount importance for start-ups, as opposed to massive multi-national corporations who have deep pockets to ensure financial preservation. Thus, carefully calibrated negotiation, often entailing CEO-to-CEO exchange must be ensured to avoid the litigation, which can potentially bankrupt the company even if the verdict later turns out favourable.

The most important notion of IP-policy is that ‘getting their first is the only thing that matters! Applications for copyrights, trademarks and most importantly, patents, must be done swiftly and accurately because in the 21 st Century, the race to success is a race against time and information. It is thus prudent for start-ups to invest sufficient resources and focus into keeping their ears to the ground. Being consistently updated with regulatory changes, policy shifts, industry-wide-campaigns, lobbying and legislative directions is crucial to obtain all necessary information with regard to IPR for fledging start ups.

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