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Intellectual Property Rights- An asset or liability for MSMEs and Start-Ups?


Introduction-

MSMEs, micro, Small, and Medium Enterprises play an essential role in the development of our Indian economy. MSMEs are the backbone of the Indian economy and act as an engine for the growth of the economy. In the Indian economy, MSME gained an important position by making a major contribution in terms of output, exports, and employment. From the beginning, India has given major priority to the MSME sector and seeks to support through policies that make these enterprises feasible & dynamic. The MSMEs sector is becoming a vast sector in employing the agriculture sector. A significant role is being performed by the MSME sector in the development of India which is closely analyzed by us.

Intellectual Property Rights play a key role in the augmentation of SMEs and start-ups. It would not be wrong to say that MSMEs are proving to be the activator for the growth of India’s economy, as they account for 29.7% of India’s GDP in the financial year 2019 and 49.66% of the exports. Nearly half of India’s exports came from MSMEs in the financial year 2019. Not only this, but MSMEs play a vital role in job creation as they form a bulk of enterprises. Some MSMEs have turned into large enterprises and Multinational Companies, by investing in the protection and creation of Intellectual property rights. However, there are large number of MSMEs that are not aware of such rights and therefore, do not invest in the protection of their brands, designs, and inventions.

IP forms the key ingredient for startups and MSMEs around the world to gain a competitive edge in the market. This creates a trustworthy relationship between the start-ups and the investors, consumers, and other stakeholders. This trust is not only to succeed but also to become a market leader in its dominion. Additionally, in engineering startups, the generation of inventions takes place every day. IP protection assumes much greater importance in both the manufacturing and engineering industries.


It is the need of the hour to increase awareness about Intellectual Property so that a good invention may not be lost to a larger competitor who can turn their ideas into a business asset. The protection available under Intellectual Property Rights is an asset for MSMEs and Start-Ups, as it not only protects their ideas, inventions, designs, and geographical indications but also provides them with leverage over larger competitors.


IPR has added inherent value to all kinds of products, innovative creations, and ideas. These rights are accepted as indispensable for the advancement and surge of business. The biggest risk MSMEs and startups face is the unauthorized exploitation of their intellectual property. There have been several incidents where MSMEs being unaware of Intellectual Property Laws, have lost business opportunities to big enterprises. These exploitations can be curbed by protecting one’s business growth by registering IP. This is being avoided by most firms as it looks cumbersome and time-consuming- but it is not.


With growing competition and easily counterfeited products, it is essential for Start-Ups and MSMEs to protect its Intellectual Property Rights vested in its original creation. Cases of infringement and piracy impact not only the goodwill of the business but also reduce the overall revenue a business generates through its Intellectual Property.

Companies like Ola, Paytm, and Zomato, all started small, but gradually with the help of IP rights, came into the list of successful and profitable startups in India. The protection of a company’s intellectual property becomes important, to avoid any potential infringement, passing off, or dilution.

There are certain success stories where the entrepreneurs used IPR to their advantage and made it big.


1. Apex Laboratories Ltd.

It was set up in the year 1978 by a group of pharmaceutical executives in Chennai. The company introduced zinc-based formulations in India and is now one of the leaders in this area. It started as a cottage industry and today it has a workforce of more than 1000 persons. An Indian Patent has been granted to it and this company has filed for 13 patent applications.

2. Fermenta Biotech Ltd.

It is a Biotech company that started its operation in 1986 with the manufacturing of Penicillin G Amidas enzymes in India. Its manufacturing facilities are WHO GMP certified. Today it is the only manufacturer of Vitamin D3 in India. Fermenta has 6 Indian Patents to its credit and one application is in the Pipeline.

There are many success stories like these, wherein they started as MSMEs or Start-Ups and made it big time in the particular fields by protecting their ideas, innovations, and creations.

To have a strong market holding, MSMEs and Start-Ups should look at IPRs as an investment as it will help them in the market by stopping their competitors from infringing on their IPR by copying or selling any of their products. IP may generate income for the MSME through licensing or sale of the IP products or services that may significantly improve MSME’s market share or raise its profit margin. IP strategy can help MSMEs, and start-ups to establish business identity and brand value through branding strategy, thereby leading to commercial success.


Role of Intellectual Property Tools for MSMEs

MSMEs and Startups may utilize many IP rights to their benefit, some of which have been listed below.

Patent – A patent is a right granted for a period of twenty years for protecting processes and inventions. Exclusive rights are given to the owner, whereby he can decide who may or may not use the patented invention and can protect the invention from getting exploited. MSMEs and Start-Ups can turn their inventions into valuable assets by patenting them. It paves a way for success and puts MSMEs ahead of the competitors as they have the authority to stop anyone from using that patented product or process in their industries.

Copyright – Copyright is an exclusive right given to creators for their literary, musical, and artistic works. It is granted to the original author and others who are authorized by him. The primary function of copyright is to protect the fruits of a man’s work, labor, skill, or test from annexation by other people. This right is overlooked by many MSMEs, as these enterprises are mostly involved in delivering products and services. However, if we look from a wider perspective, it is actually a worthy IP asset for them. A range of original literature that is used in any MSME can be protected through this right.

Trademark – Trademark helps in identifying and differentiating goods or services of a business from the other similar goods or services. Trademark registration can be obtained for a word, symbol, slogan, image or logo used by a business for commercial purposes. The validity of Trademark registration is 10 years, which can be renewed after paying the prescribed fees. A trademark protects the name, logo, tagline, slogan, and brand and prevents the competitors from using any such similar representations or visuals. MSMEs must adopt unique trademarks to create a distinctive mark in a market of infinite enterprises and big companies. Protection of the marks adopted in trade, therefore, becomes extremely important as its infringement can lead to the loss of consumers as well as its goodwill.

Geographical Indications – Another worthy IP asset for MSMEs is Geographical Indication (hereafter, ‘GI’). GI indicates that the quality, characteristics, or reputation of a product is due to its origin. MSMEs that are based in small regions and engaged in a certain craft can get their products protected by a GI tag. This will not only bring them repute but also ensures that their mark is not used without authorization. Geographical Indications also act as a catalyst for economic development and growth of the rural economy, industry, and tourism successful business ventures. For MSMEs in villages and small areas, this IP helps in ensuring a sustainable livelihood for traditional product-based groups & communities.

Industrial Designs – Industrial Design deals with the formal and the ornamental appearance of the article. It protects the aesthetics of the good and helps in promoting and protecting the design element of industrial production. The MSMEs and start-ups must register their goods and products under this IP as it protects a wide variety of products of industry and handicrafts items.

Trade Secret – Trade secret is a piece of confidential information that provides an enterprise or industry with a competitive edge over others in the market. This information generally includes manufacturing or commercial secrets like advertising tactics, a list of clients, sales methods, profiles of customers, etc. Trade secret is an asset for MSMEs, because in a country like India, keeping in mind the vast availability of traditional knowledge, protection of such trade secrets or knowledge is requisite for enjoying the benefits of it.



Government’s Role in spreading awareness regarding IPR-

In present industrial times, a large number of MSMEs are engaged in exporting the raw materials to major companies and industrial manufacturing units outside India. However, MSMEs fail to take into consideration the importance of securing their innovations, ideas and creations.

A major part of the MSME sector in India operates without giving due consideration to the protection of IPR. This absence of business awareness in the Indian industrial sector has made global counterparts stronger. So, to prevent the downfall of SMEs, the knowledge of IPR has to be preserved and spread.

The Indian government has come up with a wide range of schemes over the past 18 months to empower startups in the country. Moreover, the Government of India has given several exemptions in the IP protection fees for qualifying startups under the Startup India scheme of DIPP.

Patent protection fees for startups have come down at 80% while for trademarks the fee reduction has come down at 50%.

A 50% discount on fees has been granted for the MSMEs and a 10% rebate on e-filing has also been granted.


Furthermore, a startup can avail expedited examination facility at the Patent Office wherein the disposal of a patent application can take place within 12-18 months from the date of filing. Hence, for a startup and MSMEs, Intellectual Property protection is not as costly as it would be for non-startup companies. What is most important to Indian Startups and MSMEs is that they should focus on creating, identifying, and protecting Intellectual Property while working towards innovation and protection to excel in their respective businesses.

Hence, the Government of India has launched a list of start-up schemes that fall under different ministries and departments.

1. Start-up India Initiative and Make in India

2. Expedited Patent Examination (Available for Start-ups only)

3. Discounted Filing Fee (80% discount to start-ups)

4. Start-ups Intellectual Property Protection (SIPP)

5. Support for International Patent Protection in Electronics & IT (SIP-EIT)

6. Schemes by M/o MSMEs

7. Accelerating Growth of New India’s innovations (AGNIi)

8. Cell for IPR Promotion and Management (CIPAM)


Startups and MSMEs are also eligible for a discounted filing fee in respect of patent and trademark examinations.

The major purpose of these programs and schemes is to facilitate and support startups to raise awareness of IPR related issues in general and to educate them about the value and economic benefits.

Conclusion

One must not set aside any IP-related issues in the initial stages of a business. Developing an intelligent IP strategy early on is crucial. Because of the long-term economic benefits that it offers, startups and MSMEs cannot (and should not) neglect the importance of IP. Protecting the innovations and creations of the MSMEs and Start-Ups enables them to create a niche for themselves in the market. To avoid disputes relating to Intellectual Property resources, startups need to protect their technologies and lay the foundation for their future success. Intellectual Property Rights strengthens the probity of startups and MSMEs in the long run and generates more opportunities to reinvent and redefine their innovations without the fear of exploitation.

However, with the changing times, IPRs have become prominent and have contributed vastly to the growth of a business. Thus, in the current times of globalization, there exists the need for the government, policymakers, and SME support institutions to enhance awareness amongst the entrepreneurs and MSMEs, about Industrial designs, trade secrets, patents, geographical indications, and trademarks.


The government has been making significant attempts for encouraging creative intellectual endeavors in the economy. The government has introduced various programs on IPR for creating awareness amongst the MSMEs. IP rights have an immense role to play in the protection of all aspects of a particular business. The government has also reduced the fees for the registration of certain IPRs including patents and designs for start-ups and MSMEs, which is a step in the right direction. Startups and MSMEs can also apply for an expedited patent filing procedure for faster disposal of their patent applications.


Article by- Radhika Vivek Bhusari

College- RTMNU’s Dr. Babasaheb Ambedkar College of Law, Nagpur.

Class- LLB 6th Semester



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