Startups need to prioritise IPRs

The Covid pandemic has proven the fact that anybody from anywhere in the world can make a product or come out with an idea for anyone and disrupt the business ecosystem. Startups are not new to this game of disruption, which we all are aware has been their fundamental base to make out-of-the-box ideas work for them in the market.

Today's world is totally changed, with customers dictating the market trends and need. Companies must think ahead of the curve and not only compete with their peers but also fight it out with new startups coming up in their sectors with low-cost high-tech solutions.

Start-ups most times might not have the acumen and the bandwidth to avail of complete protection available under the intellectual property rights (IPR) regime. To begin with, they must evaluate and prioritise the IPRs involved in their business. Depending upon the type of industry involved, different IPRs play an important role in the enterprise.

Not being able to identify and manage IPs will lead to problems for startup's business, especially during negotiations with future investors or exiting its business. For many startups, IP rights are the only asset available. It is important to note that certain IPRs like patents and designs are required to be registered before disclosing them to public or the Investors . On the other hand, other IPR like trademarks and copyright need not be mandatorily registered for protection, but always the cardinal rule is that a registered IPR carries a greater value and acts as evidence of use of the IPR before courts as well as enforcement agencies.

The most important point to be earmarked for any startup before working on an idea or product is to be very clear and doubly sure that it does not violate IP rights of any other person – this will ensure safety from unwarranted litigation or legal action which can thwart its business activities even before start. This makes it more vital for startups to take careful and calculative IP decisions in their initial phase and conduct proper due diligence of IP Rights, which it is using or intends to use.

The key to leverage IP rights is proper documentation and strong foolproof agreements for management of various IP rights owned, created or acquired in future by startups. It is pertinent to have properly done non-disclosure agreements, agreements with employees or independent contractors. Usually, intellectual property is created either by the founders or some key employee or a third party. The intellectual property so created, must be protected through a proper agreement between the founder or key employee or a third party, as the case may be and the startup.

If this foundation step of protecting ideas by agreement is overlooked, it creates several bottlenecks later when such ideas become successful. Accordingly, the startups need to ensure that anything created on behalf of the startup, belongs to them and not the employee or a third party. It is always advisable to spend time and make the efforts in the beginning itself to enter into elaborate ¬¬assignments, licensing or user agreements, with provisions for all post termination of IP Right issues. Another reason for prioritising IPRs is it will help them improve the valuation of their business, generate better goodwill, protect its competitive advantage, use intellectual property as a marketing edge and use the IPRs as a potential revenue stream through licensing and raising funding from VCs and banks.

To conclude, in the long-term interest of startups and as a best practice, an Intellectual Property Policy for management of diverse IP rights will ensure minimal disputes between founders, employees, and other stakeholders for a better sustainability in today's fast paced globalised world.

(Writer is Head, Legal & IPR, Resolute Group of Companies, & a Registered Patent & TM Agent)