Importance of Intellectual Property Rights for Start-ups

In India Start-ups frequently fail to see that intellectual property rights and innovation are inextricably linked. In today’s hyper-competitive world, it’s critical to anticipate and analyse events, particularly when it comes to start-ups. Because they are fresh to the market, they must stay two steps ahead of their competitors and keep abreast of all business and economic changes.

There are several benefits that a start-up can receive when it understands how important Intellectual Property Rights (IPRs) could be. In this post we shall examine the importance of IPRs for the start-up Companies in India and further discuss the existing IPR disputes concerning the startup industry. The following could be enumerated as the major factors relevant between IPR and Start-ups: –

1. Protection of Ideas: In a competitive market, IP protection allows start-ups to preserve and exercise distinctive and differentiated product or service offerings. Maintaining fresh offerings backed by carefully developed Intellectual property rights such as Patents is one of the important success elements for a start-up.
2. Prevention against fraud and theft: Intellectual Property Rights prevent competitors, larger establishments/companies, from stealing/copying indications, inventions, brand names/trademarks, allowing start-ups to expand and profit for a certain length of time. Furthermore, for start-ups that have patented their core creations and registered their brand name/ trademark, there is invariably a high probability of delivering enthusiasm to investors, clients, and other stakeholders, because it indicates high standards and “viability study” performed by the Start-ups.
3. Protection of IPRs is a USP for Start-ups: Start-ups that protect their intellectual property rights might have a “Unique Selling Proposition” (USP) for their products and/or services, which gives them an edge over their competitors and protects them from customer and public disclosure in the course of business.
4. Driving force for Innovation: Intellectual Property Rights (IPRs) are a big part of why we have so much innovation around us. After patenting an innovation, Intellectual Property Rights allow a start-up that has produced an inventive device to compete effectively against major corporations. Intellectual Property Rights are another crucial factor in the Indian start-up ecosystem’s success.
5. Enhancement of Investor Confidence: Patented technology gives start-ups an advantage when interacting with investors for possible investment. Companies are eager to invest in start-ups with distinctive patents because it provides them access to the technology that underpins the patents, if not outright ownership of the patents. As a result, obtaining patents is one of the most reliable ways for a start-up to attract investors.
6. Creation of Newer Technologies: Once a start-up receives a patent, it can use the invention for the next 20 years without risk of others copying it. The patented technology will almost certainly lead to the creation of other technologies based on the original patent. As a result, having a patented technology raises the chances of a start-up acquiring more patents and so increasing its value. A company with only one valuable patent might swiftly acquire several more, making it more appealing to investors.
7. Protection of time and costs incurred in development of Technology: Technology investments that provide a company a competitive advantage over incumbents and others are always considerable. However, unless trademarked, such technology is open to everybody. If a competitor replicates the start-up’s technology, the hundreds of man-hours invested developing it and the associated financial costs are squandered.
8. Protection of Start-up’s Identity: Logos are also protected by trademarks. The logo of any start-up is critical to its brand’s success. If a start-up does not trademark its logo, it risks unscrupulous businesses replicating it and stealing its clients. By trademarking its logo, a start-up assures that its brand is protected and that anyone looking to buy its product or service can tell who created it.

IP Disputes and Start-ups

Since the Inception Start-ups have been caught up in serious IP litigation which has resulted in serious damage to their brand value. Following are some of the major IP disputes involving Start-ups:

1. The Fintech Unicorn Bharatpe and Phonepe have been in long run IP conflicts in the recent years over the suffix ‘pe’. In 2021 petitions seeking cancellation of registration held by Phonepe for the ‘Pe’ logo in Devnagri script. Although the cancellation petitions were rejected by the Delhi High Court as frivolous and baseless. However, both the parties are exploring alternative legal remedies in order to pursue their claims.[1]
2. Recently Edtech Unicorn Startup Upgrad filed a 3 cr suit for trademark infringement against another Ed-tech startup Scaler for allegedly using the brand name ‘upGrad’ through Google Ads. The Delhi High Court has issued an ad-interim order in upGrad’s favor, instructing Scaler not to utilize upGrad’s registered marks and/or variations in relation to Google Ads Programs or any other keyword program.[2]
3. Flipkart, India’s most well-known e-commerce site, has been chastised by Marc Enterprises, an electric appliance maker, for designating its private label MarQ, which sounds close to the latter’s brand name. Later in M/s Marc Enterprises Pvt. Ltd. v. Flipkart India Pvt. Ltd. Additional District Judge of the Patiala House Courts passed a restraining order against the use of mark “MarQ”.[3]
4. In a trademark infringement case against GrabOnRent, the Delhi High Court found in favor of GrabOn. GrabOn, a Hyderabad-based discounts and bargains marketplace, clashed with GrabOnRent, a Bangalore-based rental platform, GrabOn accused the rental firm of profiting on its goodwill The discounts company received nasty evaluations meant for GrabOnRent, which has harmed the brand’s reputation. The Court ordered GrabOnRent to pay damages to GrabOn and include a statement on every webpage/mobile app noting that the rental platform has no affiliation with GrabOn. GrabOnRent was also ordered to remove goods using the trademark ‘GrabOnRent’.[4]
5. In recent years MakeMyTrip, one of India’s largest online travel aggregators, has been surprisingly famous to have filed several Infringement against brands like MakeMyYatra, MakeMyJourney, Make My Happy Journey, Pick My Trip and Superb My Trip, MakeMytravel, Makemyhappyjournery whose brand names and logos were confusingly similar to it. Such brands can create user confusion that may potentially jeopardized MakeMyTrip’s credibility.[5]

It can be noted that the above disputes are result of poor IP safeguards of any start-up. Thus it is imminent that start-ups must deliberate upon the Plan for IPR Compliances before rolling any idea or brand to the public else even a small suffix like “Pe” could cause huge IP litigations.  

Conclusion

Bringing a new start-up company to life and putting new products into the market may be an exciting time. Many entrepreneurs, on the other hand, are so focused on getting a new product or service to market that they neglect to take the essential procedures to safeguard the accompanying intellectual property. Failure to have an IP strategy can stifle a start-up’s valuation and subject it to the danger of third-party infringement. By developing an IP plan as part of their conception, creating an action plan to protect IP assets, including protecting confidential information, securing ownership rights to the IP, and ensuring properly drafted IP-related agreements, start-ups can protect and exploit their IP assets to build value and revenue.

[1] https://www.livemint.com/companies/news/delhi-hc-rejects-bharatpe-petitions-against-phonepe-s-pe-trademark-11636726750687.html

[2] https://inc42.com/buzz/scaler-denies-trademark-infringement-charges-of-upgrad/

[3] https://www.lexology.com/library/detail.aspx?g=eefd4e2f-60a0-4f3c-8235-a3bcf47f2802

[4] https://www.theweek.in/wire-updates/business/2019/09/17/pwr19–grabon.html

[5] https://www.theippress.com/2021/10/14/make-my-wars-says-makemytrip-a-glossary-of-ongoing-mmt-disputes/