The year 2016 is clearly the year for Startup Companies; various initiatives have been taken by the Indian government to encourage the boom in startups in India for instance, the Startup India initiative in January, introduction of special provisions for Startups in the Finance Act, 2016 followed by releasing amended Patent Rules which provide for certain advantages to Startups.Here, is a brief updates on all that one needs to know about the Startup initiatives India:
It is necessary that to be categorized as a startup, an entity should be a Private Limited Company or a Registered Partnership Firm or Limited Liability Partnership only. Furthermore, A startup entity has been defined as:
a. Where more than 5 years have not passed since its incorporation;
b. The turnover for any of the financial years did not exceed Rs. 25 crores; and
c. Where it is working towards innovation, development or commercialization of new products/ processes/ service driven technology/ IP.
In order to incentivize incorporation of startups in India the government has provided certain tax benefits such as Income Tax benefits through an exemption on profits in three (3) years out of the five (5) years and 20% tax exemption on Capital Gains made by the Venture Capitalists, approved by the government, by investing in a startup. In addition to this certain legal procedural leniencies have been allowed for startups for instance, a Startup will not be subject to any labor law inspection for three (3) years or a startup falling in the ‘white category’ industry has the right to self-certify environment law compliance, it will not require special certification via government agencies.
Since the purpose of encouraging startups is to provide room for creativity and growth of technology this inadvertently implies that there is a need to lower the cost for protecting IP rights in India. It is for this purpose that under the SIPP facilitators have been appointed to advise the startups on IP based queries on a pro-bono basis, assistance in filing and disposal of IP applications relating to patents, trademark and designs etc. The fees for such assistance given by the facilitator shall be borne by the Department of Industrial Policy and Promotion (DIPP) however; the statutory fees involved will have to be paid by the start-ups themselves. In addition to this, Startups can also apply for expedited examination of their Patent Application at a nominal rate thereby allowing them to push their patent application a little faster for an early grant of patents.
In order to avail the abovementioned special benefits granted to startups by the government it is necessary that such Company is engaged in developing new products or services and/or a significantly improved existing product or service or process that creates or adds value for customers or workflow. Once these criteria are met an entity can apply for being recognized as a startup and will have to submit one of the following documents to ascertain that its business idea is novel/involves ingenuity:
– Obtain recommendation from the DIPP certifying that the nature of business proposed is innovative (in the prescribed format):
– Should be supported and recommended by an Incubator recognized as such by the Government of India (in the prescribed format);
– Obtain funding from an Incubator/Angel Fund/Private Equity Fund that has been registered with SEBI and is authorized to endorse innovative nature of businesses;
– Be funded by GoI as part of any specified scheme to promote innovation; or
– Have a patent granted by the Indian Patent and Trademark Office in areas affiliated with the nature of business being promoted.
Keeping in mind the abovementioned incentives, it is a good time to implement innovative business ideas and/or invest in such business activities.
The formation of the European Union (EU) as an integrated regional bloc was considered as a major success towards regional integration and harmonization; however, the recent Brexit has proved otherwise. With the Brexit there are political as well as legal implications. The member countries of the EU had successfully established the Office for Harmonization in Internal Market (OHIM) by virtue of which a party could apply for Trade Mark and Design registration in all the member countries through one application however, with the possibility of U.K. no longer being a member of the EU it will imply that the community registration of trade mark and design might not be valid for claiming protection in U.K. The proprietors of such marks and designs will have to file separate applications in U.K for protection. The filing of separate application for registration in U.K. and the E.U will naturally have cost implications on the applicants, making the process a little more expensive than earlier. Furthermore, the injunction orders passed by the U.K. courts in the event of infringement may no longer have a pan-EU effect. The Indian trade mark and design applicants will have to carefully assess the situation and accordingly apply for separate application for protection with the Intellectual Property Office in U.K. Furthermore, for trade marks it will be necessary to show ‘use’ of the mark in U.K as well as EU use in either one might lead to application for revocation of registration of a mark in the territory where use cannot be shown.
The implications are less for patent applications since the European Patent Office was formed as a result of the European Patent Convention which is not a result of EU membership. However, there may be a delay in the implementation of Unified Patent Court which will be a common Court for examination of Patent applications in the EU members. The Protocol on the Provisional Application of the Agreement on the Unified Patent Court (UPC) has not yet come into effect; the designated Court for the UPC was situated in London however as an after effect of Brexit the Court will have to be relocated to a member country. This will require the approval and ratification of other member countries thereby delaying the implementation of the UPC. If an Indian entity/person has to file a patent infringement action against an infringing entity in EU, separate suits will have to be filed in U.K. and E.U. thereby considerably increasing expenses.
In the light of the Brexit it is necessary to note that there will be a transition phase of almost 2 years for implementing the changes. It will also be beneficial if the IP laws in U.K. continue to be in line with the EU laws and regulations thereby providing for uniformity of procedure for the applicants.
The Brexit has led to uncertainty therefore; the IP owners should assess the situation and seek maximum protection for their IP rights.
This circular is to inform you that the Department of Industrial Policy and Promotion has released Draft Trademark Rules in relation to the Trade Mark Act, 1999, which are currently open for public review. The Draft rules propose a substantial increase in the costs of renewal fees and filing fee for trademarks. The increased fees are likely to come into effect at any time in the coming 2-4 months. To avail the benefit of lower fees (i.e. the existing rates), we recommend that:
1. Requests for renewal of trademarks which are due in 2016 be made as soon as possible;
2. The proprietors who are considering filing new trademark applications should also instruct us to file these applications immediately; and
3. The increase in official fees will also be applicable to cases wherein we have provided quotations and final instructions are pending.
The draft rules may come into force suddenly without any further notice. In case you need any clarification in this regards please feel free to contact:
R K Dewan & Co.,
+20 6687 1200
+20 2565 4455