MSMEs must protect their ideas; investment in IP protection is asset not expense

On September 16, 2019, the government announced a reduction in fee for the filing of IPRs by MSME enterprises.

Intellectual Property Rights (IPRs) are important instruments to foster a culture of innovation. IPRs include trademarks, copyrights, patents, geographical indication and industrial designs and protecting them enhances the competitiveness of Micro, Small & Medium Enterprises (MSMEs). Conventionally enterprises relied upon physical assets for their growth but over the years, increasingly it is the IPRs which determine the growth and bottom line of the enterprises. To cite an example acquisition of Motorola by Google for $12.5 billion was primarily for its patent portfolio of about 24,500 patents. Subsequently, Google retained the patent portfolio but sold the brand and the physical assets of Motorola to Lenovo for US$ 3 billion. This clearly shows the importance of protecting IPRs. Value of brand like Coca-cola is much more than its assets.

IPRs essentially protect brands, inventions, designs, creative, and literary works from being copied and commercially exploited by third parties. They grant exclusivity to the creators or owners of IPRs to commercially exploit their works. The exclusivity and potential gains by commercial exploitation of the IPRs act as an incentive to promote innovation in various fields. IPR protection grants legal rights in favour of the rights owner who may restrain third parties for using his IPRs and also claim damages.

MSME sector is one of the largest contributors to the Indian economy, however, awareness about IPRs is lacking in Indian MSMEs. The Indian government has taken various steps for promoting knowledge and facilitating IPR protection amongst MSMEs including various amendments in the laws, modernising IPR Offices and digitisation for filing applications for protecting IPRs. Intellectual Property Awareness Scheme was launched by the Cell for IPR Promotion and Management (CIPAM) in association with the Department of Industrial Policy and Promotion to build and promote IP culture in the country with the objective to enhance the awareness of IPR in the MSME Sector by conducting seminars/workshops covering topics like international filing procedures, impact of counterfeiting and piracy, promote government schemes for filing of IPRs and how to use IPR as an asset to grow business. The Development Commissioner (MSME) had issued guidelines on ‘Implementation of the Scheme Building Awareness on Intellectual Property Rights for MSMEs’.

Also read: Digital economy: Make digital highway attractive for MSMEs

On September 16, 2019, the government announced a reduction in fee for the filing of IPRs by MSME enterprises. The reduction amounted to about 60 per cent in cases of patents to 50 per cent for designs. The official fees for trademark applications are already reduced by 50 per cent for MSME enterprises. The intent of government policy is to encourage more and more MSMEs to protect their IPRs. Apart from the proposed reduction, the Ministry had also provided a new Scheme under which the MSMEs would be provided financial assistance for filing applications for IPR protection amounting to up to Rs 1 lakh for patents (domestic), up to Rs 5 lakh for patents (international), up to Rs 10,000 for trademark and up to Rs 2 lakh for GI registration.

In another significant step taken by the Indian government is the formalisation of Bilateral Patent Prosecution Highway Programme. The programme would help in reduction in disposal time and pendency of patent applications, consistency in quality of granted patents and an opportunity for Indian inventors including the MSMEs to get an accelerated examination of their patent applications. For the time being, the government has teamed up with the Japanese Patent Office for a pilot run of three years, so the MSMEs can take benefits of the same and get their patents registered in Japan at a much-accelerated rate than before. Government has also launched “L2Pro India” programme which stands for ‘Learn to Protect, Secure and Maximize Your Innovation’ on IPRs which has been developed by CIPAM-DPIIT in collaboration with Qualcomm and National Law University (NLU), Delhi. The said platform will help and enable innovators and MSMEs to understand IPRs for their ownership and protection and integrate IP into business models to maximise their commercial benefit. L2Pro has been successfully implemented in Germany, U.K, Italy, and France and has now been customized for India, to promote innovation by MSMEs and startups.

Government of India has taken significant steps to educate and encourage MSMEs to protect their IPRs. It is important that MSMEs view IPR protection as an investment to create an asset rather than an expense. Creation of an IP portfolio would not only make an enterprise more competitive but will also enhance its valuation for future merger and acquisitions.

(Siddharth Mahajan is the Partner at Athena Legal. Views expressed are the author’s own.)