02 Nov 2016

Importance of Intellectual Property for SMEs and new-age startups

In today’s globalised economy, innovation is pivotal for developing quality products and gain competitiveness in the marketplace. Globalization and outsourcing has increased pressure on organizations to improve efficiency and effectiveness. Large corporates need to innovate to differentiate their product from the competition. Innovation has led to significant improvements the way businesses operate and improve productivity, thus has been the major growth driver of the economy. Thus, it is crucial to develop and protect intellectual capital in developing countries to further drive innovation and development. Intellectual property protection is crucial for innovation. From product development to product design, raising financial resources, developing competitive strategy, intellectual property plays a crucial role in protecting innovations. In a knowledge-based and innovation-based economy, a stronger IPR regime not only helps in wealth creation but also reward innovators for their inventions. Researchers and innovators are the backbone for developments that takes place in the industrial, technological, and pharmaceutical sectors. Therefore, legal protection of the innovations has to be sought for the progress and prosperity of the economy. Intellectual property plays an important role in development of businesses across sectors.

Intellectual property is defined as any product of the human intellect. In the fiercely competitive market, companies are scrutinizing every investment and maximizing returns on investment. Large corporates and new-age startups need to understand the importance of intellectual property in maintaining exclusivity of their inventions. They are also recognizing the importance of comprehensive intellectual property portfolio that can be of substantial value. SMEs and startups are gearing up to understand the value of intellectual property, especially patents. Patents help in protecting the innovation and exclude others to make, use, offer to sell, and manufacture for a period of 20 years. Startups need to develop their patent portfolio that can be used for numerous business objectives such as competitive edge, protecting market share, generating revenue through licensing and cross-licensing, and research and development efforts. Patents prevent competitors to develop the patented technology or market it to earn revenue. Many startups are developing new technologies and have to obtain the patent to protect it from potential infringers. To obtain the patent for the pioneering technology, they have to develop a patent portfolio strategy that is in line with business objectives. The patent portfolio strategy varies from one company to another. Large corporates having huge financial resources often develop and manage a patent portfolio and inventors in the companies are incentivized to maximize the number of patents. As a result, there has been an increase in the number of patents filed by the company but has also resulted in increased number of low-value patents that affect the patent portfolio. For large corporates, patents help in providing a barrier against competitors to develop a particular technology or enter the market.

For new-age startups and SMEs, developing a patent portfolio can be cumbersome and expensive. However, they need to understand patent strategies at an early stage in order to develop a cost-effective patent strategy. They also need to focus on quality patents that can be used for both defensive and offensive purposes and align their patent strategy with business objectives. Startups should focus on obtaining patent on key products and technologies that can add value and generate revenues streams. A patent strategy involves a development and deployment phase. The development phase includes identifying key products and technologies that can be patented whereas the deployment phase includes competition mapping, licensing opportunities, and patent litigation. Moreover, startups need to focus more on development phase as compared to deployment phase. The development phase involves formulation of business goals and patent strategy in order to develop a patent portfolio and realize the true potential of patents in the future. The evaluation stage involves the mining and analyzing the intellectual assets of the company including technology, processes, products, services, and business methods. The startups can decide whether the intellectual assets can be protected by patent or any other trade protection measures. They also have to ensure that the patent strategy has to be in line with the business goals and safeguard their innovations against competitors. This also involves indentifying employees engaged in development of intellectual property and gathering company’s intellectual property such as license agreements, non-disclosure and confidentiality agreements. This helps the company to identify trade secrets, and develop and manage patent strategy and other intellectual property issues. Such issues help startups to minimize the patent-related expenditure and manage their patent portfolio effectively. It also becomes easier for businesses to evaluate the intellectual property assets owned by the company and the best method to protect it. This stage also determines whether obtaining a patent protection in other countries is prudent or filing the patent application in a particular country as they are territorial in nature. Therefore, planning this at an early stage can help businesses to minimize huge costs associated with patent filing. This phase also provide an opportunity for startups and SMEs to determine whether there is a need to conduct a patentability search for the invention to find out whether any product or processes include any intellectual asset that infringes third part rights. This can also help startups to identify strengths in their patent portfolio and white spaces vis-à-vis the competitors that have already obtain patent protection. The next phase is the procurement phase wherein startups build its patent portfolio in order to protect it from potential infringers. The patents help startups and SMEs to block competitors from entering the technology or market. Moreover, they protect the core technologies and avoid any infringement from third party.

As many startups are bootstrapped, the cost of obtaining a patent can be major concern. Therefore, many startups review their key innovations and focus on obtaining patents on core technologies. The evaluation stage helps in identifying the subject matter of patent claims and the need to conduct a prior art search. The businesses should understand the risks associated and make appropriate strategic business decisions accordingly. The business decision relates to whether to file a provisional patent application or non-provisional patent application wherein the latter describes the innovation at length and includes all legal formalities while the former only describes the innovation. As technology and market progresses over time, the businesses must assess whether the provisional application can provide sufficient protection for further development and innovation.

To sum up, the startups and SMEs need to revisit their patent strategies and evaluate the real value of their patents, and further enhance their patent portfolio. They need to understand the competitive landscape and study new trends and technologies and conduct white space analysis in order to file more patents in the particular technology area. The businesses can also consider licensing and cross-licensing of the patented technology to other companies in order to earn more revenues. The startups can acquire patents of another company to strengthen its patent portfolio and sue third parties for infringing their patents which is also known as litigation. As the company scales up, they should focus on developing an effective patent portfolio to safeguard their innovations and use it for purpose of commercialization.

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