IP in Start-up ECOSYSTEM
In this age of innovation and technology, Intellectual Property (IP) is an essential element for an organization to sustain and flourish over long periods of time. This is particularly applicable for organizations which rely heavily on R&D to develop technology based solutions for existing problems, and the biotech startup community is no different.
Gone are the days when exploitation of IP used to be limited to large organizations with deep pockets. Today, the technology driven economies have made IP integral and almost synonymous to ‘valuation’ of a start-up or MSME. Many acquisitions of start-ups in the recent past where the patented technology was at the core of the deal, have corroborated this philosophy.
As is often the case with start-ups, funding and sustainability become major hurdles that need to be timely overcome for them to stay alive in the game. The challenge is amplified multi-fold for a biotech start-up, where the lab-to-market incubation time is relatively long. This means that for the start-up to continue its quest for success, funding must keep coming in regularly, which in-turn means keeping the investors happy.
While the funding agencies in the recent times have widened their arms to the start-up community, the ROI expectations are also higher than ever before. Investors are on a constant look out for a sense of security to confirm that every dollar is well spent, and that the organization believes in its technology, is looking at safeguarding its interests and has the intent to be aggressive against competition emulating them. IP protection provides that comfort.
Though broadly IP encompasses trademarks, copyrights, industrial design rights, and trade secrets, patents form the most significant chunk for tech-driven industries. Simply put, patents provide an innovator a monopoly over a technological invention in a country, typically for 20 years, and act as exclusionary rights that prevent a third party from making, using, selling or importing the patented innovation in a geography. The idea is to incentivize innovation and advancement
of technology by recognizing and rewarding those who innovate.
Although a start-up may have several brilliant ideas in their kitty, one needs to be thoughtful in planning an IP portfolio around the ones which are realistically transformable into proof-of-concept. It is crucial that the ideas, concepts, findings and the resulting innovation from important projects is safe from the hands of imitators. With a high percentage of revenues put back into R&D, shielding valuable research is critical. Losing this knowledge to a competitor can spell doomsday for a start-up.
It is therefore imperative that an organization’s culture sees IP as a key tool that helps drive the business, attract the right talent and create a financial pool required to withstand the obstacles of time. But the buck should not stop here. What is equally important is to ensure that the overall IP strategy is also in sync with the business aspirations of the organization. Tactical planning and IP must go hand in hand to make sure that the organization is covered from all angles. This for example includes understanding the products or services which are core to the business, potential markets for the organization, kind of IP required per innovation, requirement of IP policies within the organization, overcoming challenges that may be posed by a competitor’s presence or their IP in such markets, position towards potential infringer, budgetary considerations, etc.
As procurement and enforcement of IP is geographically limited, strategically, organizations can look at targeting the right jurisdiction at the right time for the right innovation. This could have direct implications on the start-up’s ability to commercialize the invention. For example, while on one hand organizations may need to explore markets outside for inventions which are not patent eligible in India, on the other, sometimes the end-user costing makes a product non-viable for Indian consumers, despite of it being fit for patenting. In other instances, securing an early priority date may at times become vital to protect movement of information with people transitioning out of the organization; while sometimes it is caused by the need of data sharing with regulatory authorities, potential investors or commercial partners.
Though the initial phase of IP procurement could upset the financial planning for a start-up, the investment is well worth and generally reaps long term benefits. However, what they must keep in mind to ease their burden is that while the overall criteria for seeking IP rights remain similar, some countries provide advantages for organizations that fall within certain strata. For example, the United States provides special benefits for organizations having less than 500 employees and less than 4 previous US patent applications in their name. From an Indian context, start-ups are entitled to 80% reduction in official fees for patent applications, and option of faster prosecution essentially leading to a much quicker grant of patent. Further, where costing is an immediate constraint, umbrella applications such as the PCT can also be explored which allows an applicant to delay the costs and also gauge the merit of the innovation based on the feedback from the PCT authorities.
Further, from a holistic standpoint, it is equally worthwhile for start-ups to also consider compliance with the prevalent policies and enactments that are in place, and which may have bearing on procurement or enforcement of IP rights. Critical amongst these from biotech perspective are the provisions from National Biodiversity Act, which regulate access and usage of biological material obtained from India. Notably, the Act not only keeps a tab on biological material involved in innovations for which IP is being procured, but also in any commercial activity by an organization. On the other hand, regulations like the Competition Act are aimed at preventing unfair practices and dominant approach by organizations, which may be a result of poor IP enforcement, ownership & licensing issues, etc.
Start-ups also need to understand that at times, they may not possess the infrastructure, expertise or financing required for commercial exploitation of their technology. In such cases, they would need to partner with suitable players from the industry to take the innovation out of their labs and into the market. This partnership will in-turn form the source of revenue generation for their sustenance, and therefore safeguarding one’s interests in terms of legal ownership of the IP becomes critical.
Having said the above and while it is important to protect oneself, due regard must also be given to others’ rights. Since it is crucial to not step on someone else’s IP, a start-up must also consider carrying out a ‘freedom to operate’ analysis to ensure that a commercial act by the organization does not infringe upon a third party’s IP rights, be it patents, or otherwise. One sided focus on IP procurement and negligence on existing IPs could be suicidal. Moreover, such analysis of existing rights could also turn out to be a stimulus for newer ideas, concepts, improvements, etc.