IP in Start-up ECOSYS­TEM

BioSpectrum (Asia) - - Content - Durgesh Mukharya Part­ner, K&S Part­ners, In­dia

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.

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