This article has been written by Heamchand D, an advocate enrolled in the Bar Council of Tamil Nadu and Puducherry, pursuing the Diploma in IPR: Media and Entertainment Laws Course from LawSikho, and edited by Koushik Chittella. 

Introduction

World Intellectual Property Organisation, or WIPO, is an international platform for information, collaboration, services, and policies related to intellectual property that was founded in 1967. The mission of the WIPO is to lead the development of a balanced and effective international property (IP) system that enables innovation and creativity. The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement is a multilateral agreement on intellectual property, administered by the World Trade Organisation (WTO).

Intellectual Property: meaning

It is an intangible property that comes into existence through human intellect. Intellectual property refers to the creations of the mind or the products of the human intellect. Such as inventions, the creation of literary works, artistic works, dramatic works & musical works, sound recordings, trademark logos, service marks, and industrial designs used in trade. The definition, as per the WIPO, is that intellectual property refers to the creations of the mind, inventions, literary and artistic works, designs, symbols, names, and images used in commerce. It is divided into two categories:

1. Industrial Property and
2. Copyright and neighbouring rights.

Intellectual property is an intangible property that comes into existence through human intellect. Such creations & inventions are like literary and artistic works, designs, and marks used in commerce that are protected under copyrights. Industrial property is classified as patents, trademarks, and industrial designs protected by the legislation of the Patents Act, the Trademarks Act, and the Designs Act, which enable the inventor to earn monetary benefits and to prevent infringement. The creators and inventors are thus allowed to benefit from their creations. These are the legal rights governing the use of intellectual property.

Types of IP rights

The various types of IP are:

• Copyrights,
• Patent,
• Trademark,
• Designs,
• Geographical Indications, and
• Trade Secrets.

These intellectual property rights are governed by Intellectual Property laws such as

1. Copyrights Act, 1957;
2. Patents Act, 1970;
3. Trademarks Act, 1999;
4. Designs Act, 2000;
5. Geographical Indications of Goods Act, 1999.

Purpose of Intellectual Property Rights

• To protect the literary, musical, dramatic, and artistic works of the author and also the software algorithms of the developers. Copyright protects the original works of authorship, such as music, books, and artwork, under the Copyrights Act, 1957.
• To protect the patentability of inventions, innovation by the inventor that has industrial application, novelty, uniqueness, and stability in its characterization is protected under the Patents Act, 1970.
• To protect the companies that use their logos, names, and characters in the market to provide better goods and services to consumers, they are protected under trademark protection. Trademarks protect words, designs, or symbols that identify a product or service under the Trademarks Act, 1999.
• To protect the designs and shapes of the ornaments, a combination of lines, colours, configurations, and patterns that are in 2D or 3D form or in both forms is protected under the Designs Act, 2000.
• Trade secrets include confidential and proprietary information such as algorithms, customer lists, and manufacturing processes. Maintaining the secrecy of such information is crucial for tech startups. Trade secrets protect confidential information from being disclosed to the public.

All these above-mentioned protections are intended to monetize the creation of inventions and prevent infringement by others. That is the main purpose of the development of IP. Most vitally, digital technology-based inventions and innovations are nowadays growing bigger. So, the protection of those inventions is a must to prevent infringement and to monetize the invention.

Importance of IP in digital technology based startups

Intellectual property rights provide startups with legal protection for their work, which helps them run their businesses successfully in the market. The proliferation of digital technologies has led to a surge in the number of tech-based start-ups worldwide focusing on creative innovations in products, goods, and services. Such startups must face unique challenges related to IP, given the rapid pace of innovations, global competition, and the need to protect IP. The other important pointers here are:

• In a competitive marketplace, protection by IP enables startups to preserve and exercise unique and differentiated products or services. Here, one of the important factors for a startup is to keep up with their innovative steps through this protection. According to studies, 39% of the startups have patents in AI technology, and they receive 56% of the overall funding. Past studies have established that startups with registered IPs are most likely to receive funding for product commercialization. It can guide the IP strategy of a startup as well as impact investment decisions and valuable considerations. 
• IP also stands as a beacon of importance in the captivating world of start-up valuation. IP protections help digital technology-based startups develop and maintain their potential value in the market and amplify their allure to investors and stakeholders.
• For market expansion, protected IP can be used to enter new markets and expand a startup’s reach, as it reduces the risk of limitation.
• Competitive Edge: IP protection gives tech startups a competitive edge by preventing others from copying their innovations. This exclusivity can help attract investors and partners.
• Revenue Generation: IP can be monetized through licencing or selling rights to third parties. Tech startups can generate income from their IP assets.
• Attracting Investment: Investors are more likely to support startups with well-protected IP as it demonstrates a commitment to long-term success and potential returns. 

Protecting Innovations with patents

Patents grant the holder an exclusive right, which is for a limited period. This right prevents others from using, making, selling, offering for sale, or importing the invention that was patented. Hence, it serves as a defensive mechanism against infringement by competitors. The purpose of patent protection for digital technology-based startups is to protect their inventions by patenting them by filing a patent application with the Patent Office 20 years from the date of application. To secure funds and investments. Protected under the Patents Act, 1970. Patent protection for digital technology-based startups can enhance a startup’s valuation, serving as a tangible proof of the innovative capabilities inherent in the organisation. They demonstrate to investors and potential acquirers that startups have a unique, defensible technological asset that enhances the startup’s investment and generates revenue through licencing.

• In H. Lundbeck A/S vs. Symed Labs Limited (2021), the court upheld that startups need to understand patent laws and protect their innovative technologies through patents.
• In Ericsson vs. Xiaomi in 2016, Ericsson filed a lawsuit against Xiaomi in India for allegedly infringing on 8 standard-essential patents (SEPs). This case highlights how patent holders like Ericsson leverage the legal system to demand significant royalties and licencing fees for the use of their SEPs, underscoring the complexities around patent disputes and licencing agreements in the technology industry

Securing a competitive advantage with trademark

The trademark protection of the company logos, marks, and brand name has increased the potential of the products and services in the competitive market. Digital tech-based startup company logos, marks, and shapes are all protected under the Trademarks Act. The trademark protection tenure is 10 years. After the licence period is completed, you could renew the same mark in the registry. A trademark protects the start-up’s brand identity and brand value to capture the marker’s reputation and become an intangible asset that captures potential earnings. To increase the investments, brand valuation, and quality of the products and services you offer, distinguish their products or services from competitors, and assure the public of the consistent quality they expect from your startup, help build trust.

In Satyam Infoway Ltd. v. Sifynet Solutions Pvt. Ltd. (2004), the Supreme Court held that domain names are subject to trademark law and can be protected against passing off, even though there was no specific law governing domain names in India at the time.

Safeguarding Creativity with Copyright

To ensure the copyright protection of the literary and artistic work of the company and prevent unauthorised use, the startup must decide to copyright the original works of the company. Protected under the Copyrights Act, 1957. Protection lasts for the life of the author and an additional 60 years. They protect original creative works, including software code, user interfaces, and documentation. Technology-based startups can protect their software, codes, and algorithms to prevent revenue loss, earn investment, and demonstrate the protection before investors obtain the investments. 

1) In Sameer Wadekar & Anr v. Netflix Entertainment Services Pvt. Ltd. & Ors (2020), this case involved copyright infringement in the context of a web series. The court upheld the rights of the creators and ruled in favour of the plaintiffs.

Secure funding and investment 

The role of IP in startup valuation extends beyond mere perception and desirability. These assets serve as invaluable indicators of a startup’s ability to survive in the market, secure long-term success, and secure funds and investments. And also defend its market position as a barrier to potential competitors. The presence of patents, trademarks, copyrights, and trade secrets signals the investor to invest in its secure strategic partnerships and fulfil its vision.

Maximising trade secrets

Safeguarding trade secrets requires implementing strict security protocols and non-disclosure agreements (NDAs) with employees, contractors, and partners. Regular training and awareness programmes can help maintain confidentiality. Any design, formula, procedure, or other intellectual property that is confidential and lends a business a competitive edge against its competitors is referred to as a trade secret. While its importance is often overlooked as intellectual property, trade secrets are crucial information that contributes to a start-up’s success and valuation.

An IP portfolio will be of immense value only if it’s perfectly aligned with assets that bring the most value to a business. For example, patents are the most important assets of a tech company, while trademarks are the most important IP of a popular consumer brand. Trade secrets will likely be the most valuable intellectual property of companies that deal mostly with data. Intellectual property serves as a valuable asset for start-ups because it protects the business against imitators, paves the way for numerous growth opportunities, and builds confidence in investors.

Digital technology-based startups like AI and OTT

Technologies such as artificial intelligence (AI), blockchain, and quantum computing are changing the way we approach intellectual property. It has the potential to revolutionise patent searches and IP analytics, making the process more accurate and efficient. Blockchain technology offers new ways to prove the authorship and ownership of a specific intellectual property, enabling transparent and tamper-proof record-keeping. Navigating these issues will be a key task for startups in the digital-tech industry.

• In Star India Pvt Ltd v. Moviestrunk.com 2020, the court addressed copyright infringement concerning the online streaming of TV shows. Star India’s rights were upheld, emphasising the need to protect digital content.
• In Sameer Wadekar & Anr v. Netflix Entertainment Services Pvt. Ltd. & ORS 2020, this case involved copyright infringement in the context of a web series. The court upheld the rights of the creators and ruled in favour of the plaintiffs.

Challenges in IP for Generative AI

Navigating the IP landscape in the world of generative AI is complex due to the dynamic nature of the technology and the evolving legal framework regarding it. How can AI-generated creations be patented? Who owns the rights to an AI-generated work? and how to attribute authorship in the case of autonomous content creation. These are the questions that remain unanswered. Startups should work closely with IP attorneys who specialise in AI-related matters to address these challenges effectively. The need for protecting the IP rights of AI is generative.

• To protect inventions & innovations,
• A defensive strategy to prevent infringement;
• Licencing opportunity & competitive advantage
• To raise funds for investment.

Decisions regarding IP strategy

The key decisions here would be as follows:

Patenting v. Trade Secret Protection

As digital technology-based start-ups emerge as AI startups, OTT companies must decide whether to protect their brand, logos, goods, services, and code under patents or trade secrets. Patent protection is a strong legal protection and expensive, whereas trade secret protection is less expensive and not that much stronger in legal position. As well as bringing investors into the market for trade.

Patent strategy for startups involves identifying patentable assets, conducting a patent search, prioritising patent applications, and considering patent provisions to protect innovations and trade secrets from infringers. IP strategy for the companies to protect their inventions and their trade secrets to become successful in the market without any infringements or any claim made against you for infringement. Intellectual property protection, trademark protection, patent protection, and copyright protection are the best IP strategies to protect the invention and the products of goods and services.

Licencing v. Enforcement

The startups must decide whether to licence their technologies or enforce their IP rights through legal action based on several factors, such as the valuation of the assets. It depends on the assets of the startups for licencing and to enforce the rights of the assets with the larger companies to make funding and investments. Based on the licence, only investors come forward to invest. None the less, no investor would like to invest in such companies. licencing the start-up companies based upon the IP involved, for example, if the patent invention startups like Pharma companies & to protect the marks, logos, and names of the products, goods, and services of the startups under trademark licencing and copyright licencing of the digital technology content made the company get licencing from the registry. These are the licencing requirements to encourage more investments and development in the market and to prevent revenue loss or IP infringement.

Competition v. Collaboration

These startups must decide whether to compete individually in the market or to collaborate with the companies; that depends on the nature of the technologies. The competition must be large to become competitive in the market. Startups like AI must compete individually with others. For instance, Chat GPT, Bing, Perplexity, and Jenni AI. OTT companies are also similar to AI companies, either competing individually or collaborating with other OTT companies. 

Dynamics of IP management in Startups

Identification and protection of the assets, including patents, copyright, trademarks, and trade secrets. And valuation of their IP assets. They monetize their IP rights against infringements and enforce the rights they claim to defend against infringements. And collaborate with the companies and strategies to be developed by the startups to attain their market position and goals. This involves providing training in IP management. To protect the digital technology-based startups, the licencing of the startups, and the dynamics of the IP strategy to pull the market value of the products and services. 

Conclusion

The discussion combined the most important insights from these studies to develop a framework for ventures, technologies, and IP strategies to develop in a digital economy. These IP protections are made for digital technology-based startups to support them in becoming successful marketing competitors, at the economic level of the startups. For tech startups, intellectual property protection isn’t just a legal necessity but a strategic imperative. Safeguarding innovations through patents, copyrights, trademarks, and trade secrets is crucial for long-term success. By implementing a robust IP protection strategy, tech startups can secure their competitive edge, attract investment, and position themselves for sustained growth in a highly competitive landscape. Furthermore, engaging legal professionals with expertise in intellectual property can be an invaluable asset for startups. IP forms the backbone of startups, safeguarding innovative ideas through patents, trademarks, copyrights, and designs. By using this digital technology, startups can protect their assets and unlock new growth opportunities, paving the way for their success in the dynamic, competitive market. 

References

1. https://www.linkedin.com/pulse/role-intellectual-property-startup-valuationmorgan%20smith?utm_source=share&utm_medium=member_android&utm_campaign=share_via
2. https://economictimes.indiatimes.com/tech/technology/generative-ai-startups-defy-funding-winter-raise-record-10-billion-in-2023/articleshow/105905953.cms
3. https://research.chalmers.se/publication/513863/file/513863_Fulltext.pdf?fbclid=IwAR2Sw13gBd8lPAxO2kGTWvryGW6Q0yFkewE7ehzY1Esvo1hpAQi6TOy5pg.
4. https://www.pitchdrive.com/academy/ip-protection-for-startups-why-and-how-to-safeguard-your-innovation#anchor-1
5. https://appmaster.io/blog/the-role-of-intellectual-property
6. https://appmaster.io/blog/the-role-of-intellectual-property#patents-in-startups
7. https://www.financialexpress.com/business/sme/cafe-sme/startups-investing-in-generative-ai-must-prioritize-ip-rights-to-attract-investment-gain-a-competitive-edge/3273377/
8. https://www.linkedin.com/pulse/intellectual-property-rights-protection-startups-karan-bhutani
9. https://ipindia.gov.in/writereaddata/images/pdf/startups_IPRFacilitation_22April2016.pdf
10. https://www.wipo.int/export/sites/www/sme/en/documents/pdf/ip_panorama_12_learning_points.pdf
11. https://www.wipo.int/copyright/en/activities/copyright_licencing.html