by Aggarwals Associates | Nov 10, 2022 | General
Intellectual property rights (IPRs) are developing as a strategic business tool for every company organisation looking to improve its industrial competitiveness. Start-ups, with limited resources and staff, can only survive in this highly competitive world by focusing on continual growth and development-oriented innovations; consequently, it is critical that they preserve their IPRs. The Start-ups Intellectual Property Protection Scheme (SIPP) is intended to assist the protection of innovative and interested Start-ups’ Patents, Trademarks, and Designs.
The SIPP strives to raise IPR knowledge and adoption among start-ups. Scheme is geared toward nurturing and mentoring new and developing technologies among start-ups, as well as assisting them in protecting and commercialising them through access to high-quality IP services and resources.
It is marked here that a start-up can claim a 50% reduction in the official fling fee of a trademark application in India under the Trademark Rules, 2017. The goal of this reduction is to relieve small enterprises of the additional expenditure of legal compliances such as trademark registrations.
Who can apply?
SIPP is open to any start-up that has been accredited by the Start-up Certification Board as having an innovative business. In this context, a start-up is defined as an entity that is incorporated or registered in India not prior to five years, with an annual turnover of less than INR 25 crores in the previous fiscal year, and is working toward the innovation, development, deployment, or commercialization of new products, processes, or services driven by technology or intellectual property.
However, such an entity is not formed by dividing up or reconstructing an existing firm. Moreover, a firm ceases to be a start-up if its preceding fiscal year’s turnover exceeds INR 25 crores or it has completed 5 years from the date of incorporation. Furthermore, a start-up will be eligible for the benefits of this plan only when it has been certified by the Start-up Certification Board.
Facilitation of Trademark Registration: –
The Start-up India Action Plan proposes the appointment of a panel of facilitators to assist in the submission of trademark registration applications. The facilitators will assist in advising, filing, and disposing of the intellectual property registration relating to trademark including appearing on behalf of Start-ups at hearings and contesting opposition by other parties, if any, until the IPR application is finally disposed of.
Why Trademark registration is important for start-ups?
Legal Protection: – It aids in the protection of the company’s intellectual property. If someone uses company’s trademark, company has the right to sue them.
Increases the firm’s profitability: – Buyers are frequently enticed to purchase things because of the appealing design of the brand or coloured lettering. The significance of Professional Brand Logo Designing is crucial, particularly in today’s digital age.
Increased brand image and goodwill: – The Company can improve popularity by portraying the distinctive aspects of the product through the creation of an appealing logo, graphic, or text.
To cap it all, start-ups have grown dramatically in India in recent years, thanks to the incentives provided by numerous government schemes, initiatives, and laws. Reducing trademark registration costs is another important method in which the government has successfully lowered the burden of cost and expenses for such small and emerging firms, in addition to protecting their intellectual rights from abuse and imitation. Not only does trademark registration give Start-ups with protection, but it also allows them to sue third parties who violate their intellectual property rights. As a result, we strongly advise start-ups to obtain Trademarks and other intellectual property registrations at the government’s reduced rate.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali
by Aggarwals Associates | Nov 7, 2022 | General
Start-ups comes with plenty of difficulties by its own as starting fresh means dealing with problem to secure a good place in the market with effective productivity. Government of India is also working in “Make in India” plans for the development and growth of nation and gives a lot subsidy and relaxation in order to promote the entrepreneurship skills in the youth of India.
Employees are the most important part of any organisation and most importantly for start-ups that are in a keen need of good employees and it is essential to retain them in the business, the ESOPs are one of the way to keep the talented employees satisfied and retained them with the organisation for long time.
What is ESOPs?
In simple terms it means giving the employees ownership rights in the organisation by allowing them to purchase corporate shares at reduced price. This works as a motivation to the employees to work harder in the organisation and it is the prime requirement of any start-up i.e. hard work with passion. It usually included in retirement and employee benefit plan where employees own their own interest. They are offered as compensatory benefits to the employees to boost the productivity of start-ups.
How much amount of ESOP can be dispersed among the employees?
Although it is the difficult choice for the founder of start-up to determine the exact share, which is to be distributed among employees. To offer ESOPs the founder needs to create a pool by contributing their own equity in a definite proportion. The distribution of ESOP will be inversely proportional to the growth of the organisation. At initial stage the focus of the start-ups are on expansion and growth. Resultantly, there is a need to keep the talented employees in the organisation. With the growth of the company the size of ESOP pool will shrink and be replaced by the cash rewards and other monetary or non-monetary benefits. Astoundingly, it comes into mind that why this policy cannot be implemented at the initial stage inspite of ESOP pool and giving ownership rights to the employees? The answer to this question is very obvious that there is a lack of capital and cash flow in the market at foundation stage and being the major factor in growth of company the talented human capital cannot be sacrificed.
How to make-up ESOP?
To begin, the company needs to establish employee stock ownership plan as follows:
Vesting – The stock should be distributed in progressive manner. The general vesting period is three to four years.
Establish ESOP Pool- The Company can initially start with the less amount of equity i.e. 5-10%, and can increase with the growth of the company or according to the need of human power. It is suggested that it should be added in the shareholder agreement with brief facts. To avoid any hassle in the future it is recommended that agreement must be drafted by the legal attorney or under the guidance of legal advisor.
Cliff Period- It refers to the period after which an employee becomes fully vested. In general, 12 months vesting period is practiced for ESOP vesting.
Valuation Certification: The Company must create valuation report as it is essential in accounting and auditing purpose. Additionally, the company needs to mention the striking price of the share in the said report.
Approval from Directors: As soon the ESOP scheme is prepared, it needs to be presented before the Director for final approval. As the scheme is not approved at early stage, the company is not able to provide shares to the early employee at promised price.
Shareholder’s Consent: According to the provisions of Companies Act, 2013 (Act), the consent of the shareholders is mandatory as mentioned in the extraordinary general meeting which results in addition of Section 62(1)(B) of the Act. In ambit of 30 days from the board and shareholder resolution, the company with the help of designated member have to file them with the registrar of company physically or electronically.
Initiate Distributing ESOP: After completing all the procedure and permission the company can start awarding their employees with the scheme.
The company needs to prepare the ESOP scheme for the growth of company and employees. This kind of motivation leads in great enthusiasm in employee and eventually helps in hard work and concentration. It can be concluded by studying the whole procedure that steps involved in preparing ESOP is complex and need due diligence to avoid future consequences therefore, it is advisable to seek legal advice on the various stages.
-Surbhi Singla
Associate at Aggarwals & Associates, Mohali.
by Aggarwals Associates | Nov 5, 2022 | General
Legal paperwork is essential to running any business since it prevents disputes and misconceptions about how things are done on a daily basis. Over the course of a company’s existence, legal documents also safeguard the rights of the owners. In the event of any disputes involving the corporate environment, they aid in maintaining responsibility and openness.
A plethora of corporate legal documents, including sale purchase agreements, employment agreements, and joint venture agreements, etc., are necessary when running a start-up. Over the course of a company’s lifetime, these agreements serve to safeguard the interests of the owners and the company while also helping to organise the workspace.
What are the essential agreements for start-ups?
Before starting a company or making plans to turn the start-up idea into reality, start-ups should consider entering the following essential agreements: –
Non-Disclosure Agreement: –
When dealing with any client or investor, a Non-Disclosure Agreement is the first document which is required to be entered into. The confidentiality of the business as well as that of the other party is maintained by means of these start-up documents. This Agreement is a not just limited to future customers or clients, but also an effective asset to keep the control on the employees. Moreover, it secures the ideas and intellectual property rights, and protecting the start-up.
Employment Agreement: –
To ensure the success of the start-up, it is essential to assemble the team. The justifications for why, as the business expands, it is required that correct contracts are in place for every new hire. As a company with a constrained initial manpower capacity, it might not appear crucial. However, it will go a long way toward helping the staff understand their values and what the business expects of them as an asset.
Shareholder’s Agreement: –
A Shareholder’s Agreement must be in place whenever the firm is ready to move forward with private financing from people or corporations, as the case may be. It is one of the most important start-up documents since it helps to identify the rights and obligations of these shareholders, as well as their ability to exercise these rights. These contracts are crucial because they outline the connection between a company’s shareholders and are important if a co-founder decides to leave the firm.
Strategic Alliance Agreement: –
The partners of a start-up may engage into Strategic Alliance Agreements with each other in order to decide on various tactics in advance and have a very clear purpose in the early stages of a firm.
Technology Lease Agreement: –
Initial resources for equipment or technology may be insufficient for start-ups. As a result, equipment or technology may be leased for a limited time in order to save money and redirect it in a more profitable way. Start-ups may consider engaging into proper Lease Agreements for this purpose.
Vendor-Supplier Agreement: –
Start-ups can enter into Vendor-Supplier Agreements for the delivery of raw materials of various types that are required to run the intended business. Start-ups can get into a Vendor-Supplier Agreement to obtain high-quality raw materials and to negotiate the price upfront to avoid future disagreements. The terms of such delivery and payment should be spelled out in the Agreement as clearly as feasible.
Contractor Agreement: –
Start-ups can save money and time by hiring contract workers or consultants. Accordingly, start-ups can sign into Contractor Agreements for contractual personnel who are hired for a specific purpose and/or for a limited time, particularly in regard to issues such as software. Such agreements are designed to ensure that the intellectual property and other trade secrets developed for the business entity are retained by the hiring party rather than the originator of such intellectual property.
To summarise, it is critical for a start-up to properly prepare a partnership agreement in the event of a joint venture in order to avoid future ambiguity. In terms of agreements with employees, such agreements should expressly and unequivocally define the parameters of such employment in terms of duration, remuneration, fringe benefits, if any, and similar information of a similar nature in order to avoid complications that could lead to complaints or litigation later on.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali
by Aggarwals Associates | Nov 5, 2022 | General
Over the past three decades, the high-technology-based Indian pharmaceutical business has experienced sustained expansion. The current market participants include some privately held owned Indian businesses that have seized a significant portion of the domestic pharmaceutical market as a result of variables including an advantageous government policies and the absence of much foreign competition. However, because of Indian economy’s liberalisation, Indian companies are being transformed as they start to exit domestic markets and prepare for international rivalry. Eventually, factors including protection of intellectual property are escalating in significance due to the rising recognition of the need to safeguarding the valuable investments in research and development.
Therefore, endeavours are being putting on in the nation to curb the issue of weak enforceability of existing intellectual property legislations, and the legislators are moving towards setting a patent regime, that is beneficial to technological advances and is in keeping with its universal commitments.
Laws governing patent in India:
It was in 1856, when the patent rights were first time introduced in India, and thereafter, in 1970, the Patent Act, 1970 (Patents Act), was enacted. In addition to this, India has also signed the Paris Convention for the Protection of Industrial Property, 1883, and the Patent Cooperation Treaty, 1970. According to the Patents Act, any invention which meets the criteria of originality, non-obviousness and usefulness can be the subject matter of a patent. For pharmaceuticals, in the case of substances intended for use or capable of being used as food, drugs, or, medicines, or substances produced by chemical processes, patents are granted only for the processes of manufacturing of such substances and not for the substances themselves. Therefore, as of now pharmaceutical products are not granted patent protection under the Indian law.
At earlier instance, under the Patents and Designs Act, 1911, India had a product patent regime for all inventions. Howbeit, with the enactment of new Patents Act, pharmaceuticals and agrochemical products have been excluded from eligibility for patents. Resultantly, absence of patent protection for pharmaceutical products had a significant effect on the pharmaceutical industry in India and resulted in the growth of substantial expertise in reverse manufacturing of drugs that are patentable as products throughout the industrialised globe but unprotectable in India.
As a result, the Indian pharmaceutical sector expanded quickly by creating less expensive copies of certain medications that were trademarked for the home market, ultimately acting aggressively entering the global market with generic medications when the global patents expired. Aside from that a number of protections are offered by the Patents Act, halt the misuse of patent rights and improve drug availability
Striking features of the Patents Act:
It is marked here that the processes or methods of manufacture of a substance intended to be used as food, or as a medicine or drug, can be patented for a period of seven years from the date of filing or five years from the date of sealing the patent, whichever is less. Nonetheless, patents relating to other inventions are granted for a period of 14 years from the date of filing the patent, except shown to be invalid.
Additionally, the Patents Act contains provisions relating to compulsory licensing. On completion of three years from the date of sealing the patent, any person intends to working in the patented invention may apply for a compulsory license with regard to the invention. Moreover, the Patents Act provides for ‘licences of right’, according to which the Central Government, after lapse of three years from the date of sealing of the patent, can apply for an order that the word ‘licences of right’ be endorsed on the patent, by taking the ground that the patent invention is unavailable to the public at a reasonable price. Notably, the patent for certain substances that are no food items or drugs as such; however, capable of being used as food items or drugs are deemed to be endorsed with the words ‘licence of right’ immediately on completion of three years from the date of the sealing of the patent.
Impact of the World Trade Organization (WTO) on pharmaceutical patents:
Trade Related Aspects of Intellectual Property Right (TRIPS) is an agreement on international IP rights, which came into existence in 1995, as part of the agreement that provides establishment of WTO. India is a signatory to General Agreement on Tariffs and Trade (GATT), thereby making it mandatory to comply with the requirements of GATT, including the agreement on TRIPS. Hence, pharmaceutical companies in India are required to meet the minimum standards under the TRIPS Agreement.
In Patents (Amendment) Act, 1999, the provision of ‘pipeline protection’ was introduced. According to which, if the applicant has already filed an application for an invention in any convention country and a patent or Exclusive Marketing Right (EMR) has been granted in that country on or after 1st January, 1995, then such applicant can file for patent to pharmaceutical and agrochemical products in India. The pending patent application will be eligible for product patent. If the application is accepted and deemed appropriate, the applicant will be given EMRs in India until such patent is approved or refused, or for a term of five years (whichever is shorter).
Conclusion: –
India is a rising market of the drug industry and as a nation; it has made adequate efforts in the field of the pharmaceutical industry to come up with inventive research and development strategies of original drugs. Since our nation is gradually integrating into foreign markets and competing with costs and quality norms there. Although research and development is crucial to guarantee a competitive edge in the global market, the Indian pharmaceutical industry’s prospects depend on the existence of a patent.
-Kiranpreet Kaur
Associate at Aggarwals & Associates, S.A.S Nagar, Mohali
by Aggarwals Associates | Nov 3, 2022 | General
Startups mean bringing a new innovative idea in the market after studying the potential demand in the market for that product. A lot of brilliant ideas of start-ups that helps in development and empowerment of nation and economy remains underlying because of lack of resources such as the initial investment, high rate of taxes etc. To overcome this major hindrance in the development of nation in respect of innovation and wealth, Ministry of Micro, Small and Medium Enterprises under the leadership and guidance of Narayan rane, the Minster of said ministry introduced various benefits for the startup companies that includes tax exemption, subsidy in different registration processes, easy bank loan at less rate of interest and many more.
What are the conditions for start-ups to avail benefits?
Startup benefits are provided under the Startup India Action plan that defines some conditions to procure the benefits under the said Act. The said conditions are mentioned below:
- The company which wants to avail the benefits must not be older than 10 years i.e. the company has not completed the 10 year of registration.
- The nature of company must be either a private limited company or a registered partnership firm or a partnership firm with limited liability.
- The annual turnover of the company should not exceed Rs. 100 crore in any financial year since incorporation.
- The main objective of the company focus on the innovation, development and growth with high potential of wealth and employment generation.
- The company is not the result of demerger or expansion of any existing business.
What are the different schemes for Startups in India?
Tax Exemptions: The company which is eligible as start-up gets following tax exemption from Government of India:
- In order to meet the working capital requirement in initial years of incorporation the Government of India provides for 100% tax rebate on profits for the company which is registered between 2016-2022 financial year for a period of three years in a block of seven years with a condition that the annual turnover of the company does not exceed Rs. 25 crores in any financial year.
- The start-up companies are exempted from the tax liability arises from long term capital gain if the gain or any part of such gain is invested in a fund notified by Central Government within a period of six months from the date of transfer of the asset as provided under the newly added Section 54 EE of the Income Tax Act, 1961 (herein after referred as Income Tax Act). Additionally, it is also provided in the above said provision that the maximum amount that can be invested in long term assets cannot exceed 50 lakh and same cannot be withdrawn for the period of three years and if did so the exemption can be revoked in the same financial year in which the investment is withdrawn.
Simultaneously, various other exemptions are provided under the Income Tax Act for encouraging and promoting start-ups in India.
Pradhan Mantri Mudra Yojna: The Government launched the Pradhan Mantri Mudra yojana for providing loans to start-ups and micro small scale industries. Under this scheme MUDRA (Micro Units Development and Refinance Agency) bank provides low rate loans to the financial and non banking financial institutes who in results provide loans to the start-ups at low interest rate. A loan amount of upto Rs. 10 lakh can be availed from the above stated scheme.
Credit Gurantee Trust Fund for Micro and Small Scale Enterprises (CGTSME): The CGTSME scheme is the major start-up scheme launched by Government under the ministry of Micro Small and Medium Scale Industry. The Government provides a collateral free loan of upto 1 crore is provided to eligible start-ups under the said scheme.
Credit Linked Capital Subsidy for Technology Upgradation (CLCSS): Technology is the utmost important factor for the development of any company and keeping this in view government introduced the CLCSS scheme for eligible start-ups. As the cost of machinery is increasing day by day and it is difficult for the startup companies to install upgraded technology in the company therefore, the Govt of India provides financial help to upgrade their technology. 15% subsidy upto 1 crore is provided under the scheme for technology upgradation.
Financial Support in ZED certification scheme: The scheme is introduced to increase the efficiency of manufacture. The main aim of the scheme is to enable the manufacturer to produce high quality products with the minimum amount of defects in it with the best technology. Under this scheme the Govt provides financial support, tools and technology to ensure that the company will manufacture products of high class with best technology and quality.
Our Govt is continuously working on promoting start-ups and providing best help to the start-ups and small scale companies by introducing best schemes for them. A large population of India is still unaware of the benefits and somehow lack knowledge while applying for the various schemes provided by the Govt and as a result fails to avail the benefits of the said scheme. Therefore, it is essential to engage legal experts to fulfil all the requirements for falling in the ambit of eligible start-ups.
Surbhi Singla
Associate at Aggarwals & Asssociates, Mohali
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