What are Intellectual Property Rights (IPR) and why is it important for MSMEs to know about them?

Intellectual Property Rights (IPR) are rights of ownership given to individuals or organisations for their inventions or creations to protect them from unauthorised use. IPR are recognized if issued by a recognized government body and rules of which can differ from country to country.

India has undergone a lot of refinement with its patent laws over the years. It is also a signatory of the Trade Related Aspects of Intellectual Property Rights (TRIPs) Agreement issued by the World Trade Organization (WTO) in 1995. The TRIPs Agreement primarily covers copyright, industrial designs, patents, trade secrets, and trademarks, among other elements.

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Although there are many different kinds of intellectual property rights, the four most common ones are trade secrets, copyrights, trademarks, and patents.

Patent law gives one or more inventors the sole right to utilise their invention and safeguards against unauthorised use. Patents are given for tangible or intangible products that demonstrate new invention and can be scaled if copied by other parties.

Trademarks protect any logos, sounds, words, colours, or symbols that a company uses to differentiate its goods or services.

Copyright laws protect original creations from unauthorised use. These can include original works such as books, blogs, paintings, illustrations, ​​compositions, computer programs, movies, architecture, scripts, etc.

Trade Secrets are the exclusive, valuable, and confidential intellectual property that belong to a company. These could be plans, strategies, maps, customer data, internal processes or programs or techniques and formulas used by the organisation.
Trade Secrets can have commercial or competitive value and are not meant to be available in the public domain.

Intellectual property owners often use more than one of these categories of Intellectual Property Law to protect the same intangible assets. For instance, copyright law protects a product's tagline whereas trademark law secures its name.

Intellectual Property Rights Violation

Intellectual property rights violations in infringement of copying or misusing protected works.

Take the example of someone who downloaded one of his favourite YouTube videos and posted it on his channel. It was discovered later that he had violated the copyright. What exactly happened in this case? Well! The video was already published by another person which is protected under copyright and the uploader didn't get the original owner's consent before republishing it. So, this issue is considered as an Intellectual Property Rights Violation.

Other examples of intellectual property rights violations include manufacturing patented products without a licence, using a trademarked name or logo to trick customers into believing they are purchasing the actual product, copying another person's patent and passing it off as your own, etc.

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Why are MSMEs required to understand Intellectual Property Rights (IPR)?

Micro, Small and Medium Enterprises (MSMEs) are a sector that significantly contribute to the expansion and development of the Indian economy. MSMEs produce a significant amount of employment and contribute close to 30% to India's GDP as well as nearly half of the country's exports. Despite its significance, the sector is impeded by various hurdles related to ease of doing business and protection of the rights and interests of entrepreneurs.

Therefore, protecting the brands and the assets associated with small businesses is crucial in this competitive industry. The protection of their business ideas is made possible by intellectual property laws, which have a significant impact on MSME entrepreneurs. Additionally, IPR supports MSME businesses in converting their innovative potential and creativeness into market value and competitiveness. Therefore, small business owners can be better protected if they utilise IPR.

The rate of IP filings in India has gone up significantly in the recent past. In 2021, the country witnessed a 50% increase in filings compared to 7 years before, around 45% of which were filed by non-Indian nationals. However, awareness about the value of IPR and the benefits of implementing it as part of a business strategy is still relatively low in the Indian MSME space, given the vastness of the sector. While there are government initiatives in place to facilitate IP registration for small businesses, there is more ground to be covered. MSMEs, therefore, require additional instruction, facilities, and information to safeguard their intellectual abilities. Indian businesses will need to conduct effective research and development in the future to uncover new sources of growth under the product patent regime.

Government Initiatives to Promote Intellectual Property Rights for MSMEs

To assist MSMEs in protecting their intellectual property, the Indian government has developed several programs and initiatives. The MSME Innovative Scheme launched in March 2022 is designed to be an intersection of incubation, design and IPR support for MSMEs. It brings together 3 separate schemes by the Ministry of MSMEs, and operates them as separate verticals through an unified platform. This platform is meant to serve as a hub of innovation and facilitate the development as well as formalisation of new ideas in order to provide MSMEs with an easy one-portal mode of access. As MSME entrepreneurs become more tech savvy, the MSME Innovation scheme holds the potential to create better awareness about the importance of IPR when it comes to new ideas, techniques or equipment that they can quickly and easily file IPR for.

The Government of India also launched the MSME Idea Hackathon 2022 at the same time, which is an incubation scheme aimed at helping MSMEs innovate by providing financial assistance of up to Rs. 15 lakhs for each approved idea. Through this, as well as trademarks, patents, designs and geographical indications selected for grants, the government has already approved financial assistance of close to Rs. 34 crores for IPR filings by MSMEs.

Another key move by the government towards the goal of incentivizing IPR filing by MSMEs was the introduction of a relaxation in IPR filing fees, implemented in 2019. This involved the government cutting the costs associated with filing a patent by 60% and a design by 50%, respectively. In addition to this, a 50% cost reduction was made to trademark application fees. In August 2021, the government also proposed reducing the IP filing fees for MSMEs across the board. If implemented, this will further ease the financial burden of IPR filing by small business entrepreneurs and encourage them to opt for it. To speed up the patent application procedure, the government has also launched the Bilateral Patent Prosecution Highway Program, which is aimed at speeding up the patent prosecution process by facilitating authorised data sharing between patent offices.

However, despite the government's efforts, some gaps remain in the IPR process for MSMEs. The process does require legal support and it can take an average of 58 months for patent approval. This lags significantly behind countries like the US and China, at 23 months and 20 months respectively. Recently, the Economic Advisory Council to the Prime Minister has released a report on the status of the country's IP regime at present. The report has highlighted factors like delays within the system, citing staffing issues and other hurdles, and also advising on the course of action to be taken in order to resolve these issues including the introduction of certain procedural reforms to simplify and improve the efficiency of the patent application process. Going forward, we can anticipate such observations and advisory to translate into better efficiency and more positive changes in the IPR regime, facilitating more awareness and ease of filing for MSMEs.

Conclusion
MSMEs in India need to adopt a proactive stance towards filing IPR to protect their innovations and organisations, as well as gain a competitive edge, both nationally and globally. IPR has the potential to enable businesses in the Indian MSME sector to compete in the world market, as well as grow their businesses and increase their exports with confidence.

MSME business owners, particularly those involved in the manufacturing sector, stand to gain immensely from adopting IPR to protect their innovations and brand identity. As MSMEs grow their business, undertaking more innovations and securely obtaining the exclusive intellectual rights to them, their potential to expand also shoots up. At this juncture, such businesses need another critical catalyst for growth: capital support. In order to keep executing new ideas without impeding business operations and expansion plans, MSMEs can avail of fast and flexible business loans from fintechs like Kinara Capital. Kinara provides collateral-free loans, and through its myKinara App, the process of eligibility check to loan approval to disbursement can happen within just 24-hours. Kinara Capital provides business loans without any property collateral to MSMEs. Timely financing can help entrepreneurs capitalise on ideas by formalising and implementing them quickly.

While financing is one part of the puzzle, awareness about IPR filing and facilitation of the process by the government are critical to creating the right environment for MSMEs to formalise innovation and properly utilise it. With the right kind of support, MSMEs can continue to experiment and innovate, improving their product quality, marketability, speed, efficiency and productivity.

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About Kinara Capital

Kinara Capital is a fast-growing fintech propelling financial inclusion of small business owners in India. Led by a women-majority management team, Kinara Capital is globally recognized for its innovations in MSME financial inclusion. Headquartered in Bengaluru, Kinara Capital operates 125 branches across 90+ cities in India. Visit us at www.kinaracapital.com for more information and follow us on Twitter @KinaraCapital

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This release was published on openPR.