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Startups and small entities receive special status in proposed amendments

The Government of India recently announced draft amendments to the Design Rules (available at See) and Patent Rules (available at See) with the primary objective of encouraging startups and small entities to protect their intellectual property. The proposed changes include new definitions of “startups” in the design rules (to align with corresponding changes on the patents and trademarks side), and significantly reduced filing and prosecution fees for startups and small entities. Critically, the status of “startup” has also been defined, extending the life of such entities  upto ten years, thus allowing them the benefit of favourable fees, etc., for an extended period of time. These proposed changes are in line with the other amendments that have been introduced over the past few months, and if implemented successfully, could see a wave of new filings in India.

The following paragraphs summarise the changes that

The Designs (Amendment) Rules, 2019 (“Draft Design Rules”)propose to make the following amendments:

  1. Inclusion of “Startup”: “Startup” has been introduced as a separate category of applicant for designs. A startup is defined as follows-

(eb) “startup” means-
(a)  an entity in India recognised as a startup by the competent authority under Startup India initiative; 
and
(b)  in case of a foreign entity, an entity fulfilling the criteria for turnover and period of incorporation/ registration as per Startup India Initiative and submitting declaration to that effect. 
Explanation: In calculating the turnover, reference rates of foreign currency of the Reserve Bank of India shall prevail.” (emphasis added)

  • This definition is the same as that included in Rule 2(fb) of The Patent Rules, 2003 and Rule 2(x) of the Trade Marks Rules, 2017.
  • To claim the status of startup, the following documents must be submitted:
    1. For an Indian applicant: The certificate of recognition from Department for Promotion of Industrial Policy and Internal Trade
    2. In case of a foreign entity: Any document as evidence of eligibility.
  1. Fees for Startup: A fee reduction of 75% is proposed for startups for design registrations as well as any other proceeding before the Controller. Thus, the fees payable by a startup at the Indian Design Office will be equal to that payable by a natural person.
  1. Change in status of startup: An explanation has been added which clarifies that where a startup/ small entity ceases to be a startup, no difference in the scale of fees shall be payable. This includes change in status of startup due to the lapse of the period during which it is recognised as a startup, or its turnover subsequently crosses the financial threshold limit.
  1. Fees for Small Entity: The Design Rules, 2001 provide that the fees payable by a small entity is 50% of that payable by other entities. The Draft Design Rules provide that fee payable by a small entity for registration of design as well as any other proceeding before the Controller will be reduced to 25% of that payable by other entities. This makes the fee payable by a small entity equal to that payable by a natural person and a startup.

The Draft Patent (2nd Amendment) Rules, 2019 (“Draft Patent Rules”) propose to make the following amendments:

  1. Fees for Small Entity: The Patent Rules, 2003 provide that the fees payable by a small entity is 50% of that payable by other entities. The Draft Patent Rules provide that fee payable by a small entity will  be reduced to 25% of that payable by other entities. This makes the fee payable by a small entity equal to that payable by a natural person and a startup.
  2. Change in status of Startup: The Patent Rules, 2003 provide that the status of startup would cease upon completion of “five years” from the date of its incorporation or registration. The Draft Patent Rules propose to substitute this period of five years by “period during which it is recognised by the competent authority”.

 

As things stand at present, an entity ceases to be recognized as a Startup by Department for Promotion of Industry and Internal Trade (DPIIT) on completion of ten years from the date of its incorporation/ registration or if its turnover for any previous year exceeds one hundred crore rupees (see  G.S.R. notification 127 (E), available at ( See )

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