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Qualifying as a start-up as per the Indian Patent Rules

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Introduction

The Indian Government has announced various initiatives to promote start-ups. One such initiative brings various benefits to start-ups in their patenting initiatives. The benefits primarily correspond to discounts in government fees and expediting of patent examination. The government fees charged for start-ups will be the same as that charged for natural persons (individuals). In this article, we discuss the criteria to be met by an entity, regardless of whether the entity is Indian or not, to qualify as a start-up.  

Note that at the time of writing this article the amended rules, under which these benefits are being provided, was released one day before (May 16, 2016). Hence, there could be changes in the way these rules are interpreted going forward.

Criteria to qualify as start-up

Most of the criteria are objective, with one criterion being subjective in nature. To begin with the objective criteria are listed as questions, and if the answer to each of the below listed questions is in the affirmative (yes), then the entity qualifies as a start-up.

  1. Is the applicant for a patent a Private Limited company as defined in the Companies Act, 2013 or a registered partnership firm registered under section 59 of the Partnership Act, 1932 or a limited liability partnership under the Limited Liability Partnership Act, 2002?

Explanation: At present, it appears that Non-Indian partnership and limited liability partnership firms may not qualify as start-ups, since registration in India of such firms appear to be mandatory to claim benefits. However, a Non-Indian entity as long as it meets the definition of a “Private Limited Company” as defined in the Companies Act, 2013, can qualify as start-up. The definition is provided below.

“private company” means a company having a minimum paid-up share capital of one lakh rupees (USD 1515 at conversion rate of USD 1 = INR 66) or such higher paid-up share capital as may be prescribed, and which by its articles,—

  • restricts the right to transfer its shares;
  • except in case of One Person Company, limits the number of its members to two hundred:
  • Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
  • Provided further that—

(A) persons who are in the employment of the company; and

(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and

  • prohibits any invitation to the public to subscribe for any securities of

 the company;

  1. Has the entity been registered or incorporated within the last five years?
  2. Has the turnover of the entity in each of the financial year in the last five years been less than INR Twenty five crores (USD 3787878 at conversion rate of USD 1 = INR 66)?
  3. Has the entity been formed without splitting up or reconstructing a business, which was already in existence?

The entity has to provide evidence in support of the above listed criteria to be recognized as start-up. The evidence for an Indian entity can include registration or incorporation certificate, and Balance sheet/Income tax acknowledgment for the corresponding years. Whether a declaration by a Chartered accountant regarding the income of the company be accepted is yet be determined. A foreign entity may provide equivalent documents as evidence.

Further, with regards to the subjective criterion, an entity to qualify as start-up should  be working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property. The criterion is considered to be met if the entity aims to develop and commercialise a new product or service or process, or a significantly improved existing product or service or process that will create or add value for customers or workflow. The entity may provide evidence supporting its claim to have met this criterion by providing a declaration mentioning that based on the patent application that is being currently filed they are working towards developing and commercializing a new product or service or process, or a significantly improved existing product or service or process that will create or add value for customers or workflow.

We hope this article helps patent applicants decide which type of entity they fall under. You may also read our article to know about how to claim small entity status

You may also download the article for your reference. 

Please feel free check our patent services page to find out if we can cater to your patent requirements. You can also contact us to explore the option of working together. 

Best regards – Team InvnTree   

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How to claim small entity status while filing for patents in Indian Patent Office

Introduction

In a recent notification dated 28th day of February, 2014 issued by the Controller General of Patents, Designs and Trademarks, the Department of Industrial policy and promotion (DIPP), Ministry of Commerce and Industry has revised the statutory fee for all patent related filing.

Further, a major change has been dividing the applicants into 3 categories:

1. Natural person

2. Other than Natural person – Small Entity

3. Other than Natural person – Others except small entity

1. Natural person:

An individual applying for a patent is considered as a natural person.

In case the applicant is a Natural person the fee is the lowest of all the three categories. However, the fee has been increased by 60 % of the previously applicable fee, before 28th day of February 2014. The new fee is effective from 28th day of February 2014.

2. Other than natural person:

Non individuals such as companies and legal entities are categorized under other than natural persons. Prior to the notification, dated 28th day of February, 2014, there existed a single category under Other than natural person.

The patent office through this notification has divided the category of Other than natural person into the following categories:

  • Other than Natural person – Small Entity

  • Other than Natural person – Others except small entity

The patent office has fixed a different fee structure for the category of small entity and others except small entity.

The fee for a small entity is between the fee for a Natural person and the fee for Other than natural person (except a small entity). The fee for Other than natural person (except a small entity) is the highest and the fee for Natural person is the lowest.

Further, as per rule 2 of the Patent Rules, 2014 clause (fa) “small entity” means,

  1. In case of an enterprise engaged in the manufacture or production of goods, an enterprise where the investment in plant and machinery does not exceed the limit specified for a medium enterprise under clause (a) of sub-section (1) of section 7 of the Micro, Small and Medium Enterprise Development Act, 2006 (27 of 2006); and

  2.   In case of an enterprise engaged in providing or rendering of services, an enterprise where the investment is not more than the limit specified for a medium enterprise under clause (b) of sub-section (1) of section 7 of the Micro, Small and Medium Enterprise Development Act, 2006.

Qualifying as a small entity

In light of rule 2 of the Patent Rules, 2014, to qualify as a small entity, an applicant who is  engaged in the manufacture or production of goods pertaining to any industry should not have an investment limit over 10 crores ( approx USD 1670000).

Similarly, an applicant who is engaged in providing or rendering services classified under the Micro, small and medium enterprise development Act, 2006, should not have an investment limit over Rupees 5 crores (approx USD 835000).

Further, according to rule 2 of the Patent Rules, 2014, while calculating the investment in plant and machinery, the cost of pollution control, research and development, industrial safety devices, and other such things as specified by notification under the Micro, Small and Medium Enterprise Development Act, 2006, shall be excluded.

Procedure for declaration as Small entity

An applicant wishing to be declared as a small entity, has to file a declaration in Form 28, and furnish proof relating to the status of being a small entity. If an applicant wishes to file a new patent application, a form 28 should accompany form1. However, if the applicant has already filed a patent application, and wishes to file any other forms which attracts a fee, form 28 should be filed at least once accompanying the form which the applicant desires to file.

Accepted proof for small entity.

 The accepted proof as specified by the Indian Patent Act is as below:

Applicants having Indian nationality:

Indian applicants need to furnish evidence of registration under the Micro, small and medium enterprise development Act, 2006. In light of this, applicants wishing to claim small entity status need to register under the MSMED Act, 2006.

Further, the patent office may accept other proof such as balance sheet in future. We shall update this, as and when this happens.

Non-Indian Applicants:

Non-Indian applicants need to provide proof relating to their investment capital to claim small entity status. The applicants can provide any document which pertains to this. Ex: Latest filed balance sheet.

Conclusion

In light of this notification, the applicants in the other than natural persons have been divided into two further categories of small entity and Other than natural person (except a small entity), wherein an applicant of small entity status attracts a lower fee, which is half the fee for an applicant of status Other than natural person (except a small entity). In light of this, applicants wishing to claim small entity status need to furnish certain proof and documentation to claim this status. This article tries to help such applicants to claim small entity status.

We hope you found this article useful. You may be interested in reading our articles:

How much does it cost to get a patent in India?     
Filing a national phase patent application in India after filing a PCT application 

Feel free to write to us at contact@invntree.com

Best regards – Team InvnTree

This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License