Tag Archives: startup

Proposed amendment to Patent Rules has the potential to dilute improvements made so far

The Indian patent regime is infamous for its slow speed of processing patent applications. The Government has over the years taken several initiatives to address this issue, primarily by increasing the number of patent examiners. The initiatives have started showing positive results.

In terms of the actual statistics, as per the Ministry of Commerce and Industry, the pendency of patent applications awaiting examination has reduced from 204,177 in March 2017 to 172,488 as on February 2018. Further, the number of applications examined in the month of February 2018 was 6235 as against 3925 during the corresponding period of the previous year. Even though the percentage improvement in the number of applications examined monthly is significant, at the rate of 6235 applications per month, the backlogs are not going to be cleared anytime soon.

While the timeline for processing patent applications was improving, an immediate relief, by way of amendments to The Patents Rules, was made available to start-ups and those who select India as ISA or IPEA in a corresponding PCT application. The amendment provided for expedited examination of patent applications on request.

Under the expedited process, examination reports started being issued within a month or two, and lately within days, as against 4 or more years taken ordinarily. However, before we conclude that the patent office is completely equipped for speedy disposal of patent applications, we have to put the speedy disposal of the applications under expedited process in perspective. As per the 2016-17 annual report (“Report”), 38,578 requests for patent examination were filed, and the number of expedited examination requests stood at 135. Hence, at least in the year 2016-17, the patent office had to deal with a very small number of patent applications under expedited examination, and consequently the speed doesn’t necessarily reflect on the preparedness of the patent office to process a large number of requests for examination within comparable timelines.

The proposed amendment to the patent rules is aimed at enabling a much wider set of applicants to avail the benefit of expedited examination. The applicants, irrespective of nationality, who will be eligible to request for expedited examination, if the amendments were to come through, are listed below.

  1. (Eligible even now) An applicant who has selected India as the ISA or IPEA in a PCT application corresponding to the Indian application for which expedited examination is sought
  2. (Eligible even now) An applicant who is considered a “startup(refer Rule 2(fb))
  3. An applicant who is considered a “small entity” (refer Rule 2(fb))
  4. At least one of the applicants is a female, and the remaining applicants, if any, are natural persons
  5. An applicant who is considered a “government undertaking” (refer Section 2(h)), or is a similar entity in case of a foreign applicant
  6. An applicant who is eligible under patent prosecution highway

In our view, enabling the listed new category of applicants to request for expedited examination will result in workload, which will substantially limit the ability of the patent office to examine applications under expedited process at the speed at which the office is examining at present.

Consider small entities, who will be eligible. Although we do not know how many applicants have claimed small entity status while filing applications, we believe it is a significant number. Once the amendments come into force, at least a sizable number of applicants, who have claimed small entity status, and have been awaiting examination, might request for expedited examination. Hence, there is likely to be a spike in the number of expedited examination requests the office may receive soon after the introduction of the amendments. Not to forget the new applications that will be filed by small entities, who are likely to request for expedited examination, consequently adding to the queue of applications awaiting expedited examination.

Further, the number of applications awaiting examination, who have at least one female applicant, is also not know. The patent office had started collecting gender data of applicants some time back, and the patent office may have some extrapolated estimate of pending applications which have at least one female applicant. However, our guess is that it is a much smaller number compared to small entities.

Regarding government undertakings who may become eligible, might again add a much smaller number to the queue of expedited examination requests, as compared to small entities. We assume that foreign government undertakings may have filed fewer applications in India, and their inclination to file in future as well may be limited. Hence, it is mostly Indian government undertakings filing for patents in India. Considering that, as per the Report, Indian applicants filed 13,219 (30%) out of 45,444 applications in 2016-17, applications filed by government undertakings out of the 13,219 applications may relatively be a small number. Further, whether government undertakings will consider spending INR 60,000 for expedited examination instead of INR 20,000 for ordinary examination is yet another question, and in our view, very few may be willing.

Even though the inclusion of female applicants and government undertakings may not add a substantial number to the queue of expedited examination requests, we believe that the applicants who will become eligible under patent prosecution highway may add a substantial number. Even though at present India doesn’t have patent prosecution highway arrangement with any country, an arrangement with Japan is likely to take shape in the near future.

As per the Report, Japanese applicants filed 4,275 applications out of 45,444 applications filed in 2016-17, which is about 9.4%. As per an estimate, allowance rate in Japan is around 75%. Therefore, 75% of the nearly 4000 applications, i.e 3,000 applications, filed by Japanese applicants may become eligible. Further, assuming at least a 4 year waiting time in India to receive an examination report, and around a 1 year turnaround time to receive examination report in India, around 9,000 applications from Japanese may become eligible the moment the amendment is introduced.

In our view, even if 20% of the small entities and applicants eligible under patent prosecution highway were to request for expedited examination, it would cripple the patent office’s ability to examine applications at the rate the office is examining applications under expedited process.

In conclusion, the processing time of expedited examination requests is likely to be significantly impacted by inclusion of small entities and applicants eligible under patent prosecution highway. Start-ups, who have been benefiting from the expedited examination of their applications may no longer be able to get patents granted within a short period. In case the number of expedited examination requests entertained by the patent office is restricted to a certain number, then applications from start-ups may end up being a small percentage of the restricted number of applications. It may be wise to concentrate on reducing the backlog and the time taken to issues first examination reports in the ordinary course, before adding additional burden on the patent office by making a larger category of applicants eligible to apply for expedited examination.

We hope this article was a useful read. 

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

Best regards – Team InvnTree   

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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   

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

 

Highlights of amendments made to Indian Patent Rules

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The Indian Patents Rules, 2003 has been amended by way of Patents (Amendment) Rules, 2016. The amendment comes into effect on May 16, 2016. The current amendment is substantial, and can certainly have an impact on the patent filing and prosecution strategy, among other things. In this article, we have summarized some of the important amendments.

Prior to the amendment, India recognised three types of Applicants, viz., natural persons, small entity and other than small entity. With the amendment, a fourth type of applicant, “Startup”, is being recognized, and certain benefits are being provided to startups.

An entity will be considered a startup as long as the below listed conditions (non-subjective conditions are listed in this article) are met by the entity.

  1. Entity has to be 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.
  2. Five years should have not lapsed since the date of registration or incorporation of the entity.
  3. Turnover in any of the financial year should not be more than INR Twenty Five crores.
  4. Entity should not have been formed by splitting up or reconstruction of a business already in existence.

The patent office fees for startup, even though a legal entity, is the same as the fees charged for natural persons (individuals). Hence, startup would pay 60% less in government fee compared to the fee that was applicable prior to the amendment. Approximately, instead of incurring INR 20250 (filing, early publication and ordinary examination) in government fees, a startup will incur a fee of INR 8100.

A startup can also opt for expedited examination instead of ordinary examination. In an ordinary examination process an examiner has to prepare an examination report ordinarily in one month but not exceeding three months from the date of reference of the application to him by the Controller. On the other hand, in an expedited examination process, the examiner has to prepare an examination report in one month but not exceeding two months from the date of reference of the application to him by the Controller. Hence, it appears that in an expedited examination process the examiner has to prepare the examination report within two months, as opposed to three months taken in the ordinary process. The expediting option will be available for startups for a fee of INR 8000 as opposed to INR 4000, which is charged for ordinary examination. The one month reduction in time may not provide a note worthy relief to startups if the Controller does not refer the application to the examiner within a short period. The current delays in examination is being enabled by a rule which allows the Controller to ordinarily refer the application to the examiner within one month from the date of publication or date of examination request, which ever is later. Hence, the Controller is not mandated to refer the application to the examiner within one month. The rules for the expedited examination also does not mandate the time period for referring the application to the examiner. However, in practice if the expedited requests are put in a separate queue instead of the normal examination request queue, then there is a possibility examination reports from the patent office will be issued in substantially less time.

Expedited examination may also be chosen by applicants filing national phase application if they had chosen India as the ISA or IPEA at the PCT stage.

The amendment provides relief to patent practitioners, such as InvnTree, who have client across India and deal with all the four patent offices. Prior to the amendment, hearing (in person discussion with patent examiner) required the patent agent to visit the patent office, thereby making the hearing process expensive and inefficient. The current amendment provides the option of holding hearing via video conferencing. The instant amendment will drastically change the way patent consulting firms function, who may now concentrate on being located close to their client base or where good talent is available, rather than preferring to be located near the patent offices, and having multiple branches. Technology companies who engage with patent consulting firms to address their patenting requirement may also rethink their vendor selection criteria. 

One more important amendment is with respect to national phase filing in India. Prior to the amendment, the Indian national phase application was required to be filed as it is at the PCT stage. The issue with such a practice was that in several instances the PCT applications would have more than 10 claims. Since, in India each claim over 10 claims is charged a fee, even though the Applicants wished to reduce the number of claims while filing national phase application in India to reduce the extra claims fee, they could not do so. However, in light of the current amendment, an Applicant can delete claims while filing national phase application in India. Note that, only deletion of claims is allowed, and not addition or amendments of claims. The amended rules state “may delete a claim”, which may be interpreted as only one claim may be deleted. We believe that such a statement may have been drafting error, which will be corrected going forward or the rules will be followed in principle.

Yet another important amendment is with respect to the time period within with the applicant has to put the application in order for grant once the examination report is issued by the patent office. Prior to the amendment, once the patent office issues an examination report, the applicant had one year to  interact (respond to objections) with the patent office and put the application in order for grant. The current amendment has decreased the time period from one year to six months, with an option of a three months extension.

We hope this article helps patent applicants gain better understanding of the various initiatives of the Indian Patent office and thereby benefit by availing them.

You may also download our 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   

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