Introduction
In the recent years, it is the Micro, Small, and Medium Enterprises (MSMEs) and startups that are leading an innovation-based economy in India. These businesses drive the vision of ‘Make in India’, creating employment and fostering economic growth. As of December 31, 2023, India has a impressive base of 75 million MSMEs and 174,254 recognized startups, making it one of the global leaders in entrepreneurship. These businesses have become one of the leading contributors to the gross domestic product and manufacturing industry of the country over the past few years.
| Year | Share of MSME Gross Value Added (GVA) in all India Gross Domestic Product (GDP) | Share of MSME manufacturing GVA in all India Manufacturing GVA |
| 2019-2020 | 30.48% | 40.67% |
| 2020-2021 | 27.24% | 40.30% |
| 2021-2022 | 29.15% | 40.83% |
For such companies, patents have emerged as a critical strategic asset. MSMEs and startups can establish a significant market position, deter competitors, and protect innovative products and services by obtaining patents. This exclusivity not only protects the intellectual property but builds a strong brand identity with innovation. Moreover, a strong patent portfolio can increase the valuation of a company, making it more attractive to investors and potential acquirers.
Understanding how patents are an avenue for growth in Indian MSMEs and startups, the government undertook several measures to make patent filing accessible and to bring intellectual property closer to the people.
MSMEs and Startups: Defining the Innovators
MSMEs are defined by their size, revenue, and number of employees. Startups, on the other hand, are newly established ventures bringing novel products or services to the market, often in high tech and fast-evolving industries.
In India, under section 7, sub-section (1), clause (a) and (b), of the Micro, Small and Medium Enterprises Development Act, 2006, read with notification number [F. No. 2/1(5)/2019- P&G/Policy (Pt.-IV)], the MSMEs are classified as1:
| Size of Enterprise | Investment in equipments | Annual Turnover |
| Micro | Less than one crore Rupees
(for an enterprise engaged in manufacture or production) Less than ten Lakh Rupees (for an enterprise engaged in providing or rendering services) |
Not exceeding Five Crore Rupees |
| Small | More than one crore but does not exceed ten crore Rupees
(for an enterprise engaged in manufacture or production) More than ten Lakh Rupees but does not exceed two crore Rupees (for an enterprise engaged in providing or rendering services) |
Not exceeding Fifty Crore Rupees |
| Medium | More than ten crores but does not exceed fifty crore Rupees
(for an enterprise engaged in manufacture or production) More than two crore Rupees but does not exceed five crore Rupees (for an enterprise engaged in providing or rendering services) |
Not exceeding Two-Fifty Crore Rupees |
According to the Patent Rules of 2003, an entity is considered as a startup if it has been incorporated or registered within the last five years and has a turnover that does not exceed INR 25 crore for any financial year. They should be engaged actively in the innovation, development, deployment, or commercialization of new products, processes, or services based on technology or intellectual property2. Furthermore, in Patents Act, all MSMEs are defined as small entity3.
Government Initiatives to Simplify Patent Registration
Recognizing the difficulties faced by MSMEs and startups while dealing with the process of patent registration, the Indian government has adopted different initiatives to simplify and promote patent filing.
- Reduced fees: The patent filing fee structure offers concessions to startups and small entities, reducing fees to 1/5th – 1/8th of the fees for others4.
| # | Description | Fee for Small Entities and Startups | Fee for Others |
| 1. | Application for filling a patent under sections 7, 54 or 135 and rule 20(1) accompanied by provisional or complete specification [Form 1] | ₹1,600 (1/5th of Others) | ₹8,000 |
| 2. | Request for publication under section 11A(2) and rule 24A [Form 9] | ₹2,500 (1/5th of Others) | ₹12,500 |
| 3. | Request for examination of application for patent, (i) under section 11B and rule 24(1) [Form 18] | ₹4,000 (1/5th of Others) | ₹20,000 |
| 4. | Request for expedited or delayed examination of application for patent under rule 24C [Form 18A] | ₹8,000 (1/8th of Others) | ₹60,000 |
| 5. | The yearly renewal fee of a patent under section 53— Yearly renewal fee (3rd-6th year) | ₹800 per year (1/5th of Others) | ₹4,000 per year |
| 6. | The yearly renewal fee of a patent under section 53— Yearly renewal fee (7th-10th year) | ₹2,400 per year (1/5th of Others) | ₹12,000 per year |
| 7. | The yearly renewal fee of a patent under section 53— Yearly renewal fee (11th-15th year) | ₹4,800 per year (1/5th of Others) | ₹24,000 per year |
| 8. | The yearly renewal fee of a patent under section 53— Yearly renewal fee (16th-20th year) | ₹8,000 per year (1/5th of Others) | ₹40,000 per year |
| 9. | Notice of opposition to grant of patent under section 25(2) (Post Grant Opposition) [Form 7] | ₹8,000 (1/8th of Others) | ₹60,000 |
| 10. | Representation opposing grant of patent under section 25(1) (Pre Grant Opposition) [Form 7A] | ₹4,000 (1/5th of Others) | ₹20,000 |
- IP Facilitation Centre:
- Patent Facilitation Centres:
To escalate IPR awareness among MSMEs, a center has been established by the Ministry of Micro, Small, and Medium Enterprises. Under this scheme, the establishment of Intellectual Property Facilitation Centres (IPFCs) is carried out with financial support of up to ₹65 lakh per center. These awareness programs can be organized by eligible implementing agencies, such as expert organizations and prominent industry associations, to assist smaller enterprises with patent registration. Financial support of up to ₹25,000 is provided for domestic patents, and ₹2,00,000 is sanctioned as financial support for foreign patents, under this scheme.
Department of Science and Technology’s Patent Facilitating Centre was established at Technology Information Forecasting and Assessment Council (TIFAC) in the year 1995. While major scientific establishments usually have their own in-house patent support, the Patent Facilitating Centre is a one-window facility for smaller institutions, among them quite a few in the academic sector, to seek the convenient, coordinated, and contact point for patent assistance from anywhere in India.
These steps have begun to yield results as the number of patent applications and grants has continuously increased over the last five years:
Year | 2018-19 | 2019-20 | 2020-21 | 2021-22 | 2022-23 |
Filed | 50659 | 56267 | 58503 | 66440 | 82811 |
Examined | 85426 | 80080 | 73165 | 66571 | 49961 |
Granted | 15283 | 24936 | 28385 | 30073 | 34134 |
Disposed | 50884 | 55945 | 52755 | 35990 | 60046 |
The 24.4% increase in patents in 2022-2023 compared to the previous year shows the impact of the government initiatives.
Conclusion
Patents are one of the essential tools for making MSMEs and start-ups protect their IPRs and strengthen their position in the market. The government’s measures to simplify the patent process have created a favourable environment for innovation. Given the situation at hand, there has never been a better time for small entities to pursue patents so that these may be used as a springboard for such small enterprises to go expand and become global leader in innovation.
It is time MSME/startups start investing expenses towards patent protection, as investment in asset evaluation and not as a cost centre.
1 7. Classification of enterprises… (a) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951),as— (a) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951),as—
(i) a micro enterprise, where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
(ii) a small enterprise, where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees;
(iii) a medium enterprise, where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees;
(b) in the case of the enterprises engaged in providing or rendering of services, as— (i) a micro enterprise, where the investment in equipment does not exceed ten lakh rupees;
(ii) a small enterprise, where the investment in equipment is more than ten lakh rupees but does not exceed two crore rupees; or (iii) a medium enterprise, where the investment in equipment is more than two crore rupees but does not exceed five crore rupees.
2 (fb) “Startup” means an entity, where- (i) more than five years have not lapsed from the date of its incorporation or registration; (ii) the turnover for any of the financial years, out of the aforementioned five years, did not exceed rupees twenty-five crores; and (iii) it is working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property:
Provided that any such entity formed by splitting up or reconstruction of a business already in existence shall not be considered as a startup. Provided further that the mere act of developing—
(a) products or services or processes which do not have potential for commercialisation, or
(b) undifferentiated products or services or processes, or
(c) products or services or processes with no or limited incremental value for customers or workflow, would not be covered under this definition.
3 (fa) ”small entity” means, —
(i) 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 Enterprises Development Act, 2006 (27 of 2006); and
(ii) in case of an enterprise engaged in providing or rendering of services, an enterprise where the investment in equipment is not more than the limit specified for medium enterprises under clause (b) of sub-section (1) of Section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006).
4 Others = Anyone except natural person, small entity and start-up.
