Patent (Amendment) Rules 2017

Department of Industrial Policy and Promotion (DIPP) has amended Patent Rules 2003 with effect from 1^st December 2017 called the Patent (Amendment) Rules, 2017. The definition of “startup” under rule 2(FB) has been substituted with a new definition. A more liberal definition of the startup has been incorporated that can allow domestic as well as foreign entities to claim benefits such as a fast-track mechanism and a lower fee for filing patents.

According to the Patent (Amendment) Rules, 2017:

“Startup” means

(a) an entity in India recognized as a startup by the competent authority under Startup India Initiative.
(b) In case of a foreign entity, an entity fulfilling the criteria for turnover and period of incorporation/ registration as per the Startup India Initiative and submitting a declaration to that effect.

Explanation: In calculating the turnover, reference rates of foreign currency of Reserve Bank of India shall prevail.[1]

According to the Patents (Amendment) Rules, 2016 startups were defined as entities which are working towards innovation, development, deployment, or commercialization of new products, processes, or services driven by technology or intellectual property where more than five years have not elapsed from the date of incorporation/registration with a maximum turnover of INR 25 crore per year.[2] However, according to the Patent (Amendment) Rules, 2017, a startup can be an Indian entity recognized as a startup by the competent authority under the Startup India Initiative or a foreign entity that fulfills criteria for turnover and period of incorporation/registration as per Startup India Initiative.

Under Startup India Initiative an entity shall be considered as a Startup if it fulfills the following criteria:

1. incorporated as a private limited company or registered as a partnership firm or a limited liability partnership in India;
2. incorporated or registered in India not prior to seven years, however for Biotechnology Startups not prior to ten years;
3. turnover for any of the financial years since incorporation/ registration has not exceeded INR 25 crores;
4. has not been formed by splitting up or reconstruction of a business that was already in existence; and
5. working towards innovation, development, or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.[3]

In view of the foregoing, it can be concluded that the period of incorporation/registration that was 5 years under 2016 rules has been extended to 7 years (10 years in the case of biotechnology startups) by the 2017 rules. Also, foreign companies can now claim benefits if they fulfill the above-mentioned criteria for turnover and period of registration as per the Startup India Initiative. Further, to claim benefits for filing patents, an Indian entity should be recognized as a startup by a competent authority under Startup India Initiative, whereas foreign entity may provide equivalent documents as evidence for fulfilling criteria for turnover and period of incorporation/registration as per Startup India Initiative along with a declaration to that effect.