The Patent (Amendment) Rules, 2017 [which came into effect on December 01, 2017, vide Gazette Notification] have amended the definition of the term “Startup” under the Patents Rules, 2003 to include within its scope the foreign startup companies (viz. startups having registered office outside India). Firstly, the new definition has done away with all details of qualifying criteria for a Startup under the previous definition, and has simply added a qualifier for Startup to mean “an entity in India recognized as a startup by the competent authority under Startup India initiative”. Secondly, in respect of foreign entities, the definition includes those entities which fulfill the “criteria for turnover and period of incorporation/registration as per Startup India Initiative and submitting declaration to that effect.”
Accordingly, for Indian Entities to avail startup benefits under the Patent regime, they need to get themselves enrolled under the Startup India Initiative, for which the following criteria needs to be fulfilled:
(a) The entity should be incorporated as a private limited company or registered as a partnership firm or a limited liability partnership;
(b) The entity should be incorporated or registered not prior to seven years; however, for biotechnology startups, not prior to ten years;
(c) The entity’s turnover for any of the financial years since incorporation/ registration should not have exceeded INR 25 crores (approx. USD 4 million);
(d) The entity should not have been formed by splitting up or reconstruction of a business that was already in existence; and
(e) The entity should work towards innovation, development or improvement of products or processes or services, or should be a scalable business model with a high potential of employment generation or wealth creation.
For Foreign Entities, however, the criteria that needs to be fulfilled (and established) are:
(a) The entity should be incorporated or registered not prior to seven years; however, for biotechnology startups, not prior to ten years; and
(b) The entity’s turnover for any of the financial years since incorporation/ registration should not have exceeded INR 25 crores (approx. USD 4 million).
A foreign company will need to provide a declaration to the effect that these criteria are fulfilled in order to avail benefits.
Pursuant to this amendment, any foreign company qualifying as a “Startup” is entitled to avail benefits provided under the patent regime in India, which includes rebate of upto 80% on official charges payable at the Patent Office.