IPR for Medium and Small Scale Industries (MSMEs)

Editor’s note:

Small-scale industries (SSIs) are  the backbone of world economythe industrial structure mostly because of the fact that, the development of such industries helps in the overall development of the economic, social and industrial structure of the country.

While speaking with the owner of an MSME, I realized that the last thing that he cared about his business was its intellectual property (creating new IP and managing existing ones). And perhaps rightly so, why should he even care about trademarks and patents when he is making money being a vendor – he has lots of other managerial and administrative things to handle in order to keep his business running. Why should he even invest his time and money in order to protect his intellectual property? The problem with SSIs in India is that they are still working in the industrial age and have not coped up with the information age. I am not saying that the age-old method of doing business is flawed or that such methods don’t work nowadays, what I am trying to say is that SSIs or MSMEs should consider mending their ways in line with the present system. Innovation is the fuel in this knowledge-based economy. SSIs are the backbone of a nation’s economy because these are the industries that provide employment to both skilled as well as unskilled labors. On the contrary, the big industries or Multi-National Corporations only provide employment to the highly skilled workforce. Therefore, MSMEs should realize the value of creating intellectual property and protecting its already existing ones.

Recently, Treebo, a budget hotel chain filed four patent applications in India and the United States. Companies like Treebo have started to realize that the only way to have a competitive edge in this knowledge-driven economy is through intellectual property and nothing else. The problem is that while reading about intellectual property we only visualize multi-national conglomerates, and their flashy R&D labs, working on some type of invention. However, what we must realize is that our economic growth is not going to be on an exponential trajectory until a time comes when we could imagine MSMEs also within out visualization.

In 2006, with the enactment of the Micro, Small and Medium Enterprise (MSME) Development Act, 2006, any unit with an investment of rupees one to five crore in plant and machinery is classified as a small-scale industry. In general, MSMEs are such industries which are engaged in manufacturing, processing or preservation of goods and in which investment in plant and machinery does not exceed rupees one crore.

In our daily course of life, we come to hear about various kinds of small-scale industries, such as footwear industries, cutlery industries, match industries, pottery industries, watchmaking industries, and many more. Whether one belongs to an urban area or a rural area, the demands of goods manufactured in such industries are in full demand in our day to day life. Although due to the rapid development of technologies traditional some modern and advanced SSIs have emerged. However, most of these SSIs (both traditional and modern) lack knowledge about IPR protection, as a result of which they face a lot of competition in the market and are unable to survive beyond five years.

How MSMEs can benefit from IPRs?

When any SSI gets its IP protected, it is allowed to exercise a monopoly on the use of the items for a specified time, thus they can stop the entries of their competitors, which is one of the major worry for SSIs, for that specified time and therefore they can grow well. If we study thoroughly then we can notice that many SSI cannot rely upon these rights due to little or no knowledge about these rights. Besides, it is also seen that many SSIs cannot afford the very expenses of the registration criteria.

Looking deeper to these flaws, Ministry of Small Scale Industries has taken various steps to create awareness about IPR. Apart from spreading awareness, success stories have also been studied, and these success stories provide an example to others that how SSIs have been profited from the effective use of the IPR system in their business strategy.

With the touch of globalization, Indian SSIs have come to the exposure of various facilities and opportunities, but still there is a long way to forward. Although SSIs can protect their innovations, creative work, logo, etc., but still they are vulnerable to competition in many ways. As for instance, India does not have any law to protect trade secrets which is what most SSIs make a living on. Even ff one is stopped by any non-disclosure agreement, still there remains a risk of infringement. These aspects should be looked into.

Following are some benefits which may accrue to an SSIs in case it chooses to undertake an IP audit and subsequently generate and protect the outcoming intellectual property:

  1. Creating a market barrier for new entrants;
  2. Leveraging their IP portfolio to increase their company’s valuation;
  3. Licensing-in, licensing-out, cross-licensing the IP;
  4. Protecting their trade name and goodwill associated with it;
  5. Exercising a monopoly on the use of the items invented, manufactured, etc. for 20 years.
  6. Claiming for damages in case of infringement;
  7. Better management of confidential information and trade secrets;
  8. Protecting trade secrets and confidential information under the contract of employment;
  9. Availing tax benefits, among other provisions, but specially under Section 115RRB of Income Tax Act, 1961;
  10. Protection to the design of their manufactured industrial product.

It is the need of the hour that MSMEs or SSIs amalgamate their intellectual property strategy with their business and financial strategy in order to succeed in this knowledge-based economy.


The post has been contributed by Ms. Moumita Mitra, Advocate – District Courts, Kolkata.

This post has been internally edited by Siddhant Sharma.

Image from here.

L&P Editorial Team

The Law & Practice Blog's editorial team.

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