by LegitPro Associates | Oct 30, 2023 | IPR, Startup
Exit strategies are of paramount importance in the realm of business. For SMEs and start-up’s, a paradigm shift in the consideration of Intellectual Property (IP) is essential, especially when viewed through the lens of investor perspective. The execution of the exit strategy, by which investors and entrepreneurs seek returns, demands particular attention since the realization of these returns is the shared aspiration. As emerging businesses witness peers achieving commendable strides, a substantial share of the credit is attributed to safeguarding interests and assets through intellectual property rights. Contemplating the significance of intellectual property at the nascent stage is pivotal for start-up’s and SMEs to capitalize on every initial opportunity they embark upon.
Intellectual property, typically associated with patents, also encompasses trademarks and trade secrets, and each facet serves a distinct role in safeguarding business interests. Trade secrets protect technical solutions and inventions, copyrights preserve original creative content, and trademarks foster brand development. It is incontrovertible that IP rights empower investors and creators to convert their outputs into tradable commercial assets. The primary objective of Intellectual Property in the realm of start-up’s is to provide the option, for a designated period, either to prevent third-party usage without authorization or to engage in profitable business negotiations. Unauthorized use of protected IP assets is often penalized, thereby bolstering the growth prospects of start-up innovations. Since these creative outputs inherently belong to the start-up’s, they possess significant potential to assert ownership and derive value from their assets. Licensing, a prevalent practice, involves the exchange of royalty fees to deter similarly named companies operating in the same geographical region, which could otherwise cause confusion among prospective customers.
IP assumes a pivotal role in the considerations of investors. Leveraging IP assets for growth becomes feasible when the protective umbrella is established at an early developmental stage. The integration of IP rights into business plans manifests into reality as IP assets frequently drive current and future revenue streams. The prospect of augmented value and lucrative exits, despite the initial costs for start-up’s, offers these ventures an opportunity to reconsider an asset like IP, which bears a substantial price tag. To craft an effective exit strategy, start-up’s and SMEs must assess which intellectual property rights are pertinent to their business and determine when asset protection becomes imperative.
In many respects, entrepreneurs are also investors. They invest their invaluable time and resources in nurturing and expanding their ventures. Concerning intellectual property, all businesses must adopt a holistic approach, integrating intellectual property into their business plans and instituting measures to ensure the effective management of their intellectual property assets by their workforce.
Efforts on the human resource front include enhancing awareness and competence in intellectual property through the engagement of qualified intellectual property advisors or consultants. Often, this process begins with the implementation of rudimentary safeguards for protecting sensitive business information and includes explicit clauses in employment contracts, defining the transfer of intellectual property rights. On the business side, owners must develop a foundational understanding of how diverse intellectual property rights can be harnessed to advance business objectives and the requisite steps for securing them. Specific intellectual property rights may necessitate meticulous procedures before securing them; for example, patent claims depend on factors like novelty and other criteria, making it necessary to maintain confidentiality regarding technical developments before filing a patent application.
Novice investors perceive the acquisition of intellectual property rights as a risk management exercise. Being the first to secure these rights through timely applications is imperative to avoid the risk of forfeiting them. Velocity is of the essence, especially in a competitive market, where securing intellectual property rights minimizes vulnerability to infringement claims. For businesses seeking to capitalize on intellectual property opportunities, the initial steps include identifying and quantifying existing intellectual property assets (e.g., know-how, customer lists, intelligence, website, creative content, etc.), understanding their value, and implementing appropriate protective measures.
These considerations delineate the consequences of heightened competition facing our portfolio companies.
by LegitPro Associates | Oct 9, 2023 | Regulatory Compliances, Startup
The Start-up industry in India has witnessed remarkable growth over the past decade, transforming the country into a hub for innovation, technology, and entrepreneurship. With a burgeoning ecosystem, a young and tech-savvy population, and a government supportive of entrepreneurial ventures, India has become a hotspot for Start-ups. In this article, we will explore the dynamics of the Indian Start-up scene, when founders should pay attention to legal and regulatory compliance, the necessity of budgeting for compliance, and the critical challenges founders face today.
The Indian Start-up Ecosystem: A Thriving Ecosystem
India’s Start-up ecosystem has witnessed unprecedented growth, thanks to factors like demographic advantage, improved access to capital, and an increasingly entrepreneurial culture. Cities like Bangalore, Delhi-NCR, and Mumbai have emerged as hotspots for Start-ups, with numerous tech parks, incubators, accelerators, and venture capitalists.
Start-ups in India span various sectors, including technology, e-commerce, fintech, healthtech, and agri-tech. Notable success stories like Flipkart, Ola, Paytm, and Zomato have captured global attention and encouraged aspiring entrepreneurs to dream big.
Legal and Regulatory Compliance: A Foundational Aspect
As Start-ups navigate the complex landscape of Indian business, it’s crucial to address legal and regulatory compliance from the outset. Ignoring this aspect can lead to significant issues down the road. Founders must pay attention to compliance at the very beginning of their entrepreneurial journey. Legal and regulatory compliance encompasses a wide range of issues, such as company registration, intellectual property protection, taxation, labor laws, and industry-specific regulations.
Registering a company under the appropriate legal structure, obtaining the necessary licenses and permits, and complying with labor laws are fundamental steps. Intellectual property protection through patents, trademarks, and copyrights is crucial for safeguarding innovation. Founders must also be aware of tax obligations and ensure proper bookkeeping and accounting practices. Failing to address these aspects can result in penalties, legal disputes, and even the shutdown of the Start-up.
Budgeting for Compliance: A Wise Investment
Founders should allocate a specific budget for legal and regulatory compliance. While Start-ups often operate with limited resources, cutting corners in compliance can prove to be a costly mistake in the long run. Legal issues can disrupt operations, tarnish the Start-up’s reputation, and result in financial losses.
The budget for compliance should cover legal counsel, licenses, permits, registrations, and any necessary intellectual property protection. It should also factor in ongoing compliance costs like taxes and labor-related expenses. Investing in robust compliance from the beginning not only mitigates risks but also establishes a solid foundation for sustainable growth.
Critical Challenges Faced by Founders Today
Founders in the Indian Start-up landscape face a unique set of challenges, including:
Regulatory Complexity: The regulatory landscape in India can be labyrinthine, with different states and industries having varying requirements. Navigating these complexities requires expertise and resources.
Access to Funding: While the availability of venture capital and angel investors has grown, Indian Start-ups has seen a dip in securing funding in 2023. Securing funding can still be challenging, especially for Start-ups in non-metropolitan areas.
Talent Acquisition: Attracting and retaining skilled talent is a constant challenge. Competition for the best employees is fierce, and compensation expectations are high.
Market Competition: Many sectors are saturated with Start-ups, leading to intense competition. Start-ups must differentiate themselves to capture market share.
Operational Scaling: Scaling up operations is often resource-intensive. Efficient management of resources and sustainable growth is a balancing act.
Global Expansion: Expanding beyond India’s borders can be challenging due to different regulatory environments and market dynamics in other countries.
In conclusion, the Indian Start-up industry is on an upward trajectory, driven by a dynamic ecosystem and a supportive entrepreneurial culture. Legal and regulatory compliance is a cornerstone of success and should be addressed from day one. Allocating a budget for compliance is an investment in long-term sustainability. While founders face challenges, India’s Start-up landscape continues to offer immense opportunities for those who navigate the complexities with foresight and innovation. As the ecosystem evolves, Indian Start-ups have the potential to make a global impact and shape the future of business and technology.
by LegitPro Associates | Jul 24, 2023 | Corporate Law, Regulatory Compliances, Startup
While corporate governance has been a top matter of discussion over the past year, the latest incident of Mojocare founders confessing to its investors on inflating revenue has underlined the need to keep a close watch on the operations of startups. Venture-funded startups like BharatPe, Byju’s, Zilingo, Rahul Yadav’s 4B Networks and Trell are among companies that have allegedly had governance issues in the last one year.
Everyone is cautious about what might be happening even in early-stage firms and it’s better to get it checked in early stages given the current state of affairs. India is emerging as one of the fastest-growing start-up nations in the world, with over 98,000 start-ups, 400+ incubators, and 108+ unicorns. Indian start-ups are making their presence felt across the world,
contributing to both the socio-economic growth of India and other emerging economies, as well as gaining recognition from global investor communities, including governments.
The start-up sector in India has, over the last few years, become a key indicator of the economic growth of the country. A start-up is faced with several issues that must be dealt with in order for it to grow into a successful organization. Apart from planning the most effective business strategies, a start-up needs to look at the regulatory, legal and tax regimes of the country where it is proposed to be set up and carry on business. In many instances, appropriate structuring for a start-up helps to prevent future complications and mitigate risks at a future stage. Introducing corporate governance norms early in a start-up has several benefits that can outweigh the potential diversion of focus.
Here are some of the key benefits:
▪ Enhanced accountability: Corporate governance norms ensure that the startup is accountable to its stakeholders, including investors, customers, and employees. This can help establish trust and credibility, which is essential for the long-term success of the business.
▪ Improved decision-making: By establishing a clear framework for decision-making, corporate
governance norms can help the startup make better decisions that align with its values and
objectives.
▪ Reduced risk: Corporate governance norms can help the startup identify and manage potential risks, including legal and regulatory compliance, financial reporting, and data privacy.
▪ Increased access to capital and partnership: Investors and lenders are more likely to invest in startups that have established corporate governance norms. This can help the startup raise capital more easily and at more favorable terms. Furthermore, start-ups that adopt good governance practices tend to attract higher valuation premiums, which can assist in their overall fundraising and growth journey.
▪ Stronger reputation: A startup that upholds high standards of corporate governance is likely to have a stronger reputation in the market, which can help attract customers, employees, and partners.
While there is a potential risk that corporate governance norms could increase costs and/or curtail innovative thinking, it is possible to mitigate this risk by balancing governance with a culture of innovation and regularly reviewing and updating governance frameworks. The overall benefits far exceed the possible downsides.
Start-ups are growing at a fast pace and with strong aspirations. The Indian start-up ecosystem is poised to create jobs, generate wealth, and transform societies. The governance framework has the potential to act as a catalyst for start-ups to remain conscious during important decision-making processes.
LegitPro Associates Corporate Governance team completed 2 assignments of Drafting Comprehensive
Governance framework for one Series A funded start-up and another for Series B funded start-up.
Corporate governance acts as a knight in shining armor, rescuing both founders and partners at all stages, during and after fund-raising. As the saying goes, right begets right and wrong begets wrong. Following the sound principles of corporate governance will always enable a start-up to make sound investment decisions, establish best practices in the form of rights, duties, obligations, and liabilities, and ensure its smooth functioning and growth. This framework is the first step of many in the right direction!
by LegitPro Associates | Jul 19, 2023 | Knowledge Series, Startup
INTRODUCTION
Relating to sports activities in the country, sports law is an ever evolving and emerging law in India that revolves around acts of players, associates covering areas of contract, intellectual property and tort law but sans a proper legislation. A great part of sports law is covered by Contract Act which within its scope includes contracts between sports players and other parties doping policies deciding liability in the light of toddler harassment in sports intellectual property and players rights. Few other avenues may include broadcasting and endorsement of advertisements rules and policies regarding conflict of interest.
VARIOUS CONTRACTS IN SPORTS LAW
Various contracts can be drafted between players and other parties to name a few agency, indemnity, appearance, endorsement, and standard player contract. A Standard Player Contract is signed between sports clubs and athlete where the athlete agrees to represent and play for a sports club regardless of bonus or salary that he receives. On the other hand, an Appearance Contract the sign to appear in a public function for an exchange of consideration. The rate of consideration and the term of appearance is decided in this contract. The establisher of relations between athlete and private persons or sponsors to use the image of athletes in advertisements is called as the Endorsement Contract. As a lot of sports persons are susceptible to injuries insurance agreements are a must for clubs and event organisers which is manifested through Indemnity Agreements. Professional aspects of an athlete are managed by an agent due to which they have an agent principal relation between them called as the Agency Contract.
ANTI- DOPING POLICY IN SPORTS LAW
Ethical manual ordains law against doping. Usage of drugs as performance enhancers are banned according to the Anti-Doping Laws formulated by various authorities. This is for adhering to world Anti-Doping Agency Code and educate people about ill effects of such psychotropic substances. Few Anti-Doping violations include, presence of prohibited substances or the metabolites in athlete’s sample, use or attempt to use of prohibited substance by an athlete, refusing to submit a sample despite being notified, failure to provide information for where about or unavailability for doping control examination, trafficking of prohibited substance or tempering with Anti-Doping control method, complicity and prohibited Association. The World Anti-Doping Agency annually updates the list of prohibited substances or methods. This International standard define what is prohibition in-competition and out-competition the list goes on to indicate if a particular substance is banned in sports. Indeed, with such diversity even competition law is felt important since it renders a contract void if it affects the market.
by LegitPro Associates | Jul 11, 2023 | Competition Law, Knowledge Series, Startup
The CCI may ask the iPhone company to make changes to its app store billing and commission policies, as it has done in the case of Google, experts said. That would require Apple to open the ‘walled garden’, its closely guarded iOS operating system, something that the world’s most valuable company has not had to do anywhere in the world.
After its order against Google on 25th October 2022, probe against Apple is already completed and at the review stage after CCI got a new chairperson recently. Investigations into cases relating to Amazon, Meta, Swiggy, Zomato, Google, and news publishers are also in advanced stages, it is learned.
Almost for a decade all these Big Tech companies enjoyed free ride in India as far the question of abuse of Dominant position is concerned. They formed the policies, payment methods and collaborations at their own will without facing any challenge from regulatory body.
All of sudden, in last 3 years CCI started probe and order against Google was treated like landmark decision which imposed Rs. 1337 Crore fine and directing Google to allow third-party billing systems for payment on its app store and not limit the option for users to Google Play’s billing system (GPBS). Even, NCLT uphold the decision of CCI. Earlier, The Competition Commission of India (CCI) recently held the e-hospitality platform giants
MakeMyTrip- Go Ibibo and Oyo guilty of unfair trade practices. It imposed a combined pecuniary sanction of $47 million along with behavioural sanctions.
Now, probe against Apple’s app store billing and policies under review and the parties involved in the case will be called next to make their submission. The findings of the probe and the stand of the CCI are likely to be in line with the order against Google. If the CCI insists that Apple allow alternative payment methods to co-exist on its app store, then Apple ‘walled garden’ crumbles for sure. Amazon case is even more serious in nature as its directly/indirectly impacts lakhs of sellers specially domestic sellers.
After Google, Apple & Amazon, next in line are Meta, Swiggy, Zomato etc. and its seems like CCI first want to tame the Big Foreign Tech Companies and then home grown Unicorns are going to face the music. CCI’s evolving position on data-driven digital markets needs further analysis and more defined regulatory framework.
Quantum of Penalty & Relevant Turnover:
As per the provision, CCI has a discretion to impose a penalty with a quantum anywhere between 0-10 percent of the turnover. Wherein a cap of 10 percent has been imposed to keep a check on the powers of the CCI as well.
In the Excel Corp Care vs CCI case, the Supreme Court had held that the penalty under competition laws be stipulated on the basis of the ‘relevant turnover’ — turnover from the business engaged in violating conduct in the case of multi-product companies.
Moreover, CCI itself in the case of Delhi Vyapar Mahasangh vs Flipkart & Ors., and Lifestyle Equities C.V. vs Amazon noted that different segments of e-commerce platforms offer different dynamics and cannot be equated. It opined that while revenue segmentation is more appropriate in brick-and-mortar businesses, the integrated nature of multiple products and services offered over online platforms makes the relevant turnover rule ill-suited for digital platforms, exempting them from Supreme Court’s rule. It would thus be interesting to see how the appellate forums deal
with this issue, given that the regulator’s decision contradicts the apex court.
Conclusion:
Global developments witnessed in the past few years have led to a paradigm shift in the market dynamics. This shift has been propelled by thriving e-commerce model, evolving digital technologies, emerging new age markets and emergence of new business models. Well defined provision of law, clear guidance by the regulator, certainty in interpretation of the law and predictability of outcomes will surely secure the interest of all stakeholders in the competition regime.
by LegitPro Associates | Jun 28, 2023 | Knowledge Series, Startup
The legal industry in India has been witnessing a significant transformation with the increasing use of Artificial Intelligence (AI) tools. These tools are revolutionizing various aspects of legal practice – changing the way legal professionals work, enabling them to navigate through vast amounts of data more efficiently. Such tools employ natural language processing (NLP) algorithms to extract relevant information quickly and accurately, significantly reducing the time and effort traditionally required for legal research and reading.
The most relevant and inspirational example of use of such tools is the deployment of AI- transcribers in several Constitution Bench proceedings before the Supreme Court of India. On 21st February 2023, Chief Justice of India Justice DY Chandrachud announced that the Supreme Court would be publishing live transcriptions of all constitution bench proceedings using A.I. transcribers. Needless to say, this is a monumental step for an industry that is otherwise known to be fairly traditional with its processes and procedures. This step by the judiciary sets a significant precedent to be adopted by other courts within the country, as transcribing proceedings is a labor-intensive and time-consuming process. With the integration of AI transcribers, however, this task becomes significantly more efficient. AI transcribers leverage advanced speech recognition algorithms and machine learning techniques to convert spoken words into text in real-time. This enables faster and more accurate transcription of court proceedings, saving valuable time for all those involved.
Now while AI transcribers offer significant advantages, they obviously have certain drawbacks. One limitation is their dependence on audio quality. Background noise, poor audio recording, or overlapping voices can affect the accuracy of transcriptions, which is an accurate description of any court proceedings! Additionally, the most significant drawback is the inability of such transcribers to accurately understand accents, dialects, or speakers with unique speech patterns, resulting in higher error rates. This is especially the case in a country like India where proceedings of several courts are conducted in regional languages, making the use of AI transcribers redundant. Furthermore, the contextual understanding of AI transcribers is still limited, making it challenging to accurately capture complex legal or technical terminology. Lastly, the risk of privacy breaches exists when sensitive or confidential information is transcribed and stored by AI systems. Striking a balance between convenience and ensuring data security remains a challenge in the adoption of AI transcribers.
It is of course important to acknowledge that these limitations are not inherent deficiencies of AI itself, but challenges in its development and application. AI transcribers continuously learn and improve, as that is the nature of all artificial intelligence. Feedback loops and user interactions help refine the algorithms and language models, resulting in better accuracy over time. Interestingly, the only way to teach AI to work for you is to learn to use it more efficiently!
There is of the argument that employing AI transcribers would cause a massive loss of jobs across the board. While this may be somewhat true, there can be no replacement for human intelligence, reasoning, critical thinking, and analysis. AI tools are meant to augment legal professionals’ capabilities, and not replace them entirely.
The Supreme Court’s integration of AI transcribers in court proceedings exemplifies the transformative impact of AI in the legal industry. By automating the transcription process, AI tools enable greater efficiency, accuracy, and accessibility in the judicial system. While challenges remain, the utilization of AI transcribers in the Supreme Court signals a progressive approach towards leveraging technology to enhance the administration of justice in India.
