“Which entity type should I file my patent application?”

Often at times, a question that is frequently asked by individuals/startups while filing the patent application is “Which entity type should I file my application and what are its benefits”?

Inventorship and ownership are two different topics when it comes to patents. Inventions are innovated by inventors but the proprietary right or ownership belongs to the applicant.Applicant is the entity under whose name the patent application is being filed. Inventors may or may not be the applicant.For eg: Denver works for Apple Inc and comes up with an invention. In the application, Denver shall be the Inventor and Apple Inc shall be the applicant. Though he was the inventor, Apple Inc will have the entire ownership of his invention as the invention was conceptualized at Apple Inc.

Let’s discuss about the types of entities for filing patent application. In India, the types of applicants are broadly classified in to 4 types. They are Natural person or Individual(s); Startup; Small entity and Others.

Natural Person includes an individual human being. The patent application can be filed in the name of one or many individuals.The Government statutory fee is very less for natural person than compared to other options. Also in this case inventorship & ownership lies with the inventor and he may choose to sell it, transfer it, license it or commercialize it whenever he wants.

Startup is the entity which is recognized by Department for Promotion of Industry and Internal Trade (DPIIT). The entity needs to fulfill few criteria to be recognized as a startup. They are as follows:

1. Any company which is incorporated as a Private Limited Company or Registered as a Partnership firm or Limited Liability Partnership (LLP)
2. Less than 10 years of incorporation of the firm
3. Less than INR 100 crores turnover in any of the last Financial years
4. 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

Some of the notable benefits under the category are rebate in Government statutory fee; fast-tracking of patent applications and panel of facilitators to assist in patent applications. It is mandatory to submit the recognition certificate issued by Department for Promotion of Industry and Internal Trade (DPIIT) to claim the startup benefits.

Small Entity is the Small enterprise classified under the Micro, small and medium enterprise development Act, 2006. As per Indian Patents Act, a Small entity is an enterprise:

• engaged in the manufacture or production of goods, where the investment in plant and machinery does not exceed Ten crore rupees
• engaged in providing or rendering of services, where the investment in equipment is not more than Five crore rupees

Others include all entities which do not fall under any of the above categories.

Most of the time startups are confused whether to file the application in the name of individuals or in the name of the company. While both options have its own positive and negatives, there are a few important factors which help them to decide the same.

Statutory fee: The Government statutory fee is different based on the type of the applicant. Some of the fee are given below for better understanding:

Above table clearly defines that the statutory fee is very less if the applicant is the natural person. Most of the time the patent application is being filed in the name of the founder or director to reduce the associated expenses.

Fast-track examination

The option for Fast-tracking a patent application is available to some of the entity types where a request for expedited examination could be filed along with early publication.

In order to be eligible for filing request for expedited examination, at least one of the below criteria is required to be fulfilled:

• The applicant has chosen India as an International Searching Authority (ISA) or as an International Preliminary Examining Authority (IPEA) in a corresponding PCT application.
• The applicant is a Start-up; or
• The applicant is a small entity; or
• One of the applicants is a female natural person; or
• The applicant is a government undertaking in accordance with section 2(1) (h) of the Patent Act, 1970 in case of an Indian applicant, or is a similar entity in case of a foreign applicant; or
• The applicant is eligible under an arrangement for processing an international application pursuant to an agreement between Indian patent office with another participating patent office.

By fast-tracking the patent examination, a patent could be granted in 12-13 months in comparison to usual 3-4 years.

Raising funds

Companies having patents filed/granted in its name attract more investors. Investors always do a due diligence on the assets of the company before investment. These assets include both tangible and intangible assets where Intellectual property falls under intangible assets.

In case the patent is owned by the founder, the investor would make sure that the patent would be assigned to the company before the investment.

Conclusion:

While we have illustrated the various entity types and how it can benefit an inventor, it is completely up to the inventor to decide on the entity type based on their IP & Business strategy.

Authors – Anand Balagopal and Shivani Shrivastava