Relation Between IPR and Fintech Laws in India

 Introduction:

FinTech is the combination of the two words Financial and Technology is a rapidly growing sector that uses technology to enhance financial services. The term “FinTech” was first coined in 1972 by a New York banker but there is no generally accepted definition of the term Fintech. Fintech offers the evolution of technology, particularly in big data and quantum computing, artificial intelligence, blockchain and network/mobile connectivity revealing a new stream of innovations in this sector.

Fintech is regarded as one of the most provoking trends of recent past years. Growing customer expectations of financial service providers, expanding risk capital, removing entry barriers, and technological innovations have made Fintech one of the most sought-after in all industries. It has become an emphasis in recent years, and everyone wants to be part of it.  In today’s fast-paced and evolving connected world fintech are part of our daily money transfer, currency exchange, funding, and personal funding through applications.

 

What is IPR (Intellectual Property Rights)?

Intellectual property is the creative work of the human intellect and the right to intellectual property is an intangible right to a product of a man’s brain, such as an invented product. Intellectual property is at times described as Knowledge goods.

The main motivation for its protection is to promote the progress of Science and Technology, Arts, Literature and other creative work to encourage and reward creativity. Nations give statutory expression to the economic rights of creators in their creation and to the right of the public in accessing those creations. This is instrumental in promoting creativity and dissemination and application of its results. The economic and technological development of a nation will come to a halt if no instrumental protection is given to intellectual property rights. Therefore the contribution of intellectual property is sine quo non for the industrial and economical development of a nation. The prosperity achieved by developed nations is to a good extent, the result of the exploitation of their intellectual property.

Intellectual property relates to pieces of information which can be incorporated into a tangible object at the same time in an unlimited number of copies at different locations anywhere in the world. There are various types of Intellectual property copyright, industrial property, patents, trade marks, designs, plant varieties, geographical indication, layout design and integrated circuits, and trade secrets.

IPR for Fintech

Both new innovation and intellectual property play an important role in the competitive scenario of the financial sector and strong adoption of these assets will provide support for them with a competitive advantage. The adoption of new innovations reduces the market entry obstacles such as tech giants and start-ups and increases their mercantile power as new suppliers of substitute financial services. Intellectual property rights (“IPR”) serve to reinforce the position and mercantile power by way of securing the new innovative features in their products and providing them with a legal monopoly as a shield to exploit these.

FinTech innovations are very complex in nature, a single solution comprised of various correlative hardware and software components with very complex mathematical algorithms, some of which may run at a backend server and others at the user device. There are various IPRs exist in the same solution depending on the nature of the technology and innovation involved.

Over the years, the Government of India has made efforts to spread awareness of the importance of intellectual property rights among Startups, and fintech by providing various incentives like taxation incentives and others for Startups to protect their intellectual property rights.

IP Protection

India being a signatory to the agreement on trade-related aspects of IPR has established robust IP governance pursuant to the Patents Act 1970, Copyright Act 1957, Designs Act 2000, and Trademark Act 1999 along with recognition being provided under common law rights. To understand the protection provided by intellectual property rights, let’s understand intellectual property’s nature and how it is protected under Indian laws. Indian IPR law is divided into different categories which offer unique different protection. The categories are as follows:

COPYRIGHT

Copyright is a very important instrument for protecting intellectual property for Fintech businesses. Copyright protects the computer's code such as source code, pseudocode, machine code, specially developed hardware or firmware, visual interface features, audio and video instruction, application programming interface (API) and similar R&D solutions. Copyright is an important intellectual property asset for a FinTech company, especially if the program design offers efficient computation and ease of use. As their websites/applications/software is the backbone of most Form Startups and fintech companies, need to be paid special care and attention for their protection. If it is not protected within the correct time, the chances are very high that a rival or competitor may take undue advantage by copying the creator’s ideas.

PATENTS

An extremely important outlook for companies and mostly Startups is the providing protection of their inventions under the Patent Act of 1970. Applying for a Patent must be the first step for any start-up or fintech industry to obtain protection for their innovative product. Patents grant a mechanism for restraining other businesses from creating, using and selling patented technologies or products for a period of 20 years. Patents allow businesses to gain or maintain market share and protect the investments made in research and development. Patents ensure a competitive advantage and also it is used as a tool in negotiations. Each development strategy should be considering whether patent protection is available for innovations in basic technologies. Due to Fintech’s rapid fast pace of development, the attainment of an early filing date is very crucial due to the nature of the patent system.

TRADEMARKS

A fintech should protect its brand from the very beginning if has the mindset to grow big. The Trademark Act, of 1999 provides that there should have a trademark for the name/logo/brand of every individual/owner/company. Fintech companies are highly advised to invest in their trademark’s reputation, as they ensure and already have high-quality customer service. A dynamic brand/name/logo qualifies fintech companies to distinguish their unique product from their competitors’ products. It also helps a fintech company to acquire or merge or to get acquired. Fintech companies often manage financial assets, and an acknowledged trademark is especially important for their clients such as VISA, and PayPal. A financial institution needs to consider trademarks in its early development stage. Moreover, fintech will be branded and to whom that brand will be facing, brands can be registered as trademarks but they are going to face some challenges if similar brands are already in use in the market.

TRADE SECRETS

Registration of Trade Secrets is not necessary, but companies must take legitimate steps to keep them clandestine. The advantage of this form of protection is that it guarantees the absolute security of secret information as long as sufficient confidentiality measures are taken. Trade secrets include all clandestine business information that gives the owner a competitive mindset or advantage over the other competitors in the same market. Trade secrets include manufacturing secrets and trade strategies, practices, processes, designs, instruments, patterns, trading methods, or compilations of information that are not generally known or reasonably ascertainable to others. Unlawful or unauthorized use of the same is considered an unfair practice. India does not have a separate law regulating and protecting trade secrets India. However, trade secrets are regulated by many laws such as contract law, copyright law, principles of fairness, etc.

INDUSTRIAL DESIGN

The term design is defined in the Designs Act of 2000. As per the Design Act of 2000 design means the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article and has some aesthetic value. Industrial designs are used to protect the “appearance and aesthetic features of physical items such as electronic cards, computer interfaces and icons, and transaction devices. Industrial design protection is a valuable asset, particularly if a particular feature helps to promote the rareness of the trade mark, products or service which helps to increase the utility of a product.

Conclusion

Knowing the pace at which the FinTech industry is growing and the importance of intellectual property rights pertaining to this sector just like the human body and blood. Financial institutions and tech companies should develop a widespread understanding of intellectual property rights concerning this sector. Put in place suitable intellectual property policies within their organizations, ensure proper intellectual property agreements are executed with their employees, consultants and commercial partner and implement suitable mechanisms to ensure comprehensive protection of intellectual property rights. Concerning their unique innovation projects and tackle any dynamic areas of intellectual property disputes with preparation in terms of proper protection of intellectual property rights and solid contractual provisions, which should be strategically and carefully considered by an intellectual property expert in the IT field. In the case of intellectual property disputes, these should again be conducted in a very calculated manner with a proper strategy on legal grounds. The technological evidence has to be submitted before the Hon'ble Courts. Procedures of submitting these in a way which would not give and take on the validity of any intellectual property rights underlying the financial technology.