The Indian Government has announced various initiatives to
promote start-ups. One such initiative brings various benefits to
start-ups in their patenting initiatives. The benefits primarily
correspond to discounts in government fees and expediting of patent
examination. The government fees charged for start-ups will be
the same as that charged for natural persons (individuals). In this
article, we discuss the criteria to be met by an entity, regardless
of whether the entity is Indian or not, to qualify as a
Note that at the time of writing this article the amended rules,
under which these benefits are being provided, was released one day
before (May 16, 2016). Hence, there could be changes in the way
these rules are interpreted going forward.
Criteria to qualify as start-up
Most of the criteria are objective, with one criterion being
subjective in nature. To begin with the objective criteria are
listed as questions, and if the answer to each of the below listed
questions is in the affirmative (yes), then the entity qualifies as
Is the applicant for a patent a
Private Limited company as defined in the
Companies Act, 2013 or a registered partnership firm
registered under section 59 of the
Partnership Act, 1932 or a limited liability partnership
under the Limited Liability Partnership
Explanation: At present, it appears that Non-Indian partnership
and limited liability partnership firms may not qualify as
start-ups, since registration in India of such firms appear to be
mandatory to claim benefits. However, a Non-Indian entity as long
as it meets the definition of a "Private Limited Company"
as defined in the Companies Act, 2013, can qualify as start-up. The
definition is provided below.
"private company" means a company having a minimum
paid-up share capital of one lakh rupees (USD 1515 at conversion
rate of USD 1 = INR 66) or such higher paid-up share capital as may
be prescribed, and which by its articles,—
restricts the right to transfer
except in case of One Person
Company, limits the number of its members to two hundred:
Provided that where two or more
persons hold one or more shares in a company jointly, they shall,
for the purposes of this clause, be treated as a single
(A) persons who are in the employment of the company;
(B) persons who, having been formerly in the employment of
the company, were members of the company while in that employment
and have continued to be members after the employment ceased, shall
not be included in the number of members; and
prohibits any invitation to the
public to subscribe for any securities of
Has the entity been registered or
incorporated within the last five years?
Has the turnover of the entity in
each of the financial year in the last five years been less than
INR Twenty five crores (USD 3787878 at conversion rate of USD 1 =
Has the entity been formed without
splitting up or reconstructing a business, which was already in
The entity has to provide evidence in support of the above
listed criteria to be recognized as start-up. The evidence for an
Indian entity can include registration or incorporation
certificate, and Balance sheet/Income tax acknowledgment for the
corresponding years. Whether a declaration by a Chartered
accountant regarding the income of the company be accepted is yet
be determined. A foreign entity may provide equivalent documents as
Further, with regards to the subjective criterion, an entity to
qualify as start-up should be working towards innovation,
development, deployment or commercialisation of new products,
processes or services driven by technology or intellectual
property. The criterion is considered to be met if the entity aims
to develop and commercialise a new product or service or process,
or a significantly improved existing product or service or process
that will create or add value for customers or workflow. The entity
may provide evidence supporting its claim to have met this
criterion by providing a declaration mentioning that based on the
patent application that is being currently filed they are working
towards developing and commercializing a new product or service or
process, or a significantly improved existing product or service or
process that will create or add value for customers or
We hope this article helps patent applicants decide which type
of entity they fall under. You may also read our article to know
about how to claim small entity status.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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