UNIT III

LEGAL CHALLENGES IN SETTING UP BUSINESS

INTELLECTUAL
PROPERTY
Intellectual property (IP) refers to creations of the mind or intellect that are
recognized and protected by law. These creations can take various forms,
including inventions, literary and artistic works, symbols, names, images, and
designs used in commerce. Intellectual property rights grant exclusive rights
to creators or owners, allowing them to control the use and distribution of
their intellectual creations for a specified period.

Intellectual property rights incentivize innovation, creativity, and investment

by providing creators and innovators with legal protection and exclusive
rights to their intellectual creations. They enable creators to monetize their
inventions and creative works, fostering economic growth and cultural
development. Intellectual property laws vary by jurisdiction, and
enforcement mechanisms ensure compliance with IP rights and deter
infringement or unauthorized use of intellectual property.
 Intellectual Property Protection
Intellectual property (IP) protection refers to the legal rights granted to individuals or
entities over their intellectual creations or inventions. It allows creators to have exclusive
control over the use and dissemination of their intellectual assets, thereby incentivizing
innovation, creativity, and economic development. Intellectual property protection
typically involves various legal mechanisms and frameworks, including:
Patents: Patents protect inventions and discoveries
Copyrights: Copyrights protect original works of authorship
Trademarks: Trademarks protect symbols, logos, names, slogans, and other identifiers
Trade Secrets: Trade secrets protect valuable confidential information
Industrial Designs: Industrial designs protect the visual appearance
Intellectual Property Enforcement
 Patents are legal protections granted by
governments to inventors or assignees
for new inventions or discoveries. They
provide inventors with exclusive rights
to their inventions for a limited period,
typically 20 years from the filing date
PATENTS - Meaning of the patent application. Patents serve
as a form of intellectual property
protection, allowing inventors to
prevent others from making, using,
selling, or importing their patented
inventions without permission.
Features Of PATENTS
Novelty: To be granted a patent, an invention must be novel, meaning
it must be new and not previously known or disclosed to the public.
The invention must also involve an inventive step, meaning it must not
be obvious to someone skilled in the relevant field of technology.

Utility: Patents must have utility, meaning they must serve a useful
purpose and have practical applications. Inventions that are purely
theoretical or abstract ideas generally cannot be patented.

Non-obviousness: In addition to being novel, patents must involve an

inventive step that is not obvious to someone skilled in the relevant
field of technology. The invention must represent a significant
advancement or improvement over existing technologies.
Disclosure: In exchange for the exclusive rights granted by a patent, inventors are
required to disclose their inventions in detail in the patent application. This disclosure
requirement helps promote innovation by sharing technical knowledge and enabling
others to build upon existing inventions.

Exclusive Rights: Patents grant inventors exclusive rights to their inventions, allowing
them to prevent others from making, using, selling, or importing the patented
invention without permission. Patents provide inventors with a legal monopoly over
their inventions for the duration of the patent term.

Limited Duration: Patents have a limited duration, typically 20 years from the filing
date of the patent application. Once the patent expires, the invention enters the
public domain, allowing others to freely use, make, or sell the invention without
infringing on any patent rights.

Patent Application Process: The process of obtaining a patent involves filing a patent
application with the relevant patent office, which includes a description of the
invention, claims defining the scope of the invention, and any necessary drawings or
diagrams. The patent office examines the application to determine if the invention
meets the patentability criteria before granting a patent.
COPYRIGHT - Meaning
Copyright is a form of intellectual
property protection granted to the
creators of original works of
authorship, including literary,
artistic, musical, and dramatic
works, as well as software code and
architectural designs. Copyright
grants authors and creators
exclusive rights to their works,
allowing them to control how their
works are used, reproduced,
distributed, performed, and
displayed.
Aspects Of COPYRIGHT
Originality: Copyright protects original works of authorship that are fixed in a tangible form
of expression. This means that the work must be the result of the author's creative effort
and must be recorded in a physical or digital medium, such as writing, drawing, painting,
recording, or typing.

Scope of Protection: Copyright protects a wide range of creative works, including literary
works (e.g., books, articles, poems), artistic works (e.g., paintings, photographs, sculptures),
musical works (e.g., songs, compositions), dramatic works (e.g., plays, scripts), and
audiovisual works (e.g., movies, TV shows). Copyright also extends to derivative works based
on the original, such as translations, adaptations, and compilations.

Exclusive Rights: Copyright grants authors and creators exclusive rights to their works,
including the rights to reproduce the work, distribute copies to the public, perform the work
publicly, display the work publicly, and create derivative works based on the original. These
exclusive rights allow authors to control how their works are used and to derive financial
benefits from their creations.
Duration of Protection: Copyright protection lasts for a limited period, typically
for the life of the author plus 70 years after the author's death. In the case of
works created by corporations, anonymous authors, or works made for hire,
copyright protection lasts for 95 years from the date of publication or 120 years
from the date of creation, whichever is shorter.

Copyright Notice: While not required for copyright protection, including a

copyright notice on a work informs the public that the work is protected by
copyright and identifies the copyright owner. A copyright notice typically includes
the © symbol, the year of first publication, and the name of the copyright owner.

Copyright Registration: Although copyright protection is automatic upon the

creation of a work, authors and creators may choose to register their works with
the appropriate copyright office for additional legal protections. Copyright
registration provides evidence of ownership and allows copyright owners to file
infringement lawsuits and seek statutory damages and attorney's fees.
TRADEMARK - Meaning

A trademark is a form of intellectual

property protection that grants
exclusive rights to symbols, logos,
names, slogans, or other identifiers
used to distinguish goods or services
in the marketplace. Trademarks help
consumers identify and distinguish the
source of products or services and can
include words, phrases, designs,
symbols, or combinations thereof.
 Aspects Of TRADEMARKS
Distinctiveness: To be eligible for trademark protection, a mark must be distinctive and capable of
identifying the source of goods or services. Trademarks can be inherently distinctive, meaning they
are inherently capable of identifying a source (e.g., fanciful or arbitrary marks like "Apple" for
computers) or acquired distinctiveness through use in commerce (e.g., descriptive marks like "Best
Buy" for electronics retailer).

Scope of Protection: Trademarks protect the use of a mark in connection with specific goods or
services. Trademark owners have the exclusive right to use their marks in commerce and prevent
others from using similar marks that could cause confusion among consumers. Trademark protection
can extend to words, logos, symbols, colors, sounds, product packaging, and even distinctive scents or
flavors associated with products or services.
Registration: While not required for trademark protection, registering a trademark with the
appropriate government authority provides additional legal protections and benefits. Trademark
registration provides evidence of ownership, establishes a legal presumption of ownership and
validity, and allows trademark owners to enforce their rights in court. In India, trademark registration
is typically done with the Office of the Controller General of Patents, Designs and Trade Marks
(CGPDTM) generally known as the Indian Patent Office.
Legal Acts Governing Businesses In India

In India, businesses are

governed by a comprehensive
framework of legal acts and
regulations that cover various
aspects of business operations,
including company formation,
taxation, labor relations,
intellectual property rights,
and consumer protection.
Companies Act, 2013: The Goods and Services Tax
Companies Act is a central legislation (GST) Act, 2017: The GST Act
that regulates the incorporation, introduced a unified indirect tax
management, governance, and system in India, replacing various
dissolution of companies in India. It central and state taxes with a single
outlines the legal framework for the Goods and Services Tax (GST). The Act
establishment and operation of governs the levy, collection, and
different types of companies, such as administration of GST on the supply of
private limited companies, public goods and services across the country.
limited companies, and limited liability
partnerships (LLPs).
Labor Laws: India has numerous
labor laws that regulate employment
Income Tax Act, 1961: The relations, working conditions, wages,
Income Tax Act governs the levy, social security, and industrial disputes.
assessment, and collection of income Some key labor laws include the
tax in India. It outlines the rules and Industrial Disputes Act, Minimum
regulations related to the computation Wages Act, Employees' Provident
of taxable income, filing of tax returns, Funds and Miscellaneous Provisions
and payment of income tax by Act, and the Employees' State
individuals, businesses, and other Insurance Act.
entities.
Intellectual Property Laws: Intellectual property rights in India are protected by various laws,
including the Patents Act, 1970, the Copyright Act, 1957, the Trademarks Act, 1999, and the
Designs Act, 2000. These laws govern the registration, enforcement, and protection of patents,
copyrights, trademarks, and industrial designs.

Consumer Protection Laws: The Consumer Protection Act, 2019, regulates consumer rights,
protection, and redressal mechanisms in India. It provides for the establishment of consumer
courts and forums to adjudicate disputes between consumers and businesses regarding
defective goods, deficient services, unfair trade practices, and unfair contracts.

Foreign Exchange Management Act (FEMA), 1999: FEMA regulates foreign exchange
transactions, capital flows, and foreign investment in India. It governs matters related to foreign
exchange management, external trade, foreign investment, and cross-border transactions, with
the objective of promoting external trade and payments and maintaining the stability of the
foreign exchange market.
Securities Laws: Securities laws in India are governed by various statutes, including the
Securities Contracts (Regulation) Act, 1956, and the Securities and Exchange Board of India
(SEBI) Act, 1992. These laws regulate the issuance, trading, and regulation of securities, stock
exchanges, market intermediaries, and investor protection.
Form Of Business Organization
Sole Proprietorship: A sole proprietorship is the simplest form of business organization,
owned and operated by a single individual. The owner has full control and responsibility for
the business and its operations. Sole proprietorships are easy to set up, have minimal
regulatory requirements, and allow for direct retention of profits. However, the owner
bears unlimited personal liability for the debts and obligations of the business.

Partnership: A partnership is a business structure formed by two or more individuals who

agree to share profits, losses, and responsibilities. Partnerships are governed by a
partnership deed that outlines the terms and conditions of the partnership, including profit-
sharing ratios, decision-making procedures, and management responsibilities. Partnerships
can be general partnerships, where all partners have unlimited liability, or limited liability
partnerships (LLPs), where partners have limited liability up to their capital contribution.

Limited Liability Company (LLC): A limited liability company, also known as a private limited
company, is a separate legal entity distinct from its owners. LLCs are governed by the
provisions of the Companies Act, 2013, and require a minimum of two shareholders and
directors. Shareholders have limited liability, meaning their personal assets are protected
from the debts and liabilities of the company. LLCs offer flexibility in management, ease of
transferability of shares, and access to external funding through equity investments.
Public Limited Company: A public limited company is similar to a private
limited company but can offer its shares to the public and is subject to
additional regulatory requirements. Public limited companies must have a
minimum of seven shareholders and three directors. They are listed on stock
exchanges and are required to comply with stringent disclosure and reporting
requirements to protect the interests of public investors.

One Person Company (OPC): Introduced under the Companies Act, 2013, an
OPC is a hybrid form of business organization that combines the benefits of a
sole proprietorship and a private limited company. It allows a single individual
to form and operate a company with limited liability. The sole shareholder acts
as the director and has full control over the company's operations. OPCs
provide benefits such as limited liability, ease of formation, and perpetual
succession.
Cooperative Society: A cooperative society is a voluntary association of
individuals who come together to meet common economic, social, or cultural
needs through democratic control and mutual assistance. Cooperative societies
are governed by the respective state cooperative laws and operate on the
principles of self-help, mutual aid, and democratic management. They are
commonly formed to undertake activities such as agriculture, credit, housing,