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Trademark as an Asset for MSME

Ashish M. Shaji

| Updated: Mar 28, 2020 | Category: IP Rights, MSME Registration

Trademark-as-an-Asset-for-MSME

With fierce competition in the global market, novel thoughts and ideas have turned out to be an essential and significant asset for any business to succeed and prosper. These ideas are referred to as an intangible asset or an Intellectual property. It brings commercial value to a business by expression of creativity.

Tangible and intangible assets play a critical role in the business to succeed. With various MSMEs (micro, small and medium enterprises) carrying their business across several industries by using different assets for their work, intellectual property like a trademark becomes vital. 

The Government of India in recent times provided support to the MSME’s by ensuring various reliefs for MSME. With the recent “Make In India” initiative giving a promising outlook, it makes trademarks as the most important IP asset for MSME’s as they now stand a chance to make their mark more extensively and literally.  Let us try to understand how trademarks can work as an asset for Micro, Small and Medium Enterprises.

What is a Trademark?

Trademark is a kind of an intellectual property comprising of sign, design, symbol or word used to represent a business or its products. A trademark helps in distinguishing a brand or a company from other brands in a market. It allows the public to differentiate between two brands. Registration of a trademark gives the trademark owner the exclusive right to use the product or services for marketing and prevents someone else from using the same brand that has been registered earlier.

What are Micro, Small and Medium Enterprises (MSME’s)?

The Government of India enacted the micro, small and medium enterprises development Act in 2006. Under this Act, the definition of MSME was defined as:

A microenterprise is an enterprise where investment doesn’t exceed Rs. 25 lakh in plant and machinery and where the investment in equipment doesn’t exceed Rs. 10 lakh.

A small enterprise is an enterprise where investment is more than Rs. 25 lakh but doesn’t exceed beyond Rs. 5 crore in plant and machinery and where the investment in equipment is more than Rs. 10 lakh but doesn’t exceed Rs. 2 crore.

A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs. 5 crores but doesn’t exceed beyond Rs. 10 crores and where the investment in equipment is more than Rs. 2 crores but doesn’t exceed Rs. 5 crore.

The connection between MSME and Trademark

Today brands have become more subjective and evolved convincingly.  The essential part of a brand comprises of image, character, identity, reputation, etc. The name and logos are just a small sample of what a brand is. The Micro, Small and Medium Enterprises brand through its image, character, identity etc. helps in easy identification and provides their business with a competitive advantage in the market.

Trademark registration makes it possible to have the legal rights to stop others from using the same or deceptively similar brand name as the one that has been registered. Trademark plays an important role in defence mechanism to protect an MSME’s brand from loss of reputation to helping it to retain a good, trustworthy relationship with your existing consumers. A brand that has been trademarked has the ability to increase in value as an intangible asset to use as collateral to obtain financing from various financial institutions.

It may not be possible to put a value on someone else’s emotions that they feel with a brand, but the protection of the brand can be ensured by acknowledging the legal rights that come with the trademark registration. The micro, small and medium enterprises must remember that the Trademark protects their owners from others using a duplicate or deceptively similar products or services. Therefore, it becomes very critical that customer-oriented Micro, Small and Medium Enterprises in different situations empowers the customers to identify their duplicates.

Growth of Micro, Small and Medium Enterprises

With more than 28 million enterprises and about 60 million employees, MSME contributes for about 8% to the nation’s GDP, 45% to manufactured outputs and 40% to exports. It is apparent from the above statistics that the sector has grown to produce a variety of products from raw materials to finished good. It has also become a major supplier of goods having mass consumptions. MSME has shown its ability to survive and adapt to the recent changes in the economy and recession, through its flexibility and efficacy.

Trademarks for Micro, Small and Medium Enterprises

In India, the MSME’s rely on the common law of tort of passing off to protect the brand name, logo, design, symbol etc. that allows the customers to identify them in the market. This approach is basically the supreme Indian approach of taking ad hoc measures instead of sticking to an advance long term planning, and this is led by the cost-saving measures. Yet this sort of cost-saving measure may lead to an expensive proposition in future, especially in case of IPRs.

The MSME’s should look at registering or must look to Trademark their brand names and logos as a cost-saving measure considering a potential infringement in the future and to ensure a reasonably better and affordable instrument of enforcement in the court of law. In case the Trademark is not registered, the aggrieved party cannot institute an infringement suit in a court but can only initiate a lawsuit under common law tort of passing off and proving the prior usage of the name to a court of law and then obtaining an injunction against the infringer.

A trademark registration certificate to the infringer can cut short such tedious enforcement process who most likely won’t contest a bona fide trademark registration certificate in the court of law. Further, a registered trademark allows the owner of the Trademark to institute infringement proceedings against the infringer. Apart from that, the trademark registration is inexpensive for MSME in India. The government has off late scrapped half the price of the trademark application fee for the registered MSME’s.

Trademarks are a trade-able asset which means, like any other assets of MSME’s, the trademarks can also be sold, licensed or purchased from other MSME or MNC as per the needs. It is also possible for a MSME to sell their entire business while still retaining control of their brand names, logos, design or symbol that has been trademarked and then licence that Trademark further to several manufacturers.

See Our Recommendation : Trademark Search in India: Complete Procedure.

What are the documents required for MSME Trademark registration?

The documents required for MSME trademark registration are:

  1. Aadhar card of proprietor/ partner/ director
  2. Pan card of proprietor/ partner/ director
  3. MSME certificate

How to register a Trademark?

Trademark registration is the first step of establishing your own brand name. It gives numerous benefits to the trademark owner. It provides legal protection to the owner and gives a unique identity to the company or the brand. It can also act as an asset as the owner can sell or assign to another party. The following procedure is followed for trademark registration-

  • Firstly, one has to come up with a unique brand name or logo. It must be distinct in nature and should not be identical or similar to the existing Trademark in the Trademark registry. You must always check before applying for the Trademark lest the Trademark examiner objects it.
  • Then after finalizing your mark, fill the application with due care and avoiding any error and provide the supporting documents.
  • After applying for trademark registration, the examiner will then examine the brand name or logo application. The examiner will check whether the intended Trademark complies with the law and does not clash with the existing Trademark in the Trademark registry. If the trademark examiner finds no objection in the proposed Trademark then it is forwarded or else any objection is found then the status report will show as objected. The applicant can check the status of the intended Trademark application online.
  • Thereafter if the Trademark sails through stage 3, then the logo or the brand name is published in the Indian Trademark Journals. In case no one raises an opposition over the Trademark within the stipulated time, the Trademark advances to acceptance.
  • This is the final stage of the Trademark registration wherein if no one raises an opposition within the stipulated time. The registrar accepts the Trademark application and a Trademark registration certificate are issued which signifies that the Trademark is now registered and gives that company the exclusive ownership over the logo or the brand name. The issuance of the certificate also enables the company or the brand to use the registered trademark symbol next to the Trademark.

As the Indian Micro, Small and Medium Enterprises is witnessing considerable growth, making ways of many foreign investments, the identification becomes one of the most important and primary factors for them. The trademark registration for the MSME must be completed as one of the primary goals. Moreover, it has a highly inexpensive cost of registration.

Conclusion

Therefore, it can be concluded that the Trademark can work as an asset for MSME as registered Trademark shall provide protection to a MSME’s brand from loss of prestige and it will help in strengthening the relationship among the customers. Use of Registered Trademarks by MSME’s, in the long run, can benefit them by preventing others from using the same or deceptively similar brand or logo etc.

Read, More: Importance of Trademark Registration in India.

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Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on criminal and corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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