This article has been compiled by Ms. Rishita Jha, a 1st year student of LLYOD LAW COLLEGE , Uttar Pradesh.

ABSTRACT

 The aim of the article is to know how Financial sector is being revolutionised by Technological interventions and the opportunities it paves for India. Also at the same time this article analyses the varied prospects of Intellectual Property Rights (hereon IPR) and it’s importance, challages & benitits for FinTechs. With more then 2100+ Fintech startups already been registered in India and more in counting, there arises an inevitable situation of theft / Copying of trade related aspects. Thereby it becomes very crucial for every player of this field to understand, use & Cite remidies though Weapon of IPRs.

INTRODUCTION 

With the population of 1.3 billion people and the fact that the young nations witnessing high growth in digital penetration, India continues to remain an exciting global space for Fintech. Although traditional banks continue to command the financial market, but with the advancing technologies, AI (Artificial Intellegence), ML (Machine language), etc. there emerged a fusion of Financial operations & technolgical Solution — “The Fintechs” which bloomed in India around 2007-08 and became well established into market from around the time of Corona pandemic that completely restricted human movement and made them dependable to tech based banking solution. Also many studies Shows theat the younger generation is more intrigued by the financial Services provided by tech giants and no longer stipulates physical banking default service providers.

In this age of evergrowing & evolving technologies and fastest growing market of Fintech in India, there is no doubt that within few more years the idea of digital banking will if not subside then surely will be most used alternative and one-stop solution to various physical banking services.

The services offered by fintechs are no doubt easily accessible, less cumbersome to use and offers services round the clock thus propelling the exponential growth of the sector. Start-ups that are conceived to be the forerunner of India’s ambition to be a production led economy, is heavily dominated by the Fintech service providing companies. Thus it is the demand of time that these start-ups must be given a even playing ground in the market and simultaneously Safeguarding both Service providers and users against any illicit activities like data theft, Privacy control, money Laundering, etc. Also with the changing world & financial market there must be a robust modification of Rules, regulations & Scruitiny so as to provide ample safeguard while also remaining at par with the global trends and seeking new opportunities.

Fintechs are idea & technology driven dynamic industry and with the growing compitition it is very often the case of Intellectual stealing. There are more than one technological pillars for flourishment of Fintechs like their source code, Softwares, hardwares, user interface, etc. For any start-up especialy related to fintech, it is utmost important to secure their idea, innovation & identification.

WHAT ARE FINTECH ?

Now we think of fintech in terms of cryptocurrencies and start-up banks, but its roots can be traced back to the late 19th century when money could be moved around by telegrams and morse code. The word “fintech” was first used to describe the technology used in the back-end systems of established financial institutions. However, since that time, there has been a change toward more consumer-focused services and, thus, a more consumer-focused definition. But today, Financial technology (better known as Fintech) is used to describe new tech that seeks to improve and automate the delivery and use of financial services. It includes any technological innovation in the financial sector like retail banking, non-profit fundraising, payments apps, peer-to-peer (P2P) lending apps, investment advisors and even crypto-currencies/ Decentralised Finance (DeFi).

Fig. 1: Arenas of FinTechs

Fig. 2 : Fintech Revolution Drivers & Hurdels

FinTechs In India :-

India is one of the markets for fintech that is expanding the fastest, with an adoption rate of 87% compared to the global average of 64%. Currently, there are 2,000+ DPIIT-recognized Financial Technology (FinTech) startups in India with this number is growing fast. India still has 190 million people without access to banking services, making it the country with the second-largest population without such access despite experiencing tremendous growth in recent years supported by the growing internet adoption. As a result, there is a need to securely expand technology-based financial services across the nation.

The opportunity for FinTech lies in expanding the market, shaping customer behavior, and effecting long term changes in the financial industry. Indian FinTech companies have the potential to reshape the financial services landscape in three ways :-

* The Fintech startups are likely to reduce costs and improve quality of financial services. Benefits of leaner operating models can be passed on to customers.

* The Fintech industry has potential to develop unique and innovative models of assessing risks. Leveraging big data, machine learning, and alternative data to underwrite credit and develop credit scores for customers with limited credit history will improve the penetration of financial services in India.

* Fintech will create a more diverse, secured, and stable financial services landscape. FinTech companies are less homogenous than incumbent banks and offer great learning templates to improve, both, capabilities and culture.

What are Intellectual Property Rights?

IPR are the rights given to persons over the creation of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.

These rights are outlined in Article 27 of the Universal Declaration of Human Rights, which provides for the right to benefit from the protection of moral and material interests resulting from authorship of scientific, literary or artistic productions.

Fig. 3 : An overview of IPR

The importance of intellectual property was first recognized in the Paris Convention for the Protection of Industrial Property (1883) and the Berne Convention for the Protection of Literary and Artistic Works (1886). Both treaties are administered by the World Intellectual Property Organization (WIPO).

Types of IPR :

Patents :

A patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem. Patentability of any invention needs to fulfill certain criteria such as Usefulness, Novelty and Non obviousness. It provides protection for the invention to the owner of the patent for a limited period, i.e 20 years.

Copyrights :

The rights of authors of literary and artistic works (such as books and other writings, musical compositions, paintings, sculpture, computer programs and films) extracted from his or her intellectual effort are protected by copyright, for a minimum period of 50 years after the death of the author.

Industrial Property :

Protection of distinctive signs, in particular trademarks and geographical indications. The protection of such distinctive signs aims to stimulate and ensure fair competition and to protect consumers, by enabling them to make informed choices between various goods and services. The protection may last indefinitely, provided the sign in question continues to be distinctive.

Trademarks – distinguish the goods or services of one undertaking from those of other undertakings.

Geographical Indications (GIs) – identify a good as originating in a place where a given characteristic of the good is essentially attributable to its geographical origin.

Industrial Designs and Trade Secrets :

Other types of industrial property are protected primarily to stimulate innovation, design and the creation of technology.

INDIA & IPR :-

The first legislation in India relating to patents was the Act VI of 1856. The objective of this legislation was to encourage inventions of new and useful manufactures and to induce inventors to disclose secret of their inventions. The Indian Patents and Designs Act, 1911, (Act II of 1911) replaced all the previous Acts. This Act brought patent administration under the management of Controller of Patents for the first time.

After Independence, it was felt that the Indian Patents & Designs Act, 1911 was not fulfilling its objective. It was found desirable to enact comprehensive patent law owing to substantial changes in political and economic conditions in the country. Indian Government then enacted, other laws protecting and promoting Intellectual Property Rights are recognised under the legislative statute, such as: –

1. The Geographical Indications of Goods (Registration & Protection) Act, 1999
2. The Patents Act (1970)
3. The Trademark Act, 1999 (formerly The Trade and Merchandise Marks Act, 1958.)
4. The Designs Act, 2000
5. The Copyright Act, 1957

IPRs IN FINTECHS :-

FinTech innovations can be complex in nature, as a single solution may be comprised of various interrelated hardware and software components with complex mathematical algorithms, some of which may run at a backend server and certain others at the user device. Various IPRs may co-exist in the same solution, depending on the nature of the technology and innovation involved, including:

a) Software/Source code:

The source code may be subject to trade secret protection provided it meets certain legal requirements, namely the preservation of its confidentiality by undertaking all necessary measures to do so. Among the measures to preserve confidentiality include restricting access to the code by the public and  executing confidentiality agreements with all parties that may have access to the code, such as employees, developers, and other external parties. Trade secret protection arises automatically without the need for registration. It is to be noted that failing to take appropriate measures to preserve the confidentiality of the source code by the owner may lead to the loss of this valuable legal right. Though India does not have distinct legislation for protection of trade secrets, but deeming it’s importance it has been granted ample protection through various Judicial pronouncements. Disclosing, acquiring or using a source code protected by a trade secret unlawfully without the trade secret owner’s authorization may constitute a trade secret violation leading to both civil and criminal liabilities.

The author of copyright in software also possesses the “commercial rental right” . After the perusal of the arrangements under Section 51 in consonance with Section 14(a), it would be evident that any unauthorised storage, propagation, distribution of replicas, or adaptation of copyrighted software would amount to an infringement of copyright in the programme of a FinTech.

b) Algorithm:

An algorithm refers to a specific part of a software that contains a procedure or set of rules for solving a specific problem. It is common that an algorithm in FinTech solutions contain mathematical formulas and even artificial intelligence (AI) in some occasions, as part of the “secret sauce” underlying the solution. An algorithm may be subject to trade secret protection, providing the owner entitlement to the possibility of seeking legal remedies available under the law (depending on the jurisdiction) against the disclosure and certain unfair commercial practices by employees and third parties.

c) Innovation Core

Perhaps the most valuable protection of an innovation is the protection of any existing invention underlying the financial technology. An invention reflects the technical solution, which addresses the existing technical problem or challenge. In FinTech innovations, inventions are largely related to computer-implemented processes, which revolve around the technical actions executed by a computer, as well as related systems and devices configured to execute the computer-implemented processes.

While copyright protection will protect the computer code itself from copying or reproduction, it falls short of protecting the innovative technical concept or process associated with the FinTech innovation. This is important where the value of the FinTech innovation revolves around a new innovative technical concept. A patent prohibits a third party from exploiting the patented invention (in the form of a device or a process) even if the software code was developed independently or differently. In order to protect the innovation core of a FinTech solution, one must consider patent protection. A patent normally secures a wide scope of protection, which extends far beyond the literal expression of the computer instructions or software code itself.

d) Visual Design & Graphical User Interface (GUI)

Industrial designs are another form of IP which may be used to protect visual features of physical articles and products such as payment cards, devices and accessories, as well as graphical user interfaces associated to computer or mobile applications. In order to secure protection, an industrial design must be registered.

CONCLUSION

Knowing the pace at which the FinTech industry is evolving and the importance of IP rights pertaining to this sector, financial institutions and tech companies should develop a comprehensive understanding of IP rights pertaining to this sector, put in place suitable IP policies within their organizations, ensure proper IP agreements executed with their employees,  consultants and commercial partners, and implement suitable mechanisms to ensure comprehensive protection of IP rights pertaining to their innovation projects and tackle any potential areas of IP disputes with a preparation in terms of proper protection of IPRs and solid contractual provisions, which should be strategically and carefully considered. IP disputes pertaining to FinTech may occur in various contexts, including disputes pertaining to IP ownership, IP infringement and contractual disputes in the frame of the development, licensing and commercialisation of FinTech products.  IP disputes arising in FinTech are normally sophisticated in nature as they involve technical aspects pertaining to the technology itself, as well as an amalgam of IPRs associated to these.  In order to minimise the risks of IP disputes or a successful outcome in case these arise, it is important that parties involved in the development and commercialisation of FinTech solutions take precautionary measures, first from the IP protection perspective to protect the financial technology, and second from the contractual perspective to provide clarity around IPR ownership and commercialisation rights and obligations with all parties involved including suitable dispute resolution mechanisms in case a dispute arises.

CITATIONS :-

1. https://www.wipo.int/edocs/mdocs/tk/en/wipo_iptk_ge_14/wipo_iptk_ge_14_wipo_presentation_1.pdf
2. https://www.expresscomputer.in/guest-blogs/fintech-revolution-transforming-the-financial-landscape/104145/
3. https://www.thehindu.com/news/cities/Hyderabad/fintech-the-way-forward-for-banking/article65417330.ece
4. https://www.thehindu.com/news/national/other-states/fintech-industry-needs-to-work-relentlessly-on-safety-to-uphold-peoples-trust-pm-modi/article65913240.ece
5. https://ipindia.gov.in/history-of-indian-patent-system.htm
6. https://ipindia.gov.in/writereaddata/Portal/ev/sections-index.html
7. https://www.indiacode.nic.in/bitstream/123456789/1993/1/A1999-47.pdf
8. https://www.indiacode.nic.in/handle/123456789/1367?sam_handle=123456789/1362
9. https://www.iiprd.com/intellectual-property-rights-for-fintech/
10. https://blog.ipleaders.in/ipr-game-changer-fintech-companies-start-ups/
11. https://www.tamimi.com/law-update-articles/fintech-innovation-and-intellectual-property-rights-a-wake-up-call-for-financial-institutions-and-tech-companies/