Tag: Business Analytics

Payment Gateway is a technology-based service that enables businesses to accept and process digital payments securely. It acts as an intermediary between customers, merchants, banks, and payment processors by facilitating the transfer of payment information during online and electronic transactions. Payment gateways play a crucial role in e-commerce, online banking, and digital financial services by ensuring that payment data is transmitted safely and efficiently. They support various payment methods, including credit cards, debit cards, net banking, mobile wallets, and UPI. Payment gateways have become an essential component of the FinTech ecosystem, promoting secure, fast, and convenient digital transactions.

Definition of Payment Gateway

Payment Gateway is a software application or service that authorizes, processes, and secures electronic payments between customers and merchants during online or digital transactions.

Examples of Payment Gateways

• Razorpay
• PayU
• CCAvenue
• Stripe
• PayPal

Features of Payment Gateways

• Secure Payment Processing

Secure payment processing is one of the most important features of a payment gateway. It protects sensitive financial information such as card details, account numbers, and personal data during transactions. Advanced encryption technologies ensure that payment information remains confidential while being transmitted between customers, merchants, and banks. Secure processing reduces the risk of data theft, unauthorized access, and financial fraud. By maintaining high security standards, payment gateways build trust among customers and businesses. This feature is essential for ensuring the safety and reliability of online transactions and supporting the growth of digital commerce and FinTech services.

• Real-Time Transaction Authorization

Payment gateways provide real-time transaction authorization, allowing payments to be verified and approved instantly. When a customer initiates a transaction, the gateway communicates with the relevant financial institution to confirm the availability of funds and validate payment details. This process occurs within seconds, ensuring a smooth payment experience. Real-time authorization reduces waiting times and improves transaction efficiency. It also minimizes the chances of failed payments and unauthorized transactions. Fast verification enhances customer satisfaction and enables businesses to process orders quickly, making digital payment systems more reliable and efficient.

• Multiple Payment Options

A key feature of payment gateways is their ability to support multiple payment methods. Customers can choose from credit cards, debit cards, net banking, mobile wallets, UPI, and other digital payment options according to their preferences. Providing multiple payment choices improves customer convenience and increases the likelihood of successful transactions. Businesses benefit by serving a wider customer base with diverse payment needs. The flexibility offered by payment gateways contributes to better customer experiences and supports the growth of online commerce. This feature is especially important in today’s diverse and rapidly evolving digital payment environment.

• Fraud Detection and Prevention

Payment gateways incorporate advanced fraud detection and prevention mechanisms to safeguard transactions. These systems monitor transaction patterns and identify suspicious activities that may indicate fraudulent behavior. Automated tools analyze payment data and flag unusual transactions for further verification. Fraud prevention features help reduce financial losses for customers and businesses while maintaining trust in digital payment systems. Continuous monitoring and risk assessment strengthen transaction security and protect sensitive financial information. As online transactions continue to grow, effective fraud detection has become a critical feature that ensures the integrity and reliability of payment gateway services.

• Fast Transaction Processing

Fast transaction processing is a significant advantage of payment gateways. They enable customers to complete payments quickly and efficiently, reducing delays in online transactions. Automated systems handle payment verification, authorization, and confirmation within seconds. Faster processing improves customer satisfaction and supports seamless shopping experiences. Businesses benefit from quicker order fulfillment and improved cash flow management. Efficient transaction processing also helps reduce operational bottlenecks and enhances overall productivity. In today’s fast-paced digital economy, speed is a critical factor in delivering high-quality financial services, making this feature essential for modern payment gateway solutions.

• Easy Integration with Digital Platforms

Payment gateways are designed to integrate easily with websites, mobile applications, and e-commerce platforms. This integration allows businesses to accept digital payments without significant technical difficulties. Developers can connect payment gateways to existing systems using application programming interfaces (APIs) and software tools. Easy integration reduces implementation time and costs while enabling businesses to launch digital payment services quickly. Seamless compatibility with different platforms improves operational efficiency and customer experiences. The ability to integrate with various digital environments makes payment gateways highly adaptable and suitable for businesses of all sizes and industries.

• Transaction Tracking and Reporting

Transaction tracking and reporting are valuable features provided by payment gateways. Businesses and customers can monitor payment activities, view transaction histories, and verify payment statuses in real time. Detailed reports help organizations manage finances, analyze sales performance, and maintain accurate records. Transaction tracking improves transparency and accountability by providing visibility into financial activities. Businesses can use reporting tools for auditing, compliance, and decision-making purposes. This feature enhances operational control and helps identify trends or issues that may require attention. Effective tracking and reporting contribute to better financial management and business efficiency.

• Global Payment Support

Global payment support enables businesses to accept payments from customers located in different countries and regions. Payment gateways facilitate international transactions by supporting multiple currencies and payment methods. This feature helps businesses expand into global markets and reach a broader customer base. International payment capabilities improve customer convenience and support cross-border commerce. Payment gateways handle currency conversion and transaction processing efficiently, reducing complexity for merchants. Global payment support is particularly important for e-commerce businesses and organizations operating internationally. It contributes to business growth and strengthens participation in the global digital economy.

Functions of Payment Gateways

• Collection of Payment Information

One of the primary functions of a payment gateway is collecting payment information from customers. During an online transaction, the gateway captures details such as card numbers, UPI credentials, bank account information, or digital wallet data. This information is entered by customers through a secure payment interface. The gateway ensures that the data is collected accurately and transmitted safely. Efficient collection of payment information is essential for initiating the payment process and ensuring successful transactions. This function serves as the first step in connecting customers, merchants, and financial institutions within the digital payment ecosystem.

• Encryption of Payment Data

Payment gateways perform the crucial function of encrypting sensitive payment information before transmitting it across networks. Encryption converts payment data into a secure coded format that cannot be easily accessed by unauthorized individuals. This process protects customer information from cyber threats, hacking attempts, and data breaches. By maintaining confidentiality and security, encryption builds trust among users and encourages online transactions. The secure transmission of payment information is vital for maintaining the integrity of digital payment systems. This function helps businesses comply with security standards while protecting customers from financial fraud and identity theft.

• Transaction Authorization

A payment gateway authorizes transactions by communicating with banks and financial institutions. After receiving payment details, the gateway sends a request to verify whether the customer has sufficient funds or valid payment credentials. The issuing bank evaluates the request and either approves or declines the transaction. The gateway then communicates the result to the merchant and customer in real time. Transaction authorization ensures that only valid payments are processed and reduces the risk of failed transactions. This function is essential for maintaining accuracy, reliability, and trust within digital payment systems.

• Payment Processing

Payment processing is one of the core functions of a payment gateway. Once a transaction is authorized, the gateway facilitates the movement of funds between the customer’s account and the merchant’s account. It coordinates communication among multiple financial entities involved in the transaction. Automated processing ensures that payments are completed efficiently and accurately. This function reduces manual intervention and speeds up transaction completion. Effective payment processing supports seamless online shopping, service payments, and digital commerce activities. It plays a vital role in ensuring that financial transactions are conducted smoothly and without unnecessary delays.

• Fraud Detection and Prevention

Payment gateways are responsible for detecting and preventing fraudulent activities during transactions. Advanced monitoring systems analyze transaction patterns and identify unusual behavior that may indicate fraud. Risk assessment tools evaluate various factors such as transaction amounts, locations, and user activities. Suspicious transactions may be flagged for additional verification or blocked entirely. Fraud prevention protects both customers and businesses from financial losses and unauthorized activities. This function enhances trust in digital payment systems and supports the safe growth of online commerce. Continuous monitoring and security improvements make fraud detection a critical responsibility of payment gateways.

• Transaction Confirmation and Notification

After a transaction is completed, the payment gateway provides confirmation to both the customer and the merchant. Confirmation messages indicate whether the payment was successful, failed, or pending. These notifications are delivered instantly through websites, mobile applications, emails, or text messages. Transaction confirmation helps customers verify their payments and enables merchants to process orders promptly. Timely notifications improve transparency and customer satisfaction. This function ensures that all parties involved are informed about the transaction status, reducing confusion and supporting efficient business operations within digital payment environments.

• Record Maintenance and Reporting

Payment gateways maintain detailed records of all transactions processed through their systems. These records include transaction amounts, payment methods, dates, times, and authorization details. Accurate record maintenance supports financial management, auditing, and regulatory compliance. Businesses can access transaction reports to analyze sales performance, monitor cash flows, and make informed decisions. Customers can also review payment histories for reference purposes. This function improves transparency and accountability within financial operations. Reliable reporting capabilities help organizations maintain proper documentation and support effective financial planning and control activities.

• Settlement of Funds

The settlement function involves transferring approved funds from the customer’s financial institution to the merchant’s account. Payment gateways coordinate with banks and payment processors to ensure that transactions are settled accurately and efficiently. Settlement may occur immediately or within a specified processing period, depending on the payment method and financial institution. Proper settlement ensures that merchants receive payments for goods and services provided. This function is essential for maintaining business cash flow and supporting commercial activities. Efficient settlement processes contribute to trust, reliability, and smooth operation within the digital payment ecosystem.

Types of Payment Gateways

1. Hosted Payment Gateway

Hosted Payment Gateway redirects customers from the merchant’s website to the payment service provider’s platform to complete the transaction. The payment provider manages security, data encryption, and transaction processing. After payment completion, customers are redirected back to the merchant’s website. This type is easy to implement and requires minimal technical expertise. It is widely used by small and medium-sized businesses because of its simplicity and strong security features.

Example: Customers being redirected to a secure payment page for completing online purchases.

2. Self-Hosted Payment Gateway

In a Self-Hosted Payment Gateway, customers enter payment information directly on the merchant’s website. The merchant collects the payment details and securely transmits them to the payment processor for authorization and processing. This type provides greater control over the customer experience and website design. However, businesses must ensure compliance with security standards and data protection requirements. It is suitable for organizations that want greater customization and control over payment processes.

Example: An e-commerce website collecting card details directly through its checkout page.

3. API-Hosted Payment Gateway

API-Hosted Payment Gateways allow payment processing directly within a website or mobile application through Application Programming Interfaces (APIs). Customers remain on the merchant’s platform throughout the transaction process. This type offers a seamless user experience and greater flexibility in payment integration. Businesses can customize payment interfaces according to their branding requirements. However, strong security measures and technical expertise are necessary for implementation and maintenance.

Example: Mobile applications processing payments without redirecting users to external websites.

4. Local Bank Integrated Payment Gateway

Local Bank Integrated Payment Gateway connects merchants directly with a specific bank’s payment processing system. Customers are redirected to the bank’s secure platform to complete transactions. Once payment is authorized, they return to the merchant’s website. This type often involves lower processing fees and direct settlement through the bank. It is commonly used by businesses that primarily operate within a specific country or region and maintain strong banking relationships.

Example: Online merchants using a bank’s payment system for transaction processing.

5. Direct Payment Gateway

Direct Payment Gateway enables customers to make payments directly through the merchant’s website without leaving the platform. All payment processing occurs in the background while customers remain on the checkout page. This type provides a smooth and convenient user experience. Businesses have greater control over branding and customer interactions. However, they must comply with strict security requirements and maintain secure payment environments to protect customer information.

Example: Customers completing payments entirely within an online store’s checkout page.

6. Mobile Payment Gateway

Mobile Payment Gateway is specifically designed to support transactions conducted through smartphones and mobile devices. It facilitates payments through mobile applications, digital wallets, QR codes, and mobile banking platforms. Mobile payment gateways offer convenience, speed, and accessibility. They are widely used in digital commerce, transportation, retail, and service industries. The increasing use of smartphones has significantly contributed to the growth of mobile payment gateway solutions.

Example: Making payments through a mobile wallet application using a smartphone.

7. Platform-Based Payment Gateway

Platform-Based Payment Gateways are integrated into large digital platforms, marketplaces, and e-commerce ecosystems. These gateways allow multiple sellers and merchants to accept payments through a centralized payment system. The platform manages payment collection, processing, and settlement activities. This type simplifies payment management for businesses operating within online marketplaces. It supports large transaction volumes and enhances customer convenience.

Example: Online marketplaces processing payments for multiple vendors through a single payment platform.

8. Cryptocurrency Payment Gateway

Cryptocurrency Payment Gateway enables businesses to accept payments in cryptocurrencies. The gateway processes cryptocurrency transactions, verifies blockchain records, and may convert digital assets into traditional currency if required. These gateways support international transactions and provide additional payment options for customers. They help businesses participate in the growing digital asset economy while benefiting from blockchain-based transaction systems.

Example: An online merchant accepting cryptocurrency payments through a digital payment processor.

Advantages of Payment Gateways

• Enhanced Security

One of the greatest advantages of payment gateways is enhanced security. Payment gateways use advanced encryption technologies, secure socket layers (SSL), tokenization, and authentication mechanisms to protect sensitive financial information. These security measures prevent unauthorized access, data theft, and cyberattacks. Customers can make online transactions with confidence, knowing that their payment details are safeguarded. Businesses also benefit from reduced risks of fraud and financial losses. Strong security systems help maintain trust between customers and merchants. As digital transactions continue to increase, secure payment processing remains essential for the growth and reliability of online commerce.

• Faster Transaction Processing

Payment gateways significantly improve transaction speed by automating payment verification and authorization processes. Transactions are processed within seconds, allowing customers to complete purchases quickly and efficiently. Faster payment processing reduces waiting times and enhances customer satisfaction. Businesses benefit from quicker order confirmations and streamlined operations. Automated systems eliminate many manual procedures, increasing efficiency and accuracy. Speed is especially important in today’s competitive digital marketplace, where customers expect instant service. By enabling rapid transactions, payment gateways contribute to better user experiences and support the smooth functioning of online businesses and digital financial services.

• Convenience for Customers

Payment gateways provide a high level of convenience for customers by enabling payments from anywhere and at any time. Users can complete transactions using smartphones, computers, or tablets without visiting physical stores or banks. The payment process is simple, user-friendly, and accessible through multiple digital channels. Customers can quickly pay for products, services, subscriptions, and bills with minimal effort. Convenience improves customer satisfaction and encourages repeat purchases. The ability to make secure payments from remote locations supports the growing demand for digital commerce and enhances the overall effectiveness of modern financial services.

• Support for Multiple Payment Methods

Payment gateways support a wide range of payment options, including credit cards, debit cards, net banking, UPI, mobile wallets, and digital payment applications. This flexibility allows customers to choose their preferred payment method based on convenience and availability. Offering multiple payment choices improves customer experiences and increases the likelihood of successful transactions. Businesses can attract a broader customer base by accommodating diverse payment preferences. The availability of various payment methods also reduces transaction abandonment during checkout. This versatility makes payment gateways an essential tool for businesses operating in today’s diverse and dynamic digital payment environment.

• Increased Business Sales

Payment gateways help businesses increase sales by making online transactions easy, secure, and convenient. Customers are more likely to complete purchases when payment options are readily available and transactions can be processed quickly. Secure payment systems build trust and encourage customers to shop online confidently. Businesses can serve customers beyond their physical locations and operate continuously without time restrictions. The ability to accept digital payments expands market reach and creates additional revenue opportunities. By reducing barriers to purchasing, payment gateways contribute significantly to business growth, customer acquisition, and long-term profitability.

• Global Market Reach

Payment gateways enable businesses to accept payments from customers located around the world. They support international transactions, multiple currencies, and various payment methods used in different regions. This global capability allows businesses to expand into new markets and reach a broader audience. Customers can make purchases regardless of geographical location, improving accessibility and convenience. Global payment support helps businesses increase revenue and strengthen their competitive position in international markets. As cross-border commerce continues to grow, payment gateways play a critical role in facilitating global trade and supporting international business expansion.

• Improved Record Keeping and Reporting

Payment gateways automatically maintain detailed records of all transactions processed through their systems. These records include payment amounts, transaction dates, payment methods, and customer information. Accurate record keeping simplifies accounting, auditing, and financial management activities. Businesses can generate reports to analyze sales performance, track revenue, and monitor transaction trends. Automated reporting reduces administrative workload and minimizes errors associated with manual record management. Access to comprehensive financial data supports better decision-making and strategic planning. Efficient record keeping enhances transparency and helps businesses comply with financial regulations and reporting requirements.

• Reduced Cash Handling Risks

Payment gateways reduce the need for physical cash transactions, thereby minimizing risks associated with cash handling. Businesses no longer need to manage large amounts of cash, reducing the likelihood of theft, loss, or human errors. Digital transactions are automatically recorded and processed, improving accuracy and accountability. Reduced cash handling also lowers operational costs related to cash storage, transportation, and management. Customers benefit from safer payment methods, while businesses gain greater financial control. This advantage supports the transition toward cashless economies and strengthens the efficiency of modern digital financial systems.

Challenges of Payment Gateways

• Cybersecurity Threats

Cybersecurity threats are among the most significant challenges faced by payment gateways. Since payment gateways handle sensitive financial information, they are attractive targets for hackers and cybercriminals. Threats such as phishing attacks, malware, ransomware, and data breaches can compromise customer information and financial assets. A successful cyberattack can result in financial losses and damage customer trust. Payment gateway providers must continuously invest in advanced security technologies and monitoring systems to counter evolving threats. Maintaining strong cybersecurity measures is essential for ensuring the safety and reliability of digital payment transactions.

• Transaction Failures

Transaction failures can negatively affect both customers and businesses. Technical issues such as server outages, network disruptions, software errors, or banking system failures may prevent successful payment processing. Failed transactions can lead to customer frustration, abandoned purchases, and potential revenue loss for businesses. Frequent transaction failures may also harm the reputation of payment service providers. To minimize disruptions, payment gateways must maintain robust infrastructure, backup systems, and efficient troubleshooting mechanisms. Ensuring smooth and uninterrupted transaction processing remains a critical challenge in digital payment operations.

• High Processing Costs

Payment gateways often charge processing fees for handling transactions, which can increase operational expenses for businesses. These costs may include setup fees, transaction fees, maintenance charges, and settlement fees. For small and medium-sized enterprises, high processing costs can reduce profitability. Businesses must carefully evaluate payment gateway services to balance costs and benefits. While payment gateways provide convenience and security, managing associated expenses remains a challenge. Reducing processing costs without compromising service quality is important for encouraging wider adoption of digital payment solutions.

• Internet Dependency

Payment gateways rely heavily on internet connectivity for processing transactions. Any interruption in internet service can delay or prevent payment completion. In regions with poor network infrastructure or unstable internet connections, customers and businesses may experience difficulties using digital payment systems. Internet dependency can limit accessibility and affect transaction reliability. Businesses operating in areas with connectivity issues may face challenges in maintaining smooth payment operations. Improving digital infrastructure and network availability is essential for overcoming this limitation and ensuring consistent payment gateway performance.

• Fraudulent Transactions

Despite advanced security measures, payment gateways continue to face the challenge of fraudulent transactions. Cybercriminals may use stolen card information, fake identities, or unauthorized payment methods to conduct fraudulent activities. Fraud can result in financial losses, chargebacks, and reputational damage for businesses. Detecting and preventing fraud requires continuous monitoring, risk assessment, and advanced analytical tools. Payment gateways must balance security with customer convenience to avoid disrupting legitimate transactions. Combating fraud remains a constant challenge in maintaining secure and trustworthy digital payment environments.

• Regulatory Compliance Requirements

Payment gateways must comply with various financial regulations, data protection laws, and security standards. Regulatory requirements may differ across countries and regions, making compliance complex for businesses operating internationally. Payment gateway providers must continuously update their systems and processes to meet changing legal obligations. Failure to comply can result in penalties, legal issues, and loss of customer trust. Managing compliance effectively requires significant resources and expertise. Staying aligned with regulatory frameworks while supporting innovation is a key challenge for payment gateway operators.

• Integration and Technical Complexity

Integrating payment gateways with websites, mobile applications, and business systems can be technically challenging. Businesses may require specialized technical expertise to configure, test, and maintain payment gateway solutions. Compatibility issues with existing systems can increase implementation time and costs. Regular software updates and security enhancements may also require ongoing technical support. For smaller businesses with limited technical resources, integration complexity can become a barrier to adoption. Simplifying implementation processes and improving user-friendly integration tools can help address this challenge.

• System Downtime and Service Interruptions

System downtime is a major challenge that can disrupt payment processing and affect customer experiences. Technical failures, maintenance activities, server overloads, or unexpected outages may temporarily make payment services unavailable. Downtime can lead to lost sales, customer dissatisfaction, and reputational damage for businesses. Payment gateway providers must invest in reliable infrastructure, disaster recovery systems, and continuous monitoring to minimize service interruptions. Maintaining high system availability is critical for supporting uninterrupted digital transactions and ensuring customer confidence in online payment services.

Remarketing is the process of bringing previous visitors back to your website to finish the conversion process otherwise known in B2B as filling out a form. Research shows remarketing converts up to 50% traffic, while search campaigns convert roughly 2%.

The perks of remarketing include:

• Sustaining brand awareness (while they are looking at your competitors), in effect, generating leads
• Nurturing leads by keeping potential customers engaged
• Recapturing lost leads

Steps:

Create remarketing lists for every stage of your sales funnel

The first thing you need to do for your B2B remarketing strategy is to map out your sales funnels. Hopefully, you’ve already done this and created PPC campaigns for each stage of your sales funnel to address user needs as they change along the consumer journey.

Create separate remarketing landing pages

Now that you know what kind of campaigns you’re going to be creating, it’s time to think about landing pages and you’re not going to send users to the same page they visited first time around.

Create remarketing lists for your email subscribers

You might like to think a user counts as a lead once they sign up to your newsletter or download some of your content but how many of these “leads” are turning into paying customers?

To maximise your email marketing efforts, you’ll also want to create remarketing lists for your email subscribers. Here are a few examples of the sort of lists you might create:

• Users who visited your webinar signup page but didn’t sign up
• Webinar signups who didn’t attend
• Webinar signups who attended but didn’t convert
• Webinar attendees who converted but haven’t made a second purchase

These are just four examples of remarketing campaigns you can create to boost the performance of a webinar strategy, for each stage of the lead generation process. You’re going to want to think like this for all of your lead generation strategies.

Reach new audiences with Customer Match & Lookalike Audiences

Google and Facebook’s advertising platforms both offer similar features that allow you to take your email marketing lists and use them to target new users who display similar online interests and behaviours.

Take a look at Customer Match on Google Ads and Lookalike Audiences on Facebook Ads both of which can turn your email lists into entirely new PPC leads.

Maximise email signups with multi-step forms

As you can see by this stage, a strong B2B remarketing strategy is heavily integrated with your email marketing efforts and this means you need to maximise email signups to get the best results.

Move B2B leads along your sales funnels (using remarketing lists)

We’ve already looked at using remarketing lists to target users at various stages of the consumer journey but now it’s time to look at the real magic of remarketing lists: guiding users along every stage of your sales funnel and truning them into paying customers.

Post-purchase remarketing

Forrester research tells us it costs 5x more to acquire a new customer than it does to turn an existing one into a repeat buyer. You’ve already invested time and money into getting your existing customers on board, too, so it only makes sense to maximise your ROI from your existing customer base.

It doesn’t matter what line of business you’re in, there are plenty of opportunities to turn first-time buyers into loyal customers:

• Cross-selling: Related products relevant to a customer’s first purchase.
• Upselling: Upgrading from the free version to a paid version of your software platform.
• Renewing: Contractual or subscription-based products/services when the initial contract period is up.
• Rebuying: Purchasing the same product or service again at the end of its lifecycle – eg: a new phone or website redesign.
• Reinviting: Reaching out to previous customers who have left or stopped buying from you.
• Loyalty campaigns: Reaching out to customers with rewards to build stronger relationships.

Content remarketing

This is one of the most overlooked remarketing lead gen strategies around, which is a crime considering how capable it is for B2B brands.

All that time and money you’re investing in creating blog content is falling short of its full potential unless you’re targeting your readers with remarketing campaigns encouraging them to sign up to your lead gen content (webinars, eBooks, digital downloads, etc.)

Limited offer remarketing campaigns

When your PPC traffic doesn’t convert at the first opportunity, it normally means one of two things: you’re simply not offering what they want or there’s something relatively small preventing them from making the commitment.

Keep your remarketing campaigns GDPR-compliant

It wouldn’t be right to talk about remarketing for B2B lead generation in 2019 without mentioning GDPR. You don’t need to let the European regulations get in the way of your remarketing efforts but it is important to understand your obligations.

A fund is a pool of money set aside for a specific purpose, often managed by individuals, institutions, or governments. Funds are used to finance projects, investments, or operations, such as retirement funds, mutual funds, or emergency funds. In business, funds can be internally generated from profits or externally raised through investors. Funds are typically tracked and managed carefully to ensure they serve their intended purpose. Whether for personal savings, charitable causes, or business ventures, a fund provides structured financial resources to support ongoing or future needs, helping ensure stability, planning, and financial control.

Funding

Funding refers to the act of providing financial resources to support a business, project, or cause. It can come from various sources such as personal savings, loans, investors, crowdfunding, or government grants. In startups and entrepreneurship, funding is crucial for product development, marketing, hiring, and scaling operations. There are different stages of funding like seed, venture capital, and series funding. The type and amount of funding depend on business needs and growth objectives. Effective funding ensures a project’s financial health, enabling innovation and expansion while often involving ownership or repayment agreements with fund providers.

Reasons of Funding:

• Startup Capital

Funding launches a business by covering initial costs like product development, licenses, and early hires. Without capital, ideas remain unrealized. Investors (angels, VCs) provide this runway in exchange for equity or future returns.

• Scaling Operations

Expanding to new markets, hiring talent, or boosting production requires significant capital. Funding fuels growth beyond bootstrapping limits, helping businesses capture market share before competitors.

• Research & Development (R&D)

Innovation demands investment in tech, prototypes, and testing. Funding accelerates R&D cycles, enabling breakthroughs (e.g., AI tools, pharmaceuticals) that secure a competitive edge.

• Marketing and Customer Acquisition

Brand awareness and lead generation require budgets for ads, SEO, and sales teams. Funding ensures campaigns reach critical mass to drive sustainable revenue.

• Survival in Crisis

Economic downturns, cash flow gaps, or unexpected setbacks (e.g., pandemic disruptions) threaten survival. Emergency funding (loans, grants) stabilizes operations.

• Debt Refinancing

Businesses secure funding to repay high-interest loans, reducing financial strain and improving credit health for future growth.

• Strategic Acquisitions

Funding enables purchasing competitors, patents, or complementary businesses to consolidate market power and diversify offerings.

Types of Funding:

• Bootstrapping (Self-Funding)

Bootstrapping means funding a business using personal savings or revenue generated by the company. It’s common in the early stages when external investors are not yet involved. Entrepreneurs retain full ownership and control, avoiding debt or equity dilution. Though it limits initial capital, bootstrapping encourages careful spending and lean operations. It’s ideal for startups with low overhead and scalable models. However, the risk is high as the founder bears all financial burdens. Success depends on disciplined budgeting and reinvesting profits to grow steadily without relying on outside help.

• Crowdfunding

Crowdfunding involves raising small amounts of money from a large number of people, typically via online platforms like Kickstarter or Indiegogo. Entrepreneurs present their idea to the public, who fund it in exchange for rewards, early access, or equity. This method validates market demand while generating capital. It suits creative products or innovative startups looking to build a community. However, success depends on marketing appeal and transparency. Failure to meet targets or fulfill promises may damage reputation. Crowdfunding also requires detailed planning, engaging presentations, and often, a pre-existing audience to attract contributions.

• Angel Investment

Angel investors are wealthy individuals who provide capital to early-stage startups in exchange for equity or convertible debt. They often bring mentorship, industry experience, and networking opportunities. Angel funding typically bridges the gap between self-funding and venture capital, offering both financial support and strategic guidance. It’s beneficial for startups with growth potential but limited access to institutional funding. However, it involves giving up a portion of ownership and may lead to differences in vision. Angel investors are more risk-tolerant than banks and usually invest in ideas they believe in personally or professionally.

• Venture Capital

Venture Capital (VC) funding is provided by investment firms to high-potential startups in exchange for equity. VCs usually invest during the growth stage, expecting significant returns as the business scales. They offer large capital, mentorship, and market connections. However, startups must demonstrate scalability and a strong business model. VC funding comes in multiple rounds (Series A, B, C, etc.), and founders often give up substantial control. The goal of VC firms is eventual exit through IPO or acquisition. While risky, it is one of the most aggressive and fast-paced funding methods.

• Bank Loans

Bank loans are a traditional funding method where businesses borrow money from financial institutions and repay it with interest over time. It’s a non-dilutive source, meaning owners retain full equity. Banks evaluate credit history, collateral, and business plans before approval. Bank loans are suitable for stable businesses with predictable cash flow and assets to secure the loan. However, they come with rigid repayment schedules and interest obligations. Startups may find it difficult to qualify without strong financial records. Nonetheless, loans offer a structured and regulated financing option for businesses seeking long-term capital.

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization (WTO). It sets down minimum standards for the regulation by national governments of many forms of intellectual property (IP) as applied to nationals of other WTO member nations. TRIPS was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) between 1989 and 1990 and is administered by the WTO.

The TRIPS agreement introduced intellectual property law into the multilateral trading system for the first time and remains the most comprehensive multilateral agreement on intellectual property to date. In 2001, developing countries, concerned that developed countries were insisting on an overly narrow reading of TRIPS, initiated a round of talks that resulted in the Doha Declaration. The Doha declaration is a WTO statement that clarifies the scope of TRIPS, stating for example that TRIPS can and should be interpreted in light of the goal “to promote access to medicines for all.”

Specifically, TRIPS requires WTO members to provide copyright rights, covering authors and other copyright holders, as well as holders of related rights, namely performers, sound recording producers and broadcasting organisations; geographical indications; industrial designs; integrated circuit layout-designs; patents; new plant varieties; trademarks; trade names and undisclosed or confidential information. TRIPS also specifies enforcement procedures, remedies, and dispute resolution procedures. Protection and enforcement of all intellectual property rights shall meet the objectives to contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

Requirements

TRIPS requires member states to provide strong protection for intellectual property rights. For example, under TRIPS:

• Copyright terms must extend at least 50 years, unless based on the life of the author. (Art. 12 and 14)
• Copyright must be granted automatically, and not based upon any “formality”, such as registrations, as specified in the Berne Convention. (Art. 9)
• Computer programs must be regarded as “literary works” under copyright law and receive the same terms of protection.
• National exceptions to copyright (such as “fair use” in the United States) are constrained by the Berne three-step test
• Patents must be granted for “inventions” in all “fields of technology” provided they meet all other patentability requirements (although exceptions for certain public interests are allowed (Art. 27.2 and 27.3) and must be enforceable for at least 20 years (Art 33).
• Exceptions to exclusive rights must be limited, provided that a normal exploitation of the work (Art. 13) and normal exploitation of the patent (Art 30) is not in conflict.
• No unreasonable prejudice to the legitimate interests of the right holders of computer programs and patents is allowed.
• Legitimate interests of third parties have to be taken into account by patent rights (Art 30).
• In each state, intellectual property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPS signatories under the principle of national treatment (with certain limited exceptions, Art. 3 and 5). TRIPS also has a most favored nation clause.
• The TRIPS Agreement incorporates by reference the provisions on copyright from the Berne Convention for the Protection of Literary and Artistic Works (Art 9), with the exception of moral rights. It also incorporated by reference the substantive provisions of the Paris Convention for the Protection of Industrial Property (Art 2.1). The TRIPS Agreement specifically mentions that software and databases are protected by copyright, subject to originality requirement (Art 10).

Article 10 of the Agreement stipulates: “1. Computer programs, whether in source or object code, shall be protected as literary works under the Berne Convention (1971). 2. Compilations of data or other material, whether in machine readable or other form, which by reason of the selection or arrangement of their contents constitute intellectual creations shall be protected as such. Such protection, which shall not extend to the data or material itself, shall be without prejudice to any copyright subsisting in the data or material itself.”

Post-TRIPS expansion

In addition to the baseline intellectual property standards created by the TRIPS agreement, many nations have engaged in bilateral agreements to adopt a higher standard of protection. These collection of standards, known as TRIPS+ or TRIPS-Plus, can take many forms. General objectives of these agreements include:

• The creation of anti-circumvention laws to protect Digital Rights Management systems. This was achieved through the 1996 World Intellectual Property Organization Copyright Treaty (WIPO Treaty) and the WIPO Performances and Phonograms Treaty.
• More stringent restrictions on compulsory licenses for patents.
• More aggressive patent enforcement. This effort has been observed more broadly in proposals for WIPO and European Union rules on intellectual property enforcement. The 2001 EU Copyright Directive was to implement the 1996 WIPO Copyright Treaty.
• The campaign for the creation of a WIPO Broadcasting Treaty that would give broadcasters (and possibly webcasters) exclusive rights over the copies of works they have distributed.

The Patents Act provides certain safeguards for restoring a lapsed patent. Accordingly a patent that is ceased to have effect because of failure to pay the prescribed fees within the prescribed period under Section 53 of the Act or within such period, allowed under Section 142 of the Act.

The patentee of his legal representative, may, make an application in the prescribed manner for the restoration of the lapsed patent. In the case where the patent was held by two or more persons jointly then with the leave of the Controller one or more of them without joining others may submit the application for restoration within eighteen months from the date on which the patent is ceased to have effect. Though the renewal fees can be paid by any person, the application for the restoration of a lapsed patent, the application has to be made by the patentee or his legal representative.

If the patentee fails to pay the renewal fee within the prescribed period and also within the extendable period of six months by requesting extension of time, the patent ceases to have effect or lapses from the date of expiration. Patent lapsed, due to non-payment of renewal/maintenance fee can be restored within eighteen months from the date of lapse.

Within one year of an application for restoration of patent that lapsed should be made. If an overdue annuity is not paid within the extension period, the one year period for seeking restoration commences from the date of recordal.

Section 60 Indian Patent Act:

(1) Where a patent has ceased to have effect by reason of failure to pay any renewal fee within the prescribed period or within that period as extended under sub-section (3) of section 53, the patentee or his legal representative, and where the patent was held by two or more persons jointly, then, with the leave of the Controller, one or more of them without joining the others, may, within eighteen months from the date on which the patent ceased to have effect, make an application for the restoration of the patent.

(2) An application under this section shall contain a statement, verified in the prescribed manner, fully setting out the circumstances which led to the failure to pay the prescribed fee, and the Controller may require from the applicant such further evidence as he may think necessary

The Essential Requirements to Restore a Patent:

1. Under Section 60 of the Patents Act 1970, an application for restoration of lapsed patent should be made by patentee or his legal representative.
2. Prescribed fee on Form 15
3. Proof to support that failure of the renewal/ maintenance was unintentional.

Although there is no additional fee for Patent of addition, but the patent holder or the patentee has to submit each form individually for each additional patent with that of the parent restoration application.

Effect of non-payment of renewal fees

To keep the patent in force for its prescribed term, an annual renewal fee is paid to the patent Office. If the same is not paid in the stipulated period then it lapses (ceased to have effect) and becomes a public property. The Act provides certain Safeguards for restoring a lapsed patent.

Accordingly, a patent which is to have effect by reason of Failure to pay the prescribed renewal fees within the prescribed period under Section 53 of the Act, the patentee or his legal representative may make an application in the prescribed manner, for the restoration of the lapsed patent. In case where the patent was held by two or more persons jointly, then, with the leave of the Controller, one or more of them, without joining others, may submit the application for restoration within eighteen months from the date on which the patent ceased to have effect ( Section 60(1)).

Procedure for Disposal of Application for Restoration

a) When the Controller is prima facie satisfied that the failure to pay renewal fee was unintentional and there had been no undue delay, the application for restoration will be published in the official journal.

b) If the Controller is satisfied that a prima facie case for restoration has not been made, the Controller may issue a notice to the applicant to that effect. Within one month from the date of notice, if the applicant makes a request to be heard on the matter, a hearing shall be given and the restoration application may be disposed. If no request for hearing is received within one month from the date of notice by the Controller, the application for restoration is refused. In case of rejection of the application for restoration, a speaking order shall be issued.

c) Any person interested may give Notice of Opposition, in the prescribed manner, to the application within two months of the date of Publication in the official journal on the grounds that the failure to pay the renewal fee was not unintentional or that there has been undue delay in the making of the application.

d) The Notice of Opposition shall include a statement setting out the nature of the opponent’s interest, the grounds of opposition, and the facts relied upon. The notice of opposition shall be sent to the applicant expeditiously by the Controller.

e) The procedure specified in rules 57 to 63 for post grant opposition for filing of written statement, reply statement; reply evidence, hearing and cost shall apply in this case.

f) When no opposition is received within a period of two months from the date of publication of the application for restoration, or opposition, if any, is disposed of in favour of the Patentee, the Controller shall issue an order allowing the application for restoration. The unpaid renewal fee and the additional fee, as mentioned in the first schedule, shall be paid within one month from the date of order of the Controller.

g) The fact that a patent has been restored shall be published in the official journal.

h) To protect the persons who have begun to use the applicant’s invention between the date when the Patent ceased to have effect and the date of Publication of the Application for restoration, every order for restoration includes the provisions and other conditions, as the Controller may impose, for protection and compensation of the above-mentioned persons. No suit or other proceeding shall be commenced or prosecuted in respect of an infringement of a Patent committed between the date on which the Patent ceased to have effect and the date of the Publication of the Application for restoration of the patent.

Opposition to the Restoration af a Lapsed Patent

• If after hearing the applicant in cases where the applicant so desires or the Controller thinks fit, the controller is prima facie satisfied that the failure to pay the renewal fee was unintentional and that there has been no undue delay in the making of the application he shall publish the application in the prescribed manner and within the prescribed period any person interested may give notice for opposition for the restoration of the patent on either or both of the following grounds:-

a) That the failure to pay the renewal was not unintentional; or

b) That there has been undue delay in the making of the application for restoration (Section 61(1)).

• No other Grounds are prescribed for filing such notice o opposition for the restoration of a lapsed patent. Only person interested can file the notice of opposition for the restoration of the lapsed patent.
• The time period for filing the notice of opposition is two months from the date of publication and the same is filed on Form 14 with its prescribed fee. Indian Patent Act and the rules do not provide any extension beyond the period of two months for filing the opposition. However, a petition under Rule 138 of Patent Rules can be filled seeking extension of time beyond the two months period with its prescribed fees. It should be noted that the petition for extension to be filed within the period of two months only. Since the grant of the extension under rule 138 is the discretionary power of the Controller, the grant of extension cannot be taken for granted.

Rights of Patentee of Lapsed Patent which have been Restored SECTION 62

• On the restoration of a patent, the rights of the patentee shall be subject to such provision as may be prescribed by the Controller in his order and to such other provisions as he thinks fit to impose for the protection of compensation of persons who might have began to avail them of. Or the patented invention between the date when the patent ceased to have effect and the date of publication of the application for the restoration of patent Section 62(1),
• On the lapsing of the patent due to Nonpayment of the renewal fees, the patentee loses his right in the patent and the invention becomes public property. The provision contained in section 62 of The Act is to safeguard the interests of those persons who after ascertain from the Register of Patents that the patent has lapsed due to Nonpayment of the renewal fees and become public property had started commercially using the invention

Surrender of patents

(1) A patentee may, at any time by giving notice in the prescribed manner to the Controller, offer to surrender his patent.

(2) Where such an offer is made, the Controller shall advertise the offer in the prescribed manner, and also notify every person other than the patentee whose name appears in the register as having an interest in the patent.

(3) Any person interested may, within the prescribed period after such advertisement, give notice to the Controller of opposition to the surrender, and where any such notice is given the Controller shall notify the patentee.

(4) If the Controller is satisfied after hearing the patentee and any opponent, if desirous of being heard, that the patent may properly be surrendered, he may accept the offer and, by order, revoke the patent.

Invention under the Patent Act

The Act under Section 2(1)(j) defines “invention” as a new product or process involving an inventive step capable of industrial application.

The term “industrial application” refers to capable of industrial application in relation to an invention means that the invention is capable of being made or used in an industry. One of the pre-requisite of invention is that it should be new i.e. the invention proposed to be patented has not been in the public domain or that it does not form part of the state of the art.

Under the Patent Act, both processes and products are entitled to qualify as inventions if they are new, involve an inventive step and are capable of industrial application.

Requirements to Qualify as Invention

1. The Invention must be new;
2. Invention must involve an inventive step;

• The invention must be capable of industrial application or utility;

1. The invention shouldn’t come under the inventions which are not patentable under Section 3 and 4 of the Patent Act, 1970;

Non-patentable inventions are enumerated under Section 3 and 4 of the Patent Act. Such inventions are delineated below:

• Any Invention which is frivolous or which claims anything obviously contrary to well established natural laws is not patentable.
• Inventions which are contrary to public order or morality is not patentable.
• An idea or discovery cannot be a subject matter of a patent application.
• Inventions pertaining to known substances and known processes are not patentable i.e. mere discovery of a new form of a known substance which does not enhance the known efficacy of that substance is not patentable.
• An invention obtained through a mere admixture or arrangement is not patentable.
• A method of agriculture or horticulture cannot be subject matter of patent.
• A process involving medical treatment of human and animals or to increase their economic value cannot be subject matter of a patent.
• Plants and animals in whole or in part are not patentable.
• A mathematical or business method or a computer program per se or algorithms is excluded from patent protection.
• Matters that are subject matter of copyright protection like literary, dramatic, musical or artistic work is not patentable.
• Any scheme or rule.
• Presentation of information
• Topography of integrated circuits.
• Traditional knowledge.
• Inventions relating to atomic energy
• As defined in Section 2 (j)the term “invention means a new product or process involving an inventive step and capable of application”. The invention should be of absolute novelty as neither it has been used nor published in any part of the world.

Section 3 And 4 Of The Indian Patent Act

Section 3 and Section 4 of the Patent Act is highly debatable and deals with the list of exclusions that are non-patentable that do not satisfy the above conditions. Following are not the “inventions” under the meaning of this act:

(a) Inventions that are frivolous and contrary to natural laws.

Inventions which are frivolous or contrary to well established natural laws.

Example– Inventions that are against the natural laws that are any machine giving 100% efficiency, or any machine giving output without an input cannot be considered as obvious and cannot be patented.

b) Inventions which go against public morality

Inventions in which the primary or intended use or commercial exploitation of which could be contrary to public order or morality (that is against the accepted norms of the society and is punishable as a crime) or which causes serious prejudice to human, animal or plant life or health or to the environment.

Example–As in Biotechnology, termination of the germination of a seed by inserting a gene sequence that could lead to the disappearance of butterflies, any invention leading to theft or burglary, counterfeiting of currency notes, or bioterrorism.

(c) Inventions that are a mere discovery of something that already exists in nature.

The mere discovery of a scientific principle or the formulation of an abstract theory or discovery of any living or non-living substances occurring in nature.

Explanation–Mere discovery of something that is already existing freely in nature is a discovery and not an invention and hence cannot be patented unless it is used in the process of manufacturing an article or substance. For instance, the mere discovery of a micro-organism is not patentable.

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Landmark Cases of Non-patentable Inventions

In Bilski V. Kappos,

This case deals with the Patentability of a business method. In this case, Bilski and Warsaw applied for the patent on hedging risks on commodities trading but their patent got rejected by the US Supreme Court on grounds that an abstract idea cannot be patented.

(d) The mere discovery of a form already existing in nature does not lead to enhancement of efficacy.

The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Explanation: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they are significantly different in terms of efficacy.

The mere discovery of any new property or use of a known substance is not patented unless it is of greater efficiency than the original substance hence, the mere incremental innovation does not fall under the gamut of patenting.

(d) The mere discovery of a form already existing in nature does not lead to enhancement of efficacy.

The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

Explanation: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they are significantly different in terms of efficacy.

The mere discovery of any new property or use of a known substance is not patented unless it is of greater efficiency than the original substance hence, the mere incremental innovation does not fall under the gamut of patenting.

Case laws

In Glochem Industries Ltd vs Cadila Healthcare Ltd14,[2]

The Bombay High Court held that “Section 3 (d) consists of all fields including the field of pharmacology. Further, in this case, the court held that “the test to decide whether the discovery is an invention or not? It is on the patent applicant to show that the discovery has resulted in enhancement of known therapeutic efficacy of the original substance and if the discovery is nothing other than the derivative of a known substance, then, it must be shown that the properties in derivatives are significantly different in terms of efficacy. So under this sub-section, the very discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance will not be treated as an invention.

In Ten Xc Wireless Inc & Anr vs Mobi Antenna Technologies,

The Delhi High Court held that “a method of replacing conventional antennae with split-sector antennae; a split-sector asymmetric antenna for replacing conventional antennae – are all mere uses for the asymmetric antenna already known. Under Section 3(d) the subject matter claimed is therefore not an invention.

In Novartis Ag v. Union of India15,

The Supreme Court of India said that “mere discovery of an existing substance would not amount to the invention”. The Supreme Court of India further, in this case, held that for pharmaceutical patents apart from tests of novelty, inventive step and application, there is a new test of enhanced therapeutic efficacy for claims that cover incremental changes to existing drugs which also Novartis’s drug did not qualify”.

(e) Mere admixing of mixtures leading in the aggregation of properties are non- patentable.

A substance obtained by a mere admixing of two or more mixtures resulting only in the aggregation of the properties of the components thereof or a process for producing such substance is not considered the invention.

Explanation- mere addition of mixtures is non-patentable unless this satisfies the requirement of synergistic effect i.e., interaction of two or more substances or agents to produce a combined effect greater than the separate effect.

(f) Mere aggregation or duplication of devices working in a known way is not an invention.

The mere aggregation or re-arrangement or duplication of known devices each functioning independently of one another in a known way.

Explanation- mere improvement on something or combinations of different matters known before cannot be patentable unless this produces a new result or article.

(h) Horticulture or agricultural method is non-patentable.

A method related to agriculture or horticulture.

Explanation- a method of producing plants like cultivation of algae and mushrooms or improving the soil is not an invention and cannot be patentable.

(i) Medicinal, curative, prophylactic, diagnostic, therapeutic for treating diseases in human and animals are non-patentable.

Any process for the medicinal, surgical, curative, prophylactic, diagnostic, therapeutic or other treatment of human beings or any process for a similar treatment of animals to render them free of disease or to increase their economic value or that of their products.

Explanation: those medicinal methods administering medicines orally or injecting it, surgical methods like stitch free surgeries, curative methods as curing plaques etc does not fall under the ambit of the invention and are non- patentable.

Case law

In Mayo Collaborative Services V. Prometheus Laboratories, Inc20.

In this case, the US Supreme Court said that “diagnostic and therapeutic methods (which includes the treatment or cure of diseases) is not patentable as it claims a law of nature”.

(j) Essential biological processes for the production or propagation of animals and plants is not an invention.

Plants and animals in whole or any part thereof other than micro-organisms but including seeds, varieties and species and essentially biological processes for production or propagation of plants and animals.

(k) Simple mathematical or business or computer programs are not an invention.

A mathematical or business method or a computer program per se or algorithms;

Explanation– any mathematical calculation, any scientific truth or act of mental skills any activities related to business methods or algorithms (which are like the law of nature) cannot be patented.

(l) Aesthetic creation is not an invention.

A literary, dramatic, musical or artistic work or any other aesthetic creation whatsoever including cinematographic works and television productions.

Explanation– such activities like writings, painting, sculpting, choreographing, cinematographing all these which are related to creativity cannot be patented and fall under the gamut of Copyright Act, 1957.

(m) Mental act, rule or method is not an invention.

A mere scheme or rule or method of performing mental act or method of playing a game.

Explanation- playing a game such as chess, sudoku etc are not considered as inventions rather these are mere brain exercises and hence are not patented.

(n) Presentation of information is non-patentable.

Explanation- a mere presentation of information by tables, chars is not an invention and hence are not patentable, for example, railway timetables, calendars etc.

(o) The topography of integrated circuits is non-patentable

Such as semiconductors used in microchips are not patented.

(p) Traditional Knowledge is not an invention.

An invention which in effect, is traditional knowledge or which is an aggregation or duplication of known properties of the traditionally known component or components.

Explanation- the traditional knowledge is know-how, skills, that is passed from generations to generations of a community and is already known cannot be patented for example the antiseptic properties of turmeric.

(q) Atomic-Energy inventions are non -patentable.

Section 4 deals with inventions relating to atomic energy, that are also not patentable and that fall within sub-section (1) of section 20 of the Atomic Energy Act, 1962.

Will NCPI (Bhim) Qualify For Patents?

Unified Payments is a payments mechanism that allows bank customers to send and receive money via a smartphone in real time. These payments settlements technology has been developed by NPCI (National Payments Corporation of India) which is a Reserve Bank of India backed entity with support from Indian banks.

NPCI indicated that the proximity-based solution offered by Tone Tag(a Bangalore based tech startup) could employ a tone, a sound, a near field communication (NFC), a radio-frequency identification device (RFID) or deploy ultra-high frequency (UHF) technology or a combination of these relying upon algorithm encryption. The request for proposal of NCPI added a  clause that raises questions about whether NPCI’s RFP violates Section 3(k) of the Act, as amended in 2002, lists ‘a mathematical or business method or a computer programme per se or algorithms’ under ‘inventions not patentable.

Patentability of Artificial Intelligence

The AI applications are modern-day machine learning functions and are of significant importance, especially in the commercial AI sector. However, the question is, should AI be patentable?

Indian Patent System for AI-based inventions

In India for patenting an AI technology one needs to follow the Computer-related Inventions (CRIs) guidelines which exclude a computer programme or algorithms from being patented (under 3(k) of the Indian Patent Act). At present these guidelines are focused on computers/algorithm/software based inventions and also are used to examine AI based inventions.

To claim for patenting the inventions based on AI following are needed:

• Describe hardware (eg computer system, server, sensors etc.) along with AI algorithms in your patent;
• Claim working method/process of the invention which uses AI; and
• Refrain from focussing directly on programming codes/algorithms of AI.

The word “Artificial Intelligence” can be seen in claims of the granted patents but it is to be noted that this word is used to represent part of a system that utilizes data/commands provided by AI system. However, no focus is made on the operating principle of AI.

A patent is a form of intellectual property that gives the owner the legal right to exclude others from making, using, selling and importing an invention for a limited period of years, in exchange for publishing an enabling public disclosure of the invention. In most countries patent rights fall under civil law and the patent holder needs to sue someone infringing the patent in order to enforce his or her rights. In some industries patents are an essential form of competitive advantage; in others they are irrelevant.

The procedure for granting patents, requirements placed on the patentee, and the extent of the exclusive rights vary widely between countries according to national laws and international agreements. Typically, however, a patent application must include one or more claims that define the invention. A patent may include many claims, each of which defines a specific property right. These claims must meet relevant patentability requirements, such as novelty, usefulness, and non-obviousness.

Under the World Trade Organization’s (WTO) TRIPS Agreement, patents should be available in WTO member states for any invention, in all fields of technology, provided they are new, involve an inventive step, and are capable of industrial application. Nevertheless, there are variations on what is patentable subject matter from country to country, also among WTO member states. TRIPS also provides that the term of protection available should be a minimum of twenty years.

The word patent originates from the Latin patere, which means “to lay open” (i.e., to make available for public inspection). It is a shortened version of the term letters patent, which was an open document or instrument issued by a monarch or government granting exclusive rights to a person, predating the modern patent system. Similar grants included land patents, which were land grants by early state governments in the USA, and printing patents, a precursor of modern copyright.

In modern usage, the term patent usually refers to the right granted to anyone who invents something new, useful and non-obvious. Some other types of intellectual property rights are also called patents in some jurisdictions: industrial design rights are called design patents in the US, plant breeders’ rights are sometimes called plant patents, and utility models and Gebrauchsmuster are sometimes called petty patents or innovation patents.

The additional qualification utility patent is sometimes used (primarily in the US) to distinguish the primary meaning from these other types of patents. Particular species of patents for inventions include biological patents, business method patents, chemical patents and software patents.

• Patentable

To qualify for a patent, the invention must meet three basic tests. First, it must be novel, meaning that the invention did not previously exist. Second, the invention must be non-obvious, which means that the invention must be a significant improvement to existing technology. Simple changes to previously known devices do not comprise a patentable invention. Finally, the proposed invention must be useful. Legal experts commonly interpret this to mean that no patent will be granted for inventions that can only be used for an illegal or immoral purpose.

Some types of discoveries are not patentable. No one can obtain a patent on a law of nature or a scientific principle even if he or she is the first one to discover it. For example, Isaac Newton could not have obtained a patent on the laws of gravity, and Albert Einstein could not have patented his formula for relativity, E=mc2.

Under the law of the European Patent Convention (EPC), patents are only granted for inventions which are capable of industrial application, which are new and which involve an inventive step. An invention may be defined as a proposal for the practical implementation of an idea for solving a technical problem. An invention is capable of industrial application if it can be made or used in any kind of industry, including agriculture, as distinct from purely intellectual or aesthetic activity.

An invention is said to be new if, prior to the date of filing or to the priority date accorded to the application from an earlier application for the same invention, it was not already known to the public in any form (written, oral or through use), ie it did not form part of the state of the art. An invention is said to involve an inventive step if, in the light of what is already known to the public, it is not obvious to a so-called skilled person, i.e someone with good knowledge and experience of the field.

Under the Indian patent law a patent can be obtained only for an invention which is new and useful. The invention must relate to a machine, article or substance produced by manufacture, or the process of manufacture of an article. A patent may also be obtained for an improvement of an article or of a process of manufacture. In regard to medicine or drug and certain classes of chemicals no patent is granted for the substance itself even if new, but a process of manufacturing and substance is patentable. The application for a patent must be true and the first inventor or the person who has derived title from him, the right to apply for a patent being assignable.

• Non Patentable

Some inventions cannot be patented. Under the law of the European Patent Convention (EPC) the list of non-patentable subject-matter includes methods of medical treatment or diagnosis, and new plant or animal varieties. Further information on such fields can be obtained from a patent attorney. Nor may patents be granted for inventions whose exploitation would be contrary to public order or morality (obvious examples being land-mines or letter-bombs).The following are not regarded as inventions: discoveries; scientific theories and mathematical methods; aesthetic creations, such as works of art or literature; schemes, rules and methods for performing mental acts, playing games or doing business; presentations of information; computer software.

Under the Indian law the following are non patentable (as mentioned under section 3 and 5 of Indian Patents Act, 1970):

An invention which is frivolous or which claims anything obvious contrary to well established natural laws. An invention the primary or intended use of which would be contrary to law or morality or injurious to public heath. The mere discovery of a scientific principle or the formulation of an abstract theory.

The mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant.

A substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof or a process for producing such substance The mere arrangement or re-arrangement or duplication of known devices each functioning independently of one another in a known way. A method or a process of testing applicable during the process of manufacture for rendering the machine, apparatus or other equipment more efficient or for the improvement or restoration of the existing machine, apparatus or other equipment or for the improvement or control of manufacture.

A method of agriculture or horticulture. Any process for the medicinal, surgical, curative, prophylactic or other treatment of human being or any process for a similar treatment of animals or plants to render them free of disease or to increase their economic value or that of their products.

No Patent shall be granted in respect of an invention relating to Atomic energy. Claiming substances intended for use, or capable of being used, as food or as medicine or drug Relating to substance prepared or produced by chemical processes (including Alloys, optical glass, semiconductor and inter-metallic compounds), no patent shall be granted in respect of claims for the substances themselves, but claims for the methods or processes of manufacture shall be patentable. The criteria under the US laws are also quite similar as above. Books, movies, and works of art cannot be patented, but protection is available for such items under the law of copyright.

• Rights in a Patent

Patent registrations confers on the rightful owner a right capable of protection under the Act i.e. the right to exclude others from using the invention for a limited period of time. The monopoly over patented right can be exercised by the owner for a period of 20 years after which it is open to exploitation by others.

Patent confers the right to manufacture, use, offer for sale, sell or import the invention for the prescribed period.

Time Period for which Patent is granted:

Initially, the Act provided for a shorter term pf protection for medicine or drug substances. However, vide the Amendment Act of 2005 uniform period of 20 years was provided for all the Patents. Thus, once the prescribed period of 20 years is over, then any person can exploit the patented invention. Here it would be relevant to mention that similar to a trademark even the term of a patent begins from the date of application of patent.

Requirements for Grant of Patent:

1. The application for Patent shall be made at the Indian Patent Office.
2. Any person i.e. Indian or a Foreigner, individual, company or the Government can file a Patent Application.

• The person applying for Patent shall be the true and first inventor of the invention proposed to be patented.

1. The patent application can also be made jointly.
2. The patent application shall primarily disclose the best method of performing the invention known to the applicant for which he is entitled to claim protection.
3. The applicant shall also define the scope of invention.

• The invention desired to be patented shall be- new, should involve an inventive step and must be capable of industrial application.
• A patent application can be made for a single invention only.

1. An international application made under the PCT (Patent Co-operation Treaty) designating India shall be deemed as an application made under the Patents Act with the priority date accruing from the date of the international filing date accorded under the PCT.

Invention under the Patent Act:

The Act under Section 2(1)(j) defines “invention” as a new product or process involving an inventive step capable of industrial application.

The term “industrial application” refers to capable of industrial application in relation to an invention means that the invention is capable of being made or used in an industry. One of the pre-requisite of invention is that it should be new i.e. the invention proposed to be patented has not been in the public domain or that it does not form part of the state of the art.

Under the Patent Act, both processes and products are entitled to qualify as inventions if they are new, involve an inventive step and are capable of industrial application.

Requirements to Qualify as Invention:

1. The Invention must be new
2. Invention must involve an inventive step

• The invention must be capable of industrial application or utility;

1. The invention shouldn’t come under the inventions which are not patentable under Section 3 and 4 of the Patent Act, 1970;

Non-patentable inventions are enumerated under Section 3 and 4 of the Patent Act. Such inventions are delineated below:

• Any Invention which is frivolous or which claims anything obviously contrary to well established natural laws is not patentable.
• Inventions which are contrary to public order or morality is not patentable.
• An idea or discovery cannot be a subject matter of a patent application.
• Inventions pertaining to known substances and known processes are not patentable i.e. mere discovery of a new form of a known substance which does not enhance the known efficacy of that substance is not patentable.
• An invention obtained through a mere admixture or arrangement is not patentable.
• A method of agriculture or horticulture cannot be subject matter of patent.
• A process involving medical treatment of human and animals or to increase their economic value cannot be subject matter of a patent.
• Plants and animals in whole or in part are not patentable.
• A mathematical or business method or a computer program per se or algorithms is excluded from patent protection.
• Matters that are subject matter of copyright protection like literary, dramatic, musical or artistic work is not patentable.
• Any scheme or rule.
• Presentation of information
• Topography of integrated circuits.
• Traditional knowledge.
• Inventions relating to atomic energy.

Infringement of Patent:

Infringement of Patent primarily refers to intrusion or violation of the rights of a Patentee against which the Patentee has statutory rights under the Act.

The factors that are essential in determining infringement of a Patent are as under:

1. While determining infringement it has to be assessed whether the infringing activity fell within the scope of the invention. Thus, the infringement has to be determined with regard to what has been claimed as invention under the Patent Act by applying the principles or standards of construction.
2. To determine whether the infringing activity violated any statutory rights conferred to the Patentee under the Act. In this respect reference can be made to Section 48 of the Act which enumerates the rights of the Patentee with respect to a product patent and process patent.
3. To determine the infringer i.e. the person liable for the infringement.
4. To determine whether the infringing act fell within the acts which do not amount to infringement under the Patents Act i.e. excluded acts of Government use, use of patented product or process for experiment or research, import of medicine or drug by Government and patents in foreign vessels and aircrafts.