Difference between logo mark and word mark

Indian trademark law saw its origin way back in the 1940s with the advent of the Trade and Merchandise Act, 1958, subsequently increasing the need for protecting the trademarks. This upsurge can be attributed to the rise in growth of trade and commerce in the country over the years. Ever since then, the trademark law in India has been amended quite a few times to adapt with the standard of the growth of trade and commerce. Intellectual Property is an intangible property, yet one of the most important assets of a business and hence, businesses looking at the Indian market are the most in need of a trademark protection to safeguard their intellectual property rights.
However, one of the primary questions that arise when a business or a startup decides to protect their brand or trademark is – whether a business should protect its trademark as a word or a logo?

Trademarks in India can be registered in different forms namely word mark, label, logo and device mark and deciding whether to register the mark as a word mark or as a logo as a trademark is the toughest decisions to make for one before applying for registration of a trademark. Although, there isn’t a definite answer for the question, there are many factors which lead to deciding whether a business should register the brand name or trademark, as a logo or a word mark or a combination of both which is termed as a composite mark.

Trademark application as a word mark:

A word mark registers the word a person would want to use and renders stronger and wider protection to that person’s business. Once registration is granted for a word trademark, the applicant has the right to use and represent the word in any format or font which grants it extensive protection including exclusive rights to the word as a whole and also allows the applicant to depict it in various formats regardless of its style for all the goods and services in respect of the mark. In other words, by filing a word mark, one would prevent third parties from using one’s brand name in any regard.

Trademark application as a logo:

A logo or a composite mark on the other hand gives a person the rights in the combination of images, design and words taken together. Therefore, the protection given to the words encompassed in the logo are limited in comparison with the standard word marks since the rights in a logo are entitled only to the logo as a whole. If one wishes to register a particular stylized appearance or a combination of stylized wording, orientation, shape, colour and design, filing a trademark as a logo would be appropriate. In other words, by filing a logo, one would prevent third parties from using the said logo or any other logo deceptively similar, rather than the words incorporated in the logo.
Quite often, the brand name of businesses constitutes both of words and logos rather than just a logo. The safest way to protect the intellectual property in such instances would be to file the trade mark as both as a word mark and as a logo. However, since filing multiple trade mark applications would be an expensive affair, the next safest pick for businesses who are looking at cost efficiency would be to register the trade mark as a word mark.
An ideal example for such a scenario would be that of the well-known brand PEPSI. Since 1962 till date, PEPSI has changed its logo a significant number of times. Had it registered its initial trade mark application as a logo in 1962 and ceased usage of the same each time a new logo was created, then it would have to file a new trademark application for every such new logo created. The initial
trademark application would not protect any of the subsequently created logos. However, since PEPSI registered their trade mark as a word mark, they were able to do away with such redundant hassles. Ideally, separate trademark applications for word as well as logo should be filed to attain the broadest
protection for any business. While big companies might have the budget to justify such multiple applications, this may not seem economical for startup businesses. Hence, it is advisable to file the trademark as a word mark, giving one the next broadest protection against unwarranted infringers.
But again, if a business will apply for word mark registration or logo registration will completely depend on the business strategy since if a logo mark is distinctive enough then the business can go
ahead with the logo registration only. The crux of the story is mainly your client should be able to recognize you as in recognize your brand among all the other competitive brands. Your brand should stand out in the pool of thousands of other brands or competitors. Your brand should be unique or distinctive, whether as a word or a logo or a combination of both.

What should be the exercise price/strike price of an Employee Stock Option?

The exercise price for a stock option will depend on the objective for which the ESOPs are being granted. ESOPs for employees can be granted based on different considerations by different companies. In fact, even with respect to different employees within the same company, the exercise price may be different, as the ESOPs may be granted to the different employees by the company with different objectives in mind. Let us elaborate on how it works.

Remuneration lower than the market level

If you are granting ESOP benefits to your employees in lieu of salary, with the objective of making up for the lost compensation for an employee who has taken a huge salary cut and joined a start-up, it is only fair that the ESOPs be granted to the employee at an exercise price which is as low as possible. Typically, that would be the par value (or the face value) of the shares. The typical face value is INR 10, though, it differs from company to company. It would be advisable to check the face value of your company’s equity shares before finalizing the exercise price.

Market level remuneration

If your employees are already drawing market level salaries and the stock options are granted to them in the form of added incentive or bonus, then the exercise price of the options should be higher.

For example, if you are granting ESOPs soon after a fundraising round, then you could use the valuation of shares assigned by the investors in such round as the benchmark. So, if you have issued shares at a price of INR 100 per share to the investors, you could fix the exercise price at INR 100 per share or maybe at a discount to the fair market value, for instance, INR 80 per share.

I often get asked, if INR 100 (i.e. issuing shares at the fair market value) to the employees would be an unfair exercise price. I honestly don’t think so, simply because the employee is not going to buy the shares immediately. The employee can only buy the shares depending on the vesting date as per the vesting schedule, which will be after a minimum period of 1 year in India (given the mandatory 1 year cliff period). By that time, hopefully the fair market value of the shares of your company would increase. Therefore, at the time of exercise date, the ESOP still benefits the employee as the exercise price would be a discount to the then fair market value of the shares of your startup.

Online medical sales across country- Banned by Delhi High Court

On Wednesday, December 12, 2018 the Honourable Delhi High Court ordered a ban on sale of online medicines by e-pharmacists across the country. The Honourable Delhi High Court directed the Central government and the Delhi state government to implement the order on an immediate basis. A Public Interest Litigation (PIL) was filed by a Delhi based dermatologist Mr. Zaheer Ahmed who complained that lakhs of medicines were being sold on the internet every day without much regulation, posing a huge risk to both patients and doctors. A bench of Chief Justice Rajendra Menon and Justice V K Rao passed the order while acting on the Public Interest Litigation.

In the plea, the petitioner Mr. Zaheer Ahmed had pointed out that online sale of medicines is actually not permitted under the Drugs and Cosmetics Act, 1940 and Pharmacy Act, 1948 and even though the Drug Controller General of India in 2015 had clearly directed all state drug controllers to protect the interest of public health by restraining such sale online, lakhs of medicines continue to be sold online, often even without prescription. Unable to supervise,the government has failed in its responsibility to protect public health which is its constitutional obligation under Article 21. The petitioner in the PIL mentioned that “Unlike common items, drugs are highly potent, and its misuse or abuse can have serious consequences on human health, not just for the person consuming it but for humanity at large as some drugs can be addictive, habit forming and harmful to the body. A large number of children/minor or people from uneducated rural background use internet and can be victims of wrong medication while ordering medicines online,”. Blaming the government for not doing enough, the plea says online pharmacies are operating without a drug licence and warns that “unregulated sale of medicines online will increase the risk of spurious,misbranded and substandard drugs being sold” adding that “Some drugs have psychotropic substances and can be easily ordered on internet and misused for criminal activities or drug abuse.” The PIL states that Centre is aware of the risks involved in sale of medicines on internet since a panel setup by it for this purpose cautioned as late as September this year about risks involved in the online sale of medicines, particularly, prescription, habit-forming and addictive medicines. In September the Union health ministry had come out with draft rules on sale of drugs by e-pharmacies with an aim to regulate online sale of medicines across India and provide patients accessibility to genuine drugs from authentic online portals. The draft rules on “sale of drugs by e-pharmacy” state that no person will distribute or sell, stock, exhibit or offer for sale of drugs through e-pharmacy portal unless registered.

Further, in the past, the fight between traditional drug sellers and online e-pharmacies had taken a turn when the honourable Madras High Court had granted an interim injunction restraining online sale of medicines till further orders, based on a plea from the Chennai-based Tamil Nadu Chemists & Druggists Association. The court had directed the Centre to respond and posted the matter for further hearing on November 9, 2018.

The association had demanded to block links of websites selling medicines online as purchasing medicines from unlicensed online stores. These websites may sell fake, expired,contaminated, unapproved or unsafe products that are dangerous to patients and which might put their health at risk. Rules for selling drugs in India are based on Drugs and Cosmetics Act, 1940, Drugs and Cosmetics Rule, 1945 and Pharmacy Act, 1948 and these were written prior to arrival of computers and India does not legalise online sale of medicines, the petition said.

In the last two years, the 6-8 lakh odd traditional medical shops, under the banner of All India organization of chemists and druggists (AIOCD) have been protesting against proliferation of e-pharmacies in the country.
It is estimated that about 250-280 online pharmacies have come up in the country and they have cornered over Rs 800-1000 crore of the Indian drug market worth over Rs 1.2 lakh crore a year. Online pharmacies, like in other e-commerce business models, offer discounts ranging from 25 per cent to 60 per cent, besides offering value added services and free home delivery. Sources say half a dozen leaders like netmeds, 1MG, Lifecare, Medlife and Pharmeasy have so far raised over Rs 1,700 crore from venture capitalists and are aggressively marketing their business.

Following the protests, last year the Drug Controller General of India (DGCI) had formed a seven-member panel to look into the issue of online drug sales and had suggested licensing the pharmacies. As per the draft guidelines which are yet to be legalised, e-pharmacies have to register with the DCGI for a fee of Rs 50,000, which will be valid for three years. E-pharmacies will not be allowed to sell narcotic drugs, tranquilisers, and Schedule X drugs and are also not allowed to advertise any drugs.

In the west, the drug regulators have devised mechanism to monitor and regulate e-drug sales. The National Association of Boards of Pharmacy (NABP), the apex pharmacy body in the US, gives registration and certification for e-pharmacies and they have to display the certification logo on their website.

Are ESOPs free?

Are ESOPs free?

Yes and No.

The full form of ESOP is Employee Stock Options. Stock options are free and the options themselves are granted to the employees free of cost. They are considered as a part of an employee’s remuneration. It is a benefit given to the employee. There is no grant price to be paid for grant of ESOPs.

However, the definition of stock options is limited to only an option to purchase shares in the company in the future. An ESOP does not automatically convert into shares in the company.

This means that when the ESOPs granted to an employee vest, the employee will have to buy shares in the company. This process of purchasing shares in the company is called “exercise” of ESOPs. When an employee exercises the right to buy the shares in the company, the employee will have to pay the “exercise price” (or the purchase price) for these shares. This exercise price is typically decided upfront at the time of granting the ESOPs and stated in the ESOP policy, ESOP Agreement or the Grant Letter.

Therefore, technically, Employee Stock Options, as widely understood, are not free.

 

Want to understand more about ESOPs? Sign up with LexStart here and get access to our tutorials and FAQs for free.

LexGyaan Startup Series

 

Series 1 – Co-Founders’ Agreement and other legalities when starting up

Have an idea? Thinking of Starting Up? Or just testing the waters? You might be reaching out to consultants, developers, manufacturers etc. to improve upon your idea. Have you ensured that your idea is protected and you are not losing ownership of your idea or your brand for that matter? Further, as your founding team comes together, it is important to put down expectations on contribution and ownership in a Co-Founder’s Agreement. You then need to decide what kind of entity you want to house your team in. Its also important you take certain precautions. What if the idea materializes into something big? You don’t want to regret not having your developer bound by obligations to hand over the cool product that you conceptualized! This workshop helps you navigate each of these crucial decisions.

This workshop will cover the key issues an entrepreneur needs to tackle at the very outset, including:

– Co-Founders’ Agreement

– NDAs

– Hiring a web developer

– Deciding on incorporating an entity for the business,

– When to quit your current job

– Protecting your idea and your brand through trademark

Coming up:
Series 2: Starting Up
Once you have decided to proceed with you startup idea? What next? Just setting up an entity is not enough. There is hiring to do, NDAs to be signed, IP to be protected, and so on. In this second workshop in the LexStart Startup series, we will be discussing:
– Legal Cheat Sheet – Basic compliances required under the law

– Startup India – How to register? What are the benefits?

–  Hiring: HR agreements, policies and processes,

– Terms of Service and Privacy Policy

– Protecting your intellectual property

Series 3: Legalities of Structuring Incentive Plan for Employees and Advisors

 

ESOPs, Advisor Equity, Mentor Stock, these are the terms you hear a lot these days. But do you understand how each one of these work?In our third workshop of the LexStart Startup Series, we will be discussing legalities of Structuring Incentive Plan for Employees, Advisors and Mentors, including:

– What exactly do each of these terms mean – ESOP, Advisory Equity, Mentor Stock

– How do they work and answer questions like – Does the employee have to pay money? Can they get shares upfront? What happens if they leave the company?

– Most commonly used structures, mechanisms and terms

– Tax consequences

Series 4: Fundraising for your Startup
In the last and most important workshop of the LexStart series, we will be discussing the various nuances of the fundraising process, including:

 
– Overview of process of fundraise
 
– Structures for fundraise – Convertible Note, Loan, Equity, CCPS!
 
– Term sheet and the various terms of investment – how to effectively handle negotiations with investors

– Due diligence – what does it mean and what does the process entail

– Share purchase agreement, share subscription agreement, Shareholders’ agreement – understanding the various documents

– What all do you need to do to get money in bank!

PREPARING FOR FILING THE ANNUAL RETURNS? MAKE SURE YOU DON’T MISS OUT THESE MANDATORY DISCLOSURES

Yes, its that time of the year, when everyone is hustling to comply with mandatory filing requirements related to audited accounts with the Ministry of Corporate Affairs. There are certain disclosure requirements, which are relatively new, and we have summarized them below, to ensure you don’t miss them!

PUBLISH ANNUAL REPORT ON WEBSITE

Yes, You heard right! Every company is required to publish its annual returns on the company website. The link of these annual returns must be disclosed in the Directors’ Report

DISCLOSURES PERTAINING TO ANTI SEXUAL HARASSMENT POLICY

The Ministry of Corporate Affairs (MCA) mandates every company with at least 1 woman employee to have an Anti- Sexual Harassment Policy in place. Companies with more than 10 employees, and at least 1 woman employee are required to form an Internal Complaints Committee (ICC). A statement that the company has complied with the provisions relating to constitution of the Internal Complaints Committee (ICC) under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 must be inserted in the Director’s Report as required under Rule 12 of In the Companies (Accounts) Rules, 2014.

ESOP DISCLOSURES IN THE DIRECTOR’S REPORT

According to Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014, the Board of Directors are required to disclose the following details regarding the Employee Stock Option Plan (ESOPs) within the Director’s report:

  1.  number of ESOPs granted;
  2.  number of ESOPs vested;
  3.  number of ESOPs exercised;
  4.  the total number of shares created as a result of exercise of ESOPs;
  5.  number of ESOPs lapsed;
  6.  the exercise price of such ESOPs;
  7.  total amount realized by the exercise of ESOPs;
  8.  the total number of ESOPs in force
  9.  employee-wise details of ESOPs granted to :
    •  key managerial personnel
    •  any employee who receives in a year a grant of ESOPs which is 5% or more of the total ESOPs granted in that year;
    •  any employee who was granted ESOPs in a year which was equal to or exceeded 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant

Disclosure of Significant Beneficial Ownership

As per Section 90 of the Companies Act, 2013 and notified Companies (Significant Beneficial Owners) Rules 2013, every Reporting Company having shareholder that is a company or partnership firm or trust (“the Member“) has to mandatorily procure a declaration in Form BEN-1 from the ultimate beneficial owner (“the Individual Shareholder”) of all Members holding more than 10% of shareholding/control in the Reporting Company on or before September 10, 2018.

The Form BEN-1 received from the Individual Shareholder is required to be filed in E-form BEN-2 within 30 days of receipt of declaration from the Individual Shareholder.

What do you have to do?

If the abovementioned Rules are applicable to your Company, request you to approach your Individual Shareholder for providing us the below mentioned details to enable us to assist you with the filing of E-form BEN-2:

  • Self-attested scanned copy of identity proof for resident individual i.e. PAN;
  •  Self-attested scanned copy of identity proof for non-resident individual i.e. Passport;
  •  Residential address;
  •  Nationality;
  • Occupation;
  • Percentage of voting rights in the company; and
  •   Date of acquisition of shares (if available).
How can LexStart Help?

  • Prepare and file Form BEN-1 i.e. Declaration by Individual Shareholder;
  • Prepare and file E-form BEN-2 i.e. Return to the Registrar; and
  • Prepare and maintain Register of Beneficial Owner.   

₹ 9,499 /-
ONWARDS

 

Penalty for non-compliance by Individual Shareholder?

  • Fine up to INR 1,00,000/- and a continuing penalty of INR 1,000/- per day.
  • The defaulter may be charged with fraud under Section 447 of Companies Act, 2013.
  • National Company Law Tribunal (“NCLT”) may impose restrictions on transfer of shares.
  • NCLT may suspension all rights attached to shares example voting rights, dividend etc.

If you need any information or clarification, please do not hesitate to contact us.

Your Brand | Your Strongest Asset

Your brand is the image that differentiates you from your competitors. It identifies your product, your service, your company! It may be represented by a sign, a symbol, a design, a word, a colour, or a combination thereof. It conveys a sense of quality, credibility, customer satisfaction. It plays a crucial role in your marketing strategy and is at the core of your business competitiveness. It generates customer loyalty and has a value. It may become your strongest asset

1.1      Branding Strategies And Business Success

Branding aims at building a distinctive and attractive presence in the market that helps gain and retain loyal customers. Effective branding involves creating an image in the consumers’ minds about the quality of a product or a service, mainly through advertising campaigns centred on the brand. It also requires ensuring the legal protection of the brand against competitors in the relevant markets. Branding strategies are at the core of sustained market competitiveness and business success.

1.2      Brand Creation, Management And Commercialization

Creating a brand implies choosing the signs that will distinguish your products or services from those of your competitors and getting them legally protected. The legal expression of your brand is a trademark. A trademark confers on you the exclusive right to prevent third parties from using the signs that distinguish your brand in the course of trade for identical or similar goods or services. You can register your trademark in India by filing an application at the Trademarks Registry (TMR) within the Office of the Controller General for Patents, Designs and Trademarks (CGPDTM). The registration of your trademark in India will be valid for a period of 10 years from the date of the trademark registration and can be renewed time and again for similar duration of 10 years. Managing your brand implies regularly renewing your trademarks and enforcing your rights against infringers and counterfeiters. The assignment and licensing of trademark rights may play a significant role in brand commercialization through partnership, merger and franchising initiatives.

1.3      Choosing Your Trademark – Best Practices

Creating a brand implies choosing the sign (trademark) that will distinguish your products or services form those of your competitors. In principle, any sign capable of distinguishing your goods or services from those of other undertakings in the market can constitute a trademark. Thus, your trademark may be constituted by a sign, a symbol, a design, a word, a colour, or a combination thereof. However, when choosing your trademark, there are certain requirements or limitations that you need to consider.

The trademark must be distinctive. In other words, it should consist of a sign or a symbol that serves to identify your products or services and distinguishes them from those of other companies/startups. For example, the symbol of Mercedes Benz or a BMW will distinguish the quality of the cars from any other cars in the automobile industry.

  • The trademark should not be descriptive of the specific goods or services that you wish to commercialize. Generic terms used to identify those goods or services, or terms that describe their characteristics, would not be accepted. For example, ALANKAR cannot be an ideal trademark for jewellery since directly or indirectly it is describing the source of the goods or service.
  • The trademark should be capable of being represented. Most trademark offices require graphical representation, even though some also accept other means of representation for special types of marks (e.g., MP3 audio recordings for sound marks). The Indian Trademarks Registry requires that your trademark be graphically represented.
  • The trademark should not be functional, which means that the sign that constitutes your trademark should not consist exclusively of a characteristic that results from the nature of the goods themselves or that is necessary to obtain a technical result. This is especially relevant in the case of three-dimensional marks. For example, A1 or Best.
  • The trademark should not be deceptive. A sign conveying a false origin or false characteristics of a product would be refused for protection on grounds of being deceptive.
  • Most countries would refuse protection as a trademark for signs that are contrary to public order or morality.
  • State flags, State emblems and names and emblems of intergovernmental organizations are excluded from protection as trade marks in most countries around the world.

1.4      Conclusion

Finally, most importantly, you must make sure that the sign you wish to use as your trademark is still available in the market and is not the same as or similar to a well-known mark or a trademark already registered by someone else for the same goods or services. Therefore, it is very important that you make an exhaustive search for the availability of your trademark in those markets where you would like to get it protected.

Also Read – Applying for a Trademark? Here is how you can get a proprietor code.

Disclosure of Significant Beneficial Ownership

The Ministry of Corporate Affairs (MCA) on June 13, 2018 notified Section 90 of the Companies Act, 2013 (Act); and notified Companies (Significant Beneficial Owners) Rules 2013. This rule came into effect on June 14, 2018. These provisions require certain compliances to be followed by a Significant Beneficial Owner and a company.

Who is a “Significant Beneficial Owner”?

“Significant Beneficial Owner” means an individual who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds ultimate beneficial interest of not less than 10% in shares of a company or the right to exercise, or the actual exercising of significant influence or control in a company.

This applies to the (i) individual who is acting alone or together with one or more persons (includes partnerships) (ii) includes a trust (iii) person resident in India or outside India.

 Sr. No. Where Shareholder of a company is a Who is Significant Beneficial Owner?
A. Company Significant Beneficial Owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trust holds atleast 10% of share capital of the Company or exercise significant influence or control in the company.
B. Partnership Firm Significant Beneficial Owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trust holds atleast 10% of capital or is entitled of not less than 10% of profits of the partnership firm.
C. Trust The Significant Beneficial Owner shall be- the author of the trust, and the trustee and the beneficiaries with not less than 10% interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.

Where no natural person is identified in point no. A and B in the table above, the Significant Beneficial Owner is the relevant natural person who holds the position of senior managing official.

What is the obligation of Significant Beneficial Owner?

  • Every existing Significant Beneficial Owner is obligated to file a declaration in Form No. BEN-1 with the respective company. This declaration is to be made by September 10, 2018.
  • Every Significant Beneficial Owner shall file any change in his significant beneficial ownership within 30 days to the company.
  • Every individual, who acquires significant beneficial ownership in a Company, shall file a declaration in Form No.BEN-1 to the Company within 30 days of acquiring such significant beneficial ownership.

What are the obligations of the Company?

  • The company receiving the declaration has to maintain a register of Significant Beneficial Owners.
  • The company has to file a return in Form No. BEN-2of significant beneficial owners of the company and changes therein with the Registrar within 30 days from the date of receipt of the declaration.
  • Maintain a register of significant beneficial owner in Form No. BEN – 3.
  • Also, if the Company knows or has reason to believe that someone is s Significant Beneficial Owner (or has been a Significant Beneficial Owner in last 3 years) and is not registered with the company as a Significant Beneficial Owner then, the company is required to give notice to such person seeking information in Form No.BEN-4.

Consequences of non-disclosure by Significant Beneficial Owner

  • Shares may be made subject to the restriction on transfer.
  • All rights in shares held by such Significant Beneficial Owner shall be suspended, including, voting rights, dividend etc.
  • The MCA may impose penalty of up to INR 1,00,000/- and INR 1,000 per day the default continues.
  • Such Significant Beneficial Owner can be charged with fraud under Section 447 of Companies Act, 2013.

Consequences of non-compliance by a company?

Fine ranging from INR 10,00,000/- to INR 50,00,000/- for company and INR 1,000 per day the default continues.

Who is exempted from definition of Significant Beneficial Owner?

  • Mutual Funds;
  • Alterative Investment Funds (AIFs); and
  • Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (lnvlTs).