Can You Protect Your IP When Outsourcing In India


11 March 2016

Software Outsourcing


What is the actual definition of Intellectual Property?

According to the Australian Government provided definition, IP is the application of the mind to develop something new or original. Further to this they explain that it can exist in various forms; a new invention, brand, design or artistic creation. But what should be of concern to entrepreneurs (who intend to capitalise on the intellectual property they have created) is the emphasis Government places on the strategic management of said IP. Strategic management encompasses a whole range of processes, however, in relation to offshore software development IP protection is the most important.

In Australia we are blessed with a sturdy legal framework whereby IP rights are often automatically acknowledged or alternatively protected through a simple registration process. Of course, in the context of code creation, the process can be somewhat protracted due to the new legal territory the technology industry is encroaching on. Yet our organic, common law based system, that grows in sync with industry, has adapted to provide a safety-net of IP security even on the tech frontier. Unfortunately, the same may not be said for all jurisdictions of our offshore software developer counterparts …

Check out our proprietary process.

Intellectual property law in India; where does the danger lie?

The trend of outsourcing software development to India is undeniable, with one of the major draw cards widely considered to be the cost efficiency. As I have already outlined in my null hypothesis article; not only is the certainty of cost efficiency when offshoring a myth, so too is the idea that the Indian legal system will afford you any sort of copyright protection.

Indian officials are considered by some to have a laissez faire attitude toward IP licensing and general rights protection. This non-fussed mentality in relation to copyright and patent law in India has already caused issues for the European-Indian trade partnership, particularly in the pharmaceuticals industry. More recently the copyright concerns have become more prevalent in India's burgeoning tech industry, potentially posing a danger to international firms intent on offshoring software development. The motivation behind violations of copyright law in India is the quick-fix cash injection to the economy it can provide, but in essence this complacent stance toward intellectual property rights issues is no different to stealing.

When it comes to the fundamentals, as a common law jurisdiction you would think that protection of intellectual property in India would be a similarly structured beast to our Australian system. In most respects the two are similar in nature, however the fatal flaw in India is the often lack-lustre performance of enforcement officials. It's all well and good that intellectual property law in India sits on the same upper echelon as Australian legislation, but if these laws are not robustly applied then the system is - in a word - superfluous.

On this point it would be unwise not to flag the expense involved in launching intellectual property litigation in India. In a recent publication from the British Government's Intellectual Property Office the expense and time delay for dispute resolution in India was highlighted as a key concern. Bureaucratic delay is known in India to be crippling to international businesses attempting to break into their respective industries, and these same issues are seemingly consistent across all facets of the economy.

Could it crumble?

If all of this legalistic jargon is a bit too airy fairy for you to get your head around, let me illustrate the ownership of intellectual property issues in India with a more tangible example. Let's say you've registered your software design with the relevant Indian Governmental body. You - as the prudent entrepreneur that you are - have ensured you have all of the correct paperwork. You've dotted your "i"s and crossed your "t"s, to put it simply you've done everything right. But, when you are providing sensitive material of worth to one of the many software development companies in India, you discover by way of a quick Google search, you are playing with fire. Your first dealing with the company all might run smoothly, it may also go to plan the second time around, but there is certainly a possibility for it to all end in tears. While a secure application may protect your source code, there's multiple ways to achieve the same outcome. What's more important is protecting your idea.

Do your research

It's worth noting that some companies while seemingly based in one jurisdiction may very well be operating across a number of jurisdictions. Let's take the collapse of software development company Appster as an example. The company had 400 staff, the majority of which were stationed in cheaper (from a HR perspective) overseas locations like India and Russia. Appster boasted a number of worldwide offices, from New York, to Melbourne. However with only 23 staff positioned in Melbourne, it's unlikely any serious development work was conducted within Australia. That raises IP protection issues you may not have considered when dealing with what was seemingly a local company. It's always best to get a direct answer on where the software will be built.

The Clincher

Maybe in the fledgling stages of your business's development you find it necessary to overlook IP protection as a critical concern, however in doing so you may be setting yourself up for difficulties down the track. Not only will it cause many a headache trying to link two very different legal systems, but the expense to your business could very likely lead to unexpected financial costs that could hinder future prosperity. So maybe before taking an unnecessary risk by offshoring your software development, take a moment to remember there are capable companies within our borders that can offer just as much potential success.

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David Burkett

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