Intellectual Property RightsProcedure and Protection of Intellectual Property Rights in the FinTech Industry

January 31, 20220


Financial services, like other conventional businesses, is undergoing a digital transformation. As discussed in our blogs previously, the FinTech sector is rapidly expanding in the age of information and digitization, with new and innovative services, business models, and service providers.

In the near future, the FinTech industry may open up entirely new markets or provide a competitive advantage over traditional alternatives. Significant financial institutions, insurance firms, hedge fund managers, investment firms, rating agencies, audit and accounting firms, regulators, technological businesses, consortiums, not-for-profits, and start-ups may all be affected.

Software, hardware, and branding are all protected by Intellectual Property  Rights (IPR). Understanding the challenges associated with the development and deployment of IPR is critical when competing technology is involved.

Over the years, the Indian Government has made sincere efforts to raise awareness of the importance of IPR among start-ups by prioritising their significance in today’s world and providing incentive schemes for them to protect their IPR, such as tax relief.

Moving forward, we shall discuss in detail the ways in which FinTech companies can exercise their IPR and secure their IP assets in the rapidly evolving market in India.


FinTech is a branch of finance that functions digitally, with the help of technology. With technology so deeply embedded in making financial products and services available to the end consumer, FinTech companies must prioritise the protection of their Intellectual Property (IP) assets in order to optimise their commercial value and establish a digital transformation strategy.

FinTech corporations and institutions either develop technology in-house or purchase it from third-party vendors, collaborate with vendors and competitors, or procure the required technology from other FinTech-related enterprises.

Regardless of the aforementioned, in the FinTech industry, the registration of IPR  is critical for the company’s inventions and competitive technology for the following reasons:

  1. Technology ownership and protection;
  2. Intellectual Property Registration and Enforcement;
  3. Branding;
  4. Models; and
  5. Business secrets.


1. In-House Development

When employees of the company produces any new and updated technology or software/hardware related to FinTech, the company is entitled to the IPR  of such innovation. The development work, on the other hand, must be done while the said employee is employed by the FinTech company, or when the employee is functioning within his stipulated scope of work for the company.

If an employee is not hired to develop new technology but innovates something spectacular outside of work hours, the employer may not be able to claim ownership of that work.

Financial institutions and FinTech companies must guarantee that the employees working towards any innovation pertaining to  FinTech are hired and develops/innovates a new technology during the course of its employment, and that the Employment Agreements include explicit and exhaustive IPR clauses.

On the contrary, several personnel work as consultants or experts for FinTech companies. In such scenarios, unless there is an agreement to the contrary, if any such consultants or experts invent a new or updated technology or software/hardware, such innovation shall be owned by the individual and not the FinTech company.  Hence, it is advised that  suitable formal agreements are in place, specifically addressing IPR.

The FinTech companies should be aware of any registered IPR held by others that could prevent their products from being commercialised.

For example, patent infringement occurs when the claimed innovation is “exploited” without permission. As a result of patent infringement, the parties tend to opt for patent litigation which  is sometimes time-consuming and costly. Furthermore, such litigation affects the goodwill of the company, diverts the potential resources away from business, and affects its brand in the market, leading to irreparable losses.

It is also important to be vigilant about the new patent or trademark applications in the FinTech sector so that pre-grant oppositions can be considered — the initiation of such processes frequently leads to commercial disputes between the parties.

Other than patent and trademark, the FinTech companies should also actively engage in protecting other forms of IP such as design and trade secrets.

2. Branding and Trademark

In the FinTech sector, branding is extremely important as it provides better reach among target consumers and can boost the company amongst its competitors.  For example, PayPal, Visa PayWave, and Mastercard are well known brands as of today, in the FinTech market.

Early in the development process, a FinTech company must evaluate the company’s brand and target customer for the said brand. Brands can be protected under trademarks, however, if identical brands are already in use or the brand name is descriptive, registration will be difficult. The FinTech companies should conduct brand searches in all potentially relevant areas, and thereafter file trademark applications well in advance of their launch.

3. Collaborations

In the FinTech industry, collaborations are frequently employed to introduce technology-based companies to financial institutions. These collaborations take a variety of forms, including supporting FinTech start-ups, but the IPR challenges are the same regardless of the model used.

The parameters of the partnership or financial arrangement are critical in any collaboration. The terms should include the following topics pertaining to IPR in addition to the broader ones:

  • Pre-existing technology ownership and use, including licensing and use after the cooperation ends (for example, if the pre-existing technology is incorporated into new technology developed as a result of the partnership);
  • Ownership of new technology and the rights to utilise it;
  • Filing and maintaining patents and other kinds of registered IPR; and
  • The formation of management and committees that will meet on a regular basis and make decisions on issues such as patent prosecution, opposition to third-party patents, and IPR enforcement.

Furthermore, because FinTech systems must be able to connect with other FinTech systems from other companies, broader interoperability arrangements may be required.

Cross-licensing is a straightforward way for financial institutions to collaborate, but bringing together huge technologies owned by different parties will necessitate the use of licencing pools and the development of global standards to secure the sharing of standard essential patents.

4. Acquisitions

The purchase of a FinTech start- up poses a slew of unique IP rights concerns. The developer must undergo considerable due diligence to guarantee that it has all of the IPR, it claims to have and that are required for future projects. 

Employee, contractor, licensor, and collaborator agreements must be carefully scrutinised, and third-party registered IPR must be evaluated for infringement risks. The transaction should be structured to guarantee that all relevant IPR, as well as important employees with critical know-how, are acquired.


FinTech is a comparatively new industry which is just yet gaining public attraction. On the other hand, the common people and consumers are not completely aware of IPR and how the IP protection system works.

In light of the above, several companies might not actively implement stringent IP policies or ensure protection of their IP assets. Hence, lack of awareness about IPR and its importance in the FinTech industry can pose to be a problem in enforcement of IPR.

Additionally, several FinTech companies are not equipped with IP experts or a dedicated IPR team to look after the IP assets of the company or address the issues related to IPR. In such a scenario, the FinTech companies should ensure to consult and take an advice from an IP expert to build the brand and safeguard it amid the competitors, and to capitalize the IP of the said company.


With the launch of Atmanirbhar Bharat by the Government of India, it is a once-in-a-lifetime chance for establishing a business or launching a new venture. However, the urgent need of the hour necessitates entrepreneurs’ awareness of the critical value of IPR and the need for a proactive strategy to secure such rights.

Entrepreneurs must realize the need of adopting an IP protection strategy right from the outset. Protecting the company’s IP is an investment because IPR is an asset that, when safeguarded from the start, brings multiple economic rewards to the entrepreneur.

IP protection should be a primary concern that needs to be addressed for all fintech businesses, particularly start-ups.

FinTech companies’ IP assets can be safeguarded from the very beginning with adequate documentation, registration of IP, and due diligence of IPR, enhancing the efficacy and performance of their technology and programmes and providing leverage to multiple economic rewards to the owners of such IP.

-Team AMLEGALS assisted by Ms. Unnati Jain (Intern)

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