Muthdoot Finance pre IPO trademark poison pill

While reading the draft prospectus of Muthdoot Finance(http://www.sebi.gov.in/cms/sebi_data/attachdocs/1323411962927.pdf), I noticed an interesting thing that though the company had the 'Muthdoot' trademark registered in its own name(which it had been using since inception), the promoters filed a rectification application in Oct-10, not contested by the company, where they required that the ownership of the trademark revert to them. The company will still be allowed to use the trademark for a fee of 3% PAT, as long as the promoters continue to hold 51% in it.

Now, the rate of royalty does not seem unreasonable compared to other trademark fees like of the Tata name etc. What is interesting is the timing of the application. The promoters must have decided that they might as well as milk trademark fees from the newly listed entity, as corporate governance norms will minimize any potential for siphoning funds. Also, this does act as a slight deterrent to corporate raiders. I'd blogged earlier about this being done for personal services businesses, but it seems Indian promoters are now becoming more IT savvy, and cautious about losing it in the event of a takeover/sale of pledged shares.

Beyond IPR-how companies protect their intellectual property

I enrolled for the elective 'Strategic Management of Intellectual Property rights' taken by the legendary Prof Anil Gupta. During the second session, while discussing the terminator gene technology, he explained that the best way to protect intellectual property is often without legal protection. This comment of his sparked off some thinking in me, and below are the examples I came up with, as substitutes for the below IPRs.

• Patents;-Incomplete(from angle of copying) patent applications often compel wouldbe imitators to approach the patent assignee for the exact technical know how for working the patent, and theteby prevents imitation.
• Copyrights:- Digital Rights Management(DRM) is used to protect copyrights from unauthorized use and copying. This is analogous to the terminator gene technology used to protect Bt seeds.
• Trademarks:-This is maybe the only IPR for which law is the best protection.
• Trade Secrets:-By definition, this cannot be protected if not disclosed. Hence, contractual forms of control are exercised to protect this as in the Coke formula.
• Designs:- Companies like the centuries old TBZ keep changing their designs, so they do not deem it fit to register their designs. But given the high profile of their clients, any piracy is soon brought to light there.