The Impact of the Patent, Design, and Trade Mark Act on Nepalese Businesses

When foreign investors compare a private vs public company in Nepal, they usually focus on ownership, capital, and compliance.

But many overlook a critical layer: intellectual property protection under the Patent, Design and Trade Mark Act 1965.

If your business model depends on brand, technology, product design, or proprietary systems, your company structure and IP strategy must align from day one.

This guide explains how the Patent, Design, and Trade Mark Act affects private and public companies differently, and what foreign companies must consider before entering Nepal.

Understanding the Legal Framework in Nepal

Before choosing between a private and public company, investors must understand Nepal’s regulatory foundation.

Key governing laws include:

• Companies Act 2006
• Patent, Design and Trade Mark Act 1965
• Industrial Enterprises Act 2020
• Foreign Investment and Technology Transfer Act 2019

Each law affects ownership rights, IP protection, foreign equity, and compliance exposure.

For foreign companies, structure is not just administrative.
It determines brand protection, licensing flexibility, and long-term scalability.

What Is a Private vs Public Company in Nepal?

Under the Companies Act 2006, companies in Nepal are primarily categorized as:

1. Private Limited Company

A private company:

• Limits share transfers
• Restricts public share subscription
• Has a maximum of 101 shareholders
• Cannot issue shares to the public

Most foreign investors choose this route.

2. Public Limited Company

A public company:

• Can issue shares to the public
• Has no cap on shareholders
• Requires at least 7 founders
• Faces stricter disclosure requirements

Public companies are regulated more heavily.
They often prepare for listing or public capital raising.

How the Patent, Design, and Trade Mark Act Impacts Company Structure

The Patent, Design, and Trade Mark Act 1965 governs:

• Trademark registration
• Patent filings
• Industrial design protection
• Licensing and assignment rights

IP is administered by the Department of Industry (DOI).

Why Structure Matters for IP

Your company type determines:

1. Who legally owns the IP
2. How IP can be transferred
3. Whether foreign parent licensing is easier
4. How brand risk is managed

For example:

• A private company allows tighter share control. This reduces risk of IP dilution.
• A public company must disclose more. Brand disputes can impact public valuation.

Key Differences: Private vs Public Company in Nepal (IP Perspective)

Insight:
If your competitive edge depends on proprietary systems, a private company structure often offers stronger control over intellectual assets.

Trademark Registration Under the Act

Under the Patent, Design, and Trade Mark Act 1965:

• Trademarks must be registered to obtain protection
• Registration is valid for 7 years
• Renewable indefinitely

Unregistered marks have weak enforcement standing.

Foreign investors must file locally in Nepal.
International registrations do not automatically apply.

Patent and Design Protection in Nepal

Patents protect:

• New inventions
• Industrial processes
• Technological innovations

Design protection applies to:

• Product shapes
• Packaging formats
• Visual configurations

However, Nepal follows a registration-based system.
Protection is not automatic.

This is crucial for:

• Manufacturing companies
• Tech platforms
• SaaS providers
• Product exporters

Foreign Investment and IP Ownership

Under FITTA 2019:

Foreign investors may:

• Own 100% equity in most sectors
• Transfer technology through agreements
• Repatriate royalties subject to approval

But IP ownership must align with company structure.

For example:

• If IP is owned by a foreign parent, licensing agreements must be registered.
• If IP is held locally, transfer procedures differ.

Improper structuring can delay repatriation.

When Should a Foreign Company Choose a Private Company?

A private company is ideal when:

• You are entering Nepal as a subsidiary
• You want tight control over shares
• IP confidentiality is critical
• You are not raising public capital

This is common for:

• IT outsourcing firms
• Manufacturing FDI projects
• Back-office support entities
• Brand licensing operations

When Is a Public Company Strategic?

A public company may be appropriate if:

• You plan to raise capital from Nepali investors
• You aim to list shares
• You require broader funding access
• You operate at national infrastructure scale

However, public disclosure requirements increase IP exposure risks.

Step-by-Step: Protecting Your Brand in Nepal

Here is a simplified roadmap:

1. Conduct trademark availability search
2. File application at Department of Industry
3. Respond to objections, if any
4. Publish in IP Bulletin
5. Receive registration certificate
6. Monitor infringement

This process typically takes several months.

Delays often occur due to documentation gaps.

Risks Foreign Companies Often Overlook

Many investors focus only on incorporation.

But risks include:

• Registering trademark in wrong entity name
• Failing to license IP formally
• Using foreign brand without local filing
• Ignoring design protection for packaging
• Weak contract drafting

These mistakes can lead to:

• Brand disputes
• Royalty repatriation issues
• Costly litigation

How IP Strategy Connects to Business Structure

Choosing between a private vs public company in Nepal should not happen in isolation.

Your decision impacts:

• Tax treatment
• Regulatory exposure
• IP control
• Shareholder disputes
• Exit strategy

For foreign companies, a misaligned structure increases compliance risk.

Compliance and Enforcement

The Patent, Design, and Trade Mark Act provides remedies including:

• Injunctions
• Seizure of counterfeit goods
• Compensation claims

However, enforcement can be procedural.

Proper registration is essential.

EEAT: Why This Matters for Foreign Investors

According to Nepal’s Companies Act 2006 and DOI guidelines:

• IP rights must be registered domestically
• Licensing must follow statutory procedure
• Foreign technology transfer requires formal approval

Foreign investors entering Nepal’s growing market must integrate legal compliance with structural planning.

This guide is based on current legislation including:

• Companies Act 2006
• Patent, Design and Trade Mark Act 1965
• FITTA 2019
• Industrial Enterprises Act 2020

Always consult a qualified advisor before filing.

Frequently Asked Questions (People Also Ask)

1. Is a private company better than a public company in Nepal for foreign investors?

In most cases, yes. A private company offers tighter ownership control and lower disclosure obligations. It is usually preferred for subsidiaries and IP-intensive businesses.

2. Does Nepal recognize international trademark registrations?

No. Nepal is not fully integrated with automatic international trademark systems. Local filing is required for enforceable protection.

3. How long is a trademark valid in Nepal?

Seven years from registration. It can be renewed indefinitely upon payment of renewal fees.

4. Can a foreign parent license IP to its Nepali subsidiary?

Yes, but licensing agreements must comply with FITTA and may require regulatory approval for royalty repatriation.

5. What happens if a trademark is not registered?

Enforcement becomes difficult. The business risks losing exclusive rights within Nepal.

Conclusion: Align Structure with Intellectual Property Strategy

When evaluating a private vs public company in Nepal, foreign companies must go beyond incorporation costs.

The Patent, Design, and Trade Mark Act 1965 significantly influences brand security, technology protection, and long-term control.

For most foreign investors, a private company structure offers stronger IP governance and operational flexibility.

If you are planning entry into Nepal, structure and IP must be designed together.