Introduction : India’s fabless design layer is no longer the quiet corner of the semiconductor story. The Design Linked Incentive (DLI) Scheme has sanctioned 24 chip design projects and given around 95 companies access to industry-grade electronic design automation (EDA) tools as of early 2026. On the product design side, it reimburses up to 50% of eligible expenditure. RISC-V-based IP houses, meanwhile, are licensing cores directly into commercial SoC flows.
That is the opportunity. The risk we see just as often looks like this: a fabless startup builds strong architecture, gets approached for a licensing or manufacturing tie-up, and moves straight into commercial discussions, before the IP underneath that architecture is actually locked down.
The case below is a composite drawn from engagements we have advised on across India’s fabless and AI-chip ecosystem. It shows the sequence we would recommend to any design-stage startup sitting across the table from a prospective licensee.
The Situation
An AI-chip design startup had built a working accelerator architecture with strong benchmarks, a functioning prototype, and real investor interest. An Indian manufacturing partner, scaling up with support from the India Semiconductor Mission (ISM), wanted to license the core architecture for its own SoC roadmap, with a path to a broader technology transfer if the pilot succeeded.
On paper, it looked like exactly the deal a fabless startup wants: revenue without operational entanglement, a credible manufacturing partner, and a foothold in India’s growing chip market.
The real risk sat in the six weeks between “let’s discuss terms” and a signed agreement, the window where technical disclosure tends to outpace legal protection.
Where the Exposure Actually Sat
- No Indian filing on the core architecture. The startup had filed abroad, but nothing covered India. Without an Indian application, or a timely one claiming priority from the foreign filing, there was no protection in the very jurisdiction where the disclosure was about to happen.
- No freedom-to-operate (FTO) check against the Indian landscape. Patents are territorial, so clearance elsewhere says nothing about blocking claims in India. A licensing conversation is exactly when such a claim, if one exists, tends to surface, usually the hard way.
- Founding-team IP assignment gaps. Two early technical contributors had joined before formal invention-assignment paperwork was in place. An unassigned inventor is a common issue in diligence, and it surfaces at the worst possible time: mid-negotiation.
- No export-control classification run. This is the one that tends to catch fabless teams off guard. Since 23 October 2025, India’s SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) list has carried an active Category 7 for certain emerging technologies, including advanced semiconductors and related software and know-how. Where an AI chip crosses the listed technical thresholds, the documentation and source-level detail behind a license can itself need export authorization before it leaves India, whether it is headed to an overseas foundry, a foreign affiliate, or a licensee’s offshore team.
The Sequence That Closed the Gap
- An Indian patent application, filed before any disclosure. This fixed a filing date for the core architecture claims ahead of any technical disclosure to the prospective licensee. It is cheap insurance compared with negotiating from an unprotected position.
- A targeted FTO and landscape review. Scoped to the Indian filing base, it confirmed the architecture was clear to license and manufacture domestically before terms were finalized, not after.
- An invention-assignment audit. Run across the founding and early engineering team, it closed the gap before it could become a weakness in diligence.
- SCOMET classification, completed before the technology transfer agreement was signed. This settled exactly what could be shared under a standard NDA and what needed an export authorization first.
- The license structured as a package, not a single grant. It had a running royalty tied to volume rather than a flat fee, audit rights from the outset, a defined field of use, and improvement rights on jointly developed enhancements retained by the startup instead of being absorbed into the licensee’s general IP.
- The manufacturing relationship structured with incentive eligibility in mind. Support available to the Indian partner, including DLI benefits where applicable, was preserved without requiring the startup to dilute or relocate ownership of its core IP.
The Outcome
The startup closed the license with its architecture patent-pending in India, a confirmed FTO position, and export documentation that held up under the licensee’s own compliance review. It did not discover any of these gaps mid-negotiation, where each one would have cost leverage, time, or both.
In our experience, companies that walk into a licensing or investment conversation with a clean IP position, well-documented contracts, and confirmed regulatory clearance tend to get better terms than companies with the same technology and weaker paperwork. The technology is rarely the differentiator. The paperwork around it often is.
The Takeaway for Fabless Teams
If you’re a design-stage company heading toward a licensing, manufacturing, or investment conversation in India, the sequence that protects value rarely changes:
- File in India before you disclose anything, so your first disclosure never comes before your first filing
- Run the FTO check against the Indian landscape specifically, not just your home jurisdiction’s
- Close invention-assignment gaps across the team before diligence finds them
- Classify for export control before you share technical documentation, not after
- Structure the license as one package covering royalty, audit rights, field of use, and improvement rights, never negotiated piecemeal
Done early, none of this needs to slow a good deal down. It helps make sure the deal that closes is the one you meant to sign.
How We Help
At IIPRD, working in close association with Khurana & Khurana (K&K), we support fabless and AI-chip companies with:
- Patent Strategy & IP: patent filing, portfolio development, patent landscaping, FTO, infringement analysis, licensing, commercialization, and technology transfer
- Manufacturing & Incentives: advisory on fabless and design-linked incentive programs, including DLI, ISM, ECMS, and EMC 2.0
- Strategic Growth: joint ventures, technology collaborations, licensing arrangements, cross-border expansion, and foreign investment structuring
- Investment & Transactions: IP valuation, investor readiness, due diligence, M&A, fundraising, and enterprise value enhancement
- Legal & Commercial Advisory: technology licensing, NDAs, employment and invention-assignment agreements, regulatory compliance, and export-control matters
If you’re a fabless or AI-chip team heading into a licensing conversation, the right time to talk to us is before the term sheet, not after.
Author : Sanjay Sharma, In case of any queries please contact/write back to us via email to [email protected] or at IIPRD