Sunday 28 April 2013

CIPA defends UK patent box

From Treasury to Treasure? Tax-
efficiency from the Patent Box*

The United Kingdom's Chartered Institute of Patent Attorneys has been quick to defend the increasingly-repeated assertion that the British "patent box" tax scheme [frequently discussed on IP Finance since it was originally proposed: see pieces listed here] is simply a tax avoidance device, rather than a mechanism for encouraging investment.  In to a media release last week, CIPA's President Chris Mercer nails the myth firmly.  The media release reads as follows:
Patent box’ designed  to encourage innovation, not avoid tax, says patent attorneys’ president 
“Headlines in today’s media linking the ‘patent box’ to tax avoidance measures are missing the point,” says Chris Mercer, President of the Chartered Institute of Patent Attorneys. 
“Fiscal measures are one of the few tools government can use to influence corporate behaviour,” he says. “The Patent Box has only just come into effect, but there are already signs that it is having a positive effect. Companies – especially mid-size, technology-based enterprises – are starting to incorporate IP into their strategic plans. Patent attorneys are being invited to talk to main boards, not just to the R&D department [Both of these are 'attitude-changers' rather than anything else, but attitude-changing is vital if we expect there to be a change in investment behaviour too]. This is good example of how a government initiative is actually achieving the desired effect – encouraging businesses to innovate and add value by protecting their IP. 
“The idea that anyone would start inventing things and patenting them as a way of avoiding tax is nonsensical,” he added. 
There has also been an increase in patent applications at the Intellectual Property Office. ”This increase is a welcome and much-needed,” said the CIPA President. “UK companies have been falling behind their foreign competitors in terms of patent filings. The Patent Box and other government  measures to encourage innovation may have helped reverse the trend.
This blogger doubts that there is any correlation between the availability of patent box tax breaks and the number of patents filed.  In his view, given the cost and the sheer effort that attends the filing of most patents, and the negative return that most of them can realistically expected to deliver, anything that encourages investors to commit to new products and processes rather than concentrate on old, tried-and-tested ones, should be warmly welcomed.

* The illustration is of a Merck family Treasure Chest Christmas Ornament, available here for US$ 18.99.


Anonymous said...

Wishful thinking I feel.

There are plenty of "organisations" looking to secure very cheap and cheerful patents asap at the lowest possible costs on minor improvements. The narrower the better. The UKIPO is not the only source of qualifying patents.

Truth is we will have both. Those who seek to game the system purely for tax benefits, where patent costs are negligible compared to the gains and those who seek to leverage the possibility of tax benefits to justify investment in real R&D and innovation.

To deny the former is naïve.

In three to four years time we will see when HMRC has an impact review.

Fred Logue said...

Maybe I am missing something but isn't the patent box a way of incentivising innovation and avoiding tax.

By definition it is a way of avoiding tax. It remains to be seen if it incentivises innovation.

Anonymous said...

Someone I know who is familiar with the way the legislation was drafted told me patent box is too complex for many companies to take proper advantage of, and no real effort was made to reduce that complexity.

My own view is that its real purpose is to encourage GSK to stay in this country rather than focussing more towards the US and China.

Ken Jones said...

Patent Box is excellent news for the UK. Perhaps this new tax will encourage execs to look harder at patenting, after all if they license a third party at 10% it looks like the third party will only pay 10% on any profits relating to the patented product, so in essence the licence will cost the licensee nothing.This tax will also apply to foreign patents where the capital flows to the UK. Patenting is international and today both the searching and filing can all be done online.The high fees attorneys charge may be worth paying if you are a corporate and have to employ somebody to do the patenting anyway, but if you are an individual, substantial attorney fees running into thousands, create a very significant barrier. A complete UK patent actually only costs £230 in total, the UK IPO is amazing and fantastically helpful and it is now entirely possible to patent internationally yourself from your laptop, if you know how to go about it. The difficult bit is having something to patent and understanding what is and isn’t patentable. A great cheap Amazon ebook, which tells you how to go about patenting internationally, step-by-step, is DIY Patent Online. It lists all the fees and has links to all the sites you need plus you can read some of it free on Amazon. They also have a web site and unlike most patent site, which are a cure for insomnia, they aren’t trying to sell you any services. Many spout off about patents knowing little about the subject in reality. The only patent that is really worth it’s salt is a Utility Patent – they even call them utility patents in the States but in the UK they are just called Patents. These must have an 'Inventive Step' and must not be ‘obvious to somebody skilled in the art'. These are not to be confused with US Design Patents (UK Design Registration) or Australian Innovation Patents. which are easy to get and get around. Patenting is challenging when you don't know how but like everything else, once you have the hang of it, it's quite straightforward. Most businessmen are busy building empires with all the costs involved, these are tangible, you can see them. However my moniker is ‘If you can touch it, don’t touch it’. Intellectual Property is the only thing worth having, owning the IP makes you the master, the rest is just overhead, which is an idea well worth disseminating to your clients.