The Australian Financial Review has published an article today report on an initiative by IP firm Wrays and R&D tax advisor Swanson Reed which calls on the Australian government to provide assistance to companies of up to 50,000 Australian dollars for the preparation and filing of the patents. The authors of the proposal argue that Australian companies need support and that their proposal would be cheaper than the suggested patent box initiative.
The initiative is dismissed by Rui Rodrques who is an investment manager at a Sydney venture capitalist Tank Stream Ventures who argues that online tech industries do not need patents and that the support would only go to traditional industries.
The proposal is reminiscent of Germany's SIGNO SME patent initiative which supports small companies with their first application in both Germany and internationally. This has supported between 400 and 700 companies in the past fifteen years. The last evaluation report in 2009 reported that the learn process by which start-up companies began to understand the patent process was one of the key features of the programme. However, the "innovation market" project to encourage exploitation of IP did not fulfil its potential. The evaluators recommended that the financial support nonetheless be continued. Similar schemes exist in some other countries, such as in China. This author's experience of the scheme does suggest that the financial support helps to kick-start the patenting process as it reduces some of the financial burden on the company. It also helps start the discussion of the value of a company's intellectual assets to its business strategy and the appropriate protection with intellectual property rights (and not just patents).
The objections to the proposals mentioned in the AFR article are that such schemes do not necessarily help online companies and that the patenting process moves too slowly. It's also true that it can be hard for a small company to pursue patent infringements and that the financial penalties in Australia are low. This traditional view of patenting would seem to discourage start-up companies from filing. On the other hand, patents do provide assets which can be used to strengthen licensing programmes and also provide potential purchasers with additional leverage. A recent study carried out for the France Brevets investment fund suggested that - at least in France - patent savvy companies tended to be more successful than other start-up companies in which venture capital firms had invested.
Of the 3 schemes I reviewed, Singapore is more clearly delineated than Malaysia and the China IP lending is more to support local champions.
IP Office of Singapore offers to underwrite any patent as asset backed loan up to 80% of first losses (principal) capped at $1M SGD. In return successful applicants get a term loan with attractive interest capped at 7.5% at a 20-30% LTV. The valuation must be undertaken by one of the nominated parties, much like oil reserves are audited by specialists according to the accounting standard.
However, the conditions of being revenue positive and clear monetarisation pathway makes this scheme unsuitable for startups, however, it may complement other initiatives such as the Productivity Incentive Credit which encourages SMEs to acquire IP.
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