"Patents and Value: A Dialogue": Distinguishing Dogs from Diamonds

From our friend and occasional contributor Janice Denoncourt (Nottingham Law School) comes this report on "Patents and Value: a dialogue" -- the IP Finance/IPKat event in which lawyer and scholar Neil Wilkof discussed with Intellectual Asset Management editor Joff Wild a number of what seemed to be increasingly controversial issues, egged on by comments and questions from an almost uncomfortably knowledgeable audience of lawyers, patent attorneys, accountants, insurance folk and financial and management consultants.  The event, the second in a current sequence of blog-driven dialogues [the first being on life in the European Patent Office's Boards of Appeal, here], was kindly hosted by London-based multidisciplinary IP practice EIP.

This is how Janice saw it:

"This event, chaired by IP Finance blogmeister Jeremy, took place on 16 September when a roomful of members of the IP community was welcomed by host Gary Moss, head of EIP Legal, London. Jeremy then told us he was inspired to hold the event as a result of an exchange of blogpost comments [see links here] on the subject of IP value. This exchange took place between well-known personalities in the IP field: Jeremy simply had to bring them together for a live dialogue to share their well-informed and critical insights with the IP finance community.

Jeremy introduced the session by reminding us that, only a few decades ago, ‘IP value’ as a concept didn’t even exist. He recalled one transaction back in the 1980s in which patents were given a nominal value of £1 each, a sum that does not quite compare with values attributed to certain mega-patent transactions today.

Neil spoke first and offered his views on the effect of litigation on patent value in the United States. He presented a list [presented in PowerPoint format which you can read here or download here] of twelve key US patent cases that are said to have had a negative impact on the value of patents generally. This list, the basis for Neil's presentation and commentary, first appeared in Terry Ludlow’s article entitled “Sign of the times: trends in technology IP Licensing” IAM, July-August 2014 (here).

Neil took us through Ludlow’s list and the discussion is summarised below:

• eBay (2006) – Reduced (virtually eliminated) probability of getting an injunction even if you win a patent litigation. Per NW, the use of a patent as a sword is blunted.
• Sandisk (2007) Lowered the bar significantly on the grounds for filing a declaratory judgment for non-infringement. Per NW, this has made it easier for defendants.
• KSR v Teleflex (2007) Lowered the bar for obviousness and makes it easier to invalidate patents
• Seagate (2007) Raised the bar for wilful infringement, reduces the prospect for treble damages
• Quanta Computer v LG (2008) Resulted in patent exhaustion for downstream products, limits options for licensing
• Cornell University v Hewlett Packard (2009) Virtually eliminates the ‘entire market value’ (EMV) basis for damages
• Uniloc v Microsoft (2011) Eliminates the admissibility of the 25% rule of thumb to determine damages: comparable licence agreements to determine royalty rate are now required.
• Laser Dynamics v Quanta Computer (2012) Damage calculation based on smallest saleable patent practising unit, damages values drop with shrinking royalty base.
• Motorola v Apple (2012) questions the sufficiency of damages expert opinion and highlights the risks and uncertainty of damages law for patent cases.
• Motorola v Microsoft (2013) the Value of Standard Essential Patents (SEPs) drop.
• Samsung v Apple (2013) The President exercised his veto for the first time since 1987 to deny an exclusion order based on the ‘anti-competitive’ use of Standard Essential Patents (SEPs).
• Alice Corp v CLS Bank (2014) May reduce (or even eliminate) the value of many software related patents.

Neil then posed the question, “What part does patent litigation play in fixing the price of patents?” Based on the Ludlow table and analysis, and from the point of view of patent as a litigation weapon, the potential for individual patents to accrue value has been impaired by the decisions listed above and, as a result, US patents on the whole are probably less valuable than they were before 2006. 

At this point, Joff joined the discussion and explained that he is not a lawyer, an attorney or an engineer, but a journalist who just reports on what he sees and hears, and makes the odd observation. He commented that the cases discussed did not so much reduce patent values as make patents potentially less valuable than they might otherwise have been by making enforcing patent rights harder and, therefore, less attractive. The effects of the Alice v CLS Supreme Court decision are well worth watching, Joff stated. Further if, as some believe, the case renders hundreds of thousands of software patents granted by the USPTO unenforceable, then the market for such assets is almost certainly going to fall through the floor. Joff also noted the cases were all American and that different dynamics may exist in other parts of the world. For example, depending on how the unified patent court system develops, patents in Europe may become more valuable – he knew of a few non-practising entities and established US law firms that are presently looking to Europe as a potentially much more interesting place than may have been the case up to now. Joff then introduced a second list [presented in PowerPoint format which you can read here or here]: high value multi-million and billion dollar mega-patent transactions with which most readers will be familiar, including:

• Google’s acquisition of Motorola
• the sale of the Nortel patent portfolio to a consortium of smart phone manufacturers,
• Google’s acquisition of shares in Motorola Mobility, and
• the curious Quanlin Paper debt finance transaction that recently occurred in the People’s Republic of China, among others.

Nortel, in the good old days when
phones were phones and nobody
knew patents were an asset class ...

Joff stated that this list of patent transactions was unusual both because the deals were publicly disclosed and because of the enormous values attributed to patents. Most deals, he said, were done privately and for much lower sums. He also asserted that there was more going on besides strict patent value in all of these transactions. What’s more, he stated, it is important to remember that the vast majority of granted patents are worth very little or nothing at all. Neil elaborated by pointing out that several of the sellers were in financial distress eg Motorola was experiencing economic difficulties, Nortel was bankrupt and Kodak was nearly so, and pressure was on AOL to improve its share price. As a result, he said that many of the mega-transactions may simply have been “sales to get rid of dogs and get suckers to pay for them”. Joff did not agree – saying that the patents may not have been “dogs”; instead, the management of the companies that originally owned them may not have had the expertise or the inclination to maximise their value potential.  Neil observed the particular interest in securitizing patent rights in places such as China and Singapore.  He further noted that that it is important to put mega- transactions into context in terms of value. In 2002, there were low interest rates, lots of liquidity and lots of money looking for asset classes. Now in 2014, we are in a similar financial environment, with low interest rates, accumulation of capital searching for a yield. Joff noted that none of the deals in the list were about one party buying patents from another in order to monetize them through the courts, instead much more complex strategic issues were at play – and it was these considerations that had driven the patent valuations. 

Diamonds and dogs share
another context thanks to
Dave Bowie (or should
that be Bow-Wowie?) 

Jeremy was quick to assert that “you can’t call a patent ‘a dog’ because it is sold by a company in insolvency proceedings”. Further, when it comes to treating patents as an asset class, it is more important to understand the patent's value story in connection with business strategy in order to assess value. Jeremy offered an illustrative analogy with postage stamp collection value. He explained that most stamps are valueless but a small percentage are worth something that makes them an asset class. There is scarcity at the top end and it is a skill “to distinguish the dogs from the diamonds”. Joff was not so sure, noting that patent value is very contextual – and depends on things such as ownership and timing. For example, he stated, if his mother owned an 1840 British Penny Black stamp it would have an intrinsically high value that she could find out and rely on; on the other hand, give her ownership of a patent and however good it might be to someone else, in her hands it would be worth absolutely nothing because she would have no idea what to do with it. 

Apart from the speakers,
the other big attraction
was the host firm's
excellent IP Ale 

The discussion turned to Europe. Joff found it notable that to date there have been very few mega patent transactions in the EU. However in his view the position may change with the introduction of the Unified Patent Court (UPC) as the permanent injunction remedy may increase the value of good quality patents that read on popular technologies. If that turns out to be the case, he said, don’t be surprised to see more patent transactions and litigation activity in the EU in the future. He named one very well-known US law firm in which a number of senior partners have been sitting the Qualified Lawyer Transfer Test exams to qualify as solicitors in England and Wales, expressly to offer advice on English / EU patent law.

Jonathan D.C. Turner (barrister, 13 Old Square), joined the discussion and suggested that the absence of mega-patent deals in the EU may be due to the impact of strict competition (anti-trust) law and that the intervention of competition law procedures may paralyze such transactions. In his view, competition law would still be an important issue, even with the UPC in place.

Joff concluded that we needed a better understanding of the dynamics of these large patent transactions coupled with their huge patent valuations. He thought there was a danger that we might overhype patent value and that it was important to understand the patent ecosystem properly in order to extract any value at all. He added that the other thing that creates value is if many parties are bidding against each other for the patent portfolio. This drives up the price. This what happened in the Nortel sale; by contrast, in the Kodak sale companies interested in the portfolio ended up working together and the $525 million sale price was much lower than initial predictions, some of which were in the region of $2 billion to $3 billion.

Charles Till, formerly with Nortel, agreed that the dynamics of the auction process had much to do with the patent values being drawn up. He explained that Nortel was not interested in patent enforcement as it would have needed to sue its own customers. Thus the company’s strategy was to transfer the patents to its competitors, for a price, as the competitors would have no such reservations.

Jeremy clarified that, whether the asset is a postage stamp or a patent, any asset will be affected by ‘context’ and what we must be sensitive to the circumstances that tend to make patent assets more valuable.

To conclude the dialogue, Joff advised attendees to think of patent value as being about much more than monetisation. Patents are potentially valuable for any number of reasons and if you see them only as monetisable assets you will probably end up failing to make the most of what they can offer. Neil advised that, against the backdrop of the attempt to amend US patent law, it will be very important to evaluate what is currently taking place with respect to the anti-patent lobby led by a group of IP academics. It will be important for the IP community not to underestimate the power of academics and their anti-patent sentiment. As an academic myself, I think this is particularly good advice".

CIPA Congress: patent attorneys target IP commercialisation

CIPA Congress can be fun -- but there's
a thoroughly serious side to it

"The Lifecycle of Intellectual Property: Intellectual Property From Cradle to Grave" is the impressive title of this year's CIPA Congress. Since this event is run by the Chartered Institute of Patent Attorneys, one might mistakenly think that Congress is all about a load of patent attorneys getting together in order to talk shop and exchange grumbles over patent offices (particularly the European one), patent examiners, courts and clients. Fortunately nothing could be further from the truth: Congress gives the profession a chance to look beyond the daily trials and tribulations of patent practice and discuss topics that require a far greater degree of vision, commitment and understanding. An example of this can be found in Session 7, as Dominic Forsyth and Greg Corcoran explain to this blogger:

"A full and diverse panel has now been confirmed for Session 7, which addresses a range of important issues facing actors in the world of licensing and commercialisation. Experienced in-house attorney Greg Corcoran of ASML chairs the session and will coordinate talks from three very different perspectives.

* Dr Kevin Scott (Royal Philips) will share his experience and expertise from the perspective of a large, innovative multinational, discussing various ways that licensing and open innovation models can be used to achieve effective collaborations and extract value from innovations. He will provide insight on how a multinational can leverage its IP to obtain the best return on investment.

* Dr Hayley French will provide views from a dynamic young biotechnology firm, Apitope International, which has used licensing agreements to forge partnerships with investors and pharmaceutical companies worldwide. She will discuss the techniques employed by a young biotech firm to use its IP to survive in a highly competitive market.

* Dr Adam Stoten will share experience gained over 25 years by Isis Innovation, one of the UK's leading university tech transfer organisations. Having executed more than 1,000 commercial licences and supported the creation of more than 80 new companies, Isis has had the opportunity to see over the long term how agreements really stand the test of time. He will share ideas about how an established tech transfer organisation translates academic discoveries into real products and services which benefit society."

If you can get there, Congress takes place on 2 and 3 October at the Lancaster London Hotel, London W2 2TY.  For further information and registration details, click here.

China’s Changing Copyright Attitude

At a time when attitudes towards investing in China veer from the cautious and cynical at one extreme to the ambitious and optimistic at the other, it's always good to hear from people who have some experience of current conditions in that vast and complex market.  In this guest post, we feature the view of Michael Laridan, consultant to Shanghai and Beijing-based market research company Daxue Consulting.  Michael, focusing mainly on copyright but also touching briefly on other IP rights, raises an issue of particular significance to readers of this blog --  the repatriation of IP-driven earnings from China.  Michael writes:

"China has a reputation for lax attitudes towards protecting intellectual property rights, especially those held by foreign companies. As a signatory of most international copyright standards agreements, it is obliged to investigate and pursue cases of infringement, but in the past, foreign companies have found it difficult to defend their copyright in China. The process is complicated and enforcement is often difficult. In the rare cases where a domestic court has found in favour of a foreign company, the compensation has been much lower than in international courts.

That trend is changing. Enforcement and legal groundwork have been developing quickly. In the past four years, China has consistently had the highest number of resident patent applications in the world, with the gap between it and competitors like Japan and the United States growing every year. As it moves towards a design and innovation driven economy, a robust copyright dispute settlement process will increasingly become a priority for domestic companies and therefore the legal system. This pressure will be the driving force behind China's changes in IPR legislation in the future. In 2010, Beijing courts alone handled almost 8,000 IP cases. In 2012, 2,150 patent disputes were handled by the State Intellectual Property Office, twice as many as those handled the previous year. So while there is still uncertainty in their copyright landscape, there good reason to be optimistic about the state of China's IPR enforcement laws going forward.

This should be good news for foreign companies. Companies afraid of losing their trade secrets should feel more secure about entering China in the future. However, they should also be aware that filing a patent or registering copyright or trade marks in China doesn't just protect their IP, it ensures their competitors can’t hamper their efforts through the bureaucracy. Since Chinese arbitration procedure places great emphasis on definite proofs of ownership and original documentation, Chinese companies seeking to block foreign competitors may register their copyright, creating an additional hurdle for foreign companies who have not taken this step as they then have to prove in court that they are the original owners. Although trade mark regulations have improved substantially in the past decade, trade mark squatting and piracy are still serious problems, affecting even foreign brands with a strong local presence, such as when Proview challenged Apple over the name Snow Leopard in China. Most importantly, though, is what Jack Perkowski pointed out in 2012; it's essential to defend IPR in China to stop a local competitor from developing to the point where it can challenge a foreign company's own domestic market.

Should an enterprise secure IPR within China, it still faces the issue of remittance out of the country. Royalty payment from a Chinese subsidiary for relevant IP, for example, can only be transferred after it has has passed tax clearance. Since the taxes imposed for royalties can amount to less than the taxes imposed on dividends paid directly to a parent company and don’t need the annual tax audit to be completed, some companies have expatriated funds using artificially inflated royalty payments. Consequently, the tax administration has tried to impose stricter regulations for royalty remissions. Companies are encouraged to approach the relevant tax bureau in advance, and present their case for the amount of the royalty payment. The final decision often relies on the individual judgement of the bureau and tax officials on whether the royalty fee is “reasonable.” Although variable royalty rates may be preferable, they require a new justification whenever a change occurs. Depending on the company, this could mean that charging fixed royalty rates would be preferable, as they are easier for tax authorities to investigate and ultimately authorise.

As China's entrepreneurs begin to focus increasingly on innovation, the legal system will put more emphasis on IPR protection. As IPR protection increases, it will drive the market even further towards design and innovation. It should no longer be a surprise to foreign companies that China is capable of building products that can compete on an international level; as they continue to grow, they will begin to focus on international markets. Foreign companies should be viewing IPR protection developments in China with cautious optimism, and most importantly, with a plan for dealing with the repercussions of a China with robust copyright law".

Sources and further reading here, here and here

Stacking the Deck in Analysis of Smartphone Patent Licensing Costs

Estimates of patent licensing costs for smartphone manufacturers are greatly exaggerated. Allegations of excessive fees paid and resulting harm to manufacturer profits, incentives to invest and compete are faulty and unsupported by the facts -- which show much to the contrary.

A "working paper" entitled The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones has been published by one in-house lawyer at Intel and two outside counsel from WilmerHale. Intel Vice President and Associate General Counsel Ann Armstrong and WilmerHale's Joseph Mueller and Timothy Syrett argue that aggregate patent licensing fees including SEPs and non-SEPs are excessive at around $120 per $400 smartphone. They conclude that “few suppliers are meeting the basic goal of selling devices for more than the costs incurred in supplying them,” imply that this is due to the alleged royalty stack, and state that “those costs may be undermining industry profitability—and, in turn, diminishing incentives to invest and compete.”

The paper’s economic and empirical analyses are deficient and defective. In contradiction to its findings, evidence shows that licensing fees:

• Are not undermining profits and are not preventing manufacturers from covering more than their costs. According to Credit Suisse, handset manufacturer operating profits since 2007 have tripled to $51 billion on $326 billion revenues in 2013.
  
• Are not excessive. There is no basis for arbitrary price caps on smartphone patent fees, or limits based on chip manufacturing costs. The latter are unrelated to patented technologies and the value they generate more broadly in the entire device, its use in mobile networks, or across the broader ecosystem including services and applications. Methods of determining charges follow well established principles and benchmarks in bilateral negotiation. Patent licensing fees are analogous to licensing fees for book, music, movie or software publishers, which typically exceed greatly the cost of the physical mediums on which they are published and distributed.
  
• Are nowhere near $120 in aggregate; and there is copious evidence actual payments are much lower than purported. The Paper inexplicably and erroneously disregards fundamental offsets in cross-licensing which greatly reduce or eliminate fees paid to many patent owners. This figure is also systematically biased and inflated by including rates demanded by licensors, even where there is no evidence anybody—including those who have little or nothing to cross license —actually pays such rates. And, where there is, instead, copious evidence that rates actually paid, if at all, are substantially less—orders of magnitude less in some instances. For example, court-adjudicated rates were much lower than “demanded” rates in various cases, and yet the higher figures were used in calculating the above total.
  
• Are helpful, not detrimental, to the highly competitive and flourishing smartphone ecosystem. By every measure the patent system and the risk-reward balance it strikes—spurring innovation, market entry and competition while not overburdening licensees—is unmistakably working very well. 

My full and detailed analysis, in a pdf document, of this working paper by Intel and Wilmer Hale includes copious evidence countering the latter's findings.

This follows a previous my previous IP Finance posting on alleged royalty stacking entitled Theories of Harm with SEP Licensing do not stack up in which I responded to papers co-authored by Mark A. Lemley and Carl Shapiro in 2006 and 2013, and my posting entitled Absurd (F)RAND licensing-rate determinations for SEPs that analyses some U.S. court judgments which have relied on these economists in their royalty rate determinations. 

 

Patents as assets: just like bullets

Yesterday's Aistemos launch [on which see earlier blog post here] produced lots of food for thought which this blogger is still digesting. However, he couldn't resist publishing Sir Robin Jacob's point about single patents when compared with bundles of them.

In short, it is generally accepted that -- for whatever reason -- around 70 per cent of patents are invalid.  This means that, if you hold a single patent, the odds are on it being invalid and therefore incapable of enforcement and not very attractive to anyone who is contemplating an advance of funds on the security of it.  

The situation is however entirely different if you hold a portfolio of, say, 100 patents covering a single technology.  Even if each individual patent is more likely than not to be invalid, the chances are that around 30 of them will have legal force. This means that they will provide the means of controlling the market for at least part of the products and services covered by them and that they will accordingly make a more attractive prospect for a cautiously-minded lender.

It's just like bullets, Sir Robin explained.  If you just have one, it may hit the target but may also miss it. However, if you have 100, even if your aim is not very good there's a far better prospect of hitting the target -- and you only need one bullet to do the job.  So too with patents: however many of a bundle of patents turn out to be ineffective, you only need one that works properly in order to provide the requisite protection.

The trillion dollar tipping point: a report, and a product launch

Not just "a" Westbury ...

Later today this blogger will be wandering down Mayfair to London's (The) Westbury Hotel to join the formal launch event for CIPHER, described by its creators at AISTEMOS as "the world’s first intellectual property analytics tool for the business community".  This launch coincides with the release of The trillion dollar tipping point: Exploiting the untapped value in patents, a report [edited by this blogger, who is a member of the company's Advisory Board] assessing the barriers and solutions to the monetisation of the intellectual property assets which are now said to account for up to 70% of enterprise value. 

Not all data is digestible --
nor can everyone digest it

The origins of CIPHER are quite interesting: it is the fruit of a pilot project involving over 60 organisations, which include BAE Systems, Marks & Clerk, GE, PwC and Slaughter and May. Their objective was to develop a business intelligence product that could aggregate, analyse and visualise data relating to patents and related events including litigation and licensing.  This data was already available in one form or another -- but it could be indigestible or hard to assess in the hands of people who needed it in order to take business decisions.  Using databases licensed from Thomson Reuters, Lex Machina, Patent Freedom, ktMINE, 1790 Analytics and Relecura, the CIPHER tool has the capacity to search across 30 million patent families and all the world’s patent-owning organisations in real time.

This shouldn't be the standard response
to a request for a patent-backed loan

This post does not seek to promote CIPHER: if it is any good, people who try it out and find it useful will continue to use it; it will become successful and no doubt breed competitors, as is only natural.  Rather, this post seeks to draw the attention of readers, particularly those in the financial sector, to something mentioned in The trillion dollar tipping point and which has become increasingly a matter of concern: there seems to be a disjunction between the high value of intangibles such as patents in court and in transactions, on the one hand, and their relative lack of appeal as security for loans on the other. Faced with a request for finance backed by such intangibles, banks sometimes appear to behave as though the choice before them lies between taking a bad risk and making no loan at all. This is not the result of malice or wilful blindness, but stems from the paucity of information on which banks can assess the nature of the risk they take in lending on intangible securities. CIPHER is one way in which banks can better calculate risk and make their loan decisions with confidence based on understanding, not caution based on ignorance.

If anything interesting is said at the launch, this blogger will do his best to relay it to you tomorrow.

The trillion dollar tipping point: Exploiting the untapped value in patents [which also contains a Foreword from Professor Sir Robin Jacob] can be accessed here

If you are too busy to read the whole report, there's a short summary of it here

If infographics are your scene, there's one here for you

A Relatively New Resource: Guide to Intangible Asset Valuation

Robert Reilly and Bob Schweihs, two managing directors of Willamette Management Associates, have authored a book titled, Guide to Intangible Asset Valuation.  The 700 page book "explores the disciplines of intangible asset valuation, economic damages, and transfer price analysis."  Some of the topics addressed include:

Identifying intangible assets and intellectual property; Structuring the intangible asset valuation, damages, or transfer price assignment; Generally accepted valuation approaches, methods, and procedures; Economic damages due diligence procedures and measurement methods; Allowable intercompany transfer price analysis methods; Intangible asset fair value accounting valuation issues; and Valuation of specific types of intangible assets (e.g., intellectual property, contract-related intangible assets, and goodwill). 

I have not read the book yet, but here is a favorable review by Neil Beaton, Certified Public Accountant.  The book is also reasonably priced at $122.50--a very nice price compared to some of its competitors.  The publication brochure (attached to the referenced review) notes that those "[w]ho would benefit from [the] book" include:

Litigation counsel involved in tort or breach of contract matters; Intellectual property counsel; International tax practitioners; Property tax practitioners; Auditors and accountants; Valuation analysts; Licensing Executives; Multinational corporation executives; Commercial bankers and investment bankers; Merger and acquisition professionals; Bankruptcy professionals; and Judges and arbitrators. 

 I look forward to reading it.

That Patent Box seminar has just popped up again

Readers may recall that, back in August, IP Finance announced an impending seminar, "Patent Box: Tips and Predictions", that was scheduled for 9 September, in the comfy setting of the Rembrandt Hotel, London. That programme focused on the institution of the Patent Box (on which see, for example, earlier IP Finance posts here, here, here, here and here), and specifically on its UK version. The organisers had this to say about it:

"The Patent Box regime has bedded in - is it working? Big companies are obtaining major savings on tax through the regime - are you? The EU has asked questions about the legal validity of the regime - where might this end? Ensure you're adopting the best practice Ensure you're future proofing your IP tax measures".

As luck would have it, this date turned out to slightly ahead of the publication of the keenly-awaited OECD report on harmful tax practices [on which see Rob Harrison's helpful earlier blog post here].  

Once it was realised that the original date was right under the cloud of the OECD report [which has fortunately given the UK Patent Box a reasonably clean bill of health], the organisers of the conference rescheduled it for 22 October, with the same cast of speakers and in the same comfy venue. You can check out the details from the Management Forum online brochure here.

Patent Box Regimes Globally - OECD/G20 respond

The UK's patent box regime  under which companies can get significant tax reductions for income deriving from patented products has been criticized by several countries, notably Germany (see here), as resulting in unfair competition for foreign investment. This blog noted back in July that the EU commission was looking into the issue.

Germany's Finance Minister lecturing his audience
about the evils of the patent box

The OECD in conjunction with the G20 group of major economies has now published a detailed report (available for download here) on countering harmful tax practices more effectively. It includes a number of pages devoted to the patent box regime and seems to approve generally the UK practice, which differs from other countries with similar regimes. One issue that appears to be controversial is the extent to which outsourced research and development activities can later qualify for tax relief, and both the UK and Spain entered reservations on this section of the report. The report emphasizes that marketing-related IP assets such as trademarks should not qualify for the tax benefits, which would appear to impact on schemes in some countries.

It's probably not surprising that the report is at least generally supportive of favourable tax treatment of intellectual property given that a number of countries have introduced such regimes over the years (although Ireland abandoned their tax break, as reported here). The report's main recommendation is that there needs to be a clear link between the revenues and the IP right. This will probably complicate calculations in the future, but the authors noted that taxpayers may chose this in order to exploit the opportunity to benefit from an optional tax benefit. Indeed by harmonising the reporting requirements among different jurisdictions may lead to an overall reduction in complexity.

German chancellor Angela Merkel's
X-ray eyes 

And Germany's response? Well, the news magazine Spiegel reported over the weekend that the German finance ministry was considering introducing a patent box benefit in Germany and the German Industry Group BDI welcomed this move on Monday.