Published on January 25, 2013
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Commercial Success through IPFinancial reward from innovation in your business Adrian Chettle C.Eng., F.I.Mech.E. Withers & Rogers LLP Patent and Trade Mark Attorneys United Kingdom
How do we create value from innovation?• What is IP?• Patents, Trade Marks & Designs• Tax relief for IP• Q&A
Intellectual Property - what is it?What it is not a bunch of papers some legal nonsense an inventors egoIt is highly valuable a real commercial tool
IP - The Headlines $3billion patent license revenue p.a. $6 million patent portfolio sold at auction ECJ boosts AdidasTexas jury tells Boston Scientific to in three stripe rowpay inventor $431.8million
Types of IP TRADE MARKS INVENTIONS Registered PatentsCommon Law Utility models Intellectual property Copyright Know How Database Registered Design Designs rights AESTHETIC Right CREATIONS
Do you own IP rights?• Are you the designer/originator?• Is the designer/originator an employee? – Generally speaking, employee creations automatically belong to the employer.• Is the inventor/designer a contractor or consultant?Any rights arising from inventions created by consultants should be assigned as soon as possible.
IP - Strategy and Value
Standard Approach to IP Protection• Reactive - Inventory approach• Good Idea - Patent it!
Better approach to IP protection• Strategic - Visionary• Set the direction for you own innovation based on your commercial goals
Decision making• IP strategic review – Are the innovations new? – How does each fit with the business goals?• Could you maintain the idea as a trade secret?• Should you publish and not file for IP protection?
Tending to the seedlings• IP review – Periodically check for improvements – Standard foreign filing strategy for certain categories of invention – Good records system – keep your patent attorney informed• Thin out their crop periodically – Realise its not about what youve spent, but what the innovation is worth to you now and in the future.
Gathering their harvest• Passively – Competitors prevented from practising inventions – Locking partner company into joint venture – Increasing company value• Actively – Seeking licensees - risk free revenue ? – Acting against infringers
A culture of IP awareness• Invention records system• Internal IP policy – confidentiality notices – copyright notices• Do you have a policy of respecting your competitors IP?• Inventor reward scheme
Maximising returns• Exploiting IP – Product sales – Sale of business – Sale of IP – Licensing and franchising • access to new – markets – territories
Defend your market• Protect new products• Make the fact of protection known• Consider your export markets• Use a mixture of business tools
Will I infringe other IP rights?• Monitor competitors patent filings• A very good source of technical information• Check freedom to operate by making infringement searches• Watch competitor activity
Enforcement• Long term protection• Significant deterrent effect• Litigation is rare• Alternative ways to assert your rights: – Settlement – Alternative dispute resolution • Mediation • Arbitration – Licensing
Where to now?• Audit your IP today.• Is there a suitable level of awareness of IP within your business? Do you have systems in place?• Think long term - align your IP strategy with your business goals.
Tax and innovation• R&D tax credits• Patent Box (from April 2013)
R&D tax credits• an established scheme• for UK companies paying Corporation tax• giving SMEs 225% relief• against proven R&D expenditure• claims for past years are permissible
Patent BoxAn opportunity for UK companies to pay less Corporation Tax
Strategy - reasons for patenting 1. To protect your market. 2. To gain licence income. 3. To obtain a negotiating tool. 4. To maximise asset value. 5. TO OBTAIN TAX RELIEF.
Patent Box - objectives• Enhance attractiveness of UK tax system (e.g. vs The Netherlands)• Encourage location and retention of science and technology jobs in the UK• Encourage investment and growth in the UK technology sector
How much tax?• Corporation tax is currently 26% , reducing to 24%• Option to elect to HMRC for a reduction in UK corporation tax to 10%• with tapered implementation: Year 2013/ 4 2014/ 5 2015/ 6 2016/ 7 % 60 70 80 90 effective % 15.2 13.6 12.4 11.2 (Trade-off to include existing granted patents)
Which profits?• Profits passing through a UK company which is paying Corporation tax.• Profits relating to qualifying products or services covered by a relevant patent• Worldwide sales• Patent owner and exclusive licensee Key message: the proposals are generous!
Which patent rights?• UK patents• EP patents• Patents granted by some other countries• Supplementary Protection Certificates (pharmaceuticals)• Plant variety rights• NOT US patents
Do all profits qualify?• No - special calculation - less than 100% of qualifying profits will be taxed at 10% rate• HMRC fighting back!• Deductions: – "routine return figure" - the profit a business might make if it did not have access to patents – "marketing assets return figure" - excludes profits generated using established brands Key message: number crunching by accountants!
Which profits? Key message: 10% will not be reached for a few years!
What types of income qualifies?• Sales revenue• Royalties and other licence revenue• Court awards from infringement proceedings• Patent owners & exclusive licensees – i.e., if a patent is licensed then both the licensors royalties and the licensees sales can be taxed at the reduced rate
Other requirements• Opt-in - forewarning to HMRC• Active ownership – only applies to group companies – defined as performing a significant management activity – a renewal decision counts as management activity
Which products? 1
Which products? 2• Any product!• "Complex products" including one patented component• Any spares for the product, even if the spares themselves are not patented Key message: for single product SMEs, all profits will be relevant for only a single patent
What about processes?
What about services?• Unlikely to apply to entire sales revenue• Companies which use their patents to perform processes or provide services can benefit up to the level of an arms length royalty
Can I get tax relief whilst my patent application is pending?• Yes, but relief will be claimable only after the patent is granted (up to 6 years)• Accelerate granting of the patent
Who will benefit?• Start-ups - a target of the proposals!• Research and manufacturing businesses• Local subsidiaries of multinationals with "active management" in the UK , and profits washing through a UK company• Existing patent holders get a windfall!
Further information:• Withers & Rogers website - click on "Patent Box Services" button on the home page for detailed Q&A. Legislation:http://www.publications.parliament.uk/pa/bills/cbill/2010- 2012/0325/2012325.pdf• "Technical Note":http://www.hmrc.gov.uk/budget-updates/march2012/patent-box-tech-note.pdf• "Consultation on the Patent Box":http://www.hm-treasury.gov.uk/consult_patent_box_stage2.htm• HMRC HM Revenue presentation:http://www.hm-treasury.gov.uk/d/patent_box_presentation120112.pdf
Conclusions• This is a great opportunity• Tax avoidance with official approval!• Patenting should be cost negative• This is already changing our clients patenting strategy• Act as soon as possible! (at least arrange an audit)
Any questions? Adrian Chettleachettle@withersrogers.com © 2013 Withers & Rogers
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