Karl Barnfather, patent attorney at Withers & Rogers, comments on draft legislation to implement the Patent Box from April 2013.
Small and medium-sized businesses should not let an expectation that their invention will have a limited commercial lifespan stop them from obtaining patent protection and benefiting from tax relief linked to the incoming Patent Box.
From April 2013, any profits from inventions that are protected by a UK patent will be taxable at a significantly lower rate of Corporation Tax – just 10%, down from 28% currently and from 24% in April 2013. As long as an application for the invention has been filed, when the patent is granted it will be possible to claim tax relief backdated to the date of filing. Draft legislation to implement the Patent Box from April 2013 is expected next month (December).
In the past, R&D-led businesses operating in fast-moving fields like consumer electronics, automotive design and advanced materials engineering, may have regarded some of their inventions as not worth patenting because they have a commercial lifespan of just two or three years. They have taken this view largely because by the time the patent is granted by the UK Intellectual Property Office (UKIPO) – a process that takes between 1.5 and 4 years - the product is likely to have been superceded and its commercial potential lost.
Instead of filing for patent protection, some businesses have preferred to focus funding on increasing their R&D activity rather than building a patent portfolio.
However, the tax relief that will soon be available could persuade some R&D-led businesses to think again. As a by-product of their increased interest in filing, it may be possible for some businesses to make more of their innovation by seeking to license it to businesses in related markets. In some instances, there are considerable untapped commercial opportunities available to those that opt to do more to protect their intellectual property.
Businesses should consider their future product development activity and may wish to carry out an intellectual property audit in order to establish how much there is to gain from taking a more proactive patent strategy.
By Karl Barnfather, patent attorney at Withers & Rogers