1. ©
®
™

2. Commercial Success through IP
Financial reward from innovation in your business
Adrian Chettle C.Eng., F.I.Mech.E.
Withers & Rogers LLP
Patent and Trade Mark Attorneys
United Kingdom

3. How do we create value from
innovation?
• What is IP?
• Patents, Trade Marks & Designs
• Tax relief for IP
• Q&A

4. Intellectual Property - what is it?
What it is not
a bunch of papers
some legal nonsense
an inventor's ego
It is
highly valuable
a real commercial tool

5. IP - The Headlines
$3billion patent license revenue p.a.
$6 million patent
portfolio sold at auction
ECJ boosts Adidas
Texas jury tells Boston Scientific to in three stripe row
pay inventor $431.8million

6. Types of IP
TRADE MARKS INVENTIONS
Registered Patents
Common Law Utility models
Intellectual
property
Copyright Know How
Database Registered
Design Designs
rights AESTHETIC
Right
CREATIONS

7. 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.

8. IP - Strategy and Value

9. Standard Approach to IP Protection
• Reactive - Inventory approach
• Good Idea - Patent it!

10. Better approach to IP protection
• Strategic - Visionary
• Set the direction for you own
innovation based on your
commercial goals

11. 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?

12. 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 it's not about what you've
spent, but what the innovation is
worth to you now and in the future.

13. 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

14. A culture of IP awareness
• Invention records system
• Internal IP policy
– confidentiality notices
– copyright notices
• Do you have a policy of respecting your
competitor's IP?
• Inventor reward scheme

15. Maximising returns
• Exploiting IP
– Product sales
– Sale of business
– Sale of IP
– Licensing and franchising
• access to new
– markets
– territories

16. Defend your market
• Protect new products
• Make the fact of protection known
• Consider your export markets
• Use a mixture of business tools

17. 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

18. Enforcement
• Long term protection
• Significant deterrent effect
• Litigation is rare
• Alternative ways to assert your
rights:
– Settlement
– Alternative dispute resolution
• Mediation
• Arbitration
– Licensing

19. 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.

20. Tax and innovation
• R&D tax credits
• Patent Box (from April 2013)

21. 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

22. Patent Box
An opportunity for UK companies
to pay less Corporation Tax

23. 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.

24. 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

25. 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)

26. 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!

27. Which patent rights?
• UK patents
• EP patents
• Patents granted by some other countries
• Supplementary Protection Certificates
(pharmaceuticals)
• Plant variety rights
• NOT US patents

28. 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!

29. Which profits?
Key message: 10% will not
be reached for a few years!

30. 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
licensor's royalties and the licensee's sales can
be taxed at the reduced rate

31. 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

32. Which products? 1

33. 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

34. What about processes?

35. 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 arm's length
royalty

36. 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

37. 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!

38. 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

39. 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)

40. Any questions?
Adrian Chettle
achettle@withersrogers.com
© 2013 Withers & Rogers

41. ©
®
™