The Patent Box: can government do more to support SME innovation?

Innovation has become a buzzword in business vocabulary and with governments and international organisations acknowledging the value of innovation both with intellectual property asset protection and financial support, when it comes to translating a company’s IP into tangible, business value-adding patents, where is the UK on the global patenting map?

Mr Jeremy Tear, CEO HOW2 Business Solutions Ltd


While there is no question that the UK remains a leading country for innovation across a broad cross-section of industries, the number of patent applications made for developed IP is typically lower than in other European countries, especially within the SME sector where significant UK innovation takes place. Although the old adage “if it's worth copying, it's worth protecting” is even more valid in today's global business environment, the overall cost of patenting is prohibitive for most SME’s, as under patenting rules, an inventor needs to apply for a patent before they have disclosed the invention, let alone having made any money out of it, so there is no income to finance the patent application work.

“Government, to effectively support UK innovation, need to follow the pro-active approach of many European countries and the USA”.

Yet, if we look outside of the UK, most European nations are better than the UK at helping and supporting patent activity. The USA, in particular, sees this as a key element in global trade negotiations, including intellectual property agreements in their trade deals. The Federal government viewing it as part of their responsibility to protect the inventions of USA inventors and although little factual data exists on the monetary gain afforded by Intellectual Property Rights (IPR) asset protection, a 2002 survey of the Fortune 500 companies estimated that anywhere from 45% to 75% of the wealth of those companies comes from their Intellectual Property Rights.

Within the UK, the government already have a scheme called Patent Box, first introduced in 2013, then re-vamped in 2016, its aim being to create a competitive tax environment to incentivise companies to retain, develop and exploit patents in the UK supporting business investment and economic growth. While the Patent Box goes someway to addressing this issue, it is focussed to rewarding companies at the “end of the process”, by way of reducing corporation tax to 10% on profits from the worldwide sale of patented inventions. Good news for large corporations who have upfront investment budgets and an established forward innovation process, but for SME’s, who in 2016, made up 99.9% of the UK’s 5.5million private sector businesses and 60% of private sector employment, the scheme falls far short.

From HOW2’s advisory service work with SME’s on identifying, developing & protecting their IP and/or claiming under the Patent Box regime, we believe that Government, to effectively support UK innovation, need to follow the pro-active approach of many European countries and the USA. Firstly, by introducing a mechanism for loan-financing of the patent work at the beginning, as once UK IPO (Intellectual Property Office) fees, patent lawyer fees and global protection fees are taken into account, the cost can run from tens to hundreds of thousands of pounds of investment and involves a long 2-4 year commitment of undertaking. Secondly, helping companies at the commercialisation stage of the process, as distinct to competitive grant financing applications, and finally, a form of litigation insurance, to address the very real issue of the prohibitive legal costs incurred defending a patent infringement, usually conducted in the country of the “infringing” party, and one of the main reasons many SME’s choose to hope they can keep their invention “a secret” rather than embarking on the patenting process.

“UK business and the economy as a whole will not be successful in trading with the rest of the world in commodities, we have to focus on the innovation we are capable of delivering”.

With BREXIT, the UK has the opportunity to determine its future. An important element of those negotiations will be in deciding how we trade with nations around the world; securing, sharing & protecting our generated IP should be a key part of that undertaking. UK business and the economy as a whole will not be successful in trading with the rest of the world in commodities, we have to focus on the innovation we are capable of delivering, with the government determining how they can not only encourage, but effectively support UK SME’s through the whole process.


HOW2 helps companies identify and protect their IP and claim Patent Box tax relief. For your complimentary, no-obligation consultation, visit how2uk.co.uk/ipc, email enquiries@how2uk.co.uk or call (+44) 01992 505011

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