How to get smaller, more inventive businesses off the ground in 2014

Without the shackles and red tape of larger corporations, entrepreneurs have been the driving force of the economy since the crash.

In fact, the UK’s small businesses in 2013 employed a staggering 24.3 million people, and had a combined turnover of £3,300 billion.

So what’s the catch? A little matter of the Patent Box, and that fact that businesses don’t know about it.

The Patent Box lowdown

The Patent Box is a form of tax incentive, which allows companies (and that includes SMEs and startups) to apply for a lower rate of corporation tax by reducing the amount of tax they pay on patents. Having gone live in April 2013, the Patent Box was a government scheme to encourage high-value growth in the UK by supporting research and development.

So far so good.

Rumour has it that the bigger companies – the GSK, Rolls Royce, Astra Zenecas of the world – are fully up to speed with this tax incentive and will take full advantage of it in 2014. The concern is that these are the companies who need these tax breaks. It is the innovators; the new up and coming companies are crying out for financial support, but they might still be years away from their first profits, thus perpetuating the cruel irony of those who need something the most being the least aware.

SMEs and technology companies must strike while the iron’s hot. We are incredibly lucky in that the UK Intellectual Property Office (IPO) is one of the most customer-focused patent offices in the world, not to mention one of the fastest.

The whys, whats and hows of the Patent Box

We’ve established that it’s vital for SMEs to become aware of the new Patent Box legislation. Here are some key reasons why:

1. Global markets

The UK’s businesses are not just competing within the UK. Without protecting your products others will be able to import and sell copies of your products in the very  markets you work in.

2. The UK’s proud tradition of inventing

The UK has a strong history of inventions and inventors. Our leading academic institutions have always led the way in sharing articles and sharing new concepts, ideas and intellectual property with the world. But the snag is that UK’s IPO is most often not very receptive to software patents in comparison to other EU countries and more so the USA.

This means that the UK has a tradition of not filing as many patents as other European countries like Holland, Germany, France, Switzerland and the Nordic countries. However with globalisation and more outsourcing of manufacturing there is an increased need for filing patents to protect your developments.

4. Growth

It will be the UK’s SMEs and new fast growing technology companies that allow the UK to again become a powerful economic country in Europe and the world. We still have the highest level of investment funds on a European market and there is a lot of innovation taking place. By having patents in place it also allows for different types of business models for the companies.

For example, if you have some new invention that is patented you are also able to let other players in geographical markets where you are not present to explore the opportunity and give you valuable licensing revenues. In some industries even licensing to your competitors is an attractive option. With Patent Box in place this allows you to hold onto more of the profits and decide whether they should be used for increased R&D spend, reinvestment in expansion into new markets or acquiring companies to mention a few.

5. Dotting the i’s and crossing the t’s

The important fact to realise it that the Patent Box requires companies to have a granted UK (or European patent validated in the UK) on a product or services to be able to claim tax. It can be on your next generation product that you are about to launch. Remember to be able to file a patent application the invention needs to be new and inventive. It is not something that needs to be very expensive or take long time to get in place.

Seeking legal advice is a good idea. This also doesn’t have to be expensive (as legal costs can be prohibitive for smaller businesses.) Companies such as the online legal service, LawBite, make this sort of legislation easy to understand without the worry of astronomic charge out fees. Working with some experienced patent lawyers who also have commercial understanding is key to make sure you are not just putting patents in place, but those that have the most commercial value.

Christian Bunke, associate of LawBite