The main objective of the Patent Box is to incentivise companies to invest in the UK and to retain and commercialise innovation within the UK.
A company must hold a qualifying patent either as an applicant/owner or as an exclusive licensee (exclusivity must be across one or more countries or territories). The legislation also allows for ownership within a group structure or via cost sharing arrangements.
The company must also receive qualifying profits relating to the qualifying patent.
Companies must also fulfil a development condition. They (or a group member) must have been involved in the creation of the patented invention or have performed a significant amount of activity to develop the patented invention, a product incorporating the patented invention or the way in which the invention is applied.
In a group situation the company must show active management of the qualifying patent and have clear substantive responsibilities.
The proposed legislation limits qualifying patents to those currently valid and granted by the UK Intellectual Property Office or the European Patent Office or in certain other jurisdictions.
Qualifying profits include worldwide income and cover profits from both the sale of products covered by a qualifying patent and the sale of products incorporating an invention covered by a qualified patent.
Examples of the type of income that will qualify are:-
Sales of patented items
Patent royalties and other income from licensing
Income from products incorporating a patented element
Income from the sale of patents and infringement income
Sales of spare parts
The regime is due to begin on 1 April 2013. There are transitional provisions phasing in benefits over the first five years.
We suggest you start thinking about whether the relief may be relevant to your company. Do you currently hold any qualifying rights? Should you consider filing a new application or accelerating prosecution of any pending applications to faster grant? Can you attribute your profits to the Patents that you hold? Do you own the relevant IP rights? Are your licences exclusive? Do you fulfil the development criteria? If you are proposing a Patent sale, consider deferring until after the commencement date.
Now is the time to plan for the new regime, review IP strategy, business models and accounting systems.
If you have any queries arising from these issues, please contact Jeremy Redfern, Head of Commercial Services on 01905 726 789 or email email@example.com.