10 February 2012 marked the closure of the UK
government's period of consultation on the draft
legislation for a 'Patent Box', which would aim to
stimulate the UK economy by enhancing the desirability of the UK as
a location for R&D.
The legislation, currently due to come into effect on 1 April
2013, is intended to lower the rate of corporation tax from 26% to
10% (although this is due to be lowered anyway to 24% by 1 April
2013) for profits made from patented technology. It is intended to
operate as an 'opt in' scheme, in which companies
holding patents can participate if their company structure and
income from patents would provide a tax advantage by doing so.
In response to stakeholders pointing out that patents may be
commercialised throughout a lifespan of up to 20 years, the Patent
Box will be available to companies with existing patents rather
than, as first proposed, only those patents that have seen
commercialisation since November 2010. However, the suggestion by
other interested parties that the relief should be extended to
other IP rights, such as trade marks, has not been taken on by the
UK government. As will be outlined below, this limitation may work
against its overall success.
The move to introduce this legislation could be seen as a policy
designed both to rebut the oft-held notion that the UK has lost
some of international status as a hotbed of innovation and address
the fact that multi-national companies are choosing other countries
to site their R&D centres or to hold their IP.
Headlines about multinationals leaving the UK, such as a large
multi-national pharmaceutical company's decision to shift
its R&D efforts out of the UK in 2011, have pushed the
implementation of the Patent Box further up the political
This is addressed directly in the opening paragraph of a
consultation document for the Patent Box which states the UK
government is committed to creating the most competitive corporate
tax system in the G20. However, despite its efforts to attract some
of these companies to the UK with this new tax offering, it may be
that the UK is still behind the curve on this issue.
Several other European countries have already been operating
similar schemes designed, at least ostensibly, to stimulate and
reward innovation. In the Netherlands, a similar scheme is known as
the Innovation Box and imposes an effective 5% rate. In Luxemburg,
the IP Box taxes relevant profits at less than 6%. Tax relief for
innovation is also available in Belgium at a low rate and in
Ireland; all 'trading income' (therefore not limited to
income from IP) can attract an effective rate of 12.5%. All of
these countries are offering the relief to a wider potential
audience than simply patent holders.
Tax relief for innovation will be welcomed in the UK by existing
hard pressed SMEs and could lead to both growth in these companies
and to other technology focused start ups appearing. To this end,
the Patent Box may prove to be a success.
However, with limited coverage of IP rights and a higher
headline rate than some our European neighbours' equivalent
schemes, it is questionable whether the other intended effect of
the legislation, to have international companies coming to the UK,
employing UK workers and paying UK tax, will be achieved.
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The High Court has held that Marks and Spencer infringed Interflora's trade marks when it bought keyword terms sold by Google which referenced "interflora" and advertised its own flower service on the back of them.
In a recent High Court judgment, it was held not only that the claimant’s patent for a coffee machine capsule extraction device was not infringed by the supply of compatible capsules by the defendant, but that the patent itself was invalid.
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