Boxing Clever with Patents

In socio-economic terms, a patent is a trade between the inventor, or the company that employees them, and the government, who acts as a proxy for the people. The trade is simple: tell us, the government, the people, how to “do” your invention, and we will give you a 20 year right, a patent, to exclude others from “doing” that invention. Actually putting this simple trade into practice creates a huge amount of complexity, and patent law, but the trade itself is simple, and intended to promote research and development, as well as the die-hard entrepreneurial spirit of the lone inventor. But that trade it seems is not attractive enough, at least for large companies who are the large scale investor in R&D. The UK Government’s R&D Scoreboard1 paints a challenging picture for R&D investment globally, and for the UK one that the government sees a need to react too. To change the balance of the trade between the patent owner and the state.

Tax incentives for R&D have long and widely been used by governments globally to encourage innovation, and hence economic growth. The UK government is now looking into a variant on this theme: a tax incentive for revenues related to patents2. The scheme is intended to boost R&D investment in the UK by allowing companies to associate revenues with patented inventions and enjoying a lower rate of corporation tax on these revenues. Practical issues aside for the moment, this represents a shift in the balance of the trade between individual or company and the state. Not only a right to exclude others from using your invention, but also an incentive to commercialise the patent, and in the UK. One of the clichés about innovation in the UK is that it produces great inventions but fails to commercialise them. This Patent Box well be a clever incentive to get UK industry beyond that cliché. Of course, other countries may follow suit and in any case it is unlikely that the scheme will be permanent, but the nevertheless, it is positive, which is a pleasant change in times of economic “challenges”.