UK Hands Out Tax Breaks For 'Using' Patents

from the the-wrong-incentives dept

Thu, Oct 11th 2012 5:08am — Wendy Cockcroft

The UK Government has unveiled a new tax break scheme, Patent Box, for corporations that use patents -- either through owning the patent or being the exclusive licensee.

You can only benefit from the Patent Box if your company is liable to Corporation Tax and makes a profit from exploiting patented inventions.

Your company must also own or exclusively license-in the patents and must have undertaken qualifying development on them. You can read more about exclusively licensing-in patents later in this guide.

If your company is a member of a group, it may qualify if another company in the group has undertaken the qualifying development.

The Register reports that there has been some controversy over this with potential beneficiaries ecstatic over the prospect of a windfall from the tax man because Corporate Tax drops from 28% to 23% and revenue from patents will be taxed at only 10% starting in April 2013. Others are, quite reasonably, concerned that this could lead to a wave of trivial patents being filed, favor big businesses over small businesses, and distort research priorities.

Given the cost of filing a patent and the increasing frequency of litigation over patents, they've got a point.

The dangers are obvious: patents are being increasingly broadly written and the consequences of trolling costs upwards of $29 billion a year in the USA. The epic fights over software between big-name companies like Apple, Google, Microsoft, and Oracle may be amusing to read about but people can and do get put out of business by bad patents. Britain is a member of the European Union, where there is a push to introduce the Unitary Patent alongside a new patent court. This would possibly open the floodgates for the kind of patent insanity we've been seeing in America -- and perhaps make things even worse.

The idea behind Patent Box is that businesses will put the tax money they save into R&D, fueling further innovation and further patents, but we all know what actually happens in these cases: they end up litigating over patents and stifling actual innovation because the patent itself is the product. And since there's very little economic evidence that patents lead to greater innovation, this is just creating massive incentives for patents, not for innovation. It's a stupid idea to create a tax dodge for big players without doing anything to actually encourage innovation.

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Filed Under: patents, tax breaks, uk

25 Comments

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Ninja (profile), 11 Oct 2012 @ 4:26am

*facepalm*
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abc gum, 11 Oct 2012 @ 5:15am

That is a really bad idea, and they should feel bad.
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Anonymous Coward, 11 Oct 2012 @ 5:25am

What could possibly go wrong?
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Anonymous Coward, 11 Oct 2012 @ 5:34am

"The dangers are obvious: patents are being increasingly broadly written and the consequences of trolling costs upwards of $29 billion a year in the USA. "

You should try to use realistic numbers, not things that are easily debunked. If this was an MPAA report Mike would be calling it out like mad.
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Anonymous Coward, 11 Oct 2012 @ 5:47am

Re:
If this was an MPAA report Mike would be calling it out like mad.

Because there is evidence that the MPAA copyright infringement studies are bogus, which Mike as pointed to in his articles. What evidence can you point us to that the stats used bogus as well.
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Anonymous Coward, 11 Oct 2012 @ 5:48am

Call it out for what it is, this proposal has nothing to do with innovation, even by the people writing it.

It's all about giving tax cuts to the rich people running big businesses who supported the current Prime Minister in the last election, as a way to pay them back for their support and money.

Tax cuts that the UK can't afford when you consider how the same prime minister has implemented other big austerity measures, that have only stagnated the UK's economy rather then causing it to recover from the great recession. Such as tripling tuition at colleges & universities owned by the state, because you know, what better way to encourage more innovation in the future then by tripling the cost of going to college to get educated enough to make new innovations in engineering, medicine, and such?
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Zakida Paul (profile), 11 Oct 2012 @ 5:54am

Corporatist policies are, sadly, the norm for this Tory (I mean Coalition) government and this is the tip of a very nasty iceberg (and you thought the one that sunk the Titanic was bad). Corporations continue to get special treatment with tax breaks and the erosion of workers' rights in return for bribes (sorry donations) to the political parties. Politics is rotten to the core and radical change is badly needed. We may get it too in the form of riots when the Tory ideological welfare reforms show their true impact.
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Anonymous Coward, 11 Oct 2012 @ 6:15am

Re:
If it, indeed, is easily debunked, then you could've slapped Mike across the face by debunking the numbers with real data.

We both know you would, if you could.
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Ninja (profile), 11 Oct 2012 @ 6:24am

Re: Re:
Considering Motorola patent poll acquisition by Google the numbers could be even higher if Mike carefully picked the data ;)
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Ninja (profile), 11 Oct 2012 @ 6:25am

Re: Re: Re:
pool*
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Anonymous Coward, 11 Oct 2012 @ 6:26am

This is a monopolists charter, as it actively discourages cross licensing. Further it encourages writing as many patents as possible on an invention with the broasdest scope on each patent.
It also positively encourages the destruction of any start-up that infringes on any patent to preserve the exclusive use needed for the tax breaks.
It does nothing to encourage start ups as they rarely if ever have to pay corporation tax. If anything it discourages start ups as it reduces the chances of gaining a license for patents.
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Ninja (profile), 11 Oct 2012 @ 6:29am

Re:
That's a non-issue, he served his pockets pretty well. Screw the future of the country, him and his ilk are pretty much safe from those stuff that affect the rabble...
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Anonymous Coward, 11 Oct 2012 @ 6:29am

The very idea that someone thought this was necessary calls into question the effectiveness of 'intellectual property' in promoting progress.
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Anonymous Coward, 11 Oct 2012 @ 6:29am

They are doing it backwards. It should be that if you aren't using the patent you own within 3 years, it expires by default. That should make companies stop spending money on useless patents they don't need, and should also stop patent trolls who gather a ton of patents so they can sue others or license them to others like Intellectual Ventures.
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LivingInNavarre, 11 Oct 2012 @ 6:30am

Re:
The last Apple vs Samsung suit was $1 billion. Wouldn't surprise me at all if adding up all the suits (win or lose) plus associate costs to defend or prosecute these suits is actually much higher than $29 billion
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Bengie, 11 Oct 2012 @ 6:33am

riiigghhhttt
"and must have undertaken qualifying development on them" will be gamed.
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Zakida Paul (profile), 11 Oct 2012 @ 6:34am

Re:
It calls into question the government's ability to lead the country out of recession in a way that benefits 100% of the population instead of just 1%.
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abc gum, 11 Oct 2012 @ 6:42am

Re:
Unsubstantiated claims are so convincing.
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:Lobo Santo (profile), 11 Oct 2012 @ 6:52am

Re: 'Tard
0/10

"Be sure to read instructions before doing assignment."

Really? Couldn't find the link, eh?
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:Lobo Santo (profile), 11 Oct 2012 @ 6:55am

Re: Re: Will Theorisation!
Was thinking about that the other day...

How to reach full employment:

It's all about matching percentages. If you have 10% unemployment, then take 10% of the wealth away from the 10% of wealthiest individuals in the country and disperse the funds directly to the unemployed. Repeat every month until there are no wealthy or there are no unemployed.

(For our experiment, "unemployed" means "does not have a job", not "looking for a job"--because lots of gov statistics are bullshit.)
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Anonymous Coward, 11 Oct 2012 @ 8:48am

'It's a stupid idea to create a tax dodge for big players without doing anything to actually encourage innovation.'

about as stupid as the idea of UK workers signing away their rights in return for shares in a company that could be out of business in a year or be worth less. the worker could also be sacked and if extremely lucky, win a case of unfair dismissal, getting even less than is averaged out now (�9000). strange how payments of several �100,000 have been made for being sexually discriminated against and more for racial discrimination. one day companies everywhere will realise that without workers at the bottom, doing the lesser jobs, there is no need for those at the top because there is no company. the coalition government in the UK is doing it's best to do away totally with Unions as well as worker rights, so as to put the UK back to the Victorian times and before. if it succeeds, be prepared for it to spread!
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Anonymous Coward, 11 Oct 2012 @ 9:57am

Re:
Patent trolling is not really worth much outside of the USA. Generally, it is not worth that much for the winning party in a court case so it is a lot more convenient to actually take cases to the courts. With a meager payout for winning a courtcase and a far higher chance of a case getting taken to court, patent trolling will logically be less of an issue.

When that is said, this seems like an insufficiently refined proposal. On one hand it encourages using patents instead of commercial secrets and on the other it encourages patenting of far more than before.

Problem is that patenting is already the standard and commercial secrets are rare enough and the british companies are specialized enough for this to not really boosting competitiveness and research.
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gorehound (profile), 11 Oct 2012 @ 11:14am

Re:
Time for new Start-Ups to do their Business Start-Up in a friendly Nation towards them that really wants you there..............and wants to see Innovation in their Nation.
Little by little the Bricks on the Wall of Western World are crumbling.
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Anonymous Coward, 11 Oct 2012 @ 7:29pm

Re: Re: 'Tard
Yes, I can find the link. Report written by profession James Besson, an staunch anti-patent activist.

I take the numbers the same way you guys would take a pro-patent person saying patents put trillions into the economy. It's all bullshit, plain and simple. Hinging an entire piece of numbers that are bullshit is just more bullshit.

Perhaps before grading my posts in the future, you might actually want to learn how to think for yourself.
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Anonymous Coward, 11 Oct 2012 @ 7:31pm

Re: Re:
Go back and read - Mike made a post on the issue when this report came out, and it was debunked repeatedly in the comments. It's a bullshit, pulled out of the air number, and means very little. It's certainly not quality enough to hinge an entire post on... especially not one from a layperson with no practical experience in the field.
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