UK Hands Out Tax Breaks For 'Using' Patents

from the the-wrong-incentives dept

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.

Follow me on Twitter, Facebook or Google+

Filed Under: , ,

Rate this comment as insightful
Rate this comment as funny
You have rated this comment as insightful
You have rated this comment as funny
Flag this comment as abusive/trolling/spam
You have flagged this comment
The first word has already been claimed
The last word has already been claimed
Insightful Lightbulb icon Funny Laughing icon Abusive/trolling/spam Flag icon Insightful badge Lightbulb icon Funny badge Laughing icon Comments icon

Comments on “UK Hands Out Tax Breaks For 'Using' Patents”

Subscribe: RSS Leave a comment
Anonymous Coward says:

Re: 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.

Anonymous Coward says:

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.

Anonymous Coward says:

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?

Zakida Paul says:

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.

Anonymous Coward says:

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.

:Lobo Santo (profile) says:

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.)

Anonymous Coward says:

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.

Anonymous Coward says:

Re: 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.

Anonymous Coward says:

‘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!

Add Your Comment

Your email address will not be published. Required fields are marked *

Have a Techdirt Account? Sign in now. Want one? Register here

Comment Options:

Make this the or (get credits or sign in to see balance) what's this?

What's this?

Techdirt community members with Techdirt Credits can spotlight a comment as either the "First Word" or "Last Word" on a particular comment thread. Credits can be purchased at the Techdirt Insider Shop »

Follow Techdirt

Techdirt Daily Newsletter

Techdirt Deals
Techdirt Insider Discord
The latest chatter on the Techdirt Insider Discord channel...