A surprisingly low number of UK businesses protect their valuable innovations through patents, a recent report from the Intellectual Property Office has revealed. Only 17% of companies protect their ‘most valuable innovation’ with a patent according to the European Commission Community Innovation Survey contained within the report.
This remarkable finding is supported by the latest HMRC Patent Box statistics released last month. It highlighted that the scheme designed to financially support innovative companies is still relatively underused with just over 1000 claims made so far from a total of around 130,000 innovation active companies in the UK.
So why would companies not take advantage of these opportunities? There are a number of findings which indicate why UK business owners are still missing out on the opportunity to both protect and profit from their IP.
Cost identified as largest barrier to patent for small businesses
Costs related to the patenting process were identified as the largest barrier to acquiring a patent for small firms, with one in five reporting their decision not to patent was due to costs being too high (compared to 7% of medium-sized companies and just 3% of large companies).
With, in our experience, a patent costing as little as £5,000 and be granted in as little as 9 months it would seem this is a perception worth challenging. If a business then elects into the Patent Box scheme, they are able to pay a reduced Corporation Tax on profits from the patented item for the lifetime of the patent, up to 20 years. Considering the average Patent Box claim was worth £55,000 to SMEs last year, it’s certainly worth investigating. Take a look at our Patent Box page to see how we could help you take advantage of the regime.
SMEs are as motivated as large companies to protect their innovations
The report acknowledges that firms innovating on a larger scale may have more opportunity to patent driven by a higher quantity of innovations in production. But the survey revealed that there is no significant difference in the motivation to patent between large and smaller companies.
Interestingly, the data showed that during the period in question, the innovation deemed ‘most valuable’ by companies accounted for almost 60% of overall innovative sales for SMEs, and around 25% for large companies. This statistic highlights just how valuable a Patent Box claim against these products could be. As Patent Box is a profit-based regime, the Corporation Tax reduction is against worldwide revenue from the patented product – so the higher the profits from the product, the higher the Corporation Tax saving.
50% of innovating companies deemed their innovation “not patentable”
The survey also highlighted that many businesses aren’t aware that they could patent their innovation; 50% of respondents believed their innovation could not be patented. Criteria for patenting are broad; an innovation does not need to be technological to qualify – HMRC dictates that to be granted a patent, your invention must meet the following criteria:
- It must be something that can be made or used
- It must be a new product
- It must be inventive; not a simple modification to something that already exists
Interestingly, the fear that patents would disclose too much was the least popular reason for not patenting, with just 4% of votes.
We work closely with patent attorneys who are able to advise on the feasibility of a patent, so get in touch to find out if you should be patenting your innovation. Equally, the Patent Box regime is designed to complement the R&D Tax credit scheme. With over £1 billion in tax benefits claimed last year, it’s worth a conversation.