As the commencement date of the UK Patent Box initiative approaches (April 2013), eligible businesses need to begin thinking about what their current baseline looks like in regards to their existing IP portfolio. In a previous blog (“UK Businesses: Are you prepared for the Patent Box initiative?”), the purpose and goals of the UK Patent Box initiative were introduced, along with a high-level framework that businesses may consider to realize the advantages of this program. Specifically, the discussed framework incorporates 4 primary areas which include:
Arguably, the most important step in this process is Measure. Creating an accurate assessment of which products are currently protected by patents is the critical step in realizing any financial benefits from this program. Once a company understands which of its products are fully or partially protected by patents (or other forms of qualifying intellectual property), it will be in a position to work with finance and tax professionals to properly allocate revenues and calculate the resulting tax benefits. An added benefit to developing this assessment is that businesses will better understand which products may not be patent protected or, conversely, which patents are not linked to any existing products. With this information in hand, a company will have taken a valuable first step in better understanding their portfolio, and will be able to make strategic decisions, such as pruning patents that are no longer aligned with a product.
In order to understand which products are patent protected, a labor intensive exercise referred to as patent to product mapping is the most efficient way to generate the necessary data. It is recommended that businesses begin starting this process in advance of April 2013 such that by the initiation of the program they will have established their current baseline and can focus their future efforts on new, strategic IP creation. The outputs (or resulting work products) from patent to product mapping are typically: 1) an inventory of all IP attributed to relevant products, and 2) a visual tool, such as an ipLandscape, for conveying the results of the mapping to relevant stakeholders and parties. By spending time upfront to develop a process and set of supporting documents, businesses can establish a robust framework which will seamlessly incorporate future patent / product mapping information. Furthermore, an efficient Measure process is a key input into part 2 (Align) of our Patent Box framework.In Figure 1, a visual patent to product mapping is shown for Dyson, the designer and manufacturer of innovative home products (note: Dyson is not currently, nor has been, an ipCG client). In this illustrative example, linkages have been established as to which patents map to specific technologies, how these technologies map to attributes, and how these attributes end up in finished products. In this way, Dyson is able to clearly understand which patents are applicable to current / future products. By layering in revenue data for each product line, Dyson would then be in a position to calculate a baseline tax savings based on its current portfolio.
Figure 1: Illustrative example of visual patent to product mapping for Dyson
By establishing an initial patent to product mapping inventory and setting up a formal process for ongoing management, businesses can maximize the near and long term benefits of the Patent Box initiative. Additionally, this process will also start many businesses down the path of more strategic IP management, specifically by helping to understand if some patents no longer hold business value and merit “pruning” – perhaps through other revenue generating means such as sale or licensing, or through cost reducing means of abandonment.
Note: ipCapital Group provides neither tax nor legal advice. For consultation on these matters, please seek assistance from your tax or legal professionals.
Please contact ipCG Team with any questions; email@example.com