Tax Incentives and Profiting from IP


Tax Incentives

In the UK, there are several government incentives available which allow IP owners to benefit from significant tax savings. Examples of these include the Patent Box (more information here) and Research and Development tax credits. Some such benefits can even be obtained prior to final grant of any IP rights. We would therefore recommend that you check with an accountant whether your IP can qualify for any such tax benefits. We have also worked with accountants that have experience in this area, if you would like us to make a recommendation.

Profiting from IP

Investing in registered IP rights can sometimes seem expensive especially if there is no immediate obvious benefit to your bottom line in doing so. When investing in patent, design or trade mark protection it is important to know what benefit that investment gives you or your business. We have listed below just a few ways in which registered IP rights can improve your bottom line:-

IP rights protects investment

One of the main reasons for securing registered IP rights is of course to protect any investment in a new product, design or brand. Monopoly rights provide a means of legal recourse should your IP be copied, whether deliberately or inadvertently. An absence of adequate IP rights is tantamount to leaving the doors of your business or factory unlocked overnight, i.e. the risk of IP theft is higher. Worse still, by avoiding the costs associated with research and development an IP thief may quickly become a direct competitor in your core markets. You can prevent this all too common scenario and protect invested time and money by registering your IP rights.

IP rights can create licensing revenue

Although their main purpose is to deter competitors and provide a legal basis for tackling infringement, IP rights may also be used to generate new revenue streams by positively allowing others to use your IP via, for example, a royalty-bearing licensing arrangement.

Exclusivity can increase the asking price

Generating healthy profits within a crowded market is always a challenge if you are selling products or services that are also being sold by many others at competitive prices. However, if you are the only business that is entitled to sell those products or services by virtue of owning the associated monopoly IP rights then you may be able to demand a significant premium.

Certainty and clarity reduces legal / accountancy costs

As well as the obvious risk of not being protected, attempting to rely solely on unregistered IP rights – such as copyright – can often lead to increased general legal costs in the event of restructuring or sale of businesses. This arises because it can be very difficult and time consuming to, for example, identify exactly what IP is owned, who it is owned by, and when it expires. In contrast, having an easily identifiable portfolio of registered IP rights can allow e.g. accountants / lawyers to quickly and easily perform IP due diligence. This in turn can help to reduce your overall legal expenditure.

Registered IP rights can be moved within company group structures

IP rights can be assigned and licensed between different legal entities. This makes IP a valuable piece of intangible property which can be identified in intra-company agreements and attributed a value accordingly. IP rights can therefore be used to create financially advantageous company group structures.

IP rights can be sold off for a price

If you decide you no longer need particular IP rights but expect that these might be of value to others then, just like other types of physical property, IP rights can be sold outright. The sale price can create yet another review stream which would otherwise not exist.

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