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back to article New British tax-cuts-for-patents scheme criticised

A new tax cut tied to the number of patents a business owns could lead to a wave of trivial patents being filed, favour big businesses over small businesses, and distort research priorities, speakers at the London Patent Summit warned today. Businesses have broadly welcomed the Patent Box tax scheme that will see them getting a …

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Lesson learnt

It's pretty obvious, from looking at what is currently happening in the States, that what we all need is large corporations being encouraged to take out large quantities of hastily-assembled, shitty patents. What could possibly go wrong?

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Anonymous Coward

Re: Lesson learnt

Actually, the UK has been really poor at capitalising on many inventions.

In the past we have invented all manner of great things but sold the ideas to the US where they make shed loads of money from the ideas.

So this is actually a good idea.

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What plannet are you living on?

The most obvious reason why small businesses have difficulty in this country is they get clobbered by patent litigation. The entry fee for patent litigation is at least £100,000 so small businesses get nothing from owning a patent until the liquidator sells the patent to a troll.

By all means let the Chinese sue each other into bankruptcy to feed their patent lawyers. The way to grow the UK economy is to tax the trolls, not let them off taxes. I want the names of the people responsible for this 'tax cuts for patent trolls' scheme.

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Re: Lesson learnt

It's a poorly thought out idea. All it means is that, for the measly investment of $20K, a large corp can patent an obscure and undetectable function/component of their $BIG_BOX and then shuffle all that juicy profit into the 10% bracket (assuming they're declaring a profit in the UK and not doing the Dutch/Irish sandwich thang and offshoring the vast majority of profits to tax havens). Simple accounting will find out which $BIG_BOXes need such a patent and R&D is duly tasked with coming up for some trivial, undetectable patent.

Perhaps the UK has been piss-poor at capitalising on inventions and the Yanks have made boat loads of money out of them - doesn't that mean that the UK lacks in business acumen amongst inventors, not inventiveness? Get them better help in exploiting/protecting their IPR instead of helping companies like Vodafone reduce their already shrunken tax bill.

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Anonymous Coward

Re: Lesson learnt

> assuming they're declaring a profit in the UK and not doing the Dutch/Irish sandwich thang and offshoring the vast majority of profits to tax havens

If they only have to pay 10% tax here then the UK becomes a tax haven and all those companies will shuffle the profits earned in other countries to the UK.

There is a reason why so many companies pay their tax in Ireland (MS, Google, Amazon etc) and it has nothing to do with a love of all things Irish

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Re: Lesson learnt

"If they only have to pay 10% tax here then the UK becomes a tax haven and all those companies will shuffle the profits earned in other countries to the UK."

I was thinking the same thing. I work for a UK subsidiary of a global semiconductor manufacturer. We have plenty of patents (REAL patents, which we use) so this should help us anyway. However, I can see our parent company trying to shuffle more of the profit into us to reduce the tax bill, including trying to incorporate the patents into more products somehow. All in all, my employer should benefit, which will hopefully be good for me too...

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Re: Lesson learnt

Did I hear you right?

Even - and this is debatable - even if this means that I go out and now take out a patent on my latest brainwave - and am granted the patent what makes you think that the prospect of a tax break will mean any of our banks are actually willing to invest for more than 3 months of development time? They won't any more than they do now. Worse the 'vulture capitalists' will continue on their lets spread the word as wide as possible while jerking the inventor around wasting his time on business plans while we work out who will give us the biggest bung for letting the cat out of the bag.

What is needed is for the UK government to spend UK tax payers money in the UK on UK developed and UK produced products being made by UK people. FFKS buying the royal wedding china from China was really about the last straw... by appointment to her majesty and the british tax payer a bunch of slave workers from the back of china... whose houses are probably paid for from the british tax payers 'foreign aid budget' while there are millions on millions (30% of the working age population) not working in Britain.

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Re: Lesson learnt

UK becomes a tax haven... unfortunately not, there are places with sub 10% tax rates.

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Re: What plannet are you living on?

Patents are a huge help to small innovative businesses- or at least the one I run! They give investors the confidence that the business can drive a good exit for their investment without which really innovative businesses would be impossible to fund properly. Bad patents are bad, and especially in the US there is a legacy of "un-inventive" patents going back years, but it doesn't mean that we'd all be better off without any!

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Anonymous Coward

Re: Lesson learnt

> the UK has been really poor at capitalising on many inventions.

Usually because although the British are very inventive, we have no interest in taking a punt on other people's new ideas, so inventors don't get investment. Corporate tax breaks won't change that culture.

The Americans are usually happy to throw cash at anything which they think might have even a slim chance.

A much better plan is to weaken the patent system so that new ideas can be utilised for their intended purpose rather than a held as a weapon.

That is/was the whole point of the patent system.

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The IFS did a tear down in 2010:

http://www.ifs.org.uk/publications/5362

I'm a little more satirical more recently (http://www.hypothetical.org.uk/?p=73) but this process is stacking one incentive on another so almost by definition poorly targeted.

It is most definitely not business neutral as if fails to recognize defensive patenting and royalty free licensing, offers a tax cut to patent trolls and fails to recognise and reward other forms of innovation.

Maybe a lower overall tax rate would be an idea and, say, tax simplification instead of all these interventions ?

Whatever next, a tax break for video games? Oh ...

http://www.hypothetical.org.uk/?p=37

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Oh dear Lord

Cue patents on wheels, fire, and rectangles with rounded corners...

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Flame

Isn't it lucky ...

... that they have so much spare money to give to their friends in big business in tax cuts rather than 'wasting' it on helping disabled people to have decent lives?

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Anonymous Coward

Re: Isn't it lucky ...

The idea is to increase revenue.

Whether you like it or not the UK competes with other countries for tax. With some we lose out because, for example, they register in Ireland and pay their tax there. With others we gain, for example, Barclays make profits globally and pay most of their tax in the UK.

There is a point at which increasing a tax actually decreases income because businesses (and people) can and do move to different countries. By decreasing corporation tax they are hoping that more companies will move here to take advantage of it. By giving tax breaks on patents they are hoping that companies will implement the patent here (manufacture whatever it is) thus creating jobs and income in the UK.

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Anonymous Coward

Re: Isn't it lucky ... AC 11:17

The problem with setting your rate 1% lower than the country next door is that it becomes what's been called the Race to the Bottom, and we all end up with low corporate rates (if not bases, but most sensible multinationals appreciate the importance of both).

Which in turn means that governments have to try to either a) get all their revenue from non-mobile sources (transactions are good, but general sales taxes are perceived as regressive; individuals aren't typically mobile - although the ones who generate the most tax are of course - and because they notice when government's put income tax up, and respond by voting for the other lot, hitting them with regular tax rises is not so popular; land is totally immobile, but the only major economy with a serious history of land taxation is China, and the political arguments around it everywhere else are way too big) or b) cooperate in not playing a multinational game of beggar thy neighbour on corporate rates. .

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Re: Isn't it lucky ...

"There is a point at which increasing a tax actually decreases income because businesses (and people) can and do move to different countries."

If you don't give us more money, we'll move to a different country. Take it from the poor, they don't need it. We're filthy rich so we've got to have lots more money.

Now give us some more money, or we'll move to another country.

We'll move to another country if you don't give us even more money.

The only possible way to improve the economy and get more money for the poor is to take money from the poor and give it to us.

Hey, we need a lot more money. Give it to us or we'll move to another country. Take it from those work-shy layabout poor people, it's terrible how they keep demanding money for nothing, they obviously don't deserve it like we do.

Stand not upon the order of your going, but go at once.

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Anonymous Coward

Re: Isn't it lucky ...

> Hey, we need a lot more money. Give it to us or we'll move to another country. Take it from those work-shy layabout poor people, it's terrible how they keep demanding money for nothing, they obviously don't deserve it like we do.

Stop paying those work-shy layabout scum (I know many of them because I live amongst them) who have never had a job, never intend to get a job, live in a better house, have all the latest gadgets, drive a better car, HAVE JUST HAD THEIR FUCKING KITCHEN REFITTED when their old was in better condition than mine, get to go away on holiday at least three times this year, spend more time in the pub than I spend at home because I'm working 100+ hours a week trying (and failing) to keep my business afloat.

If and when my business makes money then I do want more. I want to be rewarded for the hard work and personal risk I'm taking. I want to pay less tax so that the company can build up reserves for when the bad times come again and for expansion and for employing (or should I say exploiting?) more people and for paying me more so that, finally, I can get a new kitchen, drive a car that isn't 8 years old, have at least one holiday a year and, perhaps, own my own home.

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@AC 13:41

Someone got out of bed the wrong side today.

The fundamental issue is that there are 2 populations that it is nigh on impossible to separate using legal language - nice people and bastards. Presented with an example, most of us can say which category it falls in, but the generalisation is frustratingly difficult to come by. Is that a patent troll or a genuine innovator? The deserving or undeserving poor? Virgin or First Group*?

The main difference between left and right-wing politics is that the left thinks of nice poor people and rich bastards when devising policy while the right does the opposite. Both sides forget that they are only modelling half the population at best. Worse, it's probably impossible to devise a system that nice people can work better than bastards.

*Possibly a trick question.

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Vic
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Re: Isn't it lucky ...

> I'm working 100+ hours a week trying (and failing) to keep my business afloat.

Have you not noticed the correlation?

Vic.

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So...

If I write a few lines of code (using some clever variable names), patent it, and embed it in every website I develop then I can claim 10% tax rate on all my earnings? Yay, way to go! How much does a patent cost?

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Re: So...

In fairness its quite hard to get a UK patent on plain code, as a non-obvious technical effect is required. Not impossible mind but certainly harder than say the US. However make that code related to a video game, animation and you may have access to other tax breaks instead.

Need to have a dig into the details to find out which patents they will recognise for this mind. Presumably UK and EU at least.

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Probably not.

(2) It is hereby declared that the following (among

other things) are not inventions for the purposes of

this Act, ...

(c) a scheme, rule or method for

performing a mental act, playing a game

or doing business, or a program for a

computer;...

(Patents Act 1977)

You can get round it if your code is part of something patentable but the code on its own, no.

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Re: So...

Doesn't say the patent has to be first registered with the UK patent office ...

A savvy software patent filing seems to be to first register a US patent, but word it to so that it also qualifies as an EU patent ...

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So ... not probably not

Hm, it is a serious mistake to assume that the UK and EU are free of the problems that plague the US patent system. Remember that USPTO is also governed by rules that supposedly prevent method and software patents. In reality, software patents *are* granted both in the UK, and by the EPO (which is expressily forbidden from granting patents to "software as such"), and many of these patents are as terrible, and obvious as any you find the US system.

And when it comes to tax loopholes, who says that the patent actually has to have anything to do with the income stream of the company, other than a contractual arrangement to pay a licence fee to itself or a subsiduary? It seems unlikely that Amazon, for example, is only making money from selling patented products as such, rather than merely channeling UK profits from book sales etc. through phantom patent royalities in Ireland.

The tax break is as irrational and muddle headed as the UK and EU patent systems. They go well together.

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"There are no bad sides to this!"

Tell that to the poor sods who will have to make up the difference through Income tax, VAT etc.

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WTF?

This is the stupidest corporate charity idea I've ever heard. A goldmine for businesses big enough to exploit it, and patent lawyers, a money pit for everyone else.

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Meh

Necessary evil

i view it with distaste, but i can see this sort of stuff might be necessary for UK companies to not get mugged for billions by even bigger multinational fish.

No point being right if you're also bankrupt.

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Makes you wonder which MP's have money tied up in uk based companies which have recently aquired a number of patents.....

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No wonder Deloitte is in favour and talks it up..

Any normal business is going to need heaps of very expensive consultants to report on what they have and how it can be abused (I am not going to deign that idea with a positive word, sorry).

So, from Deloitte's point of view, there are indeed no downsides. For everyone else this is almost as bad a setup for a scam as the ID card scheme was..

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Where's innovation gone?

As a small start-up I quite like it. I agree that it will encourage trivial patents, but if I need to write a trivial patent to get some tax relief I'd claim that's where the innovation bit comes in. Whilst I'd pay a patent attorney for a patent that covers a real invention, I don't see the same need for a trivial one just for patent box. So it shouldn't cost more than £250 to get something granted that gets me tax relief on something I sell.

I just see it as a useful extension of R&D tax releif once I get the product into manufacture. But anyone who pays consultants or patent attorneys to get that trivial patent is probably wasting their money.

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Devil

Awesome

I own a patent on this tax process. Ker-ching.

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FAIL

acquisitions and mergers

All the more reason for big (out of ideas) fish to snap up the little (start-up with new ideas) ones & we know how well that works - HP / Autonomy anyone?

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The opposite of what is needed

Anyone with real-world experience of the patent system will know that it is badly sick and has almost nothing to do with real innovation. The percentage of patents that protect genuine new bright ideas is tiny.

Those who say that it will favour big companies, and that will encourage the patent system to get even more clogged with stupid patents are spot on.

Big surprise that the consultants are in favour - they will be the big winners from this awful idea.

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