A primary benefit for future users of the UPC is that legal proceedings in relation to a Unitary patent or a non-opt-out European patent will not need to be divided throughout Europe and can instead be heard by a single court, with judgement applied to the entire territory – potentially 24 countries. This promises to reduce costs and time associated with the litigative process and may minimize the risk of ‘Forum Shopping’ within the E.U., where parties seek to take advantage of differences in the procedures and judgements of national courts. Given the importance of the UPC, we wish to outline the important factors that must be considered by parties when it comes to damage calculations.

Determination of damages: routes
On the 8th July 2022 the UPC’s Administrative Committee adopted the final version of the Rules of Procedure (RoP, accessible here). Those rules offer two routes for determining damages and compensation in the event patent infringement is found to have occurred. Rule 118.1 outlines that “[t]he amount of the damages or the compensation may be stated in the order or determined in separate proceedings”. A successful party can – within one year of the final decision – apply for separate proceedings for the determination of damages (Rule 126). The court may also award interim damages (Rule 119), to “cover the expected costs of the procedure for the award of damages … on the part of the successful party”.

Determination of damages: calculation factors
When seeking to understand what factors contribute to damage calculation we lookto the UPC Agreement (UPCA, available here), which defines the legal basis of court activity. That makes two commitments in relation to the award of damages: (1) the court will instruct an infringer to pay the injured party damages “appropriate to the harm actually suffered … as a result of the infringement” and (2) the court will – as far as is possible – place the injured party in a position as if no infringement had taken place. Additionally, the infringer shall not benefit from the infringement and damages shall somewhat not be punitive.

Having made these commitments the Agreement then seeks to define what the court should look to when calculating damages. The court is to take account of “all appropriate aspects” such as negative economic consequences, which may includelost profits, any unfair profits made by the infringer, and non-economic factors where necessary (for example, damage to a brand’s reputation). The court can also set damages on the basis of royalties that would have been due if the infringer had sought a licence. In a case where the infringer did so not knowingly, the court can order compensation.

Determination of damages: IP valuation expertise
Whilst the UPCA suggests areas of consideration for damage calculation, there remains substantial room for the presence of expert analysis in reaching that calculation. OxFirst Director Dr Roya Ghafele has authored many scholarly articleson patent valuation methods for assessing damages in patent infringement cases before the UPC. This work illustrates three important means of valuation: the income, cost and market approaches. These approaches appear in publicly sanctioned IP guidelines and assist in portraying value in a dynamic manner. All three play a role in delivering effective valuation and OxFirst operates a proprietaryvaluation method which accounts for their advantages. Method selection represents a crucial consideration when embarking upon a valuation and pays particular attention to the utility of the income method as the only method that can incorporate risk as a consideration. Using the income method, patent value is presumed to be based on future returns over the course of the time it retains protection. Whilst the commonly applied method by courts and regulators, the income method requires particular attention to be paid to contextual information and so requires particular expertise for its effective application.

The UPC is well equipped to exercise judgement on patents at question themselves – the technical judges bring the specialist knowledge required for this. Yet when calculating appropriate damages, the UPC will – like other courts – require assistance from patent valuation experts. This will be particularly true when the UPC has to, inevitably, consider FRAND cases. In these cases, debate has already been established around defining a royalty base, either the smallest saleable practicing unit (SSPU) or the entire market value (EMV). The choice of royalty base is decisive in calculations of appropriate FRAND rates as, in most cases, damages are calculated by factoring a royalty base with a royalty rate to establish a valuation. Patent valuation expertise will therefore be especially valuable in such circumstances.

Yet in all cases where damage calculations must be made as a consequence of infringement, well evidenced, well communicated and clear expert patent valuation analysis is potentially worth a great deal. OxFirst remains an experienced specialist in patent valuation for litigation.

Last week, Professor Adam Jaffe (Brandeis University, USA & Motu Economic and Policy Research, New Zealand) joined OxFirst for a presentation assessing the implications on the patent system from the rise of inventions created by AI.

The subject is topical; we’ve previously covered Thaler -v- Comptroller, a case to be heard by the UK Supreme Court relating to an AI that generated two inventions and a dispute following the AI being listed as an inventor, and we’ve considered non-human inventions from a patent valuation perspective.

The talk was founded on a dual premise that: (1) AI systems soon will be (or already are) making inventions, and (2) the patent system as it stands is not ready for that. Whilst patent law in most jurisdictions does not make allowances for AI to be an inventor, and that position looks likely to hold, Professor Jaffe suggested it is both unavoidable and undesirable to seek to halt the rise of AI invention machines. A change in the law will likely be required.

It is theorised that AI would be capable of creating inventions at a very low marginal cost and in substantial number. Should those inventions be patentable, either because the law changes to accommodate AI as an inventor or because AI owners exploit the indistinct line between machine-assisted invention and machine-generated invention to list themselves as inventors, patent offices could be flooded with new applications. It is important, therefore, to discuss how AI inventions relate to the fundamental goals of the patent system. A predictable and fair patent system, and one that incentivises innovation are obviously desirable, yet it is on the goal of protecting investments that develop an invention to a marketable product or process that is particularly interesting.

In a previous article considering  AI inventions, OxFirst speculated that AI inventors would lead to ‘invention factories’ – businesses who produce patentable inventionsusing their AI invention machine and sell or license those patents to others who exploit them to bring patents to market as products. We can therefore envisage a scenario with three elements: (1) AI inventors producing many more inventions each year than are currently created, (2) we assume patent offices are able to keep up, and so many more patents are granted on these inventions each year, and (3) those patent owners are unwilling or unable to exploit those patents and bring products to market. In this scenario, a substantial patent marketplace emerges.

This raises important questions for patent valuation. In any market, value is most simply determined by what someone else might pay for a product, and therefore an increase of supply (patents) into that marketplace depresses the value of each individual item given the increase in choice for buyers. Comparative IP valuation methods may need to adjust to account for this if the comparison is based on a different, non-AI generated, patent marketplace. Yet, each potential buyer of patents will have different capacities to exploit different types of patents – a chemical manufacturer has no use for a patent relating to the production of bread, for example. Increase in supply therefore, may not substantially depress value. We must also keep sight of the importance of a patent’s quality to patent valuation. A high-quality patent – by which we mean one with a long term of protection, substantial coverage and strong potential commercial gains when properly exploited – remains a valuable item whether created by a human or AI. Identifying those patents will be crucial for commercial success in an AI invention landscape.

Should a patent marketplace emerge as we have speculated, the demand for effective patent valuation to complement patent-related dealmaking will rise. Moreover, with so many patents potentially on offer, the importance of good patent valuation only grows. The problem for patent valuation therefore may be the same as for the patent offices – volume. The skills, however, remain the same. Patent valuation experts who can identify and understand market outlooks, growth implications and draw valuable insights from the comparative deal landscape to make well-founded, accurate and commercially useful judgements on these patents will be invaluable.

We are very grateful to Professor Jaffe for sharing his ongoing work with us. The question of AI inventions and how they fit into the patent system is an important and fluid issue. This talk demonstrated both the considerable interest in the area, and the need for open-minded thinking about how we might negotiate the problems and opportunities raised by AI inventions to achieve the greatest benefit from them.

The full webinar is available on OxFirst’s YouTube channel: https://www.youtube.com/user/Oxfirst.

OxFirst’s discussion article on non-human inventions from a patent valuation perspective: https://oxfirst.com/insights-&-news/thaler-v-comptroller-a-patent-valuation-perspective-on-non-human-inventions/.

Most people recognise the utility of patents to be the exclusivity, albeit temporary exclusivity, they impart on their owners to profit from an invention. Yet patents also hold real value for companies that may not even sell a product yet: they can help in the quest for capital.

At present there is often a difference in approaches to patents depending on the industry. For the chemical or biotechnology industries, patents are vital intangible assets. In others though, for example software start-ups, a patent strategy might not be so high on the list of priorities. Yet patents ought to be important to all innovative enterprises looking to bring something new to the market.

Once start-ups run out of friends and family to seek funds from, they often turn to early-stage venture capital firms as a source of funds. For example, OxFirst has helped a young innovative company in the SaaS – Software as a Service – space access further capital. The patent valuation we undertook helped the firm access over 25 Million UK Pounds in funding. The patent valuation served as a substantial instrument to communicate the value proposition of the firm to investors.

Investors looking to assess the risk/return profile of early-stage technology often content themselves with a simple Freedom to Operate search. However, a patent valuation goes way beyond such simple question. It allows an assessment ofpotential revenues associated with the intellectual property while at the same time supporting senior management decisions.

As this simple example illustrates, not only venture capital firms, but also investment banks, high net worth individuals and family offices may be prepared to finance otherwise risky technology ventures, provided the patent valuation allows them to get a better understanding as to what they may be getting themselves involved in.

Patents go a long way to mitigating the risk assumed by venture capital firms, and therefore making the start-up a more appetising investment opportunity by ensuring the future product they are investing in cannot be copied by another and a return can be made on that investment. The patent valuation can again help to size markets related to patents. There are several ways a patent valuation can be undertaken. Often one turns to the market, income or cost approach. In the case of start-ups, the early-stage nature of the firm often requires further assumptions, quite simply because markets are yet to be grasped. In an IP valuation this is often reflected in the risk rate.

The same basic logic also applies to later stage venture capital funding. A business need not have a product on the market to make themselves appealing to investors, a patent can be enough.

Should a business choose to go public through an IPO later in its life, knowledge that a company’s intellectual property is adequately managed and used to maximize revenues, will be an important element in enticing investors and driving up the potential funds from entrance to the stock market. Further use cases of a patent valuation can be the support of licensing revenues, technology transfer, transfer pricing and fostering a firm’s reputation.

Some estimations put 80-90% of a firm’s value in its intangible assets, of which patents are a component. That’s potentially a lot of money in the event of a sale. In 2021 Elon Musk’s Tesla bought Springpower International, a small Canadian start-up working on battery manufacturing technologies. At the time, Springpower had patents pending on core technologies – those patents changed ownership to Tesla following the purchase. Whilst by no means the only motivator behind the purchase, Tesla acquired Springboard’s employees and their expertise too, it is obvious the intellectual property was an important driver behind Tesla’s decision.

Patents, then, are crucial throughout the full business lifecycle: from sourcing initial intuitional funding through to selling the company. A patent valuation can help realise these opportunities and render otherwise intangible assets into tangible business opportunities. Business owners should take advantage of the opportunities it presents.

The Unified Patent Court (UPC) has announced the appointment of 85 judges to the court, as well as announcing the composition of the UPC’s Presidium following election.
The court will be led by Mr Klaus Grabinski as President of the Court of Appeal and Ms Florence Butin as President of the Court of First Instance. The Presidium is further composed of two Court of Appeal Judges and three Court of First Instance Judges.
Seven judges have been appointed to the Court of Appeal, and twenty-seven appointed to the Court of First Instance in the various divisions: Paris, Munich, Vienna, Brussels, Helsinki, Düsseldorf, Hamburg, Mannheim, Milan, The Hague, Lisbon, Ljubljana and the Nordic-Baltic regional division comprising Sweden, Estonia, Latvia and Lithuania. The post for the Copenhagen local division is yet to be filled.
In addition, 51 technically qualified judges have been appointed by field of technology: biotechnology, chemistry and pharmaceutics, electricity, mechanical engineering, and physics.

The complete list of appointments:

Appointed to the Court of Appeal:
• Mr Klaus Grabinski (DE)
• Ms Françoise Barutel (FR)
• Mr Peter Blok (NL)
• Ms Emanuela Germano (IT)
• Ms Rian Kalden (NL)
• Ms Patricia Rombach (DE)
• Ms Ingeborg Simonsson (SE)

Appointed to the Court of First Instance:
Seat of the central division in Paris:
• Ms Florence Butin (FR)
• Mr Paolo Catallozzi (IT)
• Mr Maximilian Haedicke (DE)
• Ms Tatyana Zhilova (BG)

Section of the central division in Munich:
• Ms Mélanie Bessaud (FR)
• Ms Ulrike Voß (DE)
Local division Vienna:
• Mr Walter Schober (AT)
Local division Brussels:
• Mr Samuel Granata (BE)
Local division Helsinki:
• Mr Petri Rinkinen (FI)
Local division Paris:
• Ms Carine Gillet (FR)
• Ms Camille Lignieres (FR)

Local division Düsseldorf:
• Ms Bérénice Thom (DE)
• Mr Ronny Thomas (DE)
Local division Hamburg:
• Ms Sabine Klepsch (DE)
• Mr Stefan Schilling (DE)

Local division Mannheim:
• Mr Holger Kircher (DE)
• Mr Peter Michael Tochtermann (DE)

Local division Munich:
• Mr Tobias Pichlmaier (DE)
• Mr Matthias Zigann (DE)

Local division Milan:
• Mr Pierluigi Perrotti (IT)
• Ms Alima Zana (IT)

Local division The Hague:
• Mr Edger Brinkman (NL)
• Ms Margot Kokke (NL)

Local division Lisbon:
• Ms Rute Lopes (PT)
Local division Ljubljana:
• Ms Mojca Mlakar (SI)
Nordic-Baltic Regional Division (EE, LT, LV, SE):
• Ms Kai Härmand (EE)
• Mr Stefan Johansson (SE)

Technically qualified judges appointed by field of technology:
Biotechnology:
• Mr Arwed Andreas Burrichter (DE)
• Mr Eric Enderlin (FR)
• Mr Rainer Friedrich (DE)
• Mr Paolo Gerli (IT)
• Mr Krister Karlsson (FI)
• Mr András Kupecz (NL)
• Mr Roman Maksymiw (DE)
• Mr Cornelis Schüller (NL)

Chemistry and Pharmaceutics:
• Mr Michael Alt (DE)
• Ms Kirsikka Etuaho (FI)
• Mr Renaud Fulconis (FR)
• Mr Rudi Goedeweeck (BE)
• Mr John Meidahl Petersen (DK)
• Ms Stefanie Parchmann (DE)
• Ms Laure Sarlin (FR)
• Mr Casper Struve (DK)
• Mr Steen Wadskov-Hansen (DK)
• Ms Carola Wagner (DE)

Electricity:
• Mr Pascal Attali (FR)
• Mr Eric Augarde (FR)
• Mr Bertrand Cochet (FR)
• Mr Grégoire Desrousseaux (FR)
• Mr Alain Dumont (BE) (take up of duties as of 1 Nov 2023)
• Mr Dennis Kretschmann (DE)
• Mr Alessandro Sanchini (IT)
• Mr Andrea Scilletta (IT)
• Mr Simon Walker (FI)

Mechanical Engineering:
• Mr Michel Abello (FR)
• Mr Uwe Ausfelder (DE)
• Mr Koen Callewaert (BE)
• Mr Giorgio Checcacci (IT)
• Mr Paolo Ernesto Crippa (IT)
• Mr Claus Elmeros (DK)
• Mr Frédéric Gaillarde (FR)
• Mr Bernard Christiaan Ledeboer (NL)
• Ms Elisabetta Papa (IT)
• Mr Martin Schmidt (FR/DE)
• Mr Uwe Schwengelbeck (DE)
• Mr Max Tilmann (DE)
• Ms Marie-Paule Vandeberg (BE)
• Mr Patrice Vidon (FR)
• Mr Pascal Lucien Pierre Weber (FR)
• Mr Stefan Wilhelm (DE)
Physics:
• Mr Michael Fleuchaus (DE)
• Mr Anders Max Hansson (SE)
• Ms Ulrike Keltsch (DE)
• Mr Gérard Myon (FR)
• Ms Dörte Otten-Dünnweber (DE)
• Mr Andrea Perronace (IT)
• Mr Christoph Dominik Schober (DE)
• Mr Patrik Rydman (SE)

The Institute of Electrical and Electronic Engineers (IEEE) has announced a change to its IPR policy in relation to standards which will take effect from 1st January 2023.

The changes relate to Standard Essential Patents (SEPs) which patentees agree to license to downstream innovators on a fair, reasonable and non-discriminatory (FRAND) basis. These changes hold relevance to FRAND royalty rate determinations. A press release from IEEE stated these changes “are intended to improve the clarity of IEEE’s standard processes relating to patented technologies, while offering more options for stakeholders”.

IEEE’s changes relate to the Reasonable Rate definition within the Bylaws (accessible here, p.2). They have implications for the choice of the royalty based in a FRAND royalty rate calculation and relate to the bigger picture as to what is FRAND. practicingPP

The Adequate Royalty Base in the FRAND Royalty rate valuation

The choice of a royalty base is decisive in the calculation of an appropriate FRAND royalty rate. The debate has focused on deciding whether the smallest saleable practicing unit (SSPPU) or the entire market value (EMV) is the most appropriate methodology.

And as in many cases, damages are calculated by factoring a royalty base with a royalty rate; the value of the royalty base is of substantial importance. In the SSPPU approach, the price of the component which houses the SEP technology is used as the calculation base.

On the other hand, if the conditions for EMV is met and the technology is concluded to be the primary driver of demand to the entire end-product and the primary contributor to the functionality, the entire market value approach is used.

The SSPPU methodology originates from a suit between Cornell v. Hewlett Packard Co. where the Plaintiff initially sought damages based on the end-product, but later had to change its claim as the court held the end-product as an inappropriate royalty base, concluding that calculation must be apportioned down to “the smallest saleableinfringing unit with close relation to the claimed invention.”

Shortly after, the same reasoning would be echoed in Lucent Technologies, Inc. v. Gateway, Inc where the court concluded that there was no evidence that the infringed feature in question drove the entire demand for the end-product and therefore a calculation with the end-product as the royalty base would be misplaced. In Lucent v. Gateway, as in Cornell v. Hewlett Packard, decisions did however leave the door open for the future usage of the end-product as a royalty rate while calculating damages. More specifically, in Lucent, the court concluded that there was ‘nothing inherently wrong’ with using the end-product given that the proportionate value of the infringed feature or component to the product is taken into account.

What the changes are about and how they affect the valuation of patents

We think it is valuable to show these amendments in full, with the changes italicised. Where eliminations have been made, they are shown with a strikethrough:

““Reasonable Rate” shall mean appropriate compensation to the patent holder for the practice of an Essential Patent Claim excluding the value, if any, resulting from the inclusion of that Essential Patent Claim’s technology in the IEEE Standard. In addition, determination of such Reasonable Rates should include, but need not be limited to, the consideration of:

Some optional considerations for determination of Reasonable Rates are:

• The value that the functionality of the claimed invention or inventive feature within the Essential Patent Claim contributes to the value of the relevant functionality of the smallest saleable Compliant Implementation that practices the Essential Patent Claim or to another appropriate value level of the Compliant Implementation.

• The value that the Essential Patent Claim contributes to the smallest saleable Compliant Implementation or to another appropriate value level of the Compliant Implementation that practices that Essential Patent Claim, in light of the value contributed by all Essential Patent Claims for the same IEEE Standard practiced in that Compliant Implementation.

• Existing licenses covering use of the Essential Patent Claim, where such licenses were not obtained under the explicit or implicit threat of a Prohibitive Order, and where the circumstances and resulting licenses are otherwisesufficiently comparable to the circumstances of the contemplated license.”

The bylaws have also been amended in relation to licence negotiations (p.4). Again, the accepted amendments are shown by italics with eliminations shown with a strikethrough:

“The Submitter and the Applicant should engage in good faith negotiations (if sought by either party) without unreasonable delay or may litigate or, with the parties’ mutual agreement, arbitrate: over patent validity, enforceability, essentiality, or infringement; Reasonable Rates or other reasonable licensing terms and conditions; compensation for unpaid past royalties or a future royalty rate; any defenses orcounterclaims; or any other related issues. The Submitter of an Accepted LOA who has committed to make available a license for one or more Essential Patent Claims agrees that it shall neither seek nor seek to
enforce a Prohibitive Order based on such Essential Patent Claim(s) in a jurisdiction unless the against an implementer who is willing to negotiate in good faith for a license. Seeking further information upon initial notice of infringement or choosing to litigate or arbitrate over any of the foregoing issues, however, does not by itself mean that a party so choosing is unwilling to negotiate in good faith. fails to participate in, or to comply with the outcome of, an adjudication, including an affirming first-level appellate review, if sought by any party within applicable deadlines, in that jurisdiction by one or more courts that have the authority to: determine Reasonable Rates and other reasonable terms and conditions; adjudicate patent validity, enforceability, essentiality, and infringement; award monetary damages; and resolve any defenses and counterclaims. In jurisdictions where the failure to request a Prohibitive Order in a pleading waives the right to seek a Prohibitive Order at a later time, a Submitter may conditionally plead the right to seek a Prohibitive Order to preserve its right to do so later, if and when this policy’s conditions for seeking, orseeking to enforce, a Prohibitive Order are met.”

There are three documents related to these changes: The IEEE Standards Association Board of Governors (IEEE SA BOG) approved proposed updates to the IEEE SA Standards Board Bylaws, approved proposed updates to the IEEE SA Letter of Assurance (LOA) form, and approved proposed updates to the patent policy FAQs. The changes detailed above appear in the Bylaws, but the changes are also reflected in the other two documents.

Take Away

These changes further illustrate IEEE’s desire to review its position on the bigger questions within the SEPs landscape, particularly ongoing debates relating to holdup v. holdout. For valuation professionals these updates are of importance as any FRAND royalty rate calculation needs to consider the IPR policy of the Standard Setting Organization as they govern the standards with which the patents are associated. In particular the choice of the royalty base is an important decision to make in any FRAND royalty rate calculation. By updating its IPR policy the IEEE appears to offer further choices for the valuation of standard essential patents. How this will affect the practice of FRAND royalty rate calculation and IP valuation remains to be seen.

Meta, the parent company of Facebook and Instagram, has been ordered to pay almost $175 million having been found to have infringed patents belonging to Voxer.

The ruling follows a two-year legal battle between the companies with echoes of David and Goliath relating to communications technologies patented by Voxer used in Meta’s Facebook Live and Instagram Live features. Voxer owns the Walkie-Talkie app.

Voxer shared patents and proprietary information with Facebook (as it was then known before a 2021 rebrand) following an offer to collaborate in 2012. That collaboration did not materialise and Facebook Live was launched in 2015 followed by Instagram Live the next year. Voxer alleged both products incorporated its patents, and the Texas jury ruled in their favour and imposed determined the value of damages to be $174,530,785, paid via running royalty. Meta intends to appeal.

US patent valuation for damages reflects lost profits and/or lost royalties. In this case, Voxer and Meta do not compete in the same market and so it is unlikely lost profits played a substantial role in the damage calculation. US Courts often consider at least some of the fifteen factors established in Georgia-Pacific Corp. -v- US Plywood Corp. 1970. The final factor asks that an estimate of the royalty a willing licensors and willing licensee would have agreed to just prior to the infringement be established. This is the “hypothetical bargain” or “willing licensor-willing licensee” framework.

In constructing the hypothetical bargain, juries can take into account considerations, such as comparable licensing transactions, patent value to the defendant, and apportionment. Georgia-Pacific factor 2 accounts for the rates paid by the licensee of the use of similar patents. Factors 8 – 11 concern the patent’s value to the defendant covering such factors as its commercial success and current popularity, its utility over others, the nature of the patented invention including its benefits to users, and the extent to which the patent was used by the infringer. The thirteenth factor concerns the apportionment of realised profits that can be credited as arising out of the infringed patent against realised profits from other elements of the infringing product, such as the manufacturing process or improvements made by the infringer.

Court documents relating to the patent valuation are not available, but we might also safely assume these considerations were incorporated into the jury’s consideration.  The case and its outcome (so far, this story evidently has further to run) reiterates the importance of effective valuation. Whilst the financial implications for Meta are perhaps not substantial, the company reported $100 billion in revenue in 2021, for Voxer they will be much more so. This determination has ratified the validity of their US patents and opened a new revenue stream of substantial value.

Expert testimony is required to perform and effectively communicate patent valuations and damage estimations. These conclusions must be well-founded and withstand intense scrutiny throughout the course of litigative proceedings. OxFirst is well accustomed to performing patent valuations for litigation with well over ten years of experience.

Infringed patents: US10142270 and US10511557.

Voxer’s complaint: https://ia801906.us.archive.org/16/items/gov.uscourts.txwd.1099537/gov.uscourts.txwd.1099537.1.0.pdf

Jury verdict form: https://aboutblaw.com/40j.

Georgia-Pacific Factors: https://www.ipglossary.com/glossary/georgia-pacific-factors/#.YzqgmbTMK3A

As other commentators have already noted, the ‘mini-budget’ delivered by new Chancellor Kwasi Kwarteng on Friday (23/09) was anything but mini, carrying £45 billion in tax cuts across a range of instruments. Innovation was a phrase that appeared several times in his speech to the House and, whilst much analysis has already been produced following the budget, we seek to consider what its implications are for IP and IP management more broadly in the UK.

Perhaps the most fundamental point is that these measures have immediately impacted the value of the British pound, which plummeted to a fifty year low. Times remain tough and by all accounts a recession is oncoming. In this environment, the high cost and uncertain return nature of innovative activity, be that R&D or implementation of new technologies, remains risky. Some, particularly those for whom innovation is the business such as Information and Communication Technologies or Pharmaceuticals, will continue to innovate. Others may choose not to.

One of the most prominent announcements was that corporation tax will remain at 19% beyond April 2023. That will be encouraging for business, a smaller tax bill is always better after all. Yet one advantage of the proposed rate rise would be the increase in relative advantage imparted onto innovative businesses able to exploit the Patent Box tax regime.

The Patent Box is a preferential tax regime which seeks to reward businesses who keep R&D and the commercialisation of resulting IP within the UK by offering a lower rate of corporation tax on profits derived from that IP. That rate is currently 10%. Initially an Irish creation, there are now several such schemes in operation across Europe, and most states have some facility for encouraging R&D. At the core of the Patent Box Regime is an adequate valuation of patent rights.

The patent valuation under the Patent Box is very much business dependant; those that use patents intensively stand to benefit the most from it, obviously. A simple cut in corporation tax rate benefits all business. However, the patent valuations enabled under the Patent Box regime, allow companies to better appreciate the commercial opportunities associated with intellectual property; an area many businesses still strive to come to grips with.

The new Chancellor appears to like innovation, seeing it as integral to the Government’s growth goals. He sees the cancellation of corporate tax rate rise as a means to allow businesses to “keep more of their own money to invest, to innovate and to grow”. He is keen that financial instruments, notably pensions, be “unlocked” and used to support “innovative, high-growth businesses” and particularly UK science and technology start-ups. This once more underlines the necessity to adequately value intellectual property.

Patents are crucial for business; they protect the innovations upon which a businessis built upon and assist in raising capital. It is perhaps therefore surprising that the Patent Box has not featured in the Chancellor’s moves against taxes immediately. The Patent Box regime can be a means of targeted support for many enterprises. A cut in the Patent Box rate would achieve exactly the Chancellor’s aim with the adjustment to corporation rates: allow more money to be retained for utilisation into further innovation and growth. Preserving the regime, to the contrary, appears to be a good means to assure sustainable IP management strategies.

Perhaps another ‘mini’ intervention will recognise this potential.