A granted patent offers a strong monopoly right which allows an applicant to prevent other businesses from implementing their patented idea. This helps a business create a competitive advantage by securing their place in the market, in addition to regaining the costs associated with developing and commercialising their inventions.
Although this protection is often reason enough for filing a patent application, there are other advantages associated with filing, which may be particularly relevant to start-ups and smaller businesses. In this article we explore some strategic benefits to filing a patent application which go beyond the monopoly protection afforded by a granted patent.
Patent Pending
Filing a patent application allows an applicant to stake their claim to an invention by securing a filing date. Given that virtually all jurisdictions now operate on a first-to-file system, the importance of acquiring a filing date cannot be overstated. Under a first-to-file system, patent rights are awarded to the first person to file a patent application for a given invention, regardless of who conceived of the invention first. This means that if two inventors independently develop the same invention, the one who files their application at the patent office earliest will be entitled to the patent, even if the other inventor came up with the idea months or years before. For this reason, it is important for applicants to have processes in place to identify patentable inventions early and to file applications without delay.
In addition, once a patent application has been filed, the applicant is able to refer to products or processes incorporating the features of the claimed invention as 'patent pending'. The use of the 'patent pending' marking offers start-ups and SMEs at least two distinct advantages. Firstly, it allows the business to build credibility, as it demonstrates a willingness to develop and safeguard proprietary technology. This in turn can signal to potential investors that the business takes its intellectual property seriously, enhancing its attractiveness as an investment opportunity.
Secondly, the use of 'patent pending' may deter competitors from launching competing products. In our experience, it may even lead to competitors taking products that could potentially infringe the patent once granted off the market. As a result, filing a patent application can deliver commercial benefits to a start-up or SME well before the patent is granted.
Patent Box
Under the UK Government's Patent Box scheme, a company holding a granted patent may benefit from an effective Corporation Tax rate of 10% on profits derived from its patented inventions, compared with the standard rate of 25%.
To benefit from the Patent Box scheme, a company must be liable to pay Corporation Tax, own or hold an exclusive licence over qualifying patents, and have undertaken qualifying development on those patents. Qualifying patents include those granted by the UK Intellectual Property Office, the European Patent Office, and patent offices in certain EEA countries. The reduced rate of Corporation Tax then applies to income derived from exploiting the patented invention. Such income may include profits from the sale of patented products, licensing income, and income from infringement suits (for example, damages).
Therefore, businesses interested in reducing their Corporation Tax liability may wish to pursue an alternative to the usual patent prosecution strategy. That is, typically a business will pursue broad patent claims with a view to capturing a wide range of potential infringers. However, broader claims can result in extended prosecution and a longer wait before the patent is granted.
For businesses wishing to benefit from the Patent Box scheme, an effective strategy may be to pursue narrower claims that cover the specific product or process used to generate revenue, with a view to claiming relief once the patent grants. This would typically shorten the time until grant and allow the tax savings to be realised earlier. In this respect, relief can only be claimed once the patent has been granted. However, relief can be backdated for up to six years prior to grant, provided the business has already elected into the Patent Box scheme.
UK Founders VISA
If you are an innovator outside the UK, looking to bring your business (and yourself) to the UK then filing a patent application may help you attain a visa. Specifically, a patent application may help in securing a UK Innovator Founder visa.
The UK Innovator Founder visa exists to attract new businesses, and their founders, to the UK. In order to apply for the visa, you must be able to show that your business idea is new, innovative, viable and scalable. An application is then assessed by an endorsing body to ensure that these requirements are met. Successful applicants can then stay in the UK for up to three years, with an unlimited number of extensions being available.
In this regard, a patent application can go a long way to demonstrating both that the business idea is new and innovative. This is because novelty and inventiveness are requirements for patentability and, although it is not guaranteed on filing that a patent application meets these criteria, filing a patent application is a clear indication to an endorsing body that a business believes it has new and innovative ideas. Moreover, because a granted patent can be a strong source of income, for example through licensing or sale of a patented product, a patent application provides a solid basis for arguing that the business is both viable and scalable.
Conclusion
While the monopoly protection afforded by a granted patent remains the primary motivation for most applicants, the strategic benefits of filing a patent application extend far beyond this. For SMEs and start-ups in particular, filing a patent application can deliver immediate commercial advantages through the 'patent pending' status, which builds credibility with investors and may deter competitors. Once granted, patents can unlock significant tax savings through the Patent Box scheme, and may even support visa applications for founders looking to establish their businesses in the UK.
As such, a patent application represents more than just legal protection, it is a strategic business asset that can enhance a company's market position, financial performance, and growth potential from the moment it is filed.
Please get in touch with Lewis Silkin if you would like to speak to one of our experts about patent application filing strategy.
