• Biggest jump in ten years
• Improvements to UK patent protection regime means businesses incentivised to invest more

The number of patent applications granted in the UK surged 29% to 2,992 in the last year up from 2,323 in 2010, the largest jump in a decade, says City law firm RPC (Reynolds Porter Chamberlain LLP). (year to December 31^st, see chart)

RPC says that the jump will be welcomed by the UK Government, which is relying on innovation in the UK to return to a sustainable economic position.

Source: IPO

David Cran, intellectual property and technology Partner at RPC, comments: “UK businesses are some of the most innovative in the world and a proportion of this increase is likely to reflect successful research and development by UK PLC.”

“Another factor at play is the importance of the UK market to international, IP-dependent businesses, who apply for a UK patent to protect their products from competitors in the UK.”

The increase in registrations was driven by patents being granted for:

• Drilling and mining equipment, up 29% to 498 from 387
• Health and surgical products, up 53% to 480 from 314
• Vehicles and transport, up 68% to 689 from 490
• Electric power, up 58% to 635 from 401
  
  

Says David Cran: “The UK is a centre of excellence across many disciplines, from high tech engineering and mining equipment through to pharmaceuticals and medical devices.”

According to RPC, the increase in patents granted comes despite a continuing decline in the number of patent applications made in the UK, which fell from 20,196 in 2002 to 15,343 in 2011. (see table below)

David Cran continues: “The good news is tempered by a concerning trend towards fewer patent applications being made in the UK.  If businesses reduce their investment in researching, and protecting, innovative new products and processes, that will have an inevitable impact on the new development cycle.”

“With the economy underperforming, some businesses are reluctant to spend a lot of money on R&D, because the outcome may be uncertain, or it may take a long time to deliver a return on investment.  However, successful innovation can deliver substantial returns, so cutting research spending means losing out on this potential revenue.”

“It could be that businesses are cutting overall R&D investment as a cautious measure in the current low growth economy, but spending more money on the most promising projects and patents.  That may explain why more of the UK patent applications are resulting in patents being granted.”

“The Government has a crucial role to play in promoting R&D by making sure the UK has a supportive, internationally competitive infrastructure for business to invest in intellectual property.”

Reforms to patent rules increasing their value for businesses

RPC says that three changes to the UK patent regime could stimulate greater investment in R&D by UK businesses:

1.  “Patent Box”* 10% tax rate on profits generated from patents to come into effect from 1 April 2013

David Cran explains: “The Patent Box was a highlight of the Budget for innovative UK businesses.  This lower tax rate, together with the changes to R&D tax relief that will also come into effect from 1 April 2013, will substantially increase the UK’s competitiveness as a place to invest in R&D and intellectual property.”

2.  Reforms to the UK court system have made it easier for small business to enforce their intellectual property

RPC says that reforms made in October 2010 to the UK’s Patent County Court makes it easier for small businesses to protect their intellectual property by providing a streamlined and more cost effective procedure, including a cap of £50,000 on the costs payable to the other party if unsuccessful.

In October 2011 further reforms set a clear distinction between claims that would be heard in the patent county court (where costs are capped) and the High Court (where costs are not capped).

David Cran says: “For small businesses the worry about a patent dispute is that costs will get out of hand, and that the downside of losing is simply too great, so these reforms were crucial in removing uncertainty for innovative SMEs.”

“SMEs that want to protect their intellectual property in the UK courts now have a lot more certainty about how much a dispute will cost them.”

3.  Moves towards a single European patent

RPC explains that plans for a single European Patent are being pushed forward in the EU (with the exception of Spain and Italy), which could simplify the process for businesses applying for a patent to protect their inventions across the EU.

David Cran comments: “A unitary European Patent system that simplified the current position of separate patents for each European country would be welcomed by most UK and European businesses, as it should reduce costs and increase R&D investment in Europe by making it more competitive with other territories, such as the US.”

The European Commission has claimed that it can cost more than €32,000 to obtain patent protection across the EU (given patent and translation costs) compared to $1,850 on average for the US.

David Cran continues: “The current proposals for a single European Patent, which include a centralised European patent court, remain controversial and have been heavily criticised by many, including the UK’s Parliamentary European Scrutiny Committee.”

“One of the key concerns is that any benefits at the patent application stage will be more than outweighed by the additional costs, delays and uncertainties resulting from the new unitary court system – these issues must be addressed if businesses and investors are to have confidence in the new system.”

Adds David Cran: “Traditionally businesses have viewed the UK’s infrastructure for innovation as too costly.  Patent owners have had to pay too much to obtain protection of their intellectual property and they have not been incentivised through the tax system.  It has then been costly and time-consuming for them to defend their patents and other IP in the courts. There are encouraging signs that this is changing – but there is more to be done.”

^{* The “Patent Box” tax incentive scheme enables companies to choose to apply a 10% corporation tax rate on all profits attributable to qualifying intellectual property from April 1 2013.  The legislation puts in place a clear framework explaining how businesses can calculate how much profits is attributable to qualifying intellectual property.}

ENDS

Press enquiries

David Cran, Partner
RPC
Tel: +44 (0) 20 3060 6149

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Mattison Public Relations
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