The patent conundrum for SMEs

For many SMEs, intellectual property is becoming increasingly important, especially in the digital age when companies of all sizes are at risk of their unique products or services being infringed upon. Indeed, protecting genuine business assets may be vital to the overall long-term viability of any SME.

Patents are especially important for entrepreneurial businesses who have invested considerable time and money in a new unique product. In my experience, I have seen that failing to protect your IP can mean losing market share to competitors and ultimately result in slower growth and loss of revenue. But it is a fine balancing act. While the old adage “if it’s worth copying, it’s worth protecting” may be true, the overall cost of patenting may be prohibitive for small businesses and getting expert advice on the pros and cons is vital.

There was a major change in the patenting application process in April 2018 as charges at the UK Intellectual Property Office (IPO) increased after a number of years of being static.

For applications filed electronically the main changes from 6 April were:

• Application fee rising from £20 to £60 (+£15 if not paid on filing)
• Search fee increasing from £130 to £150
• Examination fee up from £80 to £100
• New excess claims fee (£20 for each claim over 25) and excess pages fee (£10 for each page of description over 35)

Renewal fees are also increasing from Year 12 onwards by £10 per year while the renewal fees up to Year 11 are unchanged.

While these increases may be disconcerting, it’s worth pointing out that UK patent fees remain considerably lower than applications made to the European Patent Office and United States Patents and Trademark Office. SMEs should certainly not be put off seeking patents, but the overall cost/benefit must always be carefully reviewed. The decision-making process will depend somewhat on the sector, for instance, in the technological or science sector where a stream of new patents may be needed, compared to a niche business with one unique product which needs protecting quickly.

The long-term tax savings of obtaining a patent cannot be understated. SMEs can benefit from the patent box regime in addition to large companies. The patent box applies a reduced rate of corporation tax to profits attributable to qualifying patents and similar intellectual property (IP). The saving is 9% of qualifying profits, so can produce significant reductions to the companies tax bill.

Ultimately, the decision on whether or not to apply for a patent will depend heavily upon your long-term business plan and financial strategy. While it can be a very time-consuming and lengthy process (anything from a few months to up to four years), the commercial value could pay dividends in the long-run to grow your business and gain a market edge.

Michaela Johns is a Director at HWB and has more than 30 years’ experience of working with SMEs. For an informal discussion about the patent box tax regime call Michaela on 023 8046 1256 or email michaela.johns@hwb-accountants.com