The Patent Box

The “Patent Box” is an initiative by the UK Government aimed at increasing innovation by UK companies.  Qualify for the Patent Box, and (generally speaking) the profits of the business that flow from its patented products are taxed at a lower rate.

As with any tax break, there are a number of hoops to jump through before you can qualify.  Broadly speaking, these are:

  • it needs to be “your” patent.  This is not limited to patents whose registered proprietor is the exact company making the claim, fortunately.  So long as there is a genuine relationship, such that the company making the claim is either licensed under the patent, or is part of the same group and is making a contribution towards the exploitation of the patent, then the company should qualify
  • The intellectual property needs to be granted and in force.  Only certain forms of IP qualify, patents are included (obviously) but trade marks are not.  Despite the name, the Patent Box is not just for patents, however, as some other forms of IP do qualify.  If a patent is relied on, though, it needs to be a granted UK national patent or a granted European patent.
  • The profits need to be related to the IP in question.  Products sold which are covered by the patent are an obvious example, in which case it is the worldwide profits generated by that product that qualify, even if the patent is only in force in the UK.  Profits arising from licensing and sale of the IP can also qualify.
  • There is a mechanism for allocating the relevant overheads within the company so that the IP-related profits are properly arrived at.  A simple proportional allocation is possible for smaller companies, but larger companies need to put in place a division in their accounts so that they can audit the IP-related overheads.  Smaller companies may do this if they wish, for example if the overheads mainly relate to the non-patented products whereas the patented products are relatively more profitable.

The provisions are a mix of IP and accounting provisions, and in our opinion a properly-founded claim will result from a joint effort by accountancy and IP advisors.  Michael’s firm therefore offers a fixed-fee Patent Box certification service for accountants, others may be available.  

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Small Entity Fees

These are a concession made to impecunious applicants by the US and Canadian Patent Offices.  You declare to them that you are “small”, and in return for that they only charge you half fees.  So, a great deal, then?

No, it’s not.  It is a classic example of a good idea whose implementation means that it can cause great harm.  Go and have a look at the US definition of a small entity.  As you can see, it is relatively complex.  However, there are three broad classes:

  • and individual
  • a business who meets the size standards set forth in 13 CFR 121.801 through 121.805 (what? you don’t know these?)
  • a non-profit organisation such as a charity or university.

So far, so good.  However, there is a proviso to all of these, which is that the applicant must also be one that:

Has not assigned, granted, conveyed, or licensed, and is under no obligation under contract or law to assign, grant, convey, or license, any rights in the invention to any person, concern, or organization which would not qualify for small entity status as a person, small business concern, or nonprofit organization…

It’s obvious why that is needed – if it were not there, any organisation of any type or size could just set up a small company to own the patent or patent application, and licence the idea back to them.  However, it means that a genuinely small entity who has reached a deal with a large entity is no longer a small entity.

There lies the risk.  You can withdraw a claim to small entity status at any time, which means that most systems will assume that the status remains until instructions are received to withdraw it.  This means that you must tell your patent attorneys the moment you reach a deal with a large entity.  If they pay a fee at the small entity rate, perhaps one that you instructed a few months ago, on a date when you are not entitled to the fee reduction, then that is “fraud on the Patent Office” and you may lose the entire patent.

I have seen this happen in practice; small companies are bought out or agree a lucrative licensing deal.  Then a fee falls due.  A clerk somewhere is not told about the change, and pays the fee at the wrong rate… and the patent is instantly worthless.

That’s quite a downside risk.  Meanwhile, the upside benefit of halving the filing, examination and issue fees on a US application is just over $1,000.  Bear in mind that the official fees are just one outgoing, and that your patent attorney is unlikely to be offering half fees to small entities, and this figure is likely to be lost in the overall cost of patenting a typical idea.  So, plenty of risk, not much benefit.

Or, to put it differently, don’t bother with small entity fees unless you’re desperate.  After all, you do want to be bought out by a rich benefactor, don’t you?

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Can I extend an opposition deadline?

In the UK, yes. You can extend the initial two month period by one month upon request. File a form TM7a on-line at the UKIPO. You must file it by the original opposition deadline.

For Community Trade Marks (CTM), the answer is no. You get three months and that’s it.

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Do I need to register Copyright in the UK or EU?

There is no official UK or EU copyright database. Copyright protection occurs once the copyright work is created and the copyright owner is automatically entitled to all of the usual remedies under UK/EU law. No registration is necessary.

That said, the copyright owner must still prove the date of creation and that he or she is the author of the work concerned. Lodging these details with a commercial database provider may assist in this regard, but again it is not necessary.

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What can I say about my invention before filing?

Ideally, nothing.

Sometimes that isn’t commercially possible, though.  If you absolutely need to tell people about the invention and an application still isn’t filed, then make sure that those who receive the information are all under a strict duty of confidentiality.  Then, monitor them for compliance with that duty.  If they breach it, tell your patent attorney immediately even if you don’t plan to sue them for breach of confidence.

Anything else places your patent rights at risk.  Yes, there is grace period for US applications, but the patent rights in all other countries could be dead and if the disclosure starts being repeated and developed by others then you may be facing an interesting (read: expensive) time in the US Patent Office.

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What is the deadline for Appeal in a Community Design?

Chris Hall and I have been involved in a design invalidation case before OHIM.  The other side (the design proprietor) have had their appeal deemed inadmissible in a decision which (if it is followed in future) will affect how time limits should be calculated.  At present this applies only to designs, but given the similarities between the relevant Articles in the Design and TM regulations, there must be a risk that it applies also to trade marks.

A bit of background:

  • The Invalidity Division ruled that the design was invalid.
  • The decision was faxed to the proprietor on 17 July 2009.
  • In addition, on 21 July 2009, the decision was posted by registered mail.
  • Receipt was acknowledged by the proprietor on 23 July 2009.
  • The proprietor filed a Notice of Appeal on 24 September 2009.

The Decision

This was deemed too late.  The Third Board of Appeal ruled that the proprietor had been notified by fax on the 17 July, and therefore the Notice of Appeal had to be filed by 17 September 2009.  It was irrelevant that the proprietor was later also notified by registered letter as required by Article 48(1) of the implementing regulations.  This was as we argued before the Board of Appeal; so far, so good.

However, the Board went to comment that even if the decision had not been faxed to the proprietors, the Notice of Appeal would still have been filed too late.  The proprietor had acknowledged receipt of the registered letter on 23 July; therefore the due date was 23 September 2009, i.e. regardless of the “10-day rule” for notification by registered post.

There are two important principles to take from the decision.

1.   Decisions and communications subject to a time limit must be notified by registered post.  However, they may also be sent by facsimile or other means.  It is the first notification which is important for calculating time limits and dates.  If the fax arrives before the registered letter, it is the date of receipt of the fax from which time limits should be calculated.

2.   In the case of a registered letter, it is the date of receipt of the letter from which time limits should be calculated, not the date of posting plus 10 days (unless that leads to a date earlier than the date of receipt).

Both Chris and I think the second part of the decision cannot be right – effectively it takes away any meaning whatsoever for the 10-day rule.  However, it would be worth taking this into consideration when dealing with OHIM, particularly when filing Notices of Appeal.  In future it may be safest to file the Notice of Appeal within two months of the actual date of the decision.

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When is software patentable?

A common question.

There are three basic hurdles to clear in order for an idea to be patentable. It must be:

  • within an area of technology in which patents are permitted,
  • new (i.e. different to that which was previously known) and
  • inventive (i.e. not an obvious development of what was known).

The first criterion is usually called “inherent patentability”.  It is defined negatively – in other words, there are a number of areas which as declared to be unpatentable, and a patent application that sets out an invention which relates to one of those areas as such is liable to be refused. The “as such” qualification is important; it means that inventions which merely use or (indeed) rely on an excluded area in order to achieve some other effect are still patentable, because the invention is mainly concerned with that other effect, not just the excluded one.

There are four exclusions from patentability in European patent laws that usually cause problems for applicants. These are:

  • a method for performing a mental act
  • a method for doing business
  • a program for a computer, and
  • the presentation of information

From a practical perspective, to obtain a patent you need to identify something new about an idea that can be expressed in terms of an invention whose benefits lie outside these excluded areas. One way of looking at this is to start from the basis that an invention is one that makes a contribution to the field, and to then identify the field that is being contributed to. If it is the field of programs for computers (for example), then the invention is unpatentable.

However, if the contribution that is made by the invention lies outside these excluded areas, then it is patentable – even if the “new bit” lies within an excluded area (such as the software).  Thus, if you think of a novel operating method for a piece of known machinery that performs some function, and you then encode that operation method as software within a control module, then you have an “inherently patentable” invention (i.e. one that passes the first test and which is patentable if it is novel and inventive).  Here, the contribution to the art is the improved machine.

Alternatively, a piece of code that allows a PC memory to be addressed more efficiently is also patentable.  The contribution made by this invention is a PC that responds more quickly.

However, a new function for a word processor which allows an interesting new effect to be created on the page, or which allows the word processor to interact more efficiently with another program, is not patentable.  The contribution from these inventions is a better word processor, i.e. a computer program as such.

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Where should I patent my idea?

This is a really difficult question, and a very important one.  On the one hand, if you miss a country out then you may lose that chance forever.  On the other hand, if you choose too many then the costs involved could easily overwhelm you – especially if you are running a startup.

The important thing to remember is that (in general) patents can be enforced against someone who is producing the patented item, or someone who is importing the patented item.  So, if someone is producing an infringement in country “x” and then exporting it to country “y”, you can sue them in either country if you have a patent in both.  That is obviously the ideal  – i.e. to have that choice – as you can then choose the forum that is most convenient to you.  That might be the country in which the item is produced, as the resulting injunction will stop all production, including production for export anywhere.  Or it might be the country with the most favourable legal system, in terms of either its substantive law, its procedure, its language, or its costs.

But in reality, you can’t always have a free choice, because you can’t patent every invention in every jurisdiction.  You have to make a decision ahead of time.  So how do you do that?

Well, given that you can use the patent to stop people producing, or to stop them importing, then (in my opinion) the obvious route is to think carefully about your product and decide whether the production sites are limited, or the sales opportunities are limited, or neither.

If you’re Intel, then this is easy.  Chip fabrication plants are really hard to build and there are only about 5 countries in the world where they are (or could be) sited.  Cover those five and you’re done.  But this option is more widely applicable than you might think; some technologies need a lot of skill or know-how, and that can sometimes be concentrated in a limited number of countries.  IT, medical, automotive and the biotech industries all spring to mind.

Alternatively, if your widget can be produced anywhere at all (such as an injection-moulded item, for example), then think about the market.  Does it chime with specific conditions or attitudes that are local to a defined number of countries?  We acted for the inventor of the drawstring teabag, for example, for which the list of countries was easily definable based on a list of where teabags sold in significant numbers.  Other examples might be horticultural equipment suited to a temperate climate, or adverse weather equipment, or high-tech medical equipment.

If you’re in neither group – you have something that can be produced anywhere and which is wanted pretty well everywhere, then you have a dilemma.  An example would be a former client of mine who produced pipes, fittings and valves for distributing drinking water.  Here, you need to rank countries in order of importance, in terms of their actual or potential share of the market, start at the top, and work your way down until either your budget runs out or you have covered enough of the total market for the item.  Be realistic – if you have covered 90-95% of the available world market, then is it likely that someone will set up to supply the remaining 5-10%?  And if they do, will you care?

This is one reason why the Patent Cooperation Treaty (the “PCT”, i.e. an International Patent Application) can often be a very useful option.  Although it increases the end-to end cost slightly, it delays the country choice by up to 18 months.  That extra time can often be crucial in finding out exactly where the markets and the competitors are, and can let you make a far better informed choice.

A parting shot – there is one country for which I am routinely asked “Is it too late to file in X?”.  It’s not the only country I’m asked about in this way, but it does seem that every time I’m asked, that country is included in the question.  That does suggest that there is one country that is routinely missed out, and whose absence is regretted.  So think carefully about any decision not to include it.  So, which is it?…

… China.

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Ten ways to get better value out of your Patent Attorney

Using a patent attorney is expensive.

That’s not surprising; we’re highly qualified, and (most of us are) good at what we do.  What is surprising is just how many of our clients increase their bill unnecessarily.  By “unnecessarily”, I mean that they do things (or don’t do things) with the result that they pay more for exactly the same result.

So what are the main ways that clients do this?  The first one is the biggest one – the easiest and the most common way to run up a big bill while achieving nothing.

1.  Don’t reply on time.  Treat the deadlines that your patent attorney communicates to you as flexible.

The bad news is that none of them are really, truly flexible.  Most are extendable, yes (although not all of them are – so take care).  But all of them are real; if your patent attorney lets them roll past then there will be some sanction.  In the European Patent Office, we have to write to the examiner before the deadline expires and ask for more time; that is work for us and (guess what) we charge for it.  In the US, we can ask for more time retrospectively, but the USPTO charges for each month, and on a rising scale.  So even when more time is available, it is only available at a cost.

2.  Leave it to the last minute.

Sometimes, there are steps that we need to take that just require a simple “yes” or “no” answer from you.  Sometimes those require a similar amount of work from us – such as whether or not to pay an examination fee.  Other times, though, something that is just requires a brief step from you -such as “yes, please file in Paraguay” – involves a lot of work on our part, such as obtaining a Power of Attorney to file there, translating the application into the right language, and getting the text & the Power to a Paraguayan agent in time.  If you leave it to the last minute, we and all the other people involved have to drop everything else and treat your case urgently.  Guess what – that costs more.

Foreign filings are the most common area for this.  My personal record was the client who asked me at 2pm on the last day to file an application in China.  Think about the time difference; 2pm in the UK is actually after office hours in China.  Yes, I filed it, but the client was faced with a serious bill from the Chinese attorney whose evening he had no doubt ruined.

3.  Keep changing your mind

Tell us to do something, then decide you don’t want it after all.  Most importantly, wait until just after we have done it, paid the official fees, and sent you the bill before telling us.

(Yes, clients really do this.)

4.  Be vague and unclear

Tell us you’d like to patent invention “x”.  Let us draft a patent specification for that invention, then decide that actually you’d like to patent invention “y”, which is like “x” but much more widely applicable. We won’t mind, we’ll just redraft the application so that it approaches things from a completely different perspective.  That will take twice as long, though, and we charge by the hour.

5.  Don’t pay us on time

Ignore the bills we send.  After all, if we want them to be paid we’ll make a fuss about them.

This will have two effects; first, we’ll make a fuss and probably charge interest or (if things get serious) court fees.  Second, the next bill will be higher because, surprise surprise, we’ll be expecting you to be late with that one.  So, we won’t be letting you off any time, we won’t be cutting you any slack.  We feel we’ve been stung by you, so the sympathy isn’t there any more.

Worse still is the bill after that – if you’re a consistently slow or bad payer, we’ll be asking for cash in hand.  Why should we incur sizeable out-of-pocket disbursements for you when you don’t bother to pay us on time?  That means the money is in our account earning interest, when it could be in yours.

6.  Query every bill

Now, don’t misunderstand me here; if you don’t understand what the bill is for, or feel that it is on the high side, then query it.  You have a right to understand what you are paying and why, and if your patent attorney is not co-operative in this regard then you need to look for another one.

However, there are limits.  I remember one client who, we realised, had queried every single bill we had ever sent. Every single one, no matter how large or how small.  Worse, our replies to his queries then generated more queries, even though we thought that our replies were quite detailed and made things quite clear.  Eventually, we were spending as long dealing with his billing queries as we were spending on his substantive IP work.

No other client had ever raised that level of questions (or has ever since), so I am pretty confident that it was the client, not me.  We decided to politely decline all future work from that firm, which will have cost them more in the long run as their new attorney will have had to read into the cases.  Our alternative was to carry on working, but increase our rates dramatically to cover the extra time that would be needed.  You might think that would be harsh (as did I, which is why I withdrew instead) – but at an effective charging rate of half our usual rate, we were making a loss on that client.  Why should our other clients subsidise that one?

7.  Be obnoxious

You’re paying the piper, so you call the tune – right?  Yes, of course you do.

That entitles you to be as rude to the piper as you want – right?  After all, if he doesn’t like the colour of your money, he can go find another client – right?  You might be surprised to hear me say this, but yes – it does.

However, when you get stuck, when you need a quick bit of advice urgently, when you are caught short and need to give them late instructions, don’t be surprised if they are carefully recording every minute of work they do on your behalf.  Don’t expect any sympathy when it is time to work out the bill.  Don’t expect them to write off time (or forget to record it) because it was “only a telephone call” or it was “only a few minutes”.

It’s amazing how some clients think we’re worth several hundred pounds an hour, but not worth an ounce of politeness.

I’m not saying you need to be obsequious or treat us like Lords & Ladies.  Just be decent, be human, be friendly.  It means we might enjoy doing your work.  We might enjoy it for more than just the fees that it earns us.  We might actually want to keep you as a client, so that we can carry on doing it.  I don’t usually like management buzzwords, but that really is “win/win”.

8.  Be long-winded

The arguments and the examples that you give us will be used in support of your patent applications around the world.  In case you hadn’t noticed, they often speak different languages in these countries.  Whilst the foreign patent attorney may understand your language, the local Patent Office won’t.  That means translation work.  Translators charge by the word.  The more you use, the more it will cost.

If your patent attorney wants to spend their time (and therefore your money) editing your write-up so as to cut it down, he or she is doing you a favour, not ruining your work.  Trust them.

9.  Avoid modern methods of communication

Email works for us.  We can send one quickly, for you to read when it’s convenient.  If you reply by email then we can find it easily when we next pick up the case.

We’re quite happy to come and visit you instead.  We can easily spend an hour or more travelling to your office, then spend half an hour in your reception waiting for you to come and collect us, 20 minutes discussing what sort of coffee we would all like, 10 minutes discussing the weather, half an hour explaining the basic principles of patent law (again), then 5 minutes explaining what the issue is and getting a decision out of you as to what we should do.  Then starting all over again for the latecomer who missed the first half and really needs an update.

Seriously, we really don’t mind doing all that, if you prefer.  But it will cost more than 5 minutes of email correspondence would have (and we can throw in a free cc for the latecomer…).

OK, sometimes a meeting is the best way to move forward efficiently, and they are useful in the initial stages so that people get used to each other and work out how best to rub along together.  But be reasonable… don’t call a meeting for everything and anything.  If you like face-to-face meetings, if that’s how you work best, then by far and away the best way to do this is to have quarterly review meetings where you go through the whole portfolio in one big bang and reach a decision on everything that is outstanding.  Set the date for these well in advance, so that we can prepare and bring all the issues with us.

10.  Don’t bother with Our Reference

My firm is on the small side, and has a records system with something like 50,000 cases on it.  Of these, about 9,000 are live pending cases, the rest are granted cases that we monitor for renewals purposes and cases that have lapsed or expired.  You can imagine the reaction when something arrives referring to “that case you did for our sister company a few years back”.

All of our cases are indexed by our reference number.  That’s why we allocate one.  Any other form of reference, be it the case title, the application number, the filing date, whatever – unless it is a case we’re really familiar with, they all need to be put through the records system so that we can work out our reference.  Tell us that in the first case, and we can work much more efficiently.  And if we can work more efficiently, we can compete better on whatever is important to you – be it price, responsiveness, or whatever.


What you really want to know, of course, is how to minimise your bill (without affecting your portfolio adversely).  That’s easy; just do the opposite of the above.

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UK Trade Mark Opposition Deadline

The Opposition deadline in the UK is 2 months from the date of the advertisement in the Trade Marks Journal.  Simple enough, one would have thought?

No.  There is a trap for the unwary.

Every other deadline in the IP world that is expressed in terms of a number of months (/days/weeks/years)  works by ending on the day in the relevant subsequent month that has the same date number as the day on which the deadline started from.  Put simply, if you have 2 months starting from the 4th July, your deadline expires on the 4th September and you have until midnight at the end of the 4th September in which to file whatever it is that you need to file.

Except for a UK Trade Mark Opposition.

In a recent Practice Notice, the UK Intellectual Property Office announced that they have looked at the wording of the relevant Rule and have decided that, in this case, the usual interpretation is wrong.  Now, I personally disagree with their interpretation, but this is not the place for that.  What you need to know is:

For UK Trade Mark Oppositions, the deadline is one day before 2 months after the advert.

So, for example, if the advert takes place on the 4th July, then the two month term for Opposition expires on midnight at the end of 3rd September.

If you oppose the application or seek an extension* of the opposition period on 4th September, you will be too late.  You will have to wait for the registration process to complete, and then apply to invalidate the registration.  You will find that the burden of proof has then shifted against you, though.

*a one-month extension of the two-month opposition period is permitted, provided that the extension is applied for in time and in the correct manner.  The extension is personal to the person that asked for it, though, so you will need to name the potential future opponent(s) and will not be able to change this afterwards.
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