When seeking patents for medical devices, the abundance of prior art out there can mean that the available scope of protection may seem too narrow to be of any real benefit. Adamson Jones associate Georgina Bagnall and senior associate Chris MacDonald explain why Patent Box relief provides a strong incentive to keep going.
Georgina Bagnall
Chris MacDonald
To say designing and developing a medical device is complicated would be an understatement. In addition to the up-front costs, extensive research and development, and regulatory hurdles inherent in the industry, there is also a high risk of infringing on the designs and patents of other devices.
In terms of patents, the field of medical devices is one of the busiest. According to the European Patent Office (EPO), the 15,683 patents filed for ‘medical technology’ accounted for the second-highest number in 2022, following year-on-year increases since 2019, particularly during the pandemic. The US submitted the most patent applications in 2022, although the number of patent applications filed by China and Switzerland also rose sharply.
These numbers are reflective of the inherent nature of medical device development. Unlike other R&D based industries, having a patent in place before seeking investment or taking the product to market is non-negotiable.
Unfortunately, this is where many businesses encounter issues. The world of medical device patents is, to put it bluntly, a minefield. Freedom to Operate (FTO) searches and patentability checks – which, ideally, should be completed between coming up with the initial concept and fine-tuning it – are likely to expose numerous areas of potential overlap or infringement.
As a result, many concepts do not receive the desired scope of protection for preventing competition, leading inventors to, regrettably, throw in the towel. This means that any possibility of recouping the expenses incurred in preparing and filing a patent before examination is lost.
Encouraging innovation
With Patent Box, however, even a patent with a limited scope of protection can still be valuable.
Patent Box is a government tax incentive designed to encourage innovation and reward businesses that invest in R&D. As such, it incentivises businesses to, not only retain and commercialise existing patents, but to develop new patented products as well.
Using the scheme, a company can reduce the Corporation Tax rate on profits derived from the sale of products and services containing a qualifying patented innovation to 10 per cent, a figure significantly lower than the headline rate of 25 per cent. This applies to profits that derive from worldwide sales of products either containing the patented part or subject to the patented process.
Although perceived as complex, Patent Box offers numerous benefits to inventors who push ahead with securing a patent for their product or service, regardless of whether the scope of that patent matches what they originally expected or hoped for.
Providing a company owns or exclusively licenses such a patent granted by the UK Intellectual Property Office (UKIPO), the EPO, or certain European Economic Area countries, it stands to enjoy long-term tax relief that could easily offset the cost associated with the patent application process. In some cases, such benefits may even be backdated to when the application was made.
The technical and financial justification required to make a Patent Box claim, however, is where the complexity lies. To calculate the final figures, a business must identify specific revenue streams, assess intellectual property (IP) rights, review the R&D involved, and apply an HMRC formula. Both patent attorneys and Patent Box specialists are invaluable at this stage – more so the earlier they are involved in the process.
While it may seem that Patent Box adds another layer of complexity in an already complex process, it is a highly valuable – and underused – tax relief tool for businesses in the UK. Backed by the right advice, it could even be the key to harnessing the value of a medical device patent, even if said patent falls short of what you wanted it to be.
Email patentbox@gateleyplc.com to find out if your patent or technology is eligible for Patent Box tax relief or visit https://gateleyplc.com/services/patent-box/ for more information.
