Intellectual Property Valuation and

Innovation

Event and Book Launch

Jon Dawson

28 November 2013

Intellectual Property

Valuation and Innovation

Professor Ruth Taplin, Editor & Director of the Centre for Japanese and East Asian Studies

– Book overview & highlights of chapters

Dr. Tim Jones, Founder of Future Agenda

– Key points from chapter: Future Innovation & Intellectual Property

Graham Morgan, Partner & Head of Innovation, Kingston Smith LLP

– Tax Incentives available for Intellectual Property

By Prof. Ruth Taplin

For Book launch at Kingston Smith

28 November 2013

Intellectual Property Valuation and Innovation: An Overview There is a dichotomy in the global move towards a

universal definition of Intellectual Property Valuation and Innovation

Is the production of content being decoupled from the original creator making IP irrelevant?

Is open source a genuine alternative with no one owning the IP or it being granted royalty free to everyone?

Can we create value in health care through social innovation by preventing illness through social means?

Intellectual Property Valuation Can signalling through the financial reporting of

research and development costs affect the market value of companies?

Can the value of the energy we use be turned into a universal taxation tool?

Is all value creation intangible –the case of residual value insurance in the maritime sector.

Are different forms of co-creation a new way of adding value?

Intellectual Property Valuation Can innovative ways to create Big Data create value for

users- the example of crowdsourcing

Is the use of innovation and value creation essential to ending the current economic crisis?

Are both tangible and intangible assets capable of producing value but in different ways

Will Intellectual Property continue to be essential for value creation?

Future of Innovation and Intellectual Property

28 November 2013 | Tim Jones

Innovation and Intellectual Property Innovation is increasingly moving beyond the established arenas of

product and technology development where IP has traditionally had a major role to play - we need to understand potential future impact.

Looking Forwards Organisations increasingly want to identify and understand both the

anticipated and unexpected changes from within and outside their sector so that they can be better prepared for the future

Looking Back Ten years ago some saw the emerging shifts that might have impact to

include the resurgence of patent pools, IP development companies and new financial strategies such as Asset Backed Securitization

Companies of Note Over the past decade many have been surprised by shifts such as

the success of ARM’s licensing business model and the ways in which Amazon and Google have built and exploited their IP portfolios

0

200

400

600

800

1000

1200

1400

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Amazon

Google

# US Patents Granted (USPTO)

1. Differentiated Knowledge 2. The End of IP 3. Failed Drugs 4. Business Model Open Innovation 5. Corporate LEGO 6. Projects Worth Working For 7. Big Collaboration

We see seven issues that may have significant future impact

The End of IP Following change in the music industry, technologies such as 3D printing are decoupling the production of content from

the original creator and, in doing so, IP is becoming irrelevant.

Business Model Open Innovation Increasing sector-to-sector transfer of know-how independent

of IP enables successful approaches to be adopted and adapted without value transfer between parties.

Corporate LEGO With more free agents and outsourcing, more functions

within organizations are interchangeable and easily rebuilt around new value-creating units.

Future Agenda 84 Brook Street London W1K 5EH +44 203 0088 141 futureagenda.org tim.jones@futureagenda.org

The world’s leading open foresight program

Tax and Innovation - Update

Graham Morgan

November 2013

Topics

Research and Development Tax Reliefs

The Patent Box

Research & Development Tax

Reliefs

Research & Development Tax

Reliefs

Three separate schemes:

– SME scheme – deduct 225% of expenses or

surrender costs for payment of 24.75%

– Large company scheme (until 2016/17) –

deduct 130% of expenses

– Large company scheme (optional until

2016/17) – Above the line credit

SME – group has less than 500 staff, turnover up

to €100m and balance sheet total up to €86m

Research & Development Tax

Credits – SME scheme

R&D tax credit claim

£

No R&D tax credit claim

£

R&D expenditure 100,000 100,000

Either:

(A) Surrender 225% loss

to HMRC for 11% payment

(24,750)

____-___

Net cost of R&D 75,250 100,000

OR

(B) Offset 225% against

taxable profits taxed at

23%

(51,750)

(23,000)

Net Cost of R&D 48,250 77,000

R&D Tax Relief – Large

Company scheme

R&D tax credit claim

£

No R&D tax credit claim

£

R&D expenditure 100,000 100,000

Offset 130% against

taxable profits taxed at

23%

(29,900)

(23,000)

Net Cost of R&D 70,100 77,000

Research & Development Tax

Credits

To qualify for R&D, your project must fulfil

the HMRC definition. They look at four key

aspects:

– What is the scientific or technological advance?

– What were the scientific or technological

uncertainties involved in the project?

– How and when were the uncertainties actually

overcome?

– Why was the knowledge being sought not

readily deducible by a competent professional?

Research & Development Tax

Credits

No minimum annual claim from 1 April

2012

Qualifying expenditure:

– Employee costs

– Subcontractors (65%)

– Consumable stores

– Software used directly on R&D project

What is “R&D” – The 5 “P”s

Are you developing new Products?

Are you improving or developing

new Processes?

Are you filing for a technical

Patent?

Do you have engineering or

technical Professionals?

Are you developing Prototypes or

bespoke equipment?

R&D Tax relief –

Collaborating with our R&D

Partner “Peer to peer” interview between

RDP expert and client technical

staff to identify establish feasibility

of claim and identify “projects”;

Scoping and agreement of basis of

charging;

Identification of qualifying

expenditure and quantifying claim;

Preparation of supporting

document;

Incorporate claim in CT Return.

Patent Box

Overview of the “Patent Box”

A new system from 1 April 2013

to reduce the tax charge for

companies exploiting qualifying

patents etc;

Applies to profits derived from

– Licensing or sale of patent rights or

certain medicinal/botanic

innovations;

– Sales of patented invention or

products incorporating it;

– Use of patented invention in

company’s trade;

– Infringement and compensation.

Optional regime. Companies elect

in.

Patent Box

2013/1

4

2014/15 2015/16 2016/17 2017/18

Effective tax rate on

Patent Profit 15.2% 13.3% 12% 11% 10%

A product only needs to contain a single patent for all profits from the sale of

that product, and sale of accessories and spare parts to qualify for the special

Patent Box tax rate.

Typical Patent Box structure

Holding Company must actively manage

the patents it holds by being involved in

planning and decision making in developing

and exploiting its patent portfolio.

Development Company must

significantly contribute to the creation

of an eligible patent or patented invention or

perform a significant amount of activity to

develop the patent or patented invention or

any product or process incorporating the patented

invention

Patent

Holding

Company

Patent

Developmen

t Company

Grant of

exclusive

licence

Patent Box – Recent

Developments

July 2013 – Germans call for

ban on all EU tax breaks for

patents;

EC says UK patent box violates

several provisions of the EU's

code of conduct on taxation;

22 October 2013 - EU Code of

Conduct Group met;

Agenda item for December

ECOFIN;

Watch this space!

Disclaimer

This presentation covers topics only in general terms and are intended to give a wide audience, an

outline understanding of issues in tax, and therefore cannot be relied on to cover specific situations;

applications of the principles set out will depend on the particular circumstances involved.

Furthermore, responses given in the seminar to questions are based on only an outline

understanding of the facts and circumstances of the cases and therefore do not form an appropriate

substitute for considered specific advice tailored to your circumstances. We recommend that you

obtain professional advice before acting or refraining from acting on any of its contents. We would be

pleased to advice you on the application of the principles outlined in this presentation to your specific

circumstances, but in the absence of such specific advice cannot be responsible or liable.