The new beneficial Patent Box rules will be introduced with effect from 1 April 2013 and it is important therefore that companies consider how they might benefit from a 10% corporation tax rate.
There is a common misconception amongst tech companies that software cannot be patented (although this misconception is understandable when you take an initial look at the relevant patent law…)
UK patent law excludes:
‘a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer’
from constituting inventions for the purposes of filing a patent; however, the legislation subsequently offers a small crack of light for tech companies by limiting the application of this exclusion.
To understand more we need to refer to relevant case law and this has evolved to the stage where software can be patentable in the UK and Europe where it can be demonstrated that the software or coding makes a technical or inventive contribution to ‘human knowledge’. In effect, we look beyond the fact that the invention is a computer program to the underlying technical contribution or technical solution that it brings about provided it is novel and inventive.
For example, consider a software program that allows imagery to be digitally enhanced or improved. This could be patentable if it can be demonstrated that the technical problem that has been overcome is novel or inventive and therefore results in a contribution to ‘human knowledge’ – it just ‘happens’ to have been achieved using a computer program and therefore this should not preclude a patent. You can envisage software that can solve technical problems for physical hardware e.g. speed of data transfer, as well as solving technical problems related to the software all of which could be patentable.
Both the UK and European patent offices grant patents for software in cases where the facts fit which is crucial for the purposes of claiming the benefits of the Patent Box. The US rules are of little assistance to us here as a US granted patent will not qualify for the Patent Box.
Incidentally, if you find yourself pursuing patents to protect your idea and benefit from the Patent Box – don’t forget about R&D tax credits!