Are patent boxes more than an IP-shifting exercise?

Managing IP is part of Legal Benchmarking Limited, 1-2 Paris Gardens, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Are patent boxes more than an IP-shifting exercise?

There has been much focus over the past week on how companies use patents to reduce their tax liabilities

patent-box-emma.jpg

It’s a hot topic in the US in particular, where a series of executed and proposed so-called inversions designed to move the tax domicile of US companies to lower-tax jurisdictions has pushed tax policy up the political agenda.

The New York Times, for example, last week considered how pharmaceutical and biotech companies are increasingly transferring patent rights to subsidiaries abroad to enable them to enjoy lower rates of corporate tax. In Europe, the European Commission’s explanation on Tuesday of why it was taking on Ireland over its tax arrangements with Apple prompted US Senator Carl Levin, a long-time critic of multinational companies’ tax practices, to decry Apple’s practice of shifting some of its IP overseas.

But patent boxes ­– which offer companies a lower rate of tax on that part of their income attributable to patents ­­­­– have also come under scrutiny. Barrister and tax campaigner David Quentin and Nicholas Shaxson, the author of a book about tax havens, last week outlined their objection to the scheme in the UK.

They give three main reasons in support of their argument: first, that an 11% tax cut on the relevant income is unlikely to kickstart projects that would not otherwise get off the ground. Second, that the patent box rules do not simply reward the creation of new technology but also the owners of patents brought into the UK, as long as some work is done in the UK to exploit the IP. Third, that the patent system itself is designed to spur innovation, without additional subsidies.

The UK government’s real motivation in opening its own patent box, say the authors, was to compete more effectively in an international taxation race.

Evidence to support that view came last month from Germany, where Markus Kerber, the director of the Federation of German Industries, called on his own government to introduce a patent box to create meaningful incentives for keeping innovation and research and development in Germany.

There is limited data so far on the impact of the introduction of the UK’s patent box on the country’s rate of innovation. But we are interested in your experiences. Have the tax benefits on offer in those countries with a patent box changed the way your company treats IP? Have the incentives it offers been more than simply an opportunity for an accounting rejig? Do let us know.





more from across site and SHARED ros bottom lb

More from across our site

The renowned food brands were represented by a host of lawyers, including members of the firms’ IP teams
Partners at Bird & Bird and Taylor Wessing discuss how Saudi Arabia offers unique opportunities for firms dealing in IP and tech
Attorneys explain why there are early signs that the US Supreme Court could rule in favour of ISP Cox in a copyright dispute
A swathe of UPC-related hires suggests firms are taking the forum seriously, as questions over the transitional stage begin
A win for Nintendo in China and King & Spalding hiring a prominent patent litigator were also among the top talking points
Rebecca Newman at Addleshaw Goddard, who live-reported on the seminal dispute, unpicks the trials and tribulations of the case and considers its impact
Attorneys predict how Lululemon’s trade dress and design patent suit against Costco could play out
Lawyers at Linklaters analyse some of the key UPC trends so far, and look ahead to life beyond the transition period
David Rodrigues, who previously worked at an IP boutique, said he may become more involved in transactional work at his new firm
Indian smartphone maker Lava must pay $2.3 million as a security deposit for past sales, as its dispute with Dolby over audio coding SEPs plays out
Gift this article