Harnessing Patent Box relief for medical device R&D

When looking to patent medical devices, the vast amount of prior art can result in the available scope of protection seeming too narrow to be of any real benefit. We explain why Patent Box relief incentivises inventors to continue with the patent application process.

Designing and developing medical devices is an incredibly complicated process. As well as the up-front costs, extensive research and development, and robust regulatory criteria intrinsic to the sector, there is also a high risk of infringing on the designs and patents of other devices.

The field of medical devices is one of the busiest in terms of patents. 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. In 2022 the US submitted the most patent applications, while the number of patent applications filed by Switzerland and China also rose sharply.

These numbers are reflective of the fact that, unlike other R&D-based industries, within medical device development having a patent application in place before pursuing investment or taking the product to market is non-negotiable. 

However, this is where many businesses encounter obstacles; the world of medical device patents is difficult to navigate. Freedom to Operate searches and patentability checks – which, ideally, should be completed between the initial concept stage and fine-tuning – are likely to uncover numerous areas of potential overlap or infringement.

As a result, many concepts cannot receive the desired level of protection. This can lead applicants to abandon the application, and any possibility of recouping the expenses incurred in its preparing and filing is lost. 

Encouraging innovation via Patent Box

With Patent Box, however, even a patent with a limited scope of protection can still be valuable. Patent Box is a UK Government tax incentive designed to encourage innovation and reward businesses that invest in R&D. The scheme incentivises businesses to develop new patented products as well as retain and commercialise existing patents.

The Patent Box allows profits derived from patents to be taxed at a corporation tax rate of just 10%, which is significantly lower than the headline rate of 25%. This applies to profits that derive from worldwide sales of products either containing the patented part or subject to the patented process.

Although often perceived as complex, Patent Box offers numerous benefits to those who pursue patents for their products or services, regardless of whether the breadth of the final patent claims matches what they originally intended or hoped for.

So long as 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 can benefit from long-term tax relief that could easily offset the cost associated with the patent application process. It is even possible in some instances for such benefits to be backdated to when the application was first made.

Technical and financial justification 

In order to make a successful claim for Patent Box relief, a business must identify specific revenue streams, assess intellectual property rights, review the R&D involved, and apply an HMRC formula. This is where things can get complicated for applicants. Patent attorneys and Patent Box specialists can prove invaluable at this stage and should be involved from early on in the process.

While it may seem to some that Patent Box adds an extra layer of complexity to an already complex process, it is a highly valuable – and underutilised – tax relief tool available to UK businesses. Backed by expert advice, it could even be the key to harnessing the value of a medical device patent, even if that patent falls short of what was originally hoped for. 

Reworked from the original article in DesignSolutions.