GJE News Briefing

Welcome to issue 3 of our regular legal briefing, designed to provide short, useful analysis of topical events in European IP. This is a trial service and we are always delighted to receive feedback on our coverage and suggestions for areas you would like us to write about.

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Patent Update

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Taking advantage of the UK 's proposed patent-related tax breaks

By Helen Jones

The UK government has set out its plans to offer tax breaks on profits from patents and related UK and European IP rights. From April 2013 - assuming the draft Finance Act 2012 is enacted unchanged - a 10% tax rate will apply to a proportion of the profits from the licensing or sale of qualifying IP or from sale of products that incorporate it. This compares to the headline corporation tax rate of 30% (20% for small companies). Exactly what proportion depends on a formula designed to exclude profits derived from routine manufacturing or development functions (set at a level of 10%) and profits derived from exploitation of trade marks and other marketing-related intangible assets. Companies will be able to decide whether to opt in to the regime, balancing the extra administrative burden against the potential benefits.

The draft Finance Bill can be found here (pdf). The detailed discussion of the ‘patent box’ measures begins on page 95. Our fuller analysis of the measures can be found on the GJE Web site here.

Business implications

The UK government hopes to persuade companies to move high-value jobs associated with the development, manufacture and exploitation of patents to the UK. While some commentators have suggested the administrative burden of the scheme will outweigh the tax benefit, we believe that the rules will favour medium as well as large companies, and the concessions for small companies should allow even these to benefit from the regime.

Companies involved in licensing out their IP rights for a royalty should beware the proposal’s ‘active ownership’ requirement – designed to stop companies that have not contributed to the creation or development of the IP from benefiting. Receiving tax relief on the license revenue requires the licensor to retain a measure of management control. The removal of a return for use of marketing assets, may indicate that patent owners should consider carefully whether any trade marks should be included in the rights granted or whether this will increase the administrative burden in the tax calculation.

Legal implications

For patent advisors it will be important to understand some aspects of the scheme. For instance it may be relevant at the grant of a qualifying patent to assess whether the claims protect products sold or processes used that give rise to profits. Since retrospective benefit for pre-grant profits may be claimed, it will be important to ensure that patents are granted within 6 years of first filing to maximise the tax benefit. Coordination with company’s tax advisors will be wise at all stages, to ensure applications for protection are filed at the appropriate time to ensure validity, and with legal advisors to ensure agreements for transfer of rights take into account the requirements of the regime. IP plans should include a consideration of the benefit of the regime against the administrative burden and other costs. There may be benefit in pursuing patent protection in the UK and at the EPO, with narrow claims being sought in one jurisdiction to allow the scheme to be followed while keeping prosecution costs low.

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Trade Marks & Brand Protection Update

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A new focus for Community trade mark applications?

By Mark Devaney

The beginning of the end may be in sight for the "class heading" approach to filing Community-wide trade mark applications. An opinion issued by the Advocate General of the EU Court of Justice this month suggests that the current "class heading covers all approach" used by European Community trade marks office (OHIM) fails to provide sufficient clarity when filing a trade mark application and should be changed. If the Court follows his (non-binding) lead then CTM applications will have to become much more specific about the types of goods or services that the trade mark covers. But more importantly existing trade mark owners may find the cover offered by their CTMs called into question. The opinion was issued in response to questions addressed to the CJEU from the UK "IP Translator" case (C-307/10). The Advocate General's opinion can be found here.

You can read the decision in PDF form here and OHIM's Frequently Asked Questions on the subject.

Business implications

If a change in policy is adopted, trade mark applications will need to become much more specific; listing the exact products and services of interest to applicants under the mark being filed. Moreover it will become even more important to consider future business plans in some detail, ensuring that they are specifically referenced rather than relying on the class heading to automatically cover them. This will avoid the need for further applications in the future.

Existing trade mark applications and registrations should be checked to ensure that they reflect the commercial activities of the business. This is doubly important for rapidly moving businesses that have moved in to new areas since applications were originally made. Deciding whether a trade mark adequately covers the business will probably require legal advice - particularly where class headings have been used, but it is possible to devise a strategy to plug any gaps identified.

Legal implications

If OHIM changes its policy, practitioners will need to take greater care when drafting and filing CTM applications for their clients. A clear understanding of the Applicant's business will be of even greater importance to ensure that all products and services offered under the mark are covered in the list of goods and services. Practitioners should also begin assisting clients with a review of their current trade mark portfolio to identify cases where class headings have been used which may not adequately support the business. In those cases, decisions need to be taken about where amendments to existing registrations may be possible, or when new applications will be necessary.

There are also further implications in that a change in the filing habits of Applicants may also reduce the number of oppositions filed at OHIM. At present, the inclusion of a class heading in an application will often attract an opposition from a prior rights holder when in fact the commercial differences between the activities of the businesses are considerable. More focussed descriptions used in trade mark applications will mean that those commercial differences will be highlighted at the outset allaying the concerns of trade mark owners that might otherwise have objected.

Whether there will be a change in the future remains to be seen but practitioners should be on the look-out for the Court's decision to ensure that they are able to take appropriate action as soon as possible.

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Christmas at Gill Jennings & Every

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The Christmas holidays are nearly upon us and this year, in a break with tradition, we've decide to forgo sending our usual Christmas cards. Instead GJE is donating £1,000 to Macmillan Cancer Support, to help its invaluable work funding nurses, build cancer care centres and providing general support to cancer patients and their families.

The GJE offices will be closed on December 26th and 27th and January 2nd. News Briefing will return early in 2012 - GJE's centenary year.

Until then, from everyone at Gill Jennings & Every, may we wish you and all our clients, and friends in partner firms a very Merry Christmas and a peaceful and prosperous new year.

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