INSIGHTS / Blog

Source Advisors, the R&D and innovation specialists, look at the Intellectual Property challenges scale-up businesses face, and the opportunities of commercialising innovation.

The UK’s ecosystem of scale-up businesses and university spin-outs is rich in research and intellectual property (IP). Historically these groups have had huge IP success in pharma, biotech, health, computer hardware, and the energy sectors. More recently, emerging sectors such as space, nuclear, clean tech, and quantum computing are rich in IP, even fintech and Artificial Intelligence have IP opportunities which are often under-used.

The Challenge

One specific challenge scale-ups face is that their company procedures often remain less mature than their team size and budget growth would deserve – from their seed or start-up days. We see this manifesting in issues like missing grant and claim opportunities, and insufficient paperwork leading to HMRC queries. Without the right resource, their time can be spent firefighting rather than seeking out opportunities.

Most scale-up IP discussions are laser focussed on protection; this single-minded focus can lead to:

• Gold-plating of patent filings, making them up to 2-5 years longer, and up to ten times more expensive.
• Fear of costs and effect of disclosure leads to delays in developing a commercial IP strategy.
• Cashflow and capital opportunity from Patent Box is often overlooked.

Most companies try to take advantage of R&D support, from grants through to tax credits, but some companies do this better than others. R&D claims in the UK are concentrated in companies with a registered office in London, the Southeast and East of England, accounting for 60% of the total amount claimed.

Innovation starts with R&D, leads on to IP creation, then to patents, companies who fully exploit their innovation are rewarded with tax relief at every stage. A Patent Box claim for a company effectively reduces corporation tax to 10% on worldwide profits resulting from qualifying IP income. Research shows that SMEs and scale-ups are only receiving a tiny percentage of the total value currently paid out through the Patent Box scheme with 92% of the relief claimed by companies classified as large.

So, what’s the solution?

We should be seeing many of the companies claiming R&D tax relief go on to claim under the Patent Box scheme. Business could be put off by potential barriers, like a lack of awareness of the benefits, perception of complexity, fear of excessive costs, and a belief that patents are about protection and not value creation. It is important to truly understand the commercial value of IP. All scale-ups can benefit from a commercial lens on IP strategy and finding an outcomes-aligned specialist to help is key.

Source Advisors is hosting a free online Masterclass for SETsquared Scale-Up members on 20 January 12.00 – 13.00 to explore this and to enable businesses to leverage the commercial opportunities available – register your place to find out more.