There is universal recognition of the power of intellectual property and innovation to drive corporate value and economic growth. Apple, the most valuable company of all time, trades on its software, patents and design. Recent high-profile patent auctions and disputes between technology giants demonstrate where they consider their competitive advantage to lie.
The UK has long been considered a hub of innovation. Intangibles represent more than 10 per cent of our economy and we have the highest intangible-to-tangible investment ratio in the Organisation for Economic Co-operation and Development (OECD).
We have experienced spectacular growth in businesses whose IP is their core product, with successes including ARM, which licenses embedded processor architecture to nearly all mobile phone manufacturers and social gaming platform Playfish.
Logically, it should be second nature for this type of business to invest in patents, trademarks, design and copyright protection. But this is not the case. Just 6 per cent of small and medium-sized enterprises (SMEs) secure patent protection.
Innovation is in our DNA, but we need to develop the skills to know what to do with it
IP strategist Andrew Watson believes the way forward is to educate UK businesses to view IP as a strategic priority. “Innovation is in our DNA, but we need to develop the skills to know what to do with it,” he says, adding that other countries, notably China, have a national IP strategy.
No doubt this, along with the trend for innovative entrepreneurs to move abroad – commonly to the United States – to commercialise their IP, was among the factors that led the government to commission in 2011 the Hargreaves report. Its recommendations are designed to incentivise innovation. Implementation includes measures to make it quicker and easier for businesses and entrepreneurs to file patents, and put in place other IP protection measures.
On February 18, an agreement was signed to establish a single European patent and a Unified Patent Court (UPC) based in London. This will cut the cost of patent protection in the EU, bringing it into line with the US and Japan. The court is intended to make enforcement simpler and cheaper.
Is the IP landscape changing or are current initiatives too narrow in their scope and jurisdictional reach to make a significant difference? The practical impact remains to be seen. Alison Brimelow, former president of the European Patent Office, has argued that the unitary European patent “has become an internal obsession and the real problems are global”. Trevor Cook, IP partner at law firm Bird & Bird explains: “What happens outside Europe as to the IP that we develop in Europe is very much more important and the focus on Europe distracts from that.”
Professor Hargreaves’ implementation includes tax incentives designed to position the UK as an attractive place to position IP-based businesses. Initiatives, such as the Patent Box which will cut corporation tax, have been well-received by finance directors, but the actual impact remains to be seen.
The value of IP as well as advances in technology and innovation is also driving IP theft and counterfeiting, which creates problems for businesses, consumers and sometimes the general public, for example when sub-standard counterfeit components find their way into medical and transport systems.
The government is implementing further Hargreaves proposals around enforcement, but again there have been calls for international agreements or measures that reach beyond Europe to the countries where the biggest breaches occur.
Mr Watson recalls the famous quote used by Bill Gates: “Innovation without protection is philanthropy.”