Thursday, 13 November 2014

UK patent box "watered down" -- but with a spot of grandfathering

"George Osborne waters down flagship controversial tax break" is the strident headline of this Guardian post by Simon Goodley, subtitled "Patent boxes allow firms to pay much lower taxes on profits from patented inventions, but critics say it gives UK too much of a fiscal advantage". According to this article, in relevant part:
"George Osborne has watered down one of his flagship policies following a long-running dispute with Germany over a controversial UK tax break. ...

The incentives were introduced last year to encourage hi-tech businesses to commercialise their intellectual property in the UK by charging just 10% tax on the resulting income. But Germany led numerous countries in arguing that the regime encouraged artificial shifting of profits to avoid tax elsewhere.

Osborne described the new agreement as “a great deal for Britain” that protected the UK’s vital scientific research while making sure there were international rules that stop aggressive tax avoidance. It would involve the UK winding down its patent box rebates and joining other OECD countries in only granting tax breaks for patents directly tied to research and innovation at home.

Germany’s finance minister, Wolfgang Schäuble, said: “We have reached an important agreement on patent boxes. Preferential tax treatment of intellectual property must be dependent on substantial economic activity. More and more countries are speaking out against allowing too much leeway for large multinationals to minimise their taxes. Just because something is legal, does not mean it is fair in tax terms. Multinationals must contribute their fair share to public budgets – just like any other company has to.”

The Treasury denied it had performed a U-turn on the issue, although it has previously defended its original policy ... [and] countered that it had won important concessions including so-called “grandfathering”, which will allow intellectual property within existing regimes to retain tax benefits until June 2021".
While the notion of the patent box will continue to attract support, not least among patent-exploiting tax-payers, it would be sad if countries were to engage in an unseemly rush to offer the lowest rate for the sake of attracting the relocation of patents alone: tying the tax break to patents grown within the jurisdiction is therefore a wise proposition.  

Mike Mireles' posts on US thinking about patent boxes can be found here and here
"Death of a Travelling Patent Box" by Rob Harrison can be accessed here
Rob's post on the OECD report which gave the UK's patent box scheme a reasonably clean bill of health is here

Thanks go to Chris Torrero for spotting this item

Friday, 7 November 2014

Sale versus licence offline and online: can competition law bridge the doctrinal gap?

"Sale versus licence offline and online: can competition law bridge the doctrinal gap?" is the title of an article in the most recent issue of Oxford University Press's International Journal of Law and Information Technology (Winter 2014) 22 (4): 311-333. The authors are Auckland University of Technology Professors Louise Longdin and Ian Eagles, togetgher with Senior Lecturer in Law Pheh Hoon Lim. According to the abstract:
Disputes involving copyright owners seeking to privately regulate secondary markets for used software and e-music have come before the courts of both the European Union and the USA with wildly dissonant outcomes partly due to very different legislative frameworks but also to very different judicial attitudes to economic factors and developments in digital technology. 
This article considers the extent to which contract can successfully be used to bypass traditional restrictions on the reach of copyright owners’ exclusive right of distribution and also explores the role competition law could play in balancing the escalating tension between private and public interests in an increasingly digital global economy.
This blogger likes the notion of an exploration of the manner in which both consensual and regulatory approaches can be brought to play in seeking to achieve a balance between private and public interests, though he prefers to think of the tension -- whether or not it is escalating -- as itself having a creative function. It's not so much a matter of it being the grit in the oyster of software copyright that produces the pearl; rather, it is an indication of the degree to which the private and public interests can tolerate a non-preferred solution before the private sector simply stops investing in new products or the public interest simply helps itself to that for which it cannot. or will not, pay.

Big budget movies in the UK: good news for tax payers

Not much core expenditure
here, one suspects 
Late last month, on 29 October to be precise, the Finance Act 2014, Section 32 (Film Tax Relief) (Appointed Day) Order 2014 (SI 2014/ 2880) was made. This unattractively-titled provision at least had some attractive content: its effect is to increase the amount of relief available for films if they have incurred a core expenditure exceeding £20 million from 1 April 2014. Core expenditure does not mean expenditure on the naughty bits of the film that seem to be mandatory these days and which make the audience go "Cor!" when they view them.

 According to the Order's Explanatory Note:
This Order appoints 1st April 2014 as the day specified for the purposes of section 32(4) of the Finance Act 2014. Authority for this retrospective effect is given by section 32(6) of that Act. The amendments made by section 32 to the Finance Act 2014 ensure that film tax relief will be available for surrenderable losses at a rate of 25 per cent up to the first £20 million of each production’s UK core production expenditure (to a maximum of 80 per cent of UK core production expenditure) and 20 per cent thereafter (to a maximum of 80 per cent of the UK core production expenditure), for all film productions where the principal photography was not completed before the appointed day – 1st April 2014. Previously the rate of 25 per cent only applied to limited budget films i.e. those with UK core production expenditure up to £20 million.

The minimum UK spending requirement will also change from 25 per cent to 10 per cent for film productions where the principal photography was not completed before 1st April 2014.
Cor!

Thursday, 6 November 2014

U.S. Federal Trade Commission and NPE Enter Settlement Agreement

The U.S. Federal Trade Commission, a consumer protection agency, has entered a settlement with non-practicing entity MPHJ Technology Investments, LLC.  The U.S. Federal Trade Commission press release concerning the settlement states, in part:

 The settlement with MPHJ is the first time the FTC has taken action using its consumer protection authority against a patent assertion entity (PAE). PAEs are companies that obtain patent rights and try to generate revenue by licensing to or litigating against those who are or may be using patented technology.
“Patents can promote innovation, but a patent is not a license to engage in deception,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Small businesses and other consumers have the right to expect truthful communications from those who market patent rights.”
According to the FTC’s administrative complaint, MPHJ Technology Investments, LLC, bought patents relating to network computer scanning technology, and then told thousands of small businesses that they were likely infringing the patents and should purchase a license. In more than 9,000 letters sent under the names of numerous MPHJ subsidiaries, the complaint alleges, MPHJ falsely represented that many other companies had already agreed to pay thousands of dollars for licenses.
The administrative complaint also alleges that MPHJ’s law firm, Farney Daniels, P.C., authorized letters on the firm’s letterhead that were sent to more than 4,800 small businesses. These letters warned that the firm would file a patent infringement lawsuit against the recipient if it did not respond to the letter. The letters also referenced a two-week deadline and attached a purported complaint for patent infringement, usually drafted for filing in the federal court closest to the small business receiving the letter. In reality, the complaint alleges, the senders had no intention—and did not make preparations—to initiate lawsuits against the small businesses that did not respond to their letters.  No such lawsuits were ever filed.
In the proposed consent order, announced today for public comment, MPHJ, Farney Daniels, and MPHJ’s owner, Jay Mac Rust, agree to refrain from making certain deceptive representations when asserting patent rights, such as false or unsubstantiated representations that a patent has been licensed in substantial numbers or has been licensed at particular prices. The proposed order also would prohibit misrepresentations that a lawsuit will be initiated and about the imminence of such a lawsuit.
The Commission vote to accept the proposed consent order was 5-0.
The fall-out from the consent order will be interesting to watch.  According to the press release, a penalty of up to $16,000 per letter can be assessed for future violations of the law.  The Agreement Containing Consent Order can be found, here.  For additional commentary, see Bloomberg, here.  (Hat tip to Bloomberg BNA). 

Licences and Insolvency: a new book on the block

Licences and Insolvency: A Practical Global Guide to the Effects of Insolvency on IP Licence Agreements, put together by consulting editors Matthias Nordmann, Ulrich Reber and Marcel Willems on behalf of the International Bar Association, was published last month by Globe Law and Business.

The publishers describe this volume as follows:
"The number of insolvencies is increasing by the day, while insolvencies are becoming more and more complex and international. Licences represent an increasingly important part of a company’s assets - be they technology licences, name or trademark licences or licences with regard to text, photo or audiovisual material or software. While insolvency proceedings of licensors or licensees can pose material threats to the prospects of the business concerned, there are still many uncertainties as to the fate of a licence, applicable law, place of jurisdiction in such proceedings and so on.

This practical handbook provides an overview of the most relevant legal issues in over 25 [I counted 26] of the most important business nations around the globe. It provides guidance to licensors, licensees, insolvency practitioners and their attorneys to promote a better understanding of the insolvency mechanisms in these countries and the effect that such proceedings may have upon licence agreements with an insolvent entity".
This blogger is not normally enamoured with titles compiled to this template, which he has often found unhelpfully rigid. They are often of little use when seeking to ascertain the law in any given country, presumably on account of length restrictions in order to prevent imbalance between national contributions, and not much use when seeking to compare the law of the different jurisdictions since the problems encountered by him have never matched the data available.  This volume is however a pleasant and welcome exception, since the subject is one on which there is little in the way of accessible information that is conveniently presented for the IP practitioner who is more comfortable with licensing than with insolvency. This title has the potential to become rather more than a fancy calling card for its contributors and to make itself generally useful in those sad situations in which licensor, licensee or both find themselves without resources -- not just for the parties concerned but for creditors and other adversely affected third parties.  Well done!

Bibliographical data: Hardback, 328 pages. Price: £125. ISBN: 9781909416253. Book's web page here.