David Moreland: Value of IP in Scotland’s economic growth patently obvious
The Scottish government’s new Strategy for Economic Transformation for the next decade has been drawn up. The strategy focuses on the three areas of promoting investment, start-up business ventures and new green industries, and its goal is to see the Scottish economy outperform economic growth over recent years, writes David Moreland.
Intellectual Property (IP) is surely an essential tool for each of these three areas. In the first area of investment, investors are attracted and comforted by investment targets having IP rights. Why? Because IP rights make market entry, penetration and maintenance easier.
In the second area of start-up business ventures, start-ups can secure investor funding more readily. They can also punch above their weight when entering the market. Further, for investors and start-ups there are the attractive tax saving advantages of the UK government’s “Patent Box” scheme.
In the third area, namely green industries – as in any new area of technology – companies need to “stake their claim” early if they want to reap the rewards of their innovations. This is true both early in market adoption, but also as the market matures, and more competitors begin to try to get a piece of the pie.
The government’s strategy document speaks of facing a choice over the next decade between Scotland’s economy either ‘leading or lagging’. A key marker in leading is innovation, and a key indicator in innovation is patent protection. For too long many have falsely looked on patents as too difficult or too expensive. To the contrary, like any business asset – if used correctly and wisely – a patent can be a business’s key to unlocking success. Patents can give a real competitive edge and also provide tangible commercial value identifiable to the balance sheet. This is true at any stage in a company’s development or in a product’s life-cycle. For example, whether at early-stage investment, when securing or maintaining the market, or indeed as part of an exit strategy. And, of course, there’s the reduced Corporation Tax rate payable on sales of patented products available through “Patent Box”.
In Scotland and throughout the UK, the economy has well-developed skills in servicing the energy and offshore sectors. These skills can be transferred to sectors such as offshore wind, and that is clearly already happening. However, new technologies always lead to new technical problems, which in turn need new and innovative technical solutions. It is in the ripening fields of such technical problems that innovative solutions can be harvested and commercially valuable patent protection delivered.
Finance Secretary, Kate Forbes said: “The task of transforming our economy requires an equally radical transformation in the way we deliver results”. Since 2011, China has topped the world in the number of patent filings. In 2019, around 43 per cent of all patent filings in the world were Chinese. The rapid increase in filings in China was driven greatly by commercial factors rather than purely innovation factors. China has seen radical transformation in its economy, and patents have clearly been part of the strategy in delivering that transformation to the Chinese economy.
The Scottish government’s strategy advocates promotion of Scotland as a “test bed” for new technologies and markets, including government investment in renewable hydrogen fuel production. This is a laudable aim. However, to reach the desired goal of outperforming past economic growth change is required. Part of that change ought to be for Scotland PLC to promote an increase in patent filings. This would oil the wheels of investment and market growth and lead to increased activity in business deals.
I’m sure that we all want to see from the green technologies sector the same business successes and engineering expertise that we have seen in conventional energy technologies over the last five decades. However, if we are to see these, we need to be aware of how these past successes were carved out. For many innovative companies, patents and IP were (and undoubtedly still remain) a prime-factor in those successes. This was and is particularly true of the Scottish offshore energy service sector where patent rights allow burgeoning small and medium-sized firms to increase their performance and release new revenue streams.
David Moreland is a partner at Marks & Clerk. This article first appeared in The Scotsman.