22 February 2022

Australian Medical/Biotech ‘Patent Box’ Tax Legislation Revealed

Some kind of box On 10 February 2022, the Treasury Laws Amendment (Tax Concession for Australian Medical Innovations) Bill 2022 was introduced to the Australian parliament, and received its first and second readings in the House of Representatives.  The Bill represents the fulfilment of an undertaking in the Federal Government’s 2021 budget to introduce a ‘patent box’ scheme to encourage innovation and commercialisation in the Australian medical and biotechnology sectors.  A ‘patent box’ (the name refers either to an actual box on a form, or to a notional box into which a company allocates a proportion of its income) is a tax incentive scheme under which income that can be directly attributed to the commercialisation of patented technology (as distinct from other attributes, such as branding, know-how, or manufacturing capability) is taxed at a reduced rate. 

Under the scheme established by the legislation, the minimum concessional tax rate is 17%, compared with the normal corporate tax rate of 30% for large companies, or 25% for small and medium enterprises (SMEs).  However, the full benefit of the scheme is only available to the extent that R&D leading to development of a patented invention is conducted in Australia.

As the government had indicated in its original budget announcement, only medical and biotechnology inventions will be eligible for the patent box tax concession.  In particular, a patent will be eligible if it is ‘linked’ to a therapeutic good included on the Australian Register of Therapeutic Goods (ARTG).  This means that a product, which is covered wholly or in part by the claims of the patent, must be a therapeutic good (e.g. a pharmaceutical substance or medical device) that requires, and has received, marketing approval in Australia.

Interestingly, however, the patent relied upon as the basis for eligibility under the patent box scheme need not be an Australian patent.  A patent will qualify under the scheme if it is an Australian standard patent (i.e. innovation patents are not eligible), a US utility patent, or a European patent granted under the European Patent Convention (EPC). 

It was initially proposed that only patents having a priority date after the announcement would qualify.  However, in further positive news, according to the Bill patents granted or issued after the date of the budget announcement (11 May 2021) will be eligible.

It is intended that the patent box concession will commence in the coming financial year, i.e. from 1 July 2022.  However, for this to happen the legislation will need to be passed in both houses of parliament before federal election is called.  It is widely anticipated that this will occur in early to mid April, shortly after the government hands down its budget on 29 March 2022.  With no further sitting days scheduled prior to budget week, it could become a race against time to get the legislation through.

11 February 2022

Mea Culpa! Corrections to 2021 Australian Patent Filing Statistics Show a Bigger Bumper Year than Originally Reported

BugfixThis week I discovered an obscure and insidious bug in the code that maintains my Australian patent database.  It has existed for months, but did not manifest itself until January, when I prepared the data for my reports on 2021 patent filings.  The impact was that around 2,000 standard patent applications, or just over 6% of the total, went missing.  These were almost exclusively PCT national phase entry applications, mostly filed by foreign applicants.  I have now fixed the bug, and updated my data.  The two affected articles, Australian Patent Filings Up in 2021, Aided by Innovation Patent’s Demise and Huawei Takes Top Spot in Australian Patent Filings, While Aristocrat Slides Down Rankings (which was originally titled ‘LG Takes Top Spot…’), have been corrected.  The general analysis and observations are substantially unaffected by the corrections, although obviously some of the specific numerical results were wrong.  For those who have already read the original articles, here is an overview of the more significant corrections.

Most notably, the total number of standard patent applications filed in 2021 is higher than I originally reported, at 32,393 rather than 30,343.  This makes last year a new record for Australian filings by an even larger margin than reported!

The ‘missing’ applications were essentially a random sample of the overall PCT national filings, so the corrections do not change the ranking of countries of origin – the top five are still the US, Australia, China, Japan and Germany.  The numbers of filings from the US and Australia grew by more than originally reported, while Chinese originating filings remained steady compared to 2020 (not declining, as reported), Japanese filings fell by less than reported, and German filings grew slightly, rather than declining slightly as reported.

The leading applicants remain largely unchanged, although there have been some changes in ranking due to small corrections in total filing numbers.  LG and Huawei are almost neck-and-neck at the top of the filing table, so it is not hugely surprising that they have swapped places, with Huawei (255 applications) just ahead of LG (251 applications).  My apologies to any LG fans who may have been celebrating the win!

Aristocrat picked up no additional applications in the correction (none of its 2021 filings were based on PCT applications), and its slide down the rankings was therefore slightly greater than originally reported, down to 25th rather than equal 21st place.  It is still the leading Australian resident applicant, by a comfortable margin.

Provisional filing numbers were unaffected by the software bug, while innovation patent filings were negligibly impacted – just 10 applications went missing from a total of 7,653 filed in 2021.

My apologies to anyone who may have relied upon the original data for any reason.

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The Patentology Blog by Dr Mark A Summerfield is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Australia License.