Boxed Patents

One of the good things that the Gordon Brown government did in the UK was partially to recognise that the economy has no hope of getting out of the hole that the political class has made for it unless the state recognises and rewards the creation of 'intellectual property'. Unsurprisingly, they did not understand the simple basic nature of  ik, as explained in my PPE [see link from this site], but this was a step on the road to rational management of the most important of national resources.

Under the coalition the grasping hand of the Treasury has been allowed to influence the deign of the concept for protecting British intellectual property, and consequently the government announced their intention to create a 'patent box' . Under this category a company [or possibly a high-net-worth individual] would be able to secure a patent, and to implement it into production, and get tax exemptions and reductions at various stages in the process. The 2010 Coalition government declared that they would implement the plan and a few companies, including Glaxo, entered discussion with the government about using the process. Glaxo planned to extend their UK factories under a Box agreement specifically to exploit a new product for which it was in process of securing a patent. The company announced its decision to invest in the UK on Budget Day 2012 [as featured in the previous Post here], to accommodate the squalid spin doctoring of sad politicians who would seek any propaganda point in the absence of evidence of real economic progress.  In this case, there was real potential in the investment. But [as already noted] the Patent Box is not the only inducement to locate industrial plant in the UK. British labour is becoming relatively cheaper as Chinese workers begin to enjoy consumerism with larger wages, and the tax system in the UK is becoming a little less oppressive. UK and EU Labour law and the omnipresent intrusion of inept and officious 'health and safety' regulations are still deterrents to investment, especially in physical production. But steps are being taken in the right direction, albeit they are hesitant and indecisive.

The bigger issue that is disclosed by the Glaxo announcement is that safeguarding intellectual property is becoming the most important consideration of companies in the global economy: and while the US government has become obsessive about China's 'theft' of such property the EU and European governments have still not grasped the heart of this issue. The leading British ministry, BIS, has focussed on reducing the period between the filing of a patent application and the manufacture of the product; which is a good thing if it can be achieved while maintaining the secret.

But the entire positive story is yet to be told: that Brits, including Glaxo research teams, are unusually fecund in producing both patentable inventions and marketable concepts. The world's leading advertising agents are British, and several of the world's best-known and highest-regarded brands are British: yet a major feature of British business is the sad fact that while ideas continue to bubble up, and patents are registered, there is a dearth of funding to develop products fast enough. Firms  are sold in their infancy, usually to foreign owners who then reap the rewards for developing the product and its marketplace. To concentrate exclusively on implementing patents is to miss the point.

New patents can improve existing brands, or can be the basis for a new creation of brand value. The establishment of a new brand partly depends on marketing, partly on spontaneous shifts in fashion, partly on consumers' incomes increasing enough to embrace the new  consumer experience in addition to the existing standard of living. Investment must be made, often over a series of years, in the development of brand reputation as well as in the technicalities of material manufacture. Investment in systems patents and copyrights, brand-names and trademarks, is needed: these aspects can be more costly than the technical patents that are embodied in a material patent. The total suite of investments is needed to build a brand; otherwise patent-owners who are discouraged from developing their firms and their brands by lack of investments will still be tempted to cash-in their assets and sell the firm and its intellectual property to be developed in foreign hands. The British government needs to move a lot further to meet the need!

Mismanaging News

George Osborne has committed a major gaffe in public relations, by describing his biggest tax 'raid' in this year's Budget as a mere simplification of the tax system. The resentment that this has set in train will mature slowly, and be disastrous for the man's image and for his party. Meanwhile, in the twenty-four hours since he made the cock-up he has resorted to an item of crude propaganda. In the tradition of Potemkin, Stalin and Putin, his sycophants have arranged with Glaxo Smithkline to announce their decision to extend factories in the UK on Budget Day, and even to say that decisions in the Budget were favourable to the decision. Osborne touted his sneer around the TV and radio studios to extol the great investment, and suggest that it was vastly more important than the granny tax.

The company's plans must have been in train for many months. It would have been outrageously improper if the Treasury had shared their plans for setting rates of corporation tax with the company over that period. The actual reasons for the Glaxo decision British manufacturing is becoming 'affordable' again to international companies, as has been evident over many months past in the motor and fashion industries. The company owns sites and has infrastructure with skilled staff around the UK. It will be easier and possibly cheaper to invest in the UK, with or without tinkering the tax system. One can speculate what inducement was offered to the company to arrange its announcement to coincide with Budget Day, but it was probably trivial.

Osborne used the same trick a few weeks earlier, when he grabbed for his own publicity machine the announcement that a Chinese Wealth Fund was buying a block of shares in Thames Water. This transaction had been arranged as a business deal over some months but the announcement was arranged to coincide with the Chancellor's 'triumphant' return from a nugatory visit to China. There was no correlation between the visit and the deal: the announcement was crude propaganda. Such are the standards and practices that impress the current crop of puerile politicians: indeed a country gets the government that it deserves!