Patent Box Tax Regime – An economic accelerator for America?
In their recent short article in the BNA Patent Trademark and Copyright Journal, Bernard J. Knight, Jr., and Goud Maragani, who are attorneys with both tax and IP backgrounds, advocate that Congress ought to enact a “Patent Box Regime” to bolster America’s competitiveness and to increase job opportunities in the US.
A “patent box regime” is a tax system that provides a lower corporate tax rate on the portion of the company’s income that is attributable to the domestic manufacture of US-patented products. This may help balance out some recent patent-troll legislation that was intended to curb abusive behavior, but could likely result in harming US innovation. The authors point out that the White House already has admitted that high-tech patents are a key driver of economic growth and good-paying jobs, and so patented technology can be the vehicle for renewed job growth and can increase opportunity for American workers. The European Community and China already have “patent box” tax regimes. Knight and Maragani suggest that the reduced corporate tax rate should be about 5% to 15% as a realistic incentive, and that the patent box regime should apply broadly to include other patented products besides “goods” and to include foreign companies to induce them to manufacture their US-patented products in the US.
Their article originally appeared as B. Knight and G. Maragani, It is Time for the United States to Implement a Patent Box Regime to Encourage Domestic Manufacturing, 19 Stanford J. of Law, Business & Finance, p. 39, Fall 2013.
The actual qualifications and dimensions of the Patent-Box-incentive tax rate is something that Congress can debate. It does seem to me that a Patent Box act would be worth the try. After all, as Will Rogers would say, if you want less of something, tax it and if you want more of it, subsidize it (or at least lower the taxes on it).