Public sector - maximum impact?

17 January 2010


Is a recession good for innovation? History seems to suggest that it may be and numerous notable inventions have emerged from recessions, for example James Dyson's vacuum came out of the last recession in the 1990s.

Innovation is a key priority for the Scottish Government in these difficult times and politicians have described innovation as "essential" to create a more successful Scotland through sustainable economic growth. This focus on innovation should be good news for technology businesses including Scotland's Life Sciences sector – but is the public sector doing all that it could to support the sector?

Life Sciences is one of the key industry sectors identified by Scottish Enterprise and it has invested heavily in this area, with equity investments from the Co-Investment Fund and various projects initiated and supported by its subsidiary, ITI Life Sciences. The Scottish Government has also pledged up to £3 million to support the recruitment of 100 new apprentices within the life sciences sector.

Westminster has echoed this focus on innovative industries. The 2009 Pre-budget report outlines Government plans to introduce a "Patent Box", being a lower rate of corporation tax (10%) for income derived from patents. Although welcome, the implementation of this is still several years away and therefore unlikely to have an impact in the near future. By contrast, the increased taxation regime for both personal tax and National Insurance may make the UK a less attractive place for high-flying innovators and companies to base themselves.

The government has also announced legislation to be included in the Finance Bill 2010 to help more small or medium-sized companies claim enhanced tax relief for research and development spending. At present, the company making the application for relief must own any intellectual property rights deriving from the research and development spending, however this is set to be abolished. I believe that this is an important step in the right direction.

Working as an intellectual property lawyer, I have been privileged to be involved in a number of Scotland's high profile life sciences projects which have been assisted by public sector input, many of which have involved collaborations and other joint working models. In many cases the public sector involvement requires some form of payback for the Scottish economy, and rightly so, but in some cases participation conditions require that the IP resulting from the supported activity be owned by the public sector funder or by the assisted company (rather than its private sector collaborators) or exploited within an explicit geographical area.

With Scotland having such strong innovation skills and talents, valuable intellectual property is often created as a result of public support. Using public funds to leverage private investment into innovative companies can create issues for the companies if they collaborate with third parties and cede or share ownership of intellectual property or sell the intellectual property to a third party. It can be tempting to assume that ownership of intellectual property is paramount but we should not forget that many companies use licensed intellectual property to great effect.

The public sector does provide significant support to Scotland's life sciences and broader technology sector and these sectors benefit greatly from that support. I would suggest that the public sector could foster even greater innovation within these sectors by taking a proactive role in encouraging Scottish companies to work together and with the public sector on collaborative projects but placing fewer restrictions on who owns the project outputs or how they are exploited and instead recognising intellectual property as a flexible asset that can be created, owned and exploited in myriad different ways.