Intellectual property can be a key differentiator in an increasingly competitive market

The latest government statistics have revealed that the number of new companies entering the construction sector reached its highest level on record in 2018. However, at a time when orders are in decline, investment in intellectual property (IP) protection could be key to ensuring construction companies stand out from the crowd.

A growing number of construction companies

Statistics released by the Office for National Statistics (ONS) have confirmed that there were 325,736 registered construction firms operating in Great Britain 2018, an increase of 11,146 (3.5 per cent) on the previous year.

Correspondingly, the latest research and development tax credits statistics, released by HMRC, reveal an almost fourfold increase in the number of construction businesses claiming tax relief on their innovation-focused investment, rising from £35M in 2014-15 to £135M in 2017-18.

Figures revealed by the UK’s Patent Box regime – which was introduced in the UK in 2013 as a tax incentive to help businesses optimise value from their patented technologies – are less positive.

While some use is being made of the Patent Box scheme, the volume of companies making claims remains low. Furthermore, the figures indicate that some sectors are making more use of the Patent Box regime than others, with construction lagging behind sectors such as manufacturing, retail and communication.

It is important that businesses understand that research and development tax relief and Patent Box are not mutually exclusive – it is possible to claim from both schemes concurrently. With Patent Box offering a preferential corporation tax rate of ten per cent on all profits generated from the sale of their patented technologies, it makes sense for innovative businesses to avoid missing out on this value-generating opportunity.

A decline in growth

Despite the increase in the number of firms working within the construction sector, actual construction orders fell by 13.2 per cent in 2018, representing a decline of £9,225M, the first annual decline in growth since 2011.

As a result, the marketplace has become more competitive, so it is more important than ever for construction companies to invest in the development of innovative products and solutions to differentiate them from their competitors.

Development of a new technological product or process can help a new company to gain a foothold in its target market. However, it is important to protect such inventions before disclosing them to third parties or bringing them to market.

The importance of patent protection

With patent protection in place, the company could benefit from period of up to 20 years of exclusivity during which to establish a foothold in their chosen marketplace and/or leverage their invention commercially through licensing agreements.

Protection and utilisation of the IP rights generated by new companies within the construction sector can be a key factor in their success. According to a recent study published by the European Patent Office (EPO) and the European Union Intellectual Property Office (EUIPO), small and medium-sized business with at least one IP right, are 21 per cent more likely to experience noticeable growth.

Yet despite the benefits they can bring, only nine percent of SMEs in Europe own registered IP rights, in contrast to 40 per cent of larger companies.

Collaboration within the construction industry is relatively common and it is often used to improve productivity rates and optimise profits.

However, a key consideration, prior to engaging in collaborative projects, should be establish each party’s existing IP and to agree on ownership of IP that is to be created during the collaborative work. The sharing of any existing IP should be limited to what is strictly needed for the particular project and should only be shared under the protection of a non-disclosure agreement.

Innovative companies should view patent protection as a vital step, which will boost their enterprise value. Not only will IP ownership make it easier to secure investment, it can also earn them tax credits and give the business that all-important competitive edge in their chosen markets.

In summary, there is huge opportunity for companies operating in the construction sector and with the right IP strategy in place, innovators can build a more valuable business.

Mark Sugden is a European and UK patent attorney at intellectual property firm, Withers & Rogers.

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