Patent Box: Life Sciences Founders Should Revisit Their IP Strategy

Whether you're involved in drug discovery, diagnostics, medical devices or medtech, innovation is at the center of your business model. Patent strategy and defense are critical management tools for innovative life sciences founders. And with the federal government's most recent budget, taxation may soon become another key aspect of your IP strategy.

Most Canadian founders are familiar, at least at a high level, with the tax credits and incentives available through the Scientific Research & Experimental Development programs. The federal government has pledged to conduct a strategic review of the SRED program and concurrently explore a "patent box" regime.

So what is a patent box regime? In its simplest form, a patent box regime is a preferential tax rate applied to income arising from patented products and services. The policy objective is simple: provide an economic incentive to invest in more R&D.

For life sciences firms in Québec, the tax attributes of your IP are already being exploited. The Incentive Deduction for the Commercialization of Innovations ("IDCI") ensures that patent-related income, including proceeds from IP litigation, are taxed at 2% and not the standard provincial corporate rate of 11.5%.

It's too early to determine whether the federal government will only reward approved patents, patents pending and whether the tax regime applies to patents that were developed organically versus those that are acquired. But regardless of the implementation details, one thing is clear. It is time to elevate your IP portfolio strategy.

Founders should be asking themselves the right questions:

1. Are my C-Suite and Advisory Board members experience in patent portfolio strategy and defense tactics?
2. Are my systems built to properly track patent-related income and expense?
3. Are the terms of reference clear between the scientists, legal advisors and tax accountants?
4. Is your R&D pipeline producing a steady flow of patentable products and services?
5. What is the "character" of the milestone payments I receive on my out-licensing?

We have availability for select opportunities as fractional controllers and CFOs in the life sciences ecosystem. If you feel you need to improve your finance, talent and growth performance, we may be the full-stack fractional team you're looking for.

Give our office a call if you'd like to meet the rest of our life sciences finance team.

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Kit Moore, CPA, CA is the founder and lead consultant at BluePrint CPAs. As a specialized tax accountant, he can help you retain significant value but more importantly, he's a serial entrepreneur that understands how to build and grow businesses.

His industry depth?in technology, construction, real estate, energy, agriculture and even cannabis deregulation complements his technical expertise in growth strategy, advanced tax structures, innovation, mergers and corporate finance.

He's also a proud family man and devotes a significant part of his life to Cassondra, Murphy, Markus, Miles and Evelyn. When he's not balancing family and business, he likes fishing and cottage life.