Chapter INTM342640

Published date09 April 2016
Record NumberINTM342640
Patent royalties

The word “patent” is not defined in the tax legislation. A patent consists of rights conferred by letters patent to the exclusive use and benefits of a particular invention. It will last for a specified period. The period for which a patent lasts is often referred to as the term of the patent. A patent is a form of protection for an inventor. A person who wants to use an invention that has been patented must acquire rights to use the patent or be granted a licence to use it. This lets the inventor control the way in which the invention is used. Once a patent has been granted the inventor can get income by granting rights or a licence to use it.

A patent right is not recognised unless it is registered. A patent can only be applied for by the original inventor (alone or with other persons/companies). A patent right gives the owner a monopoly right to use, exercise, manufacture and sell a new invention in the country where the patent is granted. Normally, the original inventor applies for the patent to the Patent Office with a “provisional specification”. This application does not give immediate protection but the inventor is established as the “true and first inventor”. The inventor then submits a “complete specification”, usually within the first 12 months. This is accepted by the Patent Office and the patent is then granted to the originator or “sealed”.

There are international arrangements and under these an inventor who applies for a patent in one of...

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