Did you know that an Early Stage Investor is entitled to tax incentives if the company is an Early Stage Innovation Company (ESIC)? Further, that so long as the ESIC qualifies as an ESIC immediately after shares are issued to the investor, the investor’s entitlements to early stage investor tax incentives are maintained? Accordingly, there is incentive for companies to qualify as an ESIC immediately prior to issuing new shares to an investor.
A company will qualify as an ESIC if it meets the early stage test and either the “100-point innovation test” or “principles innovation test”. Typically, of the two, the 100-point innovation test is the easiest way to determine a company’s eligibility.
Various criteria may be relied upon in order to make up the 100 points. For example, an enforceable standard Australian patent gives you 50 points towards the 100-point innovative test, while an enforceable (certified) innovation patent only gives you 25 points. For this reason, it might be worth considering filing a standard patent application instead of an innovation patent application (if possible) in order to obtain ESIC status.
For those who are unaware, the main difference between a standard patent and an innovation patent is that an innovation patent requires a lower level of inventiveness when compared to a standard patent. An innovation patent also does not undergo substantial examination prior to grant. Therefore, certification is required in order to obtain enforceable rights post grant.
If you need extra points, then you may need to ask the following questions:
- Do I need these extra points?
- How much extra work will I need to put into my invention to obtain a standard patent?
The first question you will need to answer yourself. However, a registered patent attorney will be able to help you answer the second question. Regardless of whether you are intending to apply for ESIC status, you should speak to a registered patent attorney about your invention prior to filing a patent application.
You might decide that an extra 25 point is not worth the effort and choose to proceed with an innovation patent application. You will then need to think about other avenues of making up the remaining points.
Therefore, if you are thinking about applying for an innovation patent, then it might be worthwhile considering the following:
- Look at other avenues to obtain those 25 points;
- Think about the effort required for those avenues;
- Talk to your patent attorney about the strategies for obtaining a standard patent instead of an innovation patent;
- Consider which path gives you the best cost benefit ratio.
For more information about qualifying for the tax incentives available to Early Stage Innovation Companies, click here.
Alternatively, please feel free to contact me at sarah.vanderwaal@spruson.com if you wish to make an appointment to discuss what type of patent application could be used to protect your invention in order to maximise your points toward the 100-point innovation test.