Innovation in the UK Retail Sector - Nesta

Innovation in the UK Retail Sector
ii. Advising on protection of intellectual property linked to innovation
8.14 A second role played by government in relation to innovation more generally is in
providing advice on IP issues linked to the protection of innovation by firms. The
Community Innovation Survey indicated that retailers tend not to use formal mechanisms
such as trademarks and patents to protect retail innovation, in preference to
confidentiality agreements or simple secrecy. In part, this was related to the nature of
wider innovation in the sector and the difficulty of patenting incremental, customerfacing
or service process-related service innovations. Broadly-based service innovations
are themselves often inherently complex, collaborative and therefore difficult to copy.
Further, software, or particular business methods, are not patentable in Europe at present
(and the prevailing view is that the latter may not be defensibly patentable in any case). As
a result, we do not feel that a particular recommendation to Government is yet necessary
in this area, since retailers appear to be well able to employ informal methods of
protection.
iii. Financing or subsidising R&D by the retail sector
8.15 As well as supporting innovation ‘in kind’ through information provision and broking
and through advice on the protection of innovation, Governments also have the option
to directly subsidise or indirectly support through such vehicles as tax credits or the
targeted funding of institutional research programmes, the innovative activities
undertaken by firms. For example, the UK Government introduced a tax credit scheme
in April 2000 designed to reward those companies – both large and SME - engaging in
R&D (Table 8.2). The international evidence to date suggests that such tax incentives are
effective in stimulating R&D intensity (Harrison & Simpson, 2003). But such support has
tended to be most attractive to those sectors most closely associated with the science
base. Around 5,500 companies claim per year, (and there had been up to 20,000 claims by
2006) 18 but we understand that, in a typical year, less than 1% of applications for tax
credits have tended to be directly attributable to retail firms. Why is this so?
Table 8.2. Comparison of the two UK R&D tax credit schemes
SME scheme Large company scheme
150% rate of enhanced deduction 125% rate of enhanced deduction
Payable credit of up to £24 for every £100 of
qualifying expenditure on R&D
No payable credit
Company can claim for expenditure on R&D it Company can only claim for expenditure on
sub-contracts to others
R&D it carries out itself, unless it sub-contracts
R&D to certain qualifying bodies, individuals or
partnerships of individuals
Company cannot claim for contributions to Company can claim for contributions to
independent research
independent research
Claim can be reduced if the R&D project is
subsidised or a grant is received in respect of it
No reduction for grant or subsidy
Company must own the intellectual property Company need not own the intellectual
arising out of the R&D
property arising out of the R&D
Source: HMRC, 2007.
18 http://www.hmrc.gov.uk/randd/, HM Treasury/BERR, (2007), Productivity in the UK: 7. Securing long-term prosperity, November, para. 2.18.
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