The first two articles in the current series discussed the practical and legal considerations of setting up a company in Poland and employee recruitment. This article looks at ways of protecting your intellectual property.

Intellectual Property (IP)

Broadly understood intellectual property (IP) covers any of the following: copyrighted works, inventions, utility models, industrial designs, trademarks, integrated circuit topographies as well as know-how. Intellectual property is often an asset that enables the company to supply its products or services, and gives it the edge over its competitors. It is therefore important to ensure your IP is adequately protected.

An SPV doing or planning to do business in Poland using public funds should ensure that all IP issues in dealings with related entities are fully regulated. In particular, it should take care to:

  • put in place the legal protections necessary for the transfer of IP between the parent and the SPV (correctly structured agreements concerning, e.g., transfer of ownership or exclusive licensing rights);
  • determine in which jurisdiction and in which company the subsidized IP will be developed;
  • have a clear view of the rules applicable to the commercialization of the IP developed in the course of the project, e.g., if the SPV will be able to implement the IP in its own business activity and generate any profits;
  • have a complete understanding of the rules applicable to any potential transfer of the IP to related entities.

IP in R&D projects with state aid

Internal IP management is one of the assessment criteria for grant applications. This applies to both research and development projects and investment projects. Inappropriate or insufficient IP safeguards in a project can lead to the application being rejected. It is well worth the effort to ensure that all IP issues have been dealt with before you make the grant application.

Agencies which provide funding for this type of projects require the applicant to have sorted out all IP issues in advance. In line with this requirement, you should:

  • have all the IP necessary to carry out the project (e.g., research and development which are part of the project) and make clear which other entities share the ownership of these rights and on what terms;
  • indicate who will own the R&D results which will be produced as part of the project;
  • prove that there are no known and protected solutions, technologies or R&D results which would render it either impossible or inadvisable to implement your project results. To this end, before you make a grant application you should make sure the technology being developed does not infringe the intellectual property rights of a third party or that the protection available to a third party will not prevent the implementation of your project results.
  • ensure a fair distribution of IP rights to the project where you and your business partners are members of a consortium. As a rule, the parties share IP rights in proportion to their contribution to the project (project cost sharing). Should one party wish to be the sole owner of the IP rights upon project completion, it could elect to buy another consortium member’s rights at market rates.
  • develop your IP protection strategy and choose a suitable form of IP protection, e.g., consider whether taking out a patent or obtaining trade secret protection would serve your interests better.
  • With R&D projects, you must plan the commercialisation stage, decide on the form it will take and cost the project. IP management is a key element of the commercialisation stage. The grant application should specify whether the IP developed in the course of the project will be further used in your own business activity, sold off to a third party or licensed out.
  • Where your project involves implementation of the innovation, the IP aspect can make a difference because the applicant must show that, among other things, he has the right to implement the planned R&D research results or the right to mass-produce the product.

Ways of protecting your IP

The choice of the appropriate form of IP protection is key to its efficacy, but is equally important to the prospect of generating profits for the IP rights owner. The most common forms of IP protection include:

Trade secret – technical, technological or organizational information held by the company or any other information that has economic value which is not widely known, either as a whole or a sum of its parts, to persons typically dealing with this sort of information or is not easily available to such persons as long as the information holder or manager has acted with due diligence to keep the information secret. The benefits that accrue from trade secrets include protection cost savings, unlimited protection period, and no requirement to publish details and concept designs of proprietary solutions. Access to such materials and IP information should be limited to a narrow group of key employees responsible for the commercialization of the solution.

Patent protection – carries the requirement to publish technical details of the solution but confers on the owner advantages such as monopoly rights to the solution, full legal rights to use the invention, as well as an increase in the company’s market value and strengthening of its market position. Patents confer on owners exclusive rights to use the invention for commercial purposes for a set period of time and in a designated geographical area. Further advantages accrue from the well-advised choice of patent strategy. A proactive approach to the creation of a patent portfolio that reflects the company’s marketing strategy effectively limits competitors’ encroachment and protects the patent owner’s position.

Copyright – type of protection used for any creative works of individual nature, in whatever form it may take, regardless of its value, purpose or way of expression. As well as literary, multimedia and audio-visual works, it is common market practice to use this type of protection for IT solutions.

IP Box – tax advantages

Businesses registered for tax in Poland and earning profits from intellectual property can use the IP Box mechanism to benefit from a 5% preferential tax rate from selected income sources, the so-called qualifying property rights. These rights apply to a closed list of intellectual property works which includes, among other things, patents, industrial designs and copyrighted IT solutions. To qualify, the owner must receive income under one of the following heads:

  • payments or other benefits under a licence agreement that concerns a qualifying intellectual property right,
  • sale of a qualifying intellectual property right,
  • qualifying intellectual property right included in the sale price of a product or service,
  • compensation for infringement of a qualifying intellectual property right if such compensation was awarded in the course of a legal dispute, either in court or through alternative dispute resolution.

Secondly, the company must have been involved in R&D leading directly to the creation, development or improvement of the qualifying IP right and the taking out of intellectual protection cover for the R&D results as set out in the closed list of intellectual property rights.

In order for a Polish SPV to benefit from the IP Box, it is necessary to secure all IP issues between the SPV and its related entities to ensure that the IP rights (and in particular any exclusive license) belong to the right entity while their scope and legal form are in line with the IP Box requirements.

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