Duncan Bannatyne Business Matters columnist

Do you really need to patent your business idea or concept?

Duncan Bannatyne — Tue, 03 Aug 2010 00:30:12 +0000

The two business parters, pitching the idea, Stuart Archbold and Andrew Leslie, claimed that their storage system was key to the future of grocery delivery as it would allow goods to be dropped off and left for many hours before a customer returned home and had already spent almost £1m on their idea.

The idea: Deliveries received into your Shopbox whilst you are out

However, a row quickly erupted about the validity of the patent they had secured. I argued that there was nothing to stop other people from copying the idea to put a chip in the box to control the temperature. Later in the show it turned out the pair did have a patent for the product – but this was lost in the pitch and was a key reason why I pulled out of the investment.

But there are some crucial lessons that anyone with an invention can learn from this. Firstly, I’ve checked with a patent lawyer and the vital thing to remember is that it’s impossible to patent a concept or an idea only. A patentable invention must have technical features which together with the application are new and innovative.

You don’t need to have the finished article, though that always helps, but at least be able to supply sufficient technical information to prove that it can be made or used, or if it’s a method carried out. Crucially, there must be some previously unseen, ‘inventive step’ that marks the product out as unique.

If all these things are in place, the patent will play a vital role in preventing other people from creating something identical that carries out the same function and takes away from your business.

The process of applying for a patent should force entrepreneurs to consider their unique selling points and understand their place in the market before protecting their product.

That’s why I was so surprised when the owners of Shopbox said they had a patent for their concept and fellow dragon Peter Jones even appeared to agree. Peter knows as well as I do that you can’t acquire a patent for a concept alone.

Despite it becoming apparent that the duo did, in fact, hold a patent, I am afraid I would still question its value, however, and ask whether it covers that vital ‘inventive step’.

Business owners must get a patent that covers their product’s unique selling point but is not so narrow in its definition that a competitor could enter the market with a slight variation.

In the case of Shopbox, for example, a patent claim broadly defined in terms of a ‘container for groceries’ would be vulnerable to challenge. A claim protecting a technical feature of the container, such as the mechanism used to maintain a constant temperature inside, would be far more robust.

Inventors need to know that they can’t get a patent simply for a concept, and only a robust patent will offer any protection against competitors. I know of a dozen operators who claim to have a patent for a treadmill – and all of them compete in the same market and fight for the same business.

If you do apply for a patent, make sure it does the product justice and protects your unique selling point.

Duncan Bannatyne is the founder and chairman of Bannatyne Fitness and author of How to Be Smart with Your Time, is out now.

You can follow him on Twitter @duncanbannatyne

Duncan Bannatyne: Why Non-Doms have an ‘unfair’ advantage in business

Duncan Bannatyne — Fri, 19 Mar 2010 12:49:59 +0000

Would you give your customers your products if they paid one of your competitors for them?

Then why do we allow people to live in the UK, receive public sector services from the government, but pay for them in the form of taxes to another country?

Although non-doms are not required to pay tax on earnings made outside the UK, that’s not the end of it. They can also reduce the tax on their UK earnings, and here’s how it can happen.

A non-dom simply needs to say that his or her UK company is managed by a board of directors outside the UK and then make a charge to the company for “management services”. This reduces the pre-tax profit of the company and so reduces its corporation tax bill.

The money transferred offshore for “management services” is tax free and can be used to fund the non-dom lifestyle abroad – the yachts, planes and mansions.

The non-dom situation is very relevant to business owners like me in the UK because we find ourselves at a distinct disadvantage when competing with businesses owned by non-doms. Normal UK business owners pay taxes on all earnings before paying for a new car or a family holiday, unlike nondoms, so there is less money available to pump back into the future of their businesses.

This is not the fault of the non-doms; rather, it is the laws that allow them to play the system that need addressing, but if the country has more and more non-dom run businesses in 20 years time corporation tax has got to go up to fund the non-doms. The law has to be changed.

Non-doms have to provide for their families and they often give generously to charities abroad. I understand their motivations completely. But the situation is not fair and the laws need to be changed; if they aren’t, the vast majority of UK businesses will feel unfairly penalised and more of our country’s assets will be controlled by non-doms.

Two of my ‘Dragon’ colleagues are non-doms. Does this status give Doug Richard and James Cann and unfair advantage in the business sectors? I think that it would be safe to assume that it does for the reason relevant to business that i have already outlined, but this issue is far more than two people.

As I pay UK tax on all of the earnings that fund my lifestyle, and corporation tax on all of the profits made by my businesses which employ 3421 people, I am clearly at an unfair disadvantage if someone enters my business sector with a non-dom management structure as they will be operating from a far lower cost base.

The current Lord Ashcroft story highlights the inadequacy of the domicile rule when applied to taxation, and points to the urgent need for reform.

In my view, all UK residents should have a duty to pay UK tax unless they can prove that they are paying equivalent taxes elsewhere in the world. This would level the business playing field and encourage, rather than stifle, the growth of enterprise and small business in this country.

A change would also create badly-needed revenue to the exchequer and help to ensure that our economy emerges as strongly as possible from the downturn, by rewarding innovation and productivity, rather than giving the ability to exploit tax loopholes.

Airline competition good news for consumers

Duncan Bannatyne — Wed, 30 Dec 2009 13:37:40 +0000

Many premium customers have had to downgrade to avoid blowing their travel budgets, so the need to hang on to the remaining first class and business class customers is more acute than ever; at the same time, people are commonly staying at home rather than flying abroad for holidays, so airline operators are competing for fewer standard class customers with less money to spend on travel.

The struggle for superiority revolves around two key service benchmarks: on-time arrivals and customer comfort. And as there are only a couple of aircraft manufacturers in the world, the onus is on operators to find different ways of marking themselves out as the most comfortable and well-appointed in the market.

Just as the quality of the changing rooms and exercise equipment is paramount in my chain of health clubs, so airline operators are all desperate to offer the best seats. That has been reflected in Virgin Airlines’ fight to protect the disputed exclusivity of its Herringbone design seat for its upper class passengers; Virgin has spent tens of millions on the novel design, which saves space and maximises the number of seats, but it has since been copied by rivals.

Recently, Virgin’s patent application was upheld by the Court of Appeal and, in the meantime, the operator is pursuing legal action against other operators who brought in the seats. This could be disastrous news for those other operators, who face the prospect of stripping their planes of seats and spending time and money on refitting. But it does demonstrate perfectly the lengths to which operators are prepared to go in to in order to compete.

The jockeying for position among rival airline companies will benefit consumers, who can expect to receive a better service at a fairer price, but ironically the running of airports themselves is lagging way behind. BAA owns all main airports in the South East of England and has enjoyed a monopoly on the market, but this week Heathrow Airport was voted the “worst airport in the world” for the second consecutive year, in a survey conducted by the airport lounge service, Priority Pass.

Competition is what’s needed to make the running of airports as slick as that of airline operators. Thankfully, there is change afoot. BAA’s predominant market share of airports in the South East is about to be broken up, as the company has agreed to sell Gatwick Airport – which I personally think is the worst airport in the UK. If the deal goes through as expected, it will help a move towards the airline company model, with increased competition and incentives to improve facilities and services.

Follow Duncan on Twitter @duncanbannatyne

Royal Mail hit business hard with strikes

Duncan Bannatyne — Wed, 25 Nov 2009 22:46:00 +0000

The Royal Mail has put itself in a position where it must bite the bullet and shake up its operations. Its network of depots and delivery offices, each with its own workforce, has become sprawling; increased use of automated systems would make business more efficient and bring the Royal Mail more in line with its European equivalents. A look at Sir Richard Hopper’s 2008 report into Britain’s postal services tells us that, in Europe, an automated process is used to sort letters for a postman’s round in 95 per cent of cases; here, it’s only 70 per cent. In Europe, letters are placed in the correct order automatically in 85 per cent of cases; here, it’s 70 per cent. The need for change is obvious, especially when you consider how emails have revolutionized communication.

No matter how much we sympathize with our clearly hard working and loyal posties we need to consider the competitiveness of the situation. It would be a national disaster if the strike action were to lead to a large reduction in the need for the services of The Royal Mail and thereon to its complete closure. If this happened our post would be delivered by competing private operators which would not benefit either the customer or the loyal staff.

Duncan Bannatyne OBE is the founder and chairman of Bannatyne Fitness and author of How to Be Smart with Your Money; follow him on Twitter @duncanbannatyne