By Kenneth Choy, Partner, Corporate, King & Wood–Hong Kong

Hong Kong’s Financial Secretary, the Hon. John C Tsang, gave his annual budget speech Wednesday, February 24th. Buried in the 178 paragraph speech on the 2010-2011 Budget Report were two paragraphs relating to intellectual property rights. The issues mentioned by the Financial Secretary may benefit inventors and high-tech start ups.

In paragraph 106, he expanded deductibility as capital expenditure of the purchase of registered trademarks, copyrights, and registered designs. Under the current scheme, only purchase of patent rights and industrial know-how are deductible. The purpose of the expansion is to promote wider application of intellectual property and to help develop the creative industries in Hong Kong. Actual formulation for deductions will be prepared by the Inland Revenue Department. This addition brought in the most common types of intellectual property rights transferred in Hong Kong and will serve as a boon for creative entrepreneurs.

The second item concerns funding for patent applications. Currently, the Hong Kong Government provides funding assistance for Hong Kong inventors and enterprises to help them pay for the cost of filing their first patent application. The current ceiling of such grants and funds is HK$100,000. In paragraph 107, Mr. Tsang raised the ceiling to HK$150,000. Hong Kong has a recordation system for patent registration that requires the granting of a patent in another jurisdiction before a Hong Kong standard patent may be issued. To obtain a Hong Kong standard patent, an inventor must file in an approved jurisdiction where substantive review is conducted and a patent granted before a Hong Kong patent can be registered. In essence, the inventor has to pay for two patent applications to have a Hong Kong patent granted. The increase in the funding should be helpful for small inventors.

Compared to other ‘sweeteners’ offered in the speech, these two additional benefits offered for intellectual property rights are fairly minor but will have a relatively broad application. At least, the topic of IP rights is not completely left out of the speech. A full copy of the Budget report can be downloaded at