Patenting is often the best way to protect an invention. However, it takes time and money to assemble a portfolio of granted patents that can facilitate and safeguard international expansion. KaHa, a homegrown end-to-end Smart Wearables IoT platform company, is using Singapore’s tax deductions on IP investment to help make this protection more affordable.
Smart wearables is the next significant category after mobile phones, with the market estimated to have grown from around US$750m in 2012 to an estimated US$6bn in 2018. Singapore company KaHa Pte Ltd (KaHa) is at the forefront of innovation and disruption in this space and offers insights into concessions available that the company has used to protect its investment in innovations.
KaHa, founded in 2015, is a smart wearable technology platform company that licenses its technology to global brands under the brand name COVE®”. It draws on the consumer technology experience of its founder, Pawan Gandhi, who has over 10 years’ experience at Nokia and more than 18 years in the technology industry. In his experience, business success comes either from identifying a clear gap in the market or having a particular empathy with the subject matter: the focus for COVE® products covers both.“Most wearables in 2014 were directed at fitness”, Pawan explains.
“We spotted unaddressed segments, namely safety, which is a concern for senior citizens and kids, health & wellness, and digital payment. We have developed a range of proprietary solutions to cover common use cases and some less common ones—such as ways to track you even if your phone and watch are destroyed.”
Kaha’s solutions cover four main domains: safety, sports & fitness, digital health and digital payment. Integrating these into a seamless experience for the end-user has been a particular focus. As Pawan explains,
“When you are developing solutions for customer groups, such as for dementia, the fact that you have to remember to wear anything at all may be challenging. This is why we are interested in smart apparel. You don’t have to put on a wrist band: you just wear a smart T-shirt that can go through the laundry as normal.”
KaHa filed its first patent application in 2014, one year before the company was founded. Pawan explains,
“We are interested in the combination of smart wearables and the Internet of Things, as this domain can be quite game-changing. Although the most visible aspect of COVE® is the physical products, what we are really offering is an end-to-end platform built on artificial intelligence, algorithms and machine learning.”
As the product range broadens, KaHa has adopted a twin-track strategy to IP protection. It has continued to use patenting to protect aspects of new technologies it has been developing, covering areas such as device selection, pairing/disconnecting and alert transmission. In addition, the company is using the international Patent Co-Operation Treaty system to extend its protection internationally.
The company already has over a million people using its platform across six countries or regions: Singapore, India, Pakistan, Europe, the Middle East and Africa, and has plans to expand into the United States imminently.
“We are expanding into multiple countries: patenting is an integral part of our plan, and we anticipate a big spike in our activity in this area in the near future.”
Recognising the importance of investing in IP protection, especially when expanding overseas, Singapore businesses now have an opportunity to offset the costs associated with this essential step by claiming what is called “enhanced deductions”. When used for a qualifying R&D project, as in KaHa’s case, businesses can now reclaim tax at 200% of the amount spent on IP filings annually (on official filing fees and professional fees), up to a maximum of $100,000. In other words, every $1 invested brings $2 in tax benefits. Above the $100,000 threshold, deductions work on a 1:1 basis.
KaHa took the important step of obtaining professional advice on tax and accounting matters from day one. In their case, this came from Shweta Mahesh of Prudent Business Consultants. As she explains,
“The tax deductions provided by section 14 of the Income Tax Act apply to a wide range of IP-related costs. These benefits are important for start-ups, even though they may not be making profits for a few years. Provided your shareholding does not change by more than 50%, and your business activities remain largely the same, properly claimed tax losses can be carried forward indefinitely.”
This rule, which also applies in a similar way to the costs associated with buying or licensing IP rights such as patents from other people, is beneficial to companies like KaHa, especially when the need arises to extend protection internationally and renew it periodically. The main stipulation is that the IP itself (which can also be trade marks, registered designs and plant varieties) needs to be legally and economically owned by a Singapore business entity.
As Shweta observes,
“These tax concessions are important for companies like KaHa who are investing in technology development because they can use them as soon as they become profitable. So even start-ups that aren’t making money need to ensure that they record this expense and claim it.”
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