The R&D Tax Credit Aspects of the Packaging Industry

• New or improved products, processes, or software
• Technological in nature
• Elimination of uncertainty
• Process of experimentation

1. Materials, processes, and design:
   The search for new materials has gained importance in the packaging industry, particularly due to heightened environmental awareness and rising prices of raw material. New inventive materials that are renewable and smart have been discovered, however, research is necessary to determine innovative and creative ways to apply traditional materials, such as cellulose composite. Additionally, new processes are needed to enhance efficiency and effectiveness of operations while complying with ever more strict regulations. As far as design goes, the packaging industry must respond to new life-styles and to a very competitive market.
   
   
2. Sustainability:
   Innovation in the packaging industry must consider a growing concern about its environmental footprint. Responsible sourcing, resource optimization and waste reduction, water conservation, energy efficiency and the use of renewable energy, reduced greenhouse gas emissions and pollution, are examples of new inescapable priorities.
   
   
3. Cost-effectiveness:
   Similar to every other field of economic activity, the packaging industry is constantly looking for new ways to increase cost-effectiveness of its processes and products. In other words, innovation must focus on creative strategies that increase productivity relative to cost. A few domains stand out as promising targets for productivity enhancing innovation: a) reduction in package weight, b) diminution of waste after end use, c) extension of shelf life, and d) enhancement of production and transportation efficiency.

1. New Materials:
   The New York start-up, Ecovative Design is working on a new biodegradable styrofoam-type material made from mushrooms. Inspired by the natural process of adhesion, where tissue of mushrooms bound woodchips together, the company has used mycelium, the supporting structure of fungi, as a building material. By combining a mycelium network with agricultural waste, Ecovative Design has been able to create packaging products in various shapes and sizes. This innovative process is also a "green" one. In addition to being completely biodegradable, it does not require external energy. Founders of the design firm believe natural packaging is central to the industry's future.
   
   
2. DNA Authentication:
   DNA "taggants" are an innovative tool to prevent counterfeit packaging. By incorporating unique DNA sequences that cannot be reproduced, this technique offers an unprecedented level of security and constitutes an effective forensic means to verify a product's authenticity. Custom DNA sequences containing information (manufacturer's name, facility location, etc.) are embedded into a host carrier, such as ink, which is then printed onto the packaging or label. In recent years, the increase in packaging forgery has negatively affected consumers and brand owners, causing health, safety, and financial concerns. This is particularly sensitive for the pharmaceutical industry, which has experienced significant market erosion due to counterfeit.
   
   
3. Smart Labeling:
   The unprecedented multiplication of mobile devices revolutionized the access to information. In this context, every package can now be a smart package. Mobile phone barcode scanning has allowed consumers to instantly learn more about a product (its use and maintenance, for instance) and to have access to its prices and reviews. New barcode scanning apps can also simplify various tasks, such as inventory management and asset tracking.
   
   Concurrently, the packaging industry has seen the emergence of enhanced information labeling. This is particularly true for pharmaceutical companies producing over-the-counter medicines, which are currently obliged by the U.S. Food and Drug Administration (FDA) to feature "information listed in the same order; arranged in a simpler eye-catching, consistent style; and containing easier to understand words."
   
   
4. Innovative Designs:
   Crown Packaging Technology Inc. was recently issued a patent for a re-closable beverage can end. The invention comes from the need of a user-friendly and not costly mechanism that allows for the storage of beverage for later use while ensuring security, cleanliness, and maintenance of the carbonation level. Phoenix Closures is also engaged in developing new consumer-friendly designs. The company is currently working on a bottle assembly with internal scraper, inner seal, and cap. The invention is a response to the consumers' need of a convenient way to remove a measured dose of the product.
   
   
5. Electroluminescent Packaging:
   Display functions featuring electroluminescent effects are also an emerging trend in the packaging industry. The optical and electrical phenomenon through which a material emits light in response to an electric field or current allows for the colorful depiction of shining logos, images, and texts. Different areas of the package can be illuminated and motion sensors can also be incorporated. Originally conceived as a marketing tool and a means to call the consumer's attention, this technology is currently used in pricier goods, such as liquors and cosmetics.

Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Andressa Bonafé is a Tax Analyst with R&D Tax Savers.

Charles G Goulding is a practicing attorney with experience in R&D tax credit projects for a host of industries.