Académique Documents
Professionnel Documents
Culture Documents
MARCH 2010
bruegelpolicybrief
The risk for Europe is that current moves result in a patent agreement that
does not cure the system of its major ills, and thus does not bring about
any significant improvement for those who need it most: entrepreneurs and
innovative companies starting out on the innovation process. The creation
of an effective single
Cost of patenting in major economies, €s
European patent requires i)
35,000
Renewal fees (up to 10th year)
English-only post-grant
30,000 Translation cost
translation, ii) the end of
Procedural cost
25,000
* EPO-13 (6) stands for a European
nationally granted patents,
20,000 patent validated in 13 (6) countries
iii) phasing-out of the current
15,000 ‘European patent’, iv) lower
10,000 fees for young innovative
5,000 companies, and v) a radical
0
shake-up of the governance
EPO-13* EPO-6* US Japan S. Korea Brazil China
of the European Patent Office.
Source: Bruegel based on van Pottelsberghe and Mejer (2008) and van
Pottelsberghe and François (2009). Figures refer to 2008.
EUROPE SHOULD STOP TAXING INNOVATION
PATENT SYSTEMS underpin eco- growth, it needs to sort out its patent system, but the
02 nomic growth. If a patent system
is suboptimal, it is a sure sign that
patent system fast. Until it does
so, Europe is effectively putting a
Commission president recognises
that Europe’s patent system is fail-
bruegelpolicybrief
research and development will be tax on innovation. ing to pull its weight, in particular
hampered and growth will be ham- because it is fragmented:
strung. A well-functioning patent Ten years ago the EU aspired to
system is a fundamental frame- invest three percent of its GDP in ‘There are some things in our
work condition to sustain the pace R&D by 2010. It still spends less strategy that you will have
of innovation and the distribution than two percent. Not only has heard before. We make no apol-
of its benefits both within and Europe’s R&D effort been flat-lin- ogy for that. They would not be
between countries1. ing for 20 years (see Figure 1a), here if they had been done
but Europe still lags far behind the properly in the last ten years. To
Europe has been working on its US and Japan on this score and is give some examples: it is not
patent system for more than 45 being leapfrogged by China, as acceptable that because we do
years and it is still a work in illustrated by business R&D spend not have a Community patent,
progress. Unnecessary expense (see Figure 1b). The trend sug- European companies face
and legal uncertainty still abound. gests that the relative situation translation costs of around
Yet these are the very two features will worsen for Europe. China has €3000 on each patent. It is thir-
that count the most for business, long had two decisive competitive teen times more expensive in
especially small and medium- advantages over Europe: its large the EU than in the US and eleven
sized companies. There is still no ‘single’ market and a low-cost but times more expensive than in
simple ‘one-stop-shop’ for compa- educated workforce. It is fast Japan’ (Barroso, 2010).
nies seeking Europe-wide patent acquiring a third one: its ability to
protection, and duplicate fees and innovate (see Figure 2 on the next True, the patent system is not the
administrative charges – not to page). only cause of Europe’s lack of
mention the burden of possibly inventive activity, but it is one of
multiple litigation – bloat the cost In its ‘Europe 2020’ strategy for the weakest links between
of patenting in Europe. The EU smart, sustainable and inclusive Europe’s still-strong scientific
faces increasing competition from growth – the successor to the EU’s base and its lack of knowledge-
China, Japan and the United States Lisbon agenda – the EU has rolled based entrepreneurship.
for scientific talent and R&D over the R&D spending target of
resources, and so if Europe is seri- three percent of GDP. Among the In December 2009, EU industry
ous about creating the right envi- factors that should spur greater ministers meeting in the
ronment for innovation and business R&D spending is the Competitiveness Council claimed
2.0% 1.5%
EU15
1.5% EU27
1.0%
1.0%
China 0.5%
0.5%
1. For a detailed 0 0
Japan Korea United States EU27 EU15 China
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
bruegelpolicybrief
450,000
becoming a reality2. Optimistic Japan
declarations were made about a 400,000
04 BOX 1:
THE SEVEN DEADLY SINS OF EUROPE’S FRAGMENTED PATENT SYSTEM (van Pottelsberghe, 2009)
bruegelpolicybrief
• Affordability: A European patent that is maintained for ten years in just six countries is four times more
expensive than in the US, Japan and many other advanced economies. If all EU countries are targeted for
protection, costs are around 20 times higher than in the US.
• Low quality: most NPOs continue to grant national patents independently of the EPO, meaning that appli-
cants have a choice of routes for protection. This has resulted in heterogeneous quality standards.
• Complexity: enforcing and monitoring patents in many countries is cumbersome, especially for academic
spin-offs and high-tech start-ups.
• Uncertainty: patents of inventions with high market value are frequently subject to litigation. Within
Europe, this can lead to parallel litigations in several countries, often with divergent outcomes (ie one
country upholds a patent, a second country invalidates the very same patent).
• Lack of coherence: First, it is simple to operate ‘parallel imports’. Since patents are rarely protected in all
EU countries, it is possible to put imitation products onto the European market by first entering through a
state in which the competing patented product is not protected and then distributing the imitation prod-
ucts across Europe. Second, there are ‘time paradoxes’, whereby patent infringement damages may be
awarded by a national court for a patent that is later declared invalid by the EPO.
• No coordination at EU level: there is very little if any EU-level coordination of patent policies and other
directly related policies, including science and technology, competition, research and entrepreneurship.
• Weakness in global negotiations: the European patent system does not so far have one single representa-
tive in international negotiations. Rather, national patent offices have signed unilateral agreements that
on past evidence have influenced EPO behaviour (see, for instance, the signatory members of the Patent
Prosecution Highways, or PPHs)5.
European court would be set up, Table 1: Net financial flows resulting from a shift from the current
essentially arguing that national system to an EU patent, by sector (€m)
legal systems differ significantly.
Business Attorneys &
EPO NPOs Lawyers
sector translators
...and an additional cause of
blockage? Designation fees EPO -25 +40 -15
Validation fees NPOs -10 +10
There are two additional explana- Translation costs -20 +129 -129
tions for political inertia: financial Filing patent translation +60 -60
flows and loss of control. The cre- Taking over representation +46 -46
ation of the EU patent would have
significant consequences for sev- Intermediary cost for
+20 -20
maintenance
eral institutions. For instance, the
renewal fees paid for the mainte- Drop in parallel litigation* +121 -121
nance of European patents and Renewal fees** +88 +88 -176
received by NPOs (€ 654 million in Total +43 +78 +250 -270 -121
5. As explained in van 2008) are split into two parts: half
Source: Danguy and van Pottelsberghe (2009), including data from van Pottelsberghe and Mejer
Pottelsberghe (2009), is retained by the NPOs and half is
PPHs are collaborative (2008). The simulations are performed for 50,000 patents granted by the EPO (representing the
agreements that con- remitted to the EPO. Needless to actual annual average over the past few years), assuming EPO would machine-translate all granted
sist of work-sharing say, this practice generates sub- patents into all EU official languages. * Harhoff (2009) for the lower bound simulation of litigation
practices. without coor- costs; ** Based on renewal fees generated by the EU patent being split equally between the EPO and
dination of quality
stantial revenues for NPOs (€327 the NPOs. The dynamic effect of a more attractive patent system would result in higher maintenance
criteria. million, of which about €100 rates and thus more income from renewal fees for both the EPO and NPOs.
EUROPE SHOULD STOP TAXING INNOVATION
bruegelpolicybrief
90 Renewal fees (up to 10th year)
Pottelsberghe (2009) have simu-
80 Translation cost
lated the financial consequences
Procedural cost
of a straight switch of 50,000 70
* EPO-13 (6) stands for a European
patents granted by the EPO under 60
patent validated in 13 (6) countries
‘conclusions on an enhanced financing, with its own financial Still no provisions for SMEs:
06 patent system in Europe’. revenues consisting of court fees.
This could lead to overly expensive
whereas the US and Japan have
had provisions for SMEs for many
bruegelpolicybrief
No language agreement: a ‘sepa- litigation proceedings. In any case, years (SMEs pay only half the
rate regulation’ on the language the Council’s demand for budget fees), the EPO has no fee schedule
regime still has to be agreed to. neutrality of the EEUPC, though for SMEs. This is also true for the
Knowing that a key dimension of part of an agreed political package future EEUPC, which must be self-
the EU patent is its simplified lan- containing positive elements, is funded and might lead to prohibi-
guage regime, a big step still hardly a sign that European gov- tive litigation costs for SMEs.
remains to be taken. ernments are ready to boost
support for innovation. 4 POLICY RECOMMENDATIONS
Another layer of patents: the
envisaged EU patent would be an Governance failure: this is evi- Even if the recent Council conclu-
additional layer, on top of the cur- denced by a fragile agreement, an sions represent some progress on
rent European and national unsolved language puzzle, the lack the road to an effective and effi-
patents. NPOs will still grant of willingness to create a truly cen- cient European patent system,
patents independently from the tralised patent system (three lay- there are still a series of problems
EPO. Thus applicants can still opt ers are still envisaged), and a that must still be addressed. We
for multiple parallel applications to strong focus on an ‘enhanced part- have picked out four issues which
national offices, some of which nership’ between the EPO and are the keys to success:
may provide an easier route to NPOs (the European Patent
protection than the EPO process, Network). It may be noted that • Language
especially for patents with a low NPOs sit on the administrative • Complexity
inventive step. council of the EPO and also influ- • Affordability
ence negotiations on the EU • Governance
Institutional ‘financial’ sustain- patent given that they participate
ability: The EEUPC has, according in the Council’s preparatory work- Problem 1: language. Language
to the Council deal, to be self- ing groups in this field. has so far been a major obstacle to
Table 2: Filing languages at the EPO, by selected country of residence of applicants, 2009
English German French Unknown Total % English*
Austria 362 1141 0 0 1503 24%
Belgium 1438 36 142 3 1619 89%
Denmark 1445 40 1 0 1486 97%
Finland 1429 11 0 6 1446 99%
France 2712 161 6009 4 8886 31%
Germany 4918 20,129 44 2 25,093 20%
Italy 3693 52 7 88 3840 98%
Luxembourg 196 34 22 1 253 78%
Netherlands 6663 47 5 24 6739 99%
Norway 465 20 6 0 491 95%
Poland 141 16 2 10 169 89%
Portugal 101 2 4 0 107 94%
Spain 1135 51 36 26 1248 93%
Sweden 3089 47 5 5 3146 98%
Switzerland 3464 2017 375 3 5859 59%
United Kingdom 4763 18 21 2 4804 99%
Total 102,843 24,452 6764 242 134,301 77%
Source: EPO; the numbers include Euro-direct applications and PCT-regional phase. * = patents filed in English divided by the total of patents filed in
English, French and German.
EUROPE SHOULD STOP TAXING INNOVATION
the EU patent. Instead of compul- language of communication for European patents (for protection
sory translation into several lan-
guages, patents granted by the
business, scientific and techno-
logical matters.
in selected countries) and EU
patents (for protection in the
07
bruegelpolicybrief
EPO should be ‘English only’. There whole EU). There will thus still be
are several reasons for this: • At the same time, switching to ample scope for individual busi-
English would be a resolute nesses to ‘game’ the system. But
• English is the most frequently European step towards the this arrangement is also a clear
used business language world- improvement of the global message that Europe does not
wide, and this is a factor with patent system. An English give top priority to creating a sin-
patents as much as in other translation of the whole docu- gle, market-spanning patent sys-
fields. Of the patent applica- ment would make the codified tem (as the US and China have).
tions filed at the knowledge accessi- The cost of this approach is ulti-
EPO, 77 percent ‘Agreement should be ble to third parties mately borne by the European
are already in (including Japan, economy as a whole. The solution
reached to end the
English (see Table the US, China and is twofold:
2). Use of English current European India), and thus
thus represents patent directly, or at would improve the • NPOs should stop granting
the choice of the least to phase it out identification of patents, but should still provide
business sector, prior art by non- advice and search services for
after a few years of a
especially tech- European compa- local companies.
n o l o g y - b a s e d dual system.’ nies and patent
start-ups and aca- offices, thereby • Agreement should be reached
demic spin-offs. English is also reinforcing the protection of EU to end the current European
de facto the worldwide scientif- firms abroad. patent directly, or at least to
ic and technical language. phase it out after a few years of
Evidence is provided by the • When it comes to checking if a dual system.
rankings of scientific journals, new technology has already
used to gauge academic scien- been patented, patents in Problem 3: lack of affordability for
tists’ production in most national languages are of little SMEs and especially young inno-
European countries. The majori- use. This is because a technolo- vative companies. The EU patent
ty of ranked journals (more gy-based new venture located, would already be a huge step for-
than 95 percent) are English- for example in Belgium, must in ward for these applicants. Relative
6
language . any case look beyond the infor- costs (per million capita) would
mation available in Dutch and drop substantially (Figure 3). But
• The question for the future is French when conducting a free- more could be done to further off-
not if French or German will dom-to-operate survey (ie test- set these high entry fees:
remain scientific and technical ing if the new venture infringes
languages but if English will be any existing patents). • A 50 percent reduction in entry
challenged by Chinese. The Therefore, requiring translation fees for young innovative com-
Chinese emergence is a matter of patents into national lan- panies (filing fees, search fees,
of fact (Figure 2). According to guages does not serve its stat- examination fees) up to the
Thomson Reuters, the number ed objective of supporting sixth year (the average dura-
of scientific articles published innovation. tion of the examination period).
by authors based in China have 6. See for instance the
quadrupled since 2000, with Problem 2: complexity. The • A pay-back process (of the 50 journals listed in the
CNRS ranking in France,
more than 110,000 articles in agreement on an ‘enhancement’ of percent reduction) could be or in the German
2008 alone. The EU should the patent system involves adding scheduled for companies that Academic Association
secure its long-term access to an additional layer to it. The pro- keep their patents enforced for for Business Research
(Verband der
scientific knowledge by ensur- posed system would be composed more than six years. Hochschullehrer für
ing English remains the main of nationally granted patents, Betriebswirtschaft).
EUROPE SHOULD STOP TAXING INNOVATION
Problem 4: Governance failure. • Other key stakeholders than example from the directorates-
08 Presently, 27 NPOs with frequent-
ly diverging views control the EU
NPOs should be part of the
administrative council, includ-
general for research, enterprise
or internal market.
bruegelpolicybrief
system. They fear that reform will ing a representative of the busi-
undermine them. Furthermore, the ness sector (large firms and • The board of the EPO should be
EPO is independent from EU insti- small firms), a representative streamlined, with the number of
tutions, meaning little coordina- of consumers’ associations, a representatives of national
tion between it and the European representative of academic patent offices sitting on it being
Commission. Two steps should be institutions, and representa- reduced from 35 currently to 10
taken to bridge these gaps: tives of the EU institutions, for or 15.
REFERENCES:
Barroso, J. M. (2010) ‘Opening remarks of President Barroso at the Press Conference on Europe 2020, 3 March’,
http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/10/60&format=HTML, accessed 27 March
2010
Council of the European Union (2009) ‘Conclusions on an enhanced patent system in Europe’, 2982nd
Competitiveness (Internal Market, Industry and Research) Council Meeting press release, 4 December,
Brussels
Danguy J. and B. van Pottelsberghe de la Potterie (2009) ‘Cost-benefit analysis of the EU patent’, Bruegel
Working Paper 2009/08
Harhoff D. (2009) ‘Economic Cost-Benefit Analysis of a Unified and Integrated European Patent Litigation
System’, Final Report, Tender No MARKT/2008/06/D
van Pottelsberghe B. (2008) ‘Europe’s R&D: missing the wrong target?’, Bruegel Policy Brief 2008/3
van Pottelsberghe B. (2009) Lost property: the European patent system and why it doesn’t work, Bruegel
Blueprint, Brussels
van Pottelsberghe de la Potterie B. and D. François (2009) ‘The cost factor in patent systems’, Journal of
Industry, Competition and Trade 9(4), 329-355
van Pottelsberghe de la Potterie B. and M. Mejer (2010) ‘The London Agreement and the cost of patenting in
Europe’, The European Journal of Law and Economics 29(2), 211-237
Veugelers R. (2009) ‘A lifeline for Europe‘s young radical innovators’, Bruegel Policy Brief 2009/01
© Bruegel 2010. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted in
the original language without explicit permission provided that the source is acknowledged. The Bruegel
Policy Brief Series is published under the editorial responsibility of Jean Pisani-Ferry, Director. Opinions
expressed in this publication are those of the author(s) alone.
Visit www.bruegel.org for information on Bruegel's activities and publications.
Bruegel - Rue de la Charité 33, B-1210 Brussels - phone (+32) 2 227 4210 info@bruegel.org