Intellectual property
Community patents - a tough nut to crack
The debate on Community patents, which has rumbled on since 1975, and seemed to be treading water for the last several years, looks like it is moving again. The German presidency made intellectual property protection one of its priority areas, and the Internal Market Commissioner has expressed “reasonable optimism” that Community patents will be a reality "five years from now”. We examine the current status of this strategic component of European competitiveness.
Let us clarify one ambiguity right away. European patents, as delivered by the European Patent Office (EPO) in Munich, are not Community patents. The EPO, which is celebrating its thirtieth birthday this year, acts as a sort of single window. Its 6 500 officials receive patent applications from inventors, prepare patent files, much of the work of which involves researching earlier applications (have comparable inventions already been patented or published in any way?) and deliver a patent for each invention which meets its three critical conditions of novelty, non-obviousness (proof of an inventive activity) and potential industrial application.
This European title, translated into the EPO’s three official languages – German, French and English – must then be validated by being converted into as many national patents as the applicant wishes. Any disputes which arise are governed by national law. The complexity of the European system is explained by its history. Founded in the wake of the Munich accords of 1973, the EPO is an inter-governmental (i.e. not Community) institution. From seven founder countries, the EPO has grown to 31 members, not all of whom are EU Member States.
Too long and expensive?
Over the past 30 years, some 800 000 European patents have been delivered, with a significant increase in the number of applications since 2004. The European patent system has proved a success in terms of both quantity and quality. Specialists across the world recognise the “solidity” of European patents, that is, the quality of the protection they offer in the event of disputes or counterfeiting. At the same time, no one denies the urgent need for a root and branch reform of this system, which is criticised for being too long, too expensive and too complex. Examining an application takes on average 44 months, compared with 27 in the United States and 31 in Japan.
Filing a patent in the 13 most popular countries in the EPO zone costs an inventor an average € 39 675, compared with € 9 856 in the United States and € 5 541 in Japan. The cost of translation into eight languages (some of the 13 countries share the same language) represents one third of this amount, a bill that rises rapidly when protection is sought in all 31 EPO countries with their 23 official languages. Finally, the settlement of disputes by courts operating under different legal systems is a source of complexity, and at times of confusion. The Israeli company Epilady, which manufactures body hair removal devices, defended its patent in several European jurisdictions. Its case against its competitors was upheld in Germany, the Netherlands and Italy, but it lost in Austria and the United Kingdom. This demonstrates a situation of legal insecurity that is, to say the least, prejudicial to the unity of the European internal market.
A strategic issue
For the European Union, reforming the patents system is also an imperative for the proper implementation of the “Lisbon strategy for Growth and Employment”. A recent Commission survey of 10 000 inventors has put a figure on the economic interest of a patent. The “patent premium”, understood as the added value of inventions due to the simple fact of their being patented, is assessed at 1% of Gross Domestic Product for 1994-1996, and at 1.16% for 2000-2002. The more competitive and innovation-based our economy becomes, the more a patent application becomes a strategic act for enterprises and research institutes. For economists, the number of patent applications is a good indicator of the dynamism of an economy.
But it has to be said that this indicator does not do justice to the European Union, with 33 triadic patents (valid in Europe, the United States and Japan) per million inhabitants, compared with 48 in the USA and 102 in Japan. European performance in terms of patent applications is constantly worsening, to the extent that today Japan and the USA are filing more patents at the EPO than its own member countries. This weakness of European innovation has many causes, including, in industrialists’ eyes, the imperfection of the European patent system. Without a thorough reform of this system, the Lisbon Strategy, already threatened by weak R&D expenditure in several Member States, is in serious danger of remaining a pious wish.
Simplifying European patents
Both the EPO and the Commission largely share this bleak diagnosis. And both institutions have taken major initiatives in recent years to remedy this damaging situation. In 1999 the EPO launched negotiations on two topics: simplifying of the language rules, and setting up an internal jurisdiction to settle disputes in place of national jurisdictions. In both areas, draft agreements were drawn up in the early 2000s: the London protocol, which removes the obligation to translate the description part of the invention – the other part being the claims – into the three official languages and calls on signatory States where none of these languages is the official language to choose one of them for their patents; and the European Patent Litigation Agreement (EPLA), providing the legal basis for a European Patents Court. Both projects, which have been mired since 2004, have suddenly resurfaced. In July, the new French government announced its intention to ratify the London protocol, whilst in April the Commission announced its intention to support the EPO’s initiatives, in particular the EPLA, which is viewed as a springboard for the new Community patent.
The objective of the Community patent
This is because the Community patent needs to remain the ultimate objective, both for the Commission and for almost all Member States. Still to be agreed is how to get there. On 3 March 2003 the European Council adopted a "Common Political Approach" on what the Community patent should look like. This compromise text came under attack, in particular from industrialists, during the consultation launched by the Commission in January 2006. The criticism came from two sides: First, whilst the text proposed to no longer translate the descriptions – on average 16 pages in length – it intends to translate the claims – on average 4 pages – into each of the official languages of the Union, which reduces the savings. Secondly, the proposed jurisdictional system seems to be centralised in the hands of a Community jurisdiction, making access difficult for small and medium-sized companies.
In its Communication to Parliament and the Council of April 2007, the Commission seeks to respond to these criticisms, whilst summarising the observations made during the consultation. The economic experts consulted their calculators. The verdict was that the “common political approach” would reduce the average cost of translating a patent by 43%, despite the 23 official languages of the claims. This is certainly a long way from the 95% reduction that the Commission hoped for by proposing to translate only the claims and then only into the three EPO languages. But this is better than the application of the London protocol, which reduces costs by just 29%. The ever-delicate debate on the Union’s multilingualism has some hard figures now on which to chew.
On the question of the centralisation of the jurisdictional system, the Commission is suggesting a compromise between two opposing paths: either postponing the creation of a jurisdiction for handling disputes relating to future Community patents whilst supporting the EPLA project, or creating a unified structure, with the vocation of settling disputes involving both European patents and future Community patents, with the attendant difficulty of meshing Community and international law.
The ball is right now in the Council’s and Parliament’s court. In any event, new political impetus has been given to the lumbering monster of the Community patent.