1 December 2010Patents

Towards an EU patent

What are the problems with the current patent system in Europe that could be resolved by an EU patent?

Van Pottelsberghe: An EU patent would improve our innovation system in Europe and make the patent system more available to small firms and universities. Currently, once a patent is granted by the EPO (European Patent Office), it must be put in force in each desired national system—a fragmented, and hence ineffective, system. A European patent enforced in only six EU countries is five times more expensive than a US patent.

This is a significant issue, but is far from being the only problem. You must manage your portfolio at a country level and pay all the related additional costs. This means greater managerial complexity. Then, in case of parallel litigation, outcomes may vary across countries. Only large firms can afford to litigate across countries; the uncertainty is not attractive for entrepreneurs, academic spin-offs and even SMEs.

The current system also results in low quality—because it runs in parallel to the national offices system, which grant patents independently of the EPO. Companies that are in the grey zone with their patents can file in parallel another patent through the national route. So if they fail at the EPO, they can still have something granted in some countries. This reduces the overall quality of the system and creates a lowest common denominator in quality.

Fröhlinger: We have a patent system that, after grant, is currently fragmented in Europe and hampers access to proper protection for SMEs. Big companies also suffer from the system but less than small ones. The costs of filing translations, getting them published by the national offices and paying for local representatives to deal with all this are excessive.

The result is that many SMEs do not patent at all, or that they choose US patents. And even if they have patent protection in Europe, it’s only in a small number of member states. Then you have to consider the cost and complexity of litigation in different countries. Costs for litigation are skyrocketing in the UK, for example, and cannot be afforded by SMEs. A single patent and a unified patent litigation system would ensure accessibility to the patent system for SMEs.

Battistelli: We must start by acknowledging the fact that we have a European patent and the system is a success story. We have 38 member states and 600 million inhabitants. That’s more than the US, Japan and Korea put together. I think we have reached a very high degree of quality—we are acknowledged for quality over the world. We handle 50 percent of the PCT applications. and US companies represent 25 percent of our applications. When Europe can unify its work, then it is very successful.

On the other hand, it is necessary today to validate European patents nationally. In lots of countries, that means costly translations. Applied by 15 states, the London agreement already represents a big step forward on this. The second shortcoming of the system is that in case of litigation, you have to go in each national court. That means a waste of money and energy, and risking divergent decisions.

Sueur: There is a key issue. The European patent is not a bad tool. Usually, with three to six countries, we have the protection we need for certain industries for the money we can spend. In other industries requiring a broader protection, the patent is hardly affordable. But over the long term, the dissymmetry between the unified market and the fragmented approach to patents and enforcement is a problem.

The cost of the European patent is also quite important; this is why we are fighting for the ratification of the London Agreement, which avoids unnecessary costs, as translations are not read by anybody. It’s a waste of money. The EPO is very good, a stateof- the-art patent office and offers reasonable predictability however.

What are the main obstacles preventing the adoption of the EU patent, and how can they be navigated? Why does language seem to be such a problem?

Fröhlinger: It’s one of the longest outstanding problems—the idea has been around for 60 years. There are many different reasons for this, including concerns of member states that have problems with conferring jurisdiction to a unified patent litigation system.

“A single patent and a unified patent litigation system would ensure accessibility to the patent system for SMEs.”

The main stumbling block, however, has been the language for the EU patent. Some member states do not see to build on the existing EPO system with its three languages, which works well. The EU patent will not be a new type of patent—it will be a sub-category of European patent, and it is normal that it would apply the language regime of the EPO and not create something new.

Some member states have political concerns about this, but they don’t pay enough attention to the realities of the patent system and the practice of the EPO. There is no miracle solution, but it’s only at grant that you have to choose what kind of patent you want.

Battistelli: Cost is a complicated issue, and we should see patents not as costs, but as an investment. The EU patent system must be accessible to all the players, especially to SMEs and public laboratories. But it must cover its costs, as the EPO is self-financed. We have to find the balance between costs incurred and services provided. All the people in discussions agree that it won’t be used if it’s too expensive. Quality has a price: if you grant legally solid patents, you have a cost.

The language issue is very difficult, too. Language is a central aspect of our cultural identity, and Europe is built on these identities. My experience as EPO’s president, and before that as the head of a national patent office, is that we have a balance with three official languages. The EPO has had 30 year’s experience working daily in three languages.

The Council proposal is based on these three languages, and the EPO will be in charge of granting this EU patent. We understand that there are discussions around the language question, but the proposal is largely approved by member states.

Van Pottelsberghe: From my viewpoint, the language issue is a fig leaf, an easy argument used to block the creation of a truly European patent system. The most important problem comes from the NPOs (national patent offices), whose representatives are member of the working group that prepares the draft proposal for the EU Competitiveness Council. It’s like asking turkeys to vote for Thanksgiving. They want to keep their offices, their budget and their power.

A second blockage comes from lobbies that represent lawyers and attorneys. With the creation of a EU patent, at least €400 million would switch from attorneys, translators and lawyers back to the business sector and patent offices. Englishonly would be enough for the business sector (currently, 80 percent of patents are in English anyway), and an additional translation of the claims section in French and German would be acceptable provided it leads to a political agreement.

Fröhlinger: I appreciate very much Bruno van Pottelsberghe. We have worked with him and he has helped us a lot to understand the underlying economics. But on his last point, I disagree with him; 48 percent of applications from EU companies are filed in German and French. It is because German and French companies file via their national patent office. From the German office in particular, they get a first report very quickly. This effectively works as a first filter before applications go to the EPO.

“We probably need some key policy makers in Europe, such as Sarkozy or Merkel, to take it as a big political objective.”

The result is that many applications concerning inventions that are not patentable don’t even go to the EPO. This helps very much the EPO, where one of the biggest problems are the current backlogs. If we designed a system where everything went straight to the EPO, and which would force companies to use a different language of procedure for EU patents than they use for European patents, this would result in problems in those countries with lots of applications, such as Germany.

Sueur: For a while, European industry has been supporting English-only which corresponds to reality and remains a long-term goal, but at the same time, the industry refuses to change the EPC system. We have been living with this system for the last 40 years, we know it, and it’s good. At the application stage, there will be just a European patent application, as it is the case today, and after grant, it will then become, if the applicant wishes so, an EU patent.

What if agreement cannot be reached? Is there a case for some countries organising a separate system on a smaller scale?

Sueur: Provided such an agreement has a reasonable number of participants, in terms of industrial size, then why not?

Van Pottelsberghe: I think if agreement can’t be reached, then some countries should definitely do that. Those who resist will be the losers at the end of the day, and would have much less negotiating power. They would only have the opportunity to join the system in whatever form it takes.

Fröhlinger: From the Commission’s point of view, we would of course prefer to have an agreement between all our member states. There are some who start talking about enhanced co-operation—it’s foreseen in the EU treaties. If no agreement can be reached with 27 member states and if a group of member states submits a request for enhanced co-operation, we will have to consider this.

Do you think these latest efforts will be successful, and is an EU patent inevitable?

Van Pottelsberghe: If Europe continues to strengthen itself, it is inevitable, and we should have it as soon as possible. I am a bit pessimistic regarding this year’s outcome, but hope for it. We probably need some key policy makers in Europe, such as Sarkozy or Merkel, to take it as a big political objective. The UK would have its language as the main translation requirement, so may not be the best country to look to. It would be great to have strong French or German political backing.

It is however important to keep in mind that several issues still have to be addressed in order to make the system work efficiently. A key issue is to re-think the whole governance of the system. Second, Europe will still be the only major economy with a three-tier patent system (with the current proposal, three patent layers will be active: national patents, the current European patent that must be enforced in the desired member states, and the EU patent valid in all countries), which will do nothing for Europe’s competitiveness.

We will be creating a new round of 20 years of negotiation because of the three layers, and that’s incongruous.

Sueur: If I base my answer on experience, I would say nothing is going to happen even if I would say that the most recent commission proposal is probably the best so far. With a limited number of exceptions, it seems as if there is majority acceptance but no unanimity. The question is whether the minority can be appeased. If nothing happens, there will be two possible consequences.

The first option is that the file will be closed for a long time. Mr. Barnier will be then the last commissioner for a while dealing with it, this will be a disaster for EU enterprises’ competitiveness. We will not have the tools we need, at the time where there are more and more patent applications from emerging countries—China and Brazil in particular.

The second option is that a deal will be concluded between less than 27 countries but that the door will remain open for the other countries to join later on. I know that enhanced co-operation requires unanimity, but I can hardly imagine that one or two countries would prevent other countries from moving forward just because they don’t like a system they will not be a part of.

Battistelli: I am an optimist. We are very close to a decision. I am not the first EPO president to deal with this issue, but hopefully I will be the last.

All participants will be attending the IP Summit in Brussels on December 2-3.

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