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Patents, trade and foreign direct investment in the European Union

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euro-2-coin-currency-52965The EPO published a paper last week – Patents, trade and foreign direct investment in the European Union – which assessed “the impact of the European patent system on the circulation of technologies through trade and foreign direct investment in the EU single market”.

The paper contains an interesting discussion on the impact of the patent system on trade and investment, particularly in “high IP” industries such as bio-pharmaceuticals, ICT and medical device industries. However, as far as the discussion about the unitary patent system is concerned the paper glosses over or omits the challenges or drawbacks facing the unitary patent and Unified Patent Court.

For anyone who has been on the receiving end of arguments that patents stifle innovation this paper is likely to provide some counter viewpoints for discussion on how patents and strong patent systems in countries around the world increase the willingness of firms to ship technologies to foreign markers, enable R&D investment and licensing opportunities and deter opportunistic behaviour (e.g. a licensee selling lower cost versions of proprietary technology).

The paper also makes the argument that the current patent system in Europe could bring increased benefits if it was further harmonised.

Currently patent applicants in the EU can file a central application at the EPO and prosecute this as a single application through to grant at which point the granted European patent needs to be validated into a bundle of national patents. The post grant procedure therefore involves multiple validated patents with the associated need to track and renew multiple individual patents. Enforcement of this bundle of nationally validated patents across Europe potentially involves multiple court actions with the chance of conflicting decisions in different territories.

It’s against the above summary of the European patent system that the paper then introduces the “forthcoming” Unitary Patent and Unified Patent Court and the possibility that this change to the patent system in Europe will help to alleviate some of the current limitations.

The discussion of the unitary patent system in the paper is, in my view, somewhat rose tinted and, in its discussion of the potential cost of such a system, perpetuates something of a “fee saving myth”. Issues that IPcopy has with the discussion of the unitary patent system within the paper include:

  • the paper seems to want to have the best of both worlds and suggests that the study provides insights into the unitary patent system while also noting that it is not a full impact assessment of the unitary patent reforms.
  • Potential issues with bringing the unitary patent system into effect are completely omitted from the paper and so there is no mention of Brexit and the challenges that will bring and no mention of the challenge to the unitary patent system in the German courts.
  • No timescale is actually provided for implementation of the unitary patent system which is just referred to as “forthcoming”. Given that we’ve recently suggested that a delay until 2020 is not out of the question then avoiding discussion of an entry into force date seems a little misleading.
  • The paper makes repeated reference to the “UP26”, namely the 26 EU Member States that participated in enhanced cooperation which allowed the unitary patent regulation to be prepared. While it is technically correct to say that 26 countries are part of the unitary patent regulations it conveniently overlooks the fact that Poland has backed away from the whole unitary patent project. So, in reality only 25 of the 26 countries are actually involved and, as noted above, the participation of the UK and Germany (which are crucial to the whole project) is in doubt. The paper doubles down on the UP26 references with statements such as “The Unitary Patent will give applicants the option to obtain a European patent with unitary effect for the entire territory of up to 26 EU Member States…” This isn’t strictly incorrect but certainly glosses over some relevant facts.
  • Annex 3 looks at the cost of a unitary patent. The paper suggests one area where the unitary patent will save costs is in the post grant phase. To IPcopy’s mind the issues with the current arrangements post grant are overplayed somewhat. Yes, maintaining multiple EP bundle patents post grant will involve paying multiple renewal fees but if a patent owner uses a specialist renewals agency this process can be quite efficient. Even using a representative to manage this process will not be as prohibitively expensive as the paper alludes to.
  • The paper provides a cost estimate between the unitary patent renewal costs and the cost of maintaining four patents (in DE, UK, FR and IT). Over a 12 year period the savings amount to only around 600 Euros. This is seen as somewhat significant in the study but to IPcopy’s mind is a little underwhelming!
  • There is no discussion of the downsides of the unitary patent system, namely the risk of central attack and the inability to prune patent portfolios over time.

So something of a mixed bag in this study. Come for the discussion about the trade effects and impact of patents but perhaps don’t stay for the discussion of the unitary patent system!

Mark Richardson 22 November 2017


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