Closing Remarks at Public Hearing on Future Patent Policy

SPEECH/06/453

Charlie McCreevy

European Commissioner for Internal Market and Services

Closing remarks at public hearing on future patent policy

Public Discussion on Future Patent Policy in Europe

Brussels, 12 July 2006

Ladies and Gentlemen,

Throughout the world, patent authorities have a difficult role. On the one hand, they have to encourage everyone, individuals and companies alike, to innovate and provide them with the opportunity to patent and then market their invention with the certainty of securing a fair return on their investment.

On the other hand, they have to ensure that patents are only granted to inventions which are worthy of this temporary monopoly. They must not over-step the line beyond which innovation is stifled rather than promoted.

This is not an easy task. And there are many different opinions on how best to achieve the right balance! The consultation launched by DG Internal Market in January raised a number of issues for debate.

I am delighted that our initiative has met with an unprecedented level of interest among all groups of stakeholders. We received a huge number of replies, which will be vital in helping us to decide on the way forward.

But our task is all the more difficult as patents policy is decided in a number of independent fora, thus giving many of you a headache and doing European business no favours. Despite repeated calls for improvement, little progress has been made in any of these fora over recent years.

This is why we launched this broad consultation, with the aim of collecting your views on what would be the most effective and efficient manner of taking the patent system in Europe forward in the near future.

Last year we also launched a study on patents' value. The aim of the study is to complement the result of the consultation by obtaining a clearer view on the economical and social value of patents for society in Europe.

We have planned these two actions since we want to make sure that any possible initiative in the field of patents meets with your needs.

The importance of industrial property protection

In an increasingly global economy, Europe needs to play to its strengths. Building on excellence in education and research, it must deploy its creativity and inventiveness in the search for new processes, products and business models which will assist it in maintaining its competitive edge over the fast-growing emerging economies. The right regulatory framework, one which stimulates and rewards innovation, is an important element in the mix. Therefore we need to be sure that we frame our rules carefully and make them work for the benefit of all the players. Of equal importance, of course, is the correct application of the rules – and the legal certainty this brings.

Industrial property protection was identified as the first of seven major initiatives to be undertaken as part of the Commission's new industrial policy, an indication of the importance the Commission attaches to the subject. Judging by the level of attention that this consultation has prompted we are not alone in this belief. Over the coming year, I intend to accord particular attention to IPR and I will intensify my efforts to improve the industrial property environment in Europe.

Our priorities become even more comprehensible with the results we obtained with the patent value study. As Professor Gambardella will shortly tell you, we have learnt some very interesting things.

In particular, one significant issue is the creation of new businesses. It seems that many start-ups adopt business models that use patents as core assets. Often a patent is the key element around which a start-up organizes its entire business. Furthermore, an environment characterized by strong intellectual property rights, seems to influence in a positive manner the creation of new companies. New businesses are more likely to start-up because they can specialize in developing the technology and selling it to other firms, without incurring the much higher costs and risks of investing in the large scale assets for production and commercialisation.

Another important finding is the concept of “sleeping” patents. As you are aware, sleeping patents are unused patents that are simply left unexploited by the patent holder.

If we want to improve the rate of utilization of patents, sleeping patents are our natural goal. Apparently, small firms use 80% of their patents, whereas large firms use slightly less than 60% of their patents. Since large firms hold almost three-quarters of all the patents, in absolute terms their sleeping patents make up a significant reserve of technologies that could be potentially exploited possibly by other parties. Therefore, we should pay particular attention to this area if we want to improve the patent system in Europe.

The European patent system: Options for the future

Back to the consultation, I am of course aware that important decisions will have to be taken on several difficult and controversial subjects.

It is now apparent that our priorities must focus on:

-Simplifying the structure and procedures for patent grant and litigation;

-Decreasing the cost of obtaining a patent, in particular with regard to smaller businesses; and

-Last but not least, maintaining and improving the quality of patents.

There is still widespread support from industry for a Community Patent – but not for the compromise which is stuck on the table of the Council at the moment. There are hot debates about the number of languages patents should be translated into and the regional distribution of courts. My feeling is that businessmen, faced with a 21st century global economy, scratch their heads in disbelief when they see us stuck in these discussions. A vast majority of you – stakeholders – do not find the proposed language regime, as well as the jurisdictional arrangements, satisfactory. You do not want a Community Patent that does not offer clear advantages over the existing system. What you want is a cheaper and more reliable patent system. I have already said that I will go for one big, last push on the Community Patent. I still have to decide when the time is ripe.

The consultation also showed that there is clear support for the London Protocol since it would make the existing European patent system more attractive in terms of cost and efficiency. Even though the Protocol has yet to be ratified by France in order to enter into force, there seem to have been a couple of promising signs coming from Paris lately in favour of the Protocol.

The European Patent Litigation Agreement is seen as a promising route towards more unitary jurisdiction. Therefore, I will ask my services to explore the possibilities of moving this project forward. However, you should be aware that there are some institutional hurdles to be tackled if the Community is to become involved in the EPLA initiative. Furthermore, stakeholders differ on the degree of centralisation or the nature of the local first instance courts.

These views seem to depend on the differing assessments of the costs and benefits involved with more or less centralisation. It remains to be seen how we can best guarantee simplicity, proximity and accessibility with uniformity of interpretation and legal certainty.

Although the subject was not at the heart of my consultation, the quality of patents in Europe, particularly in new technology sectors, is of paramount importance to the users of the system. Any initiative aiming at reduction of patenting costs must be accompanied by patent quality enhancing solutions. We must make sure that patent applications are properly searched and examined which is an increasing challenge as technology development gears up everyday. Also, any future jurisdictional arrangement must contain safeguards against Community-wide or even larger enforcement of low quality patents, including protection against the destructive practices of "patent trolls", especially dangerous for the ICT industry.

Last, but certainly not least, we must make sure that small and medium enterprises, the backbone of European economy, have access to the patent system, unhindered by complex procedures and high costs. In that respect, we will look carefully into the idea that many SMEs put forward in their contributions: an alternative dispute resolution system, in the form of mediation or arbitration, for certain patent cases.

Having said all that, there are also areas where stakeholders did not express much enthusiasm for Community involvement. We will therefore refrain from exploring initiatives for further harmonisation of patent law, beyond what is already de facto achieved by the European Patent Convention. Also, as I said before, there will be no new initiative in the area of the computer-implemented inventions during my term as Commissioner. The vote and the far-reaching debate which preceded it demonstrated, in my opinion, that the time is not ripe for a meaningful piece of legislation to be adopted on this issue.

Conclusion

This conference marks the formal end of a very fruitful consultation period. On the basis of today's hearing and of the 2515 contributions we received, we will consider the best way forward and what we can best do to provide you with a sound patent system. The next step, of course, is to announce the options that the Commission intends to pursue as a result of this exercise. I don't expect to keep you waiting too long –I hope we will have set a course by the end of the year. But I think we have already begun our journey towards our destination. What we need is in multi-stranded package and today’s discussion has been yet another step towards teasing out those strands.

In order to overcome very complex political issues and with a view to promoting common European interests, it will be necessary to harness our efforts. The Commission, the Union, cannot do this alone. But I will endeavour to ensure that the policy the Commission adopts in response to the consultation responds as comprehensively as possible to the needs of all those who have an interest in the patent system.

Before I bid you good evening, I would like to thank all of you for coming here today, many of you having flown in from all corners of Europe, and to wish you, after all your hard work, a relaxing and enjoyable summer.

I thank you again for your contribution.

1