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Patents for Innovation
and Profit

High costs and a lack of awareness mean that European companies are failing to make best use of the patent system. New proposals from the European Commission will make patents cheaper, more accessible and more widely understood.

Contents:

I. Keys to Innovation
II. Towards a Community Patent
• Adding Value to Innovative Projects
• IPR Helpdesk
• Specialised IPR Training
• Accessing Patent Information

Things are looking up for patents in Europe. After forty years of waiting, European inventors may soon be able to take advantage of a true 'EU patent' that should cut the cost of protecting intellectual property rights (IPR) while encouraging the free flow of technical information.

The need for patent unification is clear, according to Professor Joseph Straus of the Max Planck Institute for foreign and international patent, copyright and competition law in Munich. "We cannot afford a single market without a single patent system. If we are able to accept a single currency, we cannot tolerate 15 national patents in Europe," he told delegates at Patinnova, an international conference held last May in Vienna by the Innovation Programme.

"The existing patent system is complex and lacks co-ordination," agrees Paul Waterschoot, Director of the European Commission's DG XV-E (IPR legalislation). He points out that the Commission is now reacting to the needs of patent users, who are becoming increasingly vocal about the need for change.

Two documents - last year's Action Plan for Innovation (see the December 1996 special edition ) and a forthcoming Green Paper on patents - form the basis of changes that will breathe new life into the dormant Community Patent (see 'A Plethora of Patents'), should slash the costs of patenting and provide easier access to the technical information locked up in patents.


Context

A Plethora of Patents

The European patent was born from the 1977 European Patent Convention (EPC), and allows an inventor to file a single patent application (in English, French or German) to obtain protection in all 18 EPC signatory countries (more from Eastern Europe are on the way.)

The European patent is effectively a bundle of national patents: one for each Member State in which protection is claimed. An inventor can apply for a European patent through the European Patent Office (EPO). Once the EPO grants a patent the competence for administering it is transferred to each national patent office.

The Community patent is a long-awaited and never realised policy goal: a single patent which covers the entire European Union. A Community Patent Convention of 1973 was finally adopted in 1989, but has since only been ratified by seven Member States and is now moribund.

I. Keys to Innovation

The current emphasis on innovation as a source of industrial competitiveness, and hence prosperity, makes patents a natural focus - patents, after all, are inherently about innovation.

Yet according to recent studies undertaken by the European Patent Office (EPO), only 59,000 companies in Europe have made any use of the patent system in the last five years; a further 111,000 innovative companies are estimated to be in a position to benefit from the patent system but fail to do so. In fact, it is estimated that billions of ECUs are wasted every year in Europe on re-inventing and re-developing existing ideas because of lack of information.

Most people recognise that large, high-tech companies need patents and other intellectual property protection to safeguard their investment in research and development. Less widely appreciated is the fact that smaller companies and low-tech business can also benefit from patent protection.

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The failure to understand patents and all the many ways they can be used is costing European industry millions of ECU every year.

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A case in point is Irish company Kleerex International, which uses clear acrylic sheet to make racks for displaying retail products such as magazines and sweets. "Acrylic products of this kind used to be made by craft-based, localised industries, in short production runs. There was little investment in R&D and new designs were quickly copied by competitors," says company founder and licensing director Frank Carroll.

Carroll designed an innovative flat-pack modular construction system that could be manufactured at low cost yet gave a product that was more versatile and performed better than those of his competitors. When starting up the company in 1987 he realised that without patent protection his inventions would be widely copied, and is grateful to the financial support he received from the Irish Institute of Research and Standards. "If they had not covered the cost of patents on our first two products we would not have been able to afford protection," he says.

Since then the company has developed new products and expanded to the point where it now has 20,000 installed systems in the UK, as well as products made under licence in the USA and Australia. Carroll has plenty of criticism of the patent system: he thinks that patents remain too expensive and do not give enough protection to small firms that cannot afford lengthy court cases. Nevertheless, he acknowledges that his success has depended heavily on a willingness to take patents seriously.

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Around 80 per cent of all publicly-available technical information is published in patent documentation - and often nowhere else.

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Market Intelligence

But if patents are important as a way to protect hard-earned R&D results, they are equally significant as a source of technical information. An often-quoted figure is that around 80 per cent of all publicly-available technical information is published in patent documentation - and often nowhere else. Of this information, around 90 per cent can be used directly by people other than the respective patent holders; only the remaining 10 per cent is protected by valid patents.

One company that appreciates the value of patents as an information source is Austrian farm equipment manufacturer Schauer Maschinenfabrik. This medium-sized firm, employing 220 people, makes automated animal feeding systems based on what managing director Gerhard Vogl refers to as "mid-technology". It's a fast-moving field, he explains, and the company relies on patents to stay abreast of the activities of its five main competitors as well as to protect its inventions.

Since 1985 Schauer has applied for 33 patents. Of these three are still at the application stage and seven were not granted. Of the remainder, 16 are still in force and seven were dropped from the company's portfolio because they had been superceded. "Patents give us important protection and are a weapon in the battle for market share," says Vogl. Patents cost the company around 43,000 ECU annually, or 11 per cent of Schauer's R&D budget.


II. Towards a Community Patent

Since the benefits of patents are clear, why do so few European firms, especially SMEs, use the existing patent system? According to the delegates at the Patinnova conference, the main problems are excessive costs, overlap between national and European procedures, the need to file patents in foreign languages, slow administration and poor access to published patents.

Probably the most apparent problem with the current system is cost. Patent costs are not always easy to compare, because they are made up of several different components payable at different stages during the lifetime of the patent. Nevertheless, there is no doubt that European patents are far more expensive than those from America or Japan.

A typical European patent giving protection in eight Member States costs DM 36,000, Professor Straus told Patinnova delegates - and this does not include mandatory translation costs. A US patent, by comparison, costs around DM 3,000. Japanese patents cost only DM 2,200 each, though this figure is somewhat misleading because Japanese patents tend to be smaller in scope than their western counterparts.

The total cost includes the fees charged by the EPO and national patent offices, patent attorneys' charges and translation costs. The EPO is currently in the process of cutting its fees by around 20 per cent, but many users think this is still too expensive. "I welcome the cut in EPO fees but it's still not enough," said Frank Carroll of Kleerex.

If the EPO's costs are still too high at least its customers are getting a service that is generally acknowledged to be highly professional. Translation costs, on the other hand, come in for even more criticism because they account for around 40 per cent of the cost of a patent and yet are often considered next to useless. At the moment a European patent must be translated into the language of every country in which protection is claimed. "Translations are hardly ever used," notes Renate Remandas, Vice-President of the EPO, "and as the number of Member States grows from 18 to 30 the cost of translation will rise in proportion."

Translation is a political problem too. This is not so much because each country wants patent documentation to be available in its own language - Patinnova, in fact, showed that there is wide support for filing patents in a small subset of the official Community languages - but because translation costs discourage companies from filing in less industrialised countries or in eastern Europe.

At the conference Jan Galama, patents and licensing director of Philips International in the Netherlands, admitted that costs forced his company to be "very selective" about where to file European patents, and that this could result in some countries becoming "patent-poor". This discourages investment because companies are reluctant to manufacture goods in countries where they do not hold patents to prevent copying.

Dual System Overlap

These and other problems all stem from today's 'dual system' arrangements. While inventors can apply for a European patent through either the EPO or a national patent office, in reality patent applications are split equally between these two routes. In fact, more than 90% of applications filed by EU nationals are based on a previous national application.

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There is no doubt that European patents are far more expensive than those from America or Japan.

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In addition, while 'the EPO route' can grant patent protection in up to 18 countries, legal challenges against the patent can be heard in each country. If some are successful, the supposedly European patent ends up recognised in some countries but not in others. This is hardly conducive to the smooth functioning of the Internal Market. The need to work with many different patent offices also increases costs and slows down the patent granting process in other ways, and makes accessing patent literature more difficult.

The Innovation Action Plan recognised that the coexistence of national and European patents, and the failure of the Community patent to come into force, are responsible for many of these problems. To put matters right it promised a Green Paper on the Community patent and related issues.

New Green Paper

This Green Paper is likely to be published as this edition went to press. Consultation will take place during the rest of the year, with a political agenda taking shape in the first few months of 1998. The Paper's main point is that the Community patent must be created, and that it must be less expensive and more efficient than the current system.

Costs can be reduced in two ways. To begin with, the amount requiring translation must be reduced. The draft Green Paper proposes two possibilities - the production of high quality abstracts, which will be the only text requiring translation; and the 'compacted document' solution, where the patent is reduced to around 20 pages with the help of the patent examiner.

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In 1994, industry spent about 2 billion ECU in Europe on legal or out-of-court proceedings to protect patents.

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A second aspect to reducing costs relates to the problem of enforcement. Today's patents may provide protection to small, innovative companies in theory, but if they do not have the financial resources to go to the courts then in practical terms the protection is worthless. One possibility floated by the Green Paper is the establishment of a sort of insurance fund which will help finance SMEs' legal battles in enforcing their rights.

Another issue, of course, is the procedure for both granting and challenging patents, which was one of the main stumbling blocks for the original Community patent. Could a single judge in any country overturn a Community patent across all of the EU? The Commission would like to see both granting and legal challenge procedures centralised, using the European Patent Office and the European Court of Justice. Whether this will be achieved remains to be seen.

Finally, the Green Paper will also address the harmonisation of the EU's national systems, tackling issues such as employees' rights to their inventions and the protection of software, which cannot currently be patented as such.

The changes the Commission has in mind will require determination and a formidable degree of co-operation between the EU's Member States. The consensus on these issues at Patinnova was impressive, especially since many of those present were patent lawyers and other specialists with vested interests in the existing system.

Translating this consensus into action will be worth the effort. Patents throughout Europe will be simpler and cheaper to administer and free from today's legal uncertainties. Patent documentation may be more easily available, further stimulating innovation. In short, the Commission is planning a European patent system that is truly competitive with those of the USA and Japan.

Innovation Programme Services

Adding Value to Innovative Projects

The Innovation Programme's QUICK SCAN service has shown that patent information can reduce duplication of R&D and save public money.

The Innovation Programme's 1995 Call for Proposals for technology validation and technology transfer projects resulted in 100 project proposals being granted funding for their first, feasibility phases. All of these projects were offered the QUICK SCAN service, where the European Patent Office's search division at The Hague checked the patent literature to see if the proposals were as novel as they claimed to be, and to learn more about the potential market.
Saving time and money: a QUICK SCAN report during the definition phase of an Innovation Project led by Trumpf Maschinen Austria showed that the laser-based optical measuring system they proposed for their sheet metal machines ( pictured ) had already been developed elsewhere. They elected to develop mechanical systems instead.

The aim is to help identify relevant future technological trends, alert the proposers to any similar work already performed elsewhere, provide useful information on targeting products and services, and so on. It is a particularly useful service to the SMEs behind the proposed projects - small European companies are more ignorant of patents than their counterparts in Japan and the USA, and two-thirds of the SMEs generating inventions have no access to the patent system whatsoever.

Expert Analysis

The contractors received copies of the EPO's search report and all related documents, plus guidelines on how to proceed, for example by establishing an intellectual property rights (IPR) strategy.

Of the 100 proposals, 87 contained enough concrete technical detail to be suitable for patent searching. The searches showed that 30 of these were truly novel; in the remaining 57 cases the EPO questioned the novelty of the whole project or parts of it. As a result, three of the projects changed direction significantly or were abandoned. Twelve more projects changed their IPR strategy as a result of the QUICK SCAN search. Five of these applied for a patent or registered trademark and the other seven thought it worthwhile to contact a patent lawyer.
Innovation à la Tarantino: a nine minute video has been produced to explain novelty searches, patent strategy and the QUICK SCAN service. It is available in five languages (EN, FR, DE, IT and ES) and in both PAL and VHS formats.

Compared to the total budget of the projects action line, the 'savings' as a result of QUICK SCAN are estimated to be around 3-5%. The cost of the QUICK SCANs, however, was only 0.15%.

Market Intelligence

The project also succeeded in raising awareness of the market information available in patents. A questionnaire sent to all the participants was answered by 47 of them, and revealed that 50 per cent gained a better insight into the competitive situation as a result of QUICK SCAN. Three projects were able to identify new market opportunities, and three others found possible opportunities to license their technology. Other consortia discovered technologies that might be available for licence, or learned of interesting technologies in the form of abandoned patent applications or lapsed patents.

The Innovation Programme is continuing to offer QUICK SCAN to new project consortia, although in future the service will probably not be free, as it is at present. The Commission also has plans to including the regional dimension by allowing Innovation Relay Centres to take part in the QUICK SCAN process.

Contact
Innovation Programme, DG XIII/D-1
Fx. +352 4301 32073
• QUICK SCAN: M. Schmiemann
• QUICK SCAN video: G. Haesen


IPR Helpdesk

The Innovation Programme has firm plans for a combined Web site and telephone helpline to provide patent information.

The need for the IPR Helpdesk was identified in the First Action Plan for Innovation in Europe. The Innovation Programme initially intends the service to become the Commission's intellectual property hotline for protecting EU research results, but it could go on to become a valuable resource for all issues relating to research exploitation and IPR issues, including project planning.

The IPR Helpdesk Web site, which will be open to everyone, will be backed up by a telephone helpline reserved for organisations taking part in EU-funded research projects. Neither the Web site nor the helpline will seek to replace professional advice from lawyers or patent agents.

The Web site will provide:

  • useful information on R&D planning, technical co-operation, and protecting and exploiting results;
  • information on important IPR activities in the Member States, with contact points;
  • bibliographies and links to other Web sites dealing with IPR matters;
  • a forum for feedback and discussion, possibly with areas reserved for EU project participants.

After a preliminary feasibility study a Call for Tenders could take place later this year, so the IPR Helpdesk could be in operation by the spring of 1998. The annual budget provided by the Innovation Programme should be of the order of 2 MECU.

Contact
M. Schmiemann, DG XIII/D-1
Fx. +352 4301 32073
E-m. manfred.schmiemann@ec.europa.eu


Specialised IPR Training

Seminars on handling IPR are being developed for participants in EC R&D projects.

The seminars were originally developed for European Commission officials and scientific officers monitoring the EC's R&D projects. The seminar covers all aspects of IPR, from the initial reservation of property rights to the licensing process. Special attention is paid to the IPR aspects of the EC's model contracts for cost reimbursement, project management and partner cooperation, while case study and role-play sessions have been developed to help illustrate the main points.

The seminar is an initiative of the Commission's in-house Coordination Group for Dissemination and Exploitation, DG IX (Personnel) and the Innovation Programme, which now intends making similar seminars available free of charge to R&D project participants. Three different 1.5 day seminars are planned - the general seminar, plus two specialised seminars on biotechnology and information/communication technologies.

While it remains to be seen whether these seminars can be funded under the Fourth Framework Programme, the Innovation Programme is confident that they will become available under the Fifth, which gets underway next year.

Contact
M. Schmiemann, DG XIII/D-1
Fx. +352 4301 32073
E-m. manfred.schmiemann@ec.europa.eu




Accessing Patent Information

The PATLIB network is composed of around 130 offices across the 18 Member States of the European Patent Organisation. Each node in the network is a national or regional patent library or information centre and has qualified staff on hand to offer advice.

The various offices are networked together by the national patent offices with the assistance of the European Patent Office (EPO), from which an address list of PATLIB centres can be obtained. The EPO's European Patent Information and Documentation Systems (EPIDOS) office is devoted to producing and disseminating patent information products. For information on granting and appealing against European patents, however, contact the EPO's main office.

The two EPIDOS-INPADOC databases are the largest patent databases in the world in terms of both the countries and time span covered. One, known as PFS, deals with all patent documents applied for in 65 patent offices worldwide, receiving 25,000 new documents each week. The other, PRS, deals with the legal status of patents - whether they are in force or not - in 22 patent offices, and is growing at around 40,000 documents a week. Other databases include the Register of European Patents, which provides detailed information on all European and Euro-PCT patent applications in English, French and German.

EPIDOS supplies this and other information both on-line (although not via the WWW) and through the ESPACE series of CD-ROMs. The latter numbers several hundred disks in total, although many users need only the 3-disk ESPACE-ACCESS A series, which gives access to searchable bibliographic and abstract data for European or international patent applications.

Contact
• European Patent Office Tl. +49 89 23 99 0
Fx. +49 89 23 99 44 65
Http://www.austria.eu.net/epo/
• EPIDOS Information Service
Tl. +43 1 521 26 0
Fx. +43 1 521 26 5491
E-m. infowien@epo.e-mail.com



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