A study on the state of the patent system in the European Union has recently been published by DG XIII of the European Commission. The study, which was conducted by an external consultant on behalf of the European Commission, is part of the EIMS (European Innovation Monitoring System) series of reports and relates to the Commission's Green Paper on Innovation. According to the study, since there is no single European patent, with separate patents needed for each Member State, there is a potential for fragmentation of the internal market. The cost of securing patent protection in every Member State discourages companies from exploiting their innovative potential, while the lack of legal mechanisms and judicial infrastructure at European level means that interpretations and applications of patent legislation are different. The study contrasts this with the situation in the USA and Japan, which both have a single patent mechanism and legal framework allowing protection in the whole territory - both comparable markets to the EU. The existing structure in Europe consists of the European Patent Convention (EPC), which includes non-EU Member States, and the Agreement relating to Community patents, which has not yet entered into force. These two instruments represent a complex legal framework for those seeking patent protection, and are subject to different legal jurisdictions. The study calls for the adoption of a "truly operational Community patent system", which would be comparable to that of its two main competitors, Japan and the USA. This system should also provide adequate and non-discriminatory treatment for non-EU Member States. Under this system, the costs for patent protection within Europe would be reduced to a level comparable to the USA and Japan (although the costs of translation have to be considered in setting the fees). The study also notes that, in the USA, SMEs benefit from a 50% reduction in the costs of patenting, whereas, in Europe, no such reduction exists under the EPC.