The European Commission (EC) recently published a plan highlighting how the EU’s innovative potential may support the EU’s recovery and resilience. Some interesting points are raised in the plan with various opportunities and commercial implications.
The plan identifies five challenges based on certain findings. Notable among these findings include the following:
- Intellectual Property Rights (IPR)-intensive industries presently account for almost 45% of Europe’s GDP and directly contribute to the creation of almost 30% of all jobs.
- Only 9% of EU Small and Medium-sized Enterprises (SMEs) have registered IP Rights (IPR) (although it should be noted that many more SMEs in the EU will have unregistered IPR such as copyright and trade secrets).
- Although 26% of high-value research publications on artificial intelligence (AI) comes from Europe, only 4 out of the top 30 patent applicants (13%) and 7% of businesses, engaged in AI patenting worldwide, are European.
- Incidentally, this citation also highlights a disparity between different economic territories in terms of the level of research and development (R&D) contribution to gross domestic product (GDP). Despite the level of public-sector R&D contribution to GDP being similar in each territory, the private sector R&D contribution to GDP is much lower in Europe compared with South Korea, Japan and the US. Further, the overall R&D contribution to GDP is even lower in the United Kingdom than the EU (1.7% compared with 2.2%) although both the EU and the UK have ambitious targets for increases in overall R&D spending. The cited EC and UK research notes do not seem to specifically address how to substantially increase private sector R&D spending to level up with other advanced economies.
- Cyber theft of trade secrets accounts for an estimated EUR 60 billion of losses in the EU.
- It should be highlighted that trade secrets are more difficult to enforce than patents and other types of registered IPR. Although seeking patent protection may not always be appropriate for some commercial strategies, the patent system provides a relatively robust approach for protecting technical innovations in most territories, including China. An advantage of patents and other registered IPR over trade secrets is the ability to sell and licence these IPR, which may provide valuable income to help support R&D activity.
In response to the identified challenges, the EC’s plan specifies some proposals for action, including:
- upgrading the system for IP protection,
- incentivising the use and deployment of IP, notably by SMEs,
- facilitating access to and sharing of intangible assets while guaranteeing a fair return on investment,
- ensuring better IP enforcement, and
- improving fair play at global level.
Selected highlights of these proposals for action include the following:
- Supporting a rapid roll out of the unitary patent (UP) system, to provide a more unified approach to patent protection and enforcement across the EU.
- The plan envisages that a constitutional delay in Germany will be overcome to support the roll out of the UP system. It is unavoidable to mention at this point that the changed relationship between the EU and the UK presently rules out participation of the UK in the UP system. However, the ability to obtain and enforce a European patent that is effective in the UK remains the same as before.
- Making it easier for SMEs to leverage their IP when trying to get access to finance. Although intangibles are often amongst the most valuable assets, a survey shows that not many SMEs benefit from their IP when trying to get access to finance.
- An interesting proposal in the plan is to provide a bank guarantee mechanism for SMEs and creators that is based on their IP, which may improve access to finance.
- Exploring ways to incentivise the rapid pooling of critical IP in times of crisis, for instance through a novel licensing system making critical IP available in a controlled manner and on a temporary basis. Such a licensing system may facilitate the rapid manufacture of IP-protected products in emergency situations.
- Such a system could provide a valuable source of income to businesses if they own any IPR that could be useful in such a crisis but cannot fulfil the level of demand placed on them.
- Ensuring that effective systems for issuing compulsory licences are in place, to be used as a means of last resort and a safety net, when all other efforts to make IP available have failed.
- Although potentially controversial, the plan seems to suggest that the EC wants to oversee issuance of compulsory licences, which is mainly a matter for national law in each EU member state.
- Despite guidance on the EU approach to standard essential patents (SEPs), some businesses find it difficult to agree on SEP licensing. This can frequently lead to disputes, in which patent holders claim that their SEP has been infringed and the other party complains that the patent holder has imposed unfair conditions on a licensing agreement. Based on a pilot study, the EC will explore the creation of an independent system of third-party essentiality checks to improve legal certainty and reduce litigation costs.
- According to the pilot study, it is envisaged that standards that require the use of patented technology will become more widespread in view of developments like Internet of Things (IoT), Industry 4.0, connected cars, etc. The pilot study also envisages that many more companies, especially SMEs, will be part of future license negotiations. As acknowledged by the pilot study, the present environment for essentiality checks is considered complex and opaque and may represent a high risk for stakeholders such as SMEs.
The EC’s plan therefore includes some ambitious targets while acknowledging various risks and opportunities. The plan provides a valuable insight into the EC’s present thinking and ambitions, which will have implications for commercial strategies both within the EU and worldwide, especially as the plan acknowledges the EC’s desire to influence global IP policy development. Businesses that engage in IPR-intensive activities may benefit from continually assessing their approach to IPR in anticipation of potential changes such as those noted above.
 R&D spending in the UK. Including analysis of R&D by region and industry, and international comparisons of R&D, House of Commons Library, 2021.
This is for general information only and does not constitute legal advice. Should you require advice on this or any other topic then please contact Andrew Rudhall or your usual Haseltine Lake Kempner advisor.