EU Breaks Through with Unified Patents

After almost 40 years of debate, nationalist posturing and outright hostility, the concept of a European unitary patent is almost a reality.

Up until now, companies had to secure and defend patents in each European company. But at a summit for the European Union (EU) in Brussels in late June, leaders agreed on the creation of a patent scheme that would require a single step to obtain patent protection across Europe. This means for the first time, patents granted will be simultaneously valid across 25 European countries, instead of applying to each of the 27 member countries of the EU for patent protection. Spain and Italy are opting out of the agreement, at present. The unified patent system is not expected to take place until 2014, if it is ratified.

“A single European patent should ultimately help smaller European companies and startups to protect inventions and attract venture capital,” says Rouget Henschel, a partner specializing in patent law at Foley & Lardner LLP in Washington D.C. “What venture capitalists want to see is patents. By making patents more affordable, a unified patent court can help European startups.”

The notion of a unified patent system was first suggested in the 1970s. For companies wishing to do business and file patents in Europe, both within the continent and worldwide, the unified patent is particularly noteworthy for small companies—including many thousands of VC-backed startups—with limited budgets, for whom the tens of thousands of dollars in patent application costs can prove a financial drain.

“It will give us more certainty on the process of gaining a patent. All of our companies are based on patents, so our companies’ costs will go down because they will spend less money on patent lawyers.”

Christian Schneider

Managing Partner

Vesalius

The cost of gaining a unified European patent should be 70% less than the current multi-country expense, according to the European Patent Office. The proposed system would reduce patent litigation costs for European companies by an estimated €289 million ($354 million) each year. It should also promote the convergence of patent systems between the United States and Europe, towards a “first to file” system rather than a “first to invent,” according to patent experts.

For Europe’s legislators, the unified patent is a symbol of a harmonized Europe and a pursuit of economic growth, a quality lacking in recent years against a backdrop of debts and political crises.

Proponents argue that Europe’s fragmented patent system is one of the reasons that the continent has lagged behind the United States and Asia in turning its scientific and technical IP into commercial products. In happier economic times, this was less of an issue. But when countries are becoming insolvent and thousands are starving on the streets of Athens, it is no longer tenable.

As Benoit Battistelli, president of the European Patent Office, put it at the European Inventor of the Year Awards in Copenhagen this June: “If an invention is patented, it means the company is serious. A patent is currency. In taking this long-awaited step towards the completion of the European patent system, Europe has demonstrated its conviction that the best way to counter current economic uncertainties is to boost innovation and strengthened the competitiveness of its industry.”

“If an invention is patented, it means the company is serious.”

Benoit Battistelli

President

European Patent Office

The lack of a unitary European patent is “a tax on innovation that Europe can no longer afford,” says Máire Geoghegan-Quinn, the EU Commissioner for Research Innovation and Science.

Manfred Stefener, who received one of the Inventors of the Year Awards at the Copenhagen event in acknowledgement of his portable fuel cell technology, agreed: “A single patent system would make life much easier,” says Stefener, who has previously raised VC funding for his ventures. “It takes a lot of time and money, so I would welcome a quicker and easier way to get protection.”

European VCs applaud the decision to press ahead with a unified patent.

“It will give us more certainty on the process of gaining a patent,” says Christian Schneider, managing partner at Vesalius, a German-based firm with a €150 million ($184 million) portfolio invested in biotech, pharma and food nutrition companies among others. “All of our companies are based on patents, so our companies’ costs will go down because they will spend less money on patent lawyers.”

Schneider believes that the new system will save time, since he will no longer have to draw up endless lists of which countries to include in patent applications.

But while the new system is welcome, it has not been something that the VC community has been lobbying hard to achieve.

“I was at a recent conference and it was a topic we discussed,” he says. “There was a sigh of relief that it is going to happen, but people were not jumping up and down. It was something we complained about more than we ask for it to happen.”

Martin Bader, a patent attorney and managing partner at Swiss-based BWG AG, has some reservations about the new system, one of which is the potential for increased costs.

The unified patent is 70% cheaper than applying to all the EU member countries one-by-one. But if an entrepreneur wants to register a patent in one country (in the intent of creating a national patent), then the cost of a unitary EU patent will be higher. In most cases, applicants will want to cover the entire continent, but there will no doubt be alternative cases.

He points out that since the European Parliament has yet to ratify the proposal, there is the slim possibility that it will not happen at all. But even should it reach the statute books, obstacles remain.

“It’s still not clear what happens in patent disputes, if you are an EU-based party and the other is a non-EU-based party, who would sue whom?” he asks. “There is a lot of room for legal argument.”

For now, the U.K. government has blocked the idea of the European Court of Justice acting as a court of final appeal over patents, arguing that it has no background in intellectual property.

Bader questions what the benefits are for some smaller VC-backed companies, having to apply for a European patent rather than just a national one.

“I’m not sure what practical difference it will make,” he says. “I get the feeling that some countries think it’s nice to discuss this patent and have a fight about it, but they’d like to remain with the current system.”

He adds, “I suppose if you are a small company, maybe relying on VC, it could be easier to build up models that rely on a unified Euro patent.”

David Nicholson is a London-based contributor. He can be reached at dn@davidnicholson.com.

European Patents at a Glance

  • Instead of applying to each of the 27 member countries of the European Union for patent protection, as at present, it should be possible beginning in 2014 to gain protection in 25 countries with one application. Italy and Spain are opting out of the plans for a unified patent system. The European Patent Office covers other countries, such as Norway and Switzerland, which are not in the EU, so some opponents argue fragmentation of the patent system will continue in Europe.
  • The European Patent Office is currently based in Munich. EU leaders agreed to split the seat of a new patent court between Paris, Munich and London. The U.K. office will handle patents for pharmaceuticals and life sciences, which should account for about one-third of patents.
  • Currently in Europe, those who file patents to protect their intellectual property have to validate a patent in each EU member state. Currently, after applications are filed for patent protection through the European Patent Office, the patent must be validated in each state, a process that can involve significant costs due to translation and local validation fees.
  • A unified common patent across Europe could reduce costs and administrative burdens on businesses. The European Commission reports that filing individual patents across Europe can cost 10 times what patents cost to register in the United States. Once the proposed unified patent system is in placed in Europe, it’s estimated that patents would cost about €680 ($833) compared to an average of €1,850 ($2,265) for a U.S. patent.