Report University of Maastricht "Proportionaliteit in het octrooirecht"

IP2Innovate

A new academic study by economists at the universities of Bordeaux, Grenoble, and Universitat Pompeu Fabra (Barcelona) highlights how patent assertion entities (PAEs) are continuing to take advantage of weaknesses in Europe’s patent system. The study, entitled Patent Privateering, looks at one specific method of patent abuse. Patent privateering is a term to describe a situation where a patent owner hands patents to a patent assertion entity (PAE) to exploit for mutual benefit, allowing the patent owner to maintain a secret stake in the patents. The study concluded that patent privateering is widespread in Europe. The practise has been around for many years but as other jurisdictions including the US have made it harder, Europe’s patent system is a ripe target for abuse. This is largely because patent courts in Europe do not apply the principle of proportionality, and instead hand out injunctions to patent owners almost automatically.

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With Austria signed up, the Unified Patent Court agreement has now been ratified by the required 13 member countries. The dream of forging one single patent jurisdiction for Europe is on course to become a reality, after decades of uncertainty.

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IP2Innovate welcomes the Commission’s Digital Fitness Check and its commitment to delivering a simpler, more competitive Europe. As a coalition of small and large companies that create innovative products and services in Europe and that collectively hold thousands of European patents, IP2Innovate strongly supports efforts to reduce unnecessary regulatory burdens for companies while maintaining high standards of protection for fundamental rights, consumer safety and European values. A key obstacle to Europe’s digital competitiveness lies in the outdated framework governing the enforcement of patents. The Intellectual Property Rights Enforcement Directive (IPRED), adopted in 2004, requires remedies for patent infringement to be proportionate but does not set out clear criteria for how proportionality should be assessed in relation to today’s complex digital and connected technologies – such as AI systems, IoT devices, semiconductors, smart vehicles or critical infrastructure. As a result, the lack of clear rules on how to ensure remedies are proportionate in relation to complex products has led to the de facto automatic granting of injunctions in patent cases, which result in the removal of entire product lines from the market even when the patent infringement relates to a minor feature of a complex product that incorporates thousands of patented components1. For complex products automatic injunctions create excessive litigation risk, legal uncertainty and significant disruption to supply chains, investment and innovation, and force Europe’s digital innovators to pay excessively high licensing fees for patents to settle patent lawsuits. This situation is to the detriment of Europe’s industrial base and competitiveness. Modernising IPRED to clarify how courts should assess proportionality and consider alternative remedies where appropriate would directly support the Commission’s simplification agenda. While this would require targeted amendments to the IPRED, the overall effect would be a reduction in regulatory burdens through: • Reduced litigation risk and administrative burden, particularly for SMEs and companies developing complex digital products; • Improved legal certainty and predictability, enabling companies to invest with confidence; • Lower financial and operational disruption, safeguarding innovation, jobs and supply chains. Amending the IPRED to provide further specificity on proportionality in patent litigation would not impact a patent holder’s ability to enforce its patent rights, but would make sure such enforcement is appropriately balanced in the digital age. Additionally, amending the IPRED would help reduce the number of avoidable court cases by making appropriate settlements between patent owners and innovative product companies more likely. As a result, courts would face a lower workload and could handle the remaining cases more efficiently, ultimately strengthening trust in the European patent system. A clearer, more balanced framework would align Europe with other regions of the world, enhance Europe’s global competitiveness, and prevent distortive practices that extract value without contributing to innovation. This issue is particularly well‑suited to be addressed at EU level, as digital products and services circulate seamlessly across the entire Single Market. Divergent interpretations of IPRED’s proportionality requirement create fragmentation, legal uncertainty and opportunities for forum‑shopping. Because patent enforcement rules directly affect the functioning of the Single Market, action by individual Member States cannot entirely resolve these inconsistencies. Only EU‑level reform can ensure uniformity and promote a proportionate and consistent application of remedies across jurisdictions. Modernising IPRED therefore directly supports the Commission’s objective of “a more cost-effective and innovation-friendly implementation of European rules – all the while maintaining high standards and core objectives of the rules”. This is exactly what IP2Innovate is calling for with the modernisation of the IPRED to clarify how courts should assess proportionality and consider alternative remedies where appropriate. Experience shows that non-binding clarification is not sufficient to address this structural problem. The Commission’s 2017 guidance on IPRED did not materially change judicial practice or reduce the near-automatic granting of injunctions in patent cases. More than two decades after its adoption, IPRED requires targeted modernisation to ensure that Europe’s patent enforcement system supports – rather than hinders – the Union’s objectives of competitiveness, simplification and technological leadership. About IP2Innovate IP2Innovate is a coalition of small and large research-intensive companies that develop innovative products and services in Europe, collectively holding thousands of European patents, as well as industry associations representing more than 40 companies. The coalition works with policymakers, the legal profession and judicial authorities to promote a balanced and innovation-friendly European patent system that supports investment, competitiveness and the successful commercialisation of new technologies in Europe. 1. This conclusion has been confirmed by the recently published Commission’s study on the enforcement of intellectual property rights in the EU - Internal Market, Industry, Entrepreneurship and SMEs Contact: contact@ip2innovate.eu https://ip2innovate.eu/