IP2Innovate welcomes Draghi’s call to improve the pipeline from innovation to commercialization

IP2Innovate

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.

IP2Innovate

Decades old framework harms competitiveness. Modernising EU’s patent system will be key to EU’s ability to innovate, compete and grow. ​​​Two decades is a long time to lag behind. But that’s how long the European Commission’s Competitiveness Compass tells us the EU has been trailing ​other major economies​. Why? ​​​​Part of the problem is that the system holding Europe back sits on decades old framework. The application of the IPR Enforcement Directive (IPRED), created before today's tech revolution, results in the heavy-handed enforcement over patents which damages innovation. The Compass recognises that to compete, Europe must be able to lead in critical technologies like AI, robotics, biotechnology, and clean energy – all sectors characterized by complex products incorporating thousands of patented technologies. Yet the current application of the IPRED does not cater for complex products. Currently, European patent courts nearly always grant automatic injunctions in patent infringement cases, even if the manufacturer of a complex product has accidentally infringed a patent reading on a minor component of that product. This means companies have to take entire product ranges off the market or pay excessively high settlements, with costs rising into the hundreds of millions. This is impacting investment decisions and​​​ diverting resources from key technology areas​​​​​, and what’s more, it​’​s enriching an ecosystem of ​​​investors​ that buy up ​trivial​ patents specifically to benefit from the imbalanced system. After 20 years, this outdated framework needs updating to ensure remedies for infringement are proportionate, and abusive patent litigation doesn’t hinder innovation and competitiveness. The United States ​​​made this adjustment almost twenty years ago​. The 2006 eBay v. MercExchange US Supreme Court decision required courts to evaluate the facts of each case before issuing injunctions. This balanced approach has​​​ put a stop to automatic injunctions​ while protecting legitimate patent rights. As Europe aims to close its productivity gap and lead in critical technologies, modernising IPRED is key. A more balanced patent system would support Europe's innovative capacity in the exciting and complex technologies that will drive future growth, and help bridge the competitiveness gap. The Compass states the EU needs to close the innovation gap and simplify rules to leverage the benefits of the Single Market. Otherwise, it will “will lose relevance” in a world characterised by strength of the “big powers”.

IP2Innovate

A new academic paper titled Realizing the potential of proportionality in patent enforcement A case for amending IPRED by professor Rafal Sikorski from Adam Mickiewicz University in Poznan, Poland makes a convincing case for making targeted amendments to the IP rights enforcement directive (IPRED). IP2Innovate spoke to him and asked why IPRED reform is so important for European competitiveness? Here’s what he said: “We are aware that patent enforcement, especially injunctive relief, can be leveraged by patent holders to obtain excessive royalties. Users innovate with their products but find there may be a patent in a small part of the product, one that may even have come from a component supplied by a third party. This is frequently the case with complex tech products. Clearing up these patent issues is both time consuming and costly and in some cases – that is when patent applications have just been filed by patent holders but not yet published – simply impossible”. Professor Sikorski said. “This impacts competitiveness because it can result in products being removed from the market. The injunction creates a barrier to entry and that stifles competition It deprives the market of competition, and it denies consumers the ability to buy these products. “Products have been barred from sale in Europe due to patent disputes. It has happened in the mobile phone sector, laptops, cars. Even a temporary injunction has a very negative effect on a firm’s business. “Mario Draghi’s report on how to restore European competitiveness has been interpreted by some patent owners as a call for strengthening patent enforcement. However, I would argue that Europe must have a more flexible system. Ensuring healthy innovation and competitiveness requires more than just rigid enforcement. It also needs flexibility to address concerns in individual cases.”