High Quality Patents Could Keep Patent Trolls In Check In Europe, EU Report Finds 27/10/2016 by William New, Intellectual Property Watch 1 Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window)A new report by respected economists under the European Commission has found that problems of patent assertion entities in Europe could be better controlled if patent quality stays high in the region. It also found that the majority of patent assertion entities in Europe have focused on vulnerable targets – mainly in the telecommunications sector – and the report provides significant research on such entities operating in the European Union. The findings shine light on the key role of standard essential patents, with suggestions for policymakers and predictions about the impact of the prospective changes to the European patent system. The 150-page report is available here [pdf] The report was edited by Nikolaus Thumm and Garry Gabison of the Joint Research Centre. The study provides an overview of patent assertion practices and of patent assertion entities (PAEs) in Europe, taking into consideration their impact on innovation and technology transfer in European ICT markets, according to sources. It provides the European perspective on patent assertion entities as a counterbalance to the situation in the United States recently analysed by the US Federal Trade Commission. According to the report, there is a lack of consensus on the definition of a PAE. But it said they “observed some recurring patterns across PAEs’ business models in Europe.” These included: sources of funding (which in turn seem to influence the business model and assertion strategy); extent and nature of R&D investments (any R&D spending seems to be aimed at increasing litigation and monetisation value); and revenue-generating strategies. On the latter, licensing fees from alleged infringers is the primary source of revenue. The study found several common features: most assertion claims relate to standards; are targeted at the more vulnerable segment of the supply chain, such as telecommunications providers; the majority of assertions originated in Germany; litigated patents are generally low quality; and many patents asserted are invalidated in courts. Other PAEs engage in ancillary activities and also share several common features: They are more likely to have established some form of cooperation with universities, research organisations, and some are even funded by the State. They provide IP consulting services to third parties and engage in research activities which aim to exploit the full potential of existing technologies. They tend to conduct very strong prior art research and stringent validity tests. But it is unclear whether these ancillary activities are part of the business models or just for public relations purposes to improve the acceptance of PAEs. Patent Quality a Key Factor in Impact The quality of the patent asserted is “the most decisive factor” in the impact of patent assertion, the report said. Asserting low quality patents may have a negative impact on the welfare, while asserting high quality patents may be positive. As long as Europe maintains its traditionally high quality patents, it should see less risk of excessive problems, it said. “Low patent quality is the source of the detrimental effects of patent assertion mentioned above,” the report said. “The European Patent System has a longstanding tradition of comparatively high quality patents. This is one reason why excessive large-scale aggregation of questionable patents has not been observed in Europe so far. Assuming that the quality of European patents will stay high or might even increase under the new unitary patent regime, there is less risk that excessive patent aggregation will happen in Europe in the future. The full conclusions of the report are reprinted below: A direct way to limit large-scale assertion of low quality patents is to ensure that the standards maintained in patent granting procedures are of the highest quality. This could be achieved in the following ways: by continuously promoting effective ways of conducting prior art search that fully utilises technological advancements. Prior art searches by the EPO are already considered of higher quality than those conducted by other patent offices around the world and EPO considers that continuously improving search quality is an ongoing priority. by using patent fees as a market-based mechanism which acts as a screening device to “raise the quality bar”. Policy could also be directed towards minimising legal uncertainty. By minimising uncertainty, companies can improve their information sets and, by extension, can commit to decisions that better reflect market dynamics. At the same time, the behaviour of some PAEs that exploit this exact type of uncertainty can be reduced by: increasing patent ownership transparency; ensuring that the UPC courts strive for the highest quality, supported by highly technical, specialised judges who have substantial experience in the subject matter; and Increasing the clarity of FRAND licensing commitment for SEPs. The institutional and legal framework in Europe has not allowed the more negative consequences associated with PAEs to materialise to the same extent as it has, according to some economic literature, in the US. Moreover, some of the negative consequences that we have identified are hypothetical in their current form and are based on stakeholder evidence which can be susceptible to bias. Further research would be helpful. In particular, it would be useful to conduct a quantitative empirical analysis to test whether, all else being equal, PAEs tend to assert lower or higher quality patents than practicing entities, or if there are particular types of PAEs that focus on asserting lower or higher quality patents. Moreover, further analysis is required of companies that enforce their patents with the help of PAEs in comparison with those that that carry out their own enforcement. It is expected that significant changes in the coming years in the European patent system will fundamentally alter the dynamics of the market. The introduction of the Unitary Patent and the Unified Patent Court will have a considerable impact on PAEs. In addition, the ongoing debate on FRAND licencing and any subsequent changes will have significant effect on PAEs. [End of conclusions] Background (from the report) The report was prepared in the context of the three-year research project on European Innovation Policies for the Digital Shift (EURIPIDIS) jointly launched in 2013 by JRC and DG CONNECT of the European Commission. This project aims to improve understanding of innovation in the ICT sector and ICT-enabled innovation in the rest of the economy. The purpose of the EURIPIDIS project is to provide evidence-based support to the policies, instruments and measurement needs of DG CONNECT for enhancing ICT Innovation in Europe, in the context of the Digital Agenda for Europe, of the European Digital Single Market, and of the ICT priority of Horizon 2020. It focuses on the improvement of the transfer of best research ideas to the market. EURIPIDIS aims to: better understand how ICT innovation works, at the level of actors such as firms, and also of the ICT “innovation system” in the EU; assess the EU’s current ICT innovation performance, by attempting to measure ICT innovation in Europe and measuring the impact of existing policies and instruments (such as FP7 and Horizon 2020); and explore and suggest how policy makers could make ICT innovation in the EU work better. Within EURIPIDIS, the present report concentrates on points 1 and 3 above. The report offers: a description of the different business practices of a newly emerged type of actor (i.e. patent assertion entities-PAEs) within the European ICT sphere an assessment of how PAEs affect innovation performance and technology transfer in ICT in Europe. a set of policy conclusions (at national or EU levels) related to how innovation in ICT in Europe can be enhanced. Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related William New may be reached at email@example.com."High Quality Patents Could Keep Patent Trolls In Check In Europe, EU Report Finds" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.