Maurits Lugard on Creating a More Effective Patent System

The debate over the future of the European patent system was rekindled at a July hearing at the European Commission in Brussels. Maurits Lugard is a Brussels-based attorney representing small and large companies, including Microsoft, as legal counsel to the Association for Competitive Technology. He offered his view in favor of a stronger and more streamlined patent system. Opponents say that proposed changes to the patent system would be harmful to small businesses and consumers.

Maurits Lugard writes: “On July 12, the European Commission hosted a hearing on the future direction of patent policy in Europe, which followed a public consultation launched earlier this year. As this process unfolds, the perspective and views of small and medium-sized businesses (SMEs) must be considered. Some very practical improvements to the patent system could be adopted that would benefit SMEs and large organisations alike.

The Association for Competitive Technology (ACT) is an international trade association representing more than 3000 SME innovators from Europe and the United States. ACT focuses on creating an environment that inspires and rewards innovation from information technology entrepreneurs.

An effective patent system is absolutely vital to the overall health of the European economy. Patents reward creativity and innovation and provide the foundation upon which millions of jobs are created and sustained. But patents play an especially critical role for small businesses. In fact, in many ways, SMEs depend much more upon an effective patent system than larger companies. Without expansive cash reserves and other resources to rely on, SMEs depend heavily on patent protection to guarantee their investments and defend against misuse of their ideas and products.

This is evident if we look at some concrete SME experiences. Galleria, a UK-based SME that develops software for the optimisation of the location and display of goods in retail stores. The world’s largest retails chains are usually reluctant to work with small companies but when they realized that Galleria’s solution was not only superior to that offered by the competitors, but also patented, the company won the same respect given to its larger competitors. As a result, Galleria has experienced a 200% growth, and its customers (which include Tesco) are among the biggest retailers in the business.

Another excellent example comes from Cyberfab, a French SME that has developed a wireless health monitoring technology for conditions ranging from sleep apnea to cardiovascular disease. The company has applied for patents as a means to grow and capitalize its innovation: protecting its unique solution provides investors and lenders with a measurable assessment of the company’s value.

However, the patenting process is at present too costly and lengthy for an SME. One of the most significant costs is the requirement that patents, once validated in the countries for which protection is sought, be translated into the language of each country in which patent protection is being requested.

For many SMEs, this expense alone accounts for one-third of the total cost of securing a patent. As a result, many smaller companies are deterred from taking advantage of the patent system. In contrast, large companies are much more able to absorb such costs in their operating budgets.

The good news is that a workable solution to the translation problem is already within striking distance. Five years ago, several European nations drafted a document known as the London Agreement, which could potentially reduce considerably the number of languages required for a patent application, essentially requiring only English, French or German. The formal entry into force of this agreement would be a positive step forward in reducing patent costs and allowing SMEs to become more competitive, both within Europe and globally. A significant step forward would be adoption of the London Agreement in France, where the Parliament has recently received an official study recommending this proposal.

Translation costs are not the only shortcomings with the present system. Lengthy litigation and the associated costs also place a heavy burden on small business owners. In addition, the current system causes uncertainty because identical patents can be found valid or infringed in one member state and not in another.

A step in the right direction would be the introduction of the European Patent Litigation Agreement (EPLA), which would create a more efficient system with greater technical expertise. This would mean greater consistency among patent decisions issued by member states. In addition, Europe should look at ways to implement alternative dispute resolution mechanism like mediation and arbitration. These are often less expensive and less acrimonious than prolonged battles through patent litigation.

I know that the Association for Competitive Technology is not alone in believing that concrete improvements can and should be made to our current patent system, including a reduction in translation costs and a more efficient and consistent legal system. After all, SMEs account for 99% of all businesses in Europe. They represent the true engines of growth and innovation that can enable Europe to meet its objective of becoming the most competitive and dynamic knowledge-driven economy by 2010. As it considers its next steps, the European Commission should think carefully about the needs and concerns of these small and medium businesses, to shape a patent policy which will help to have more stories like Galleria and Cyberfab, not fewer.”

Maurits Lugard is a partner in the Brussels office of Sidley Austin LLP and is legal counsel to the Association for Competitive Technology.