Something odd is happening in the world of patents: The American and European systems are starting to look more alike – and that has big implications for invention, trade and the economies on both sides of the Atlantic.
Recent change in US patent law, combined with changes underway in the European Union, “creates some opportunities,” says James Pooley, Deputy Director General of the Geneva-based World Intellectual Property Organisation. “We have a moment in time to shift the nature of the (international patent) debate from positions grounded in history to positions grounded in best practice.” That could lead to more patent reform across the globe – and a much-needed boost for world trade.
The shift towards greater transatlantic collaboration is endorsed at the top of both the US and EU governments. In Washington, says Victoria Espinel, the US IP Enforcement Coordinator, the White House recognises “how important it is for the US to have coordination and close cooperation with Europe, and how much more successful we are when we do that.” Likewise, says Hiddo Houben, head of the trade section in the EU Delegation to Washington, “to the extent that our societies are built on innovative talent, we have a shared interest that outweighs any differences in our legal systems.”
Says Randall R. Rader, Chief Judge of the US Court of Appeals for the Federal Circuit: “As we move to a system that will serve the economic interests of the entire world, it would be beneficial to have a patent system which is as close to uniform as possible.”
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How to hasten that kind of patent convergence was the key theme of a conference 7 May by Science|Business, a Brussels- and London-based media and communications company. The event, in the Rayburn House Office Building on Capitol Hill in Washington, DC, was organised in partnership with the Transatlantic Policy Network and with the support of the Federal Circuit Bar Association. It was the first in a series of Science|Business events and research into the fast-changing world of IP policy. Behind the convergence is historic legal change on both sides of the Atlantic. In 2011, President Obama signed the America Invents Act, the first major overhaul of patent law since 1980. It represents a seismic US policy shift towards a European system of ‘first to file’ rather than ‘first to invent.’ At the same time, after more than three decades of debate, the EU is tantalisingly close to adopting a new, simplified system for applying and contesting a patent across the EU that, the European Commission says, can cut patent costs by 80 per cent.
The economic impact
The impact of these changes will be enormous for inventors on both sides of the Atlantic. Surveying existing studies, Walter Park, an economist at American University in Washington, estimates that the legal differences in the two systems costs $6 billion a year in foregone gross domestic product across the ocean, in the form of delays, disputes and higher costs as inventors clash. That gives some indication of the potential benefit of the legal changes – but he notes that, even more important than convergence of the two systems will be whether, as they implement their new legal regimes, the EU and US also succeed in simplifying the patent process for inventors. “Harmonisation is not an end, but a means; it’s more important to promote transparency and non-discrimination,” he says.
The stakes are high. Trade in IP is big for both blocs – though historically tilted towards the US: For every dollar of IP that EU inventors sell in the US, American inventors sell $2.50, Park says. It’s also rising: In the past decade, the value of US IP trade has risen from the equivalent of 6 per cent to 8 per cent of merchandise trade. Inasmuch as the EU bore most of the costs of the current legal differences – of the $6 billion GDP loss, about $5 billion came at the expense of the EU – the changes might be expected to give the biggest boost to Europe. But formal trade in licenses, royalties and other forms of IP is only a small portion of the overall importance of invention to both economies; their most dynamic industries – in computers, pharmaceuticals, aerospace, energy, media, the Internet, finance – are dependent on a steady flow of new ideas, for which the formal IP system is a starting point. A better IP system benefits all.
Boosting transatlantic trade
In this and many other fields, says James Elles, a British member of the European Parliament and founder of the Transatlantic Policy Network, the aim is to “find a right way to build a transatlantic space which is basically without barriers to trade or investment.” Taken together, the EU and US comprise a market of more than 850 million people, half of global GDP and a third of world trade. Greater trade cooperation is vital for both sides to boost economic growth and create more jobs. In IP specifically, he says, “the more we can understand each others’ agendas, then you can begin to take common action together.”
“We have similar cultures” and challenges, agrees Bart Gordon, former Chairman of the US House Committee on Science and Technology and currently a partner at Washington law firm K&L Gates. He notes that wages in most of the world are far lower than in the US and Europe – meaning that, to compete, the transatlantic powers will need to use their brainpower. “It is more important than ever that we be innovative in our products and services and manufacturing ability. It all starts with IP.”
Pity the inventor
At present, the patent system perplexes inventors on both sides of the ocean. Academic researchers often feel outgunned by better-informed corporate lawyers, observes Donald Singer, a professor of clinical pharmacology and therapeutics at the University of Warwick; some years ago as a young British researcher with a hot idea, he himself felt daunted at his first encounter with an American company and its IP lawyer. At the best of times, researchers “are confused by some of the jargon.” That contributes to an unfair asymmetry in the system. For instance, a European university “may have a good patent agent who frames the patent, but then what happens is that other players out there and other companies will pay a lot more money to try to break the patent.”
Now the scenario worsens, Singer adds, with the advent of cross-disciplinary technologies like personalised medicine: “You might have four different companies involved in a negotiation, with researchers in the background, and that makes it very complicated. If these are transatlantic partnerships, it is very important to have a seamless system – to encourage the researchers in the first place to think that protecting intellectual property will be both possible and practical.”
But the system can be difficult for companies, too - especially small ones. “It’s really about the small and medium business sector, and providing them with the flexibility they need,” says David Kappos, Director of the US Patent and Trademark Office and Under Secretary of Commerce for Intellectual Property. Agrees Judge Rader: “What really is at stake is the public getting access to more technology. Without patent protection, an inventor cannot get investment, create manufacturing plants, and make it into a technology accessible to the public. A lot of good ideas that can benefit our society get lost for a lack of support.”
The road to cooperation
International collaboration on patents started with the 1883 Paris Convention for the Protection of Industrial Property, in which countries agreed to grant some priority to patents granted in other countries. In 1970 the Patent Cooperation Treaty created a system of filing for a global patent, administered by WIPO; and again in 1995 the Agreement on Trade Related Aspects of Intellectual Policy strengthened collaboration on international enforcement. Now, says WIPO’s Pooley, the new American law “moves the US to the standards of the rest of the world, and it provides the US and the EU with an opportunity to begin very substantive discussions among themselves that might not have been possible before.” But, he adds, in doing so they shouldn’t forget the rest of the world: “As these discussions go forward, they should move incrementally to involve other players throughout the world - to engage in a little more inclusiveness.”
US-EU collaboration began gathering speed about 2005, when the two governments formed a Transatlantic Intellectual Property Working Group, that meets several times a year to coordinate positions where possible. “Our discussions were mostly focused on a few discrete issues where we had differences of view. The many issues where we had a common sense of priorities were the ones we did not focus on. And that clearly was not a good way to manage the relationship,” says Espinel.
But the politics of IP has gotten ever-more complicated. “There’s an almost existential debate going on about the value of IP generally,” observes the USPTO’s Kappos.
For starters, how you feel about IP depends on your commercial interests. The spread of ‘open innovation’ - collaborative research among large groups - is forcing companies and universities to rethink the way they handle IP, says Daria Golebiowska-Tataj, member of the Executive Board of the European Institute of Innovation and Technology. And business models in some industries are changing. In the ICT industry, with the rise of open source software and rapid prototyping, “time to market is much more important than the protection of the IP.” Likewise, she says, in the media business, “it’s not simply about protecting the content, but about getting business out of the ’long tail’, or less popular content. The logic of the industry is changing.”
The politics is changing, too. Lawmakers in Washington were stunned by extraordinary public protests in 2011 over an effort to pass the ‘Stop Online Piracy Act,’ an online copyright measure caricatured as pitting free speech against commercial interests. Likewise, in Germany, the Pirates Party against online copyright has gained seats in two state parliaments. And In Poland, the government was forced by unexpected public protest this year to back down from signing an international anti-counterfeiting treaty.
But pushing for global cooperation is a growing awareness among policy makers that they cannot work in isolation. Earlier this year, a US House committee held a Congressional hearing on global IP. Says Kellie Adesina, legislative counsel for US Rep. Judy Chu: “In Congress, we tend to think: ‘This is what America is doing and that’s it.’ But we are now starting to see we need to think about these things in the context of how they impact our global partners.”
Says James E. Brookshire, Executive Director of the Federal Circuit Bar Association: “It is gratifying to see there’s more interconnectivity in the world. Something is happening: These things take a while, but it is good to hear that people are raising their eyes a little higher off the ground.”
A special report about the Science|Business meeting on Capitol Hill is available for download here.
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