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News : Innovation Last Updated: Jan 12, 2011 - 4:56 AM


China promotes flood of patents while Europe tries to break patent logjam
By Michael Hennigan, Founder and Editor of Finfacts
Jan 11, 2011 - 5:16 AM

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China plans a massive increase in innovation patents while last month in Europe, the European Commission agreed to push ahead with a decade-long goal to develop a common patent filing system, despite the objections of Italy and Spain.

The New York Times said in an article on New Year's Day that China’s goal for annual patent filings by 2015 is two million. That number includes “utility-model patents,” which typically cover items like engineering features in a product and are less ambitious than “invention patents.” In the American system, there are no utility patents.

In 2009, about 300,000 applications for utility patents were filed in China, roughly equal to its total of invention patents, which have been growing slightly faster than utility filings in recent years. But even if just half of China’s total filings in 2015 are for invention patents, the national plan calls for a huge leap, to one million, by 2015. By contrast, patent filings in the United States totaled slightly more than 480,000 in the 12 months ended in September 2010, according to the patent office.

China also plans to double its number of patent examiners, to 9,000, by 2015. (The United States has 6,300 examiners.)

Vivek Wadhwa who is a visiting scholar at University of California-Berkeley, senior research associate at Harvard Law School, and director of research at the Center for Entrepreneurship and Research Commercialization at Duke University, says in an article in Bloomberg's Business Week magazine on Monday this week, that many in the tech industry, himself included, consider most US patents commercially frivolous and irrelevant. But as The Economist has reported, this problem is far worse in China, where patent examiners are paid more if they approve more patents. They routinely approve even the most dubious filings. And Chinese academics, companies, and individuals have strong incentives to patent worthless ideas: With more patent filings, professors gain tenure, workers and students gain residence permits to live in a desirable cities, corporate income tax is reduced from 25% to 15%, and companies win lucrative government contracts. The reward doesn't come from innovation, but from the act of filing a patent application.

Wadhwa warns that patents in Silicon Valley are used to stop other companies from innovating. Startup entrepreneurs live in constant fear that behemoths or patent trolls will bankrupt them with frivolous lawsuits. In relation to China, he says that because of language problems and the sheer volume of patent filings, there is no easy way for foreign companies entering the Chinese market to determine whether patents that cover their technologies already exist.

He concludes: "China may do with intellectual property what it did with capitalism: adapt our system and beat us at our own game."

European Patent

In mid-December, the European Commission pushed ahead with the development of a common European patent system, despite opposition from Spain and Italy because they wished to have their own languages used.

Twelve countries have indicated their intention to use the ‘enhanced co-operation' process to create a patent among themselves after ministers failed to reach unanimity on an EU-wide system.

The Commission published its plan (pdf) for how to move ahead and the proposal to authorise the procedure now needs to be approved by the European Parliament and the Council of Ministers by qualified majority.

Member states that do not sign up to the unified patent system at this stage will be able to join at a later date, while companies registered in countries that are not taking part will still be able to file patents under the new system.

The patent will be granted in English, French or German, but applicants would be able to choose to file applications in any other official EU language. It would then be translated into one of the three languages.

The 12 countries that have requested the move are Denmark, Estonia, Finland, France, Germany, Lithuania, Luxembourg, the Netherlands, Poland, Slovenia, Sweden and the UK.

"Filing for patents in Europe is a costly and complicated affair, making it available only to those companies who have deep pockets," said Michel Barnier, the European Commissioner for Internal Market and Services. "The unacceptable reality is that on average innovators validate and protect their patents in only 5 of the EU's 27 Member States because of the high costs. European inventors can afford no further delay. This is why the Commission proposes that some Member States should be able to move ahead for a unitary patent protection, and I hope that over time all Member States will join this new system. In any case, companies will not be discriminated against and will be able to apply for an EU Patent under equal conditions, no matter what their countries of origin."

Existing situation for patents in Europe

The Commission says the current European Patent system, particularly in terms of translation requirements, is very expensive and complex. The European Patent Office (EPO) - - a body of the intergovernmental European Patent Organisation comprised of 38 countries (EU 27 + 11 other European countries) -- examines patent applications and is responsible for granting a European Patent if the relevant conditions are met. But for the granted patent to be effective in a member state, the inventor then has to request that it be validated at national level in every individual country where patent protection is sought. This process involves considerable additional translation and administrative costs.

A European Patent validated in only 13 member states can cost up to €18,000, of which nearly €10,000 arises from translation fees alone. This has created a situation in which the cost of a European Patent is ten times greater than a US patent, which costs on average €1,850. Because of the costs involved, most inventors only patent their invention in a very limited number of member states.

On December 19th, five days after the Commission decision, the Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, announced that he was
"pressing for a European Union patent that could save Irish firms €6m annually and protect their products across all member states."

The Government has written to the European Commission following a Cabinet decision urging it to adopt a single EU-wide patent for all countries in its jurisdiction.

He noted that the European Commission had received a formal request from 12 member states for enhanced cooperation on a single EU patent.

"The Government here has now written a letter of support for that move," he said but did not clarify why Ireland was not among those countries.

Figures from the European Patent Office showed that 145 patents were granted to Irish applicants in 2009 - - up 19% on the year before.

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