Source: EURLEX
Language: en
Format: md

EUROPEAN COMMISSION

Brussels, 13.4.2011
SEC(2011) 483 final

**COMMISSION STAFF WORKING PAPER**

## **_SUMMARY OF THE IMPACT ASSESSMENT_**

_**Accompanying document to the**_

Proposal for a

**REGULATION OF THE EUROPEAN PARLIAMENT AND THE COUNCIL**
**implementing enhanced cooperation in the area of the creation of unitary patent**
**protection**

_**and the**_

Proposal for a

**COUNCIL REGULATION**

**implementing enhanced cooperation in the area of the creation of unitary patent**
**protection with regard to the applicable translation arrangements**

{COM(2011) 215 final}
{COM(2011) 216 final}
{SEC(2011) 482 final}

# **EN EN**

**1.** **I** **NTRODUCTION**

Patents are an important enabler for economic growth through innovation. Investment in
research (R&D) accounts for 1.9% of GDP in the EU [1] and a functioning patent system is
essential to translate that investment into economic growth.

Today, however, patent protection in Europe is fragmented. The Europe 2020 Strategy [2] and
the Single Market Act [3] identified the creation of an economy based on knowledge and
innovation as a priority. Both initiatives are seeking to improve the framework conditions for
business to innovate by creating unitary patent protection in the EU Member States (MS).

In spite of broad recognition of the competitive disadvantage European business faces in the
absence of unitary patent protection, in December 2010 the Competitiveness Council could
only confirm [4] that there were insurmountable difficulties that made the establishment of such
protection in the entire EU impossible to attain within a reasonable period. This statement was
followed by a request from 12 MS to establish enhanced cooperation in the area of unitary
patent protection. The Commission subsequently submitted a proposal [5] to the Council for
authorising enhanced cooperation that was followed by the request of another 13 MS to join
the cooperation. The European Parliament gave its consent to the launch of enhanced
cooperation on 15 February [6] and the Competitiveness Council adopted the authorising
decision on 10 March [7] . As a consequence, the impact assessment report (IA) has to take into
account the conditions set by the Council's authorising decision. Finally, this IA does not
address the unified patent litigation system that follows a parallel work stream and will be
subject to different legal instrument. The Impact Assessment Quality Board issued a
favourable opinion on 25 February 2011.

**2.** **C** **ONTEXT** **–** **THE EXISTING PATENT SYSTEMS IN** **E** **UROPE**

In the EU, patent protection can be obtained either through the national patent offices of the
MS that grant national patents or through the European Patent Office (EPO).

If the applicant chooses to apply for a "European patent", the application is dealt with by the
EPO under the procedures laid down in the European Patent Convention (EPC) [8] . The EPC
established centralised procedures for the search, examination and grant of European patents
in English, French or German. But a patent that is granted and published, does not take effect
automatically. It must first be validated in the States in which the patentee seeks protection,
i.e. the European patent has to be "converted" to national patents.

1 Eurostat, 2008 data.
2 COM(2010) 2020.
3 COM(2010) 608 final/2.
4 Press release 17668/10.
5 COM(2010) 790.
6 P7_TA(2011)0054.
7 Council Decision 2011/167/EU of 10 March 2011 authorising enhanced cooperation in the area of the
creation of unitary patent protection (OJ. L 76, 22.3.2011, p. 53).
8 [http://www.epo.org/patents/law/legal-texts/html/epc/1973/e/ma1.html](http://www.epo.org/patents/law/legal-texts/html/epc/1973/e/ma1.html)

# EN 1 EN

**3.** **P** **ROBLEM DEFINITION**

The procedure for searching, examining and granting European patents is well-functioning
and widely accepted by applicants from Europe and third countries. This standardised
procedure, however, is complemented by mandatory post-grant procedures that are complex,
divergent and result in unnecessary cost for business. This IA looks into the problems and
possible solutions with respect to the post-grant stage of patent protection.

**3.1.** **Problem 1: High costs related to the translation and publication of patents**

After the grant of European patents the applicable national validation requirements include
translation, publication fees and various formal filing requirements. Where the patent holder
fails to observe any of the above, the European patent is deemed to be void _ab initio_ in that
State. The fees charged by patent agents add to these costs.

Even if the London Agreement [9] reduced the costs of validation requirements in some MS, the
overall cost of validation in 3 MS (DE, FR, UK) equal € 680; it reaches € 12 500 in 13 MS
and over € 32 000 if a patent is validated in the whole EU. It is estimated the actual validation
costs are around € 193 million per year in the EU.

**3.2.** **Problem 2: Differences in the maintenance of patents in the Member States**

Renewal fees have to be paid by the patentee each year in each country where the patent is
validated. If he/she does not pay the fees, the patent lapses and becomes part of the public
domain. Renewal fees show great diversity in the MS. Moreover, there are many auxiliary
provisions in the national law that make the maintenance of patents in several MS
unnecessarily difficult. The deadlines for the payment of the fees differ, payment by bank
transfer is still not possible everywhere, some countries make the appointment of a patent
attorney mandatory and communication with the national patent offices is often only possible
in the local language. It is estimated that the accumulated cost of the technical assistance for
payment can reach € 61-81.2 million over a 10-year period.

**3.3.** **Problem 3: Administrative complexity of registering transfers, licences and**
**other rights**

Patents can facilitate transactions in the markets for technology: they can be bought and sold
as property titles or, more frequently, be subject to licensing agreements. Transfers and rights
are registered in the national patent registers of the countries where the patent is validated.
Such registration requires appointing a professional representative in more than half of the
MS. Registering the transfer of a patent valid in 5 countries can cost € 2000-2500 in addition
to the different procedural fees charged in the MS. Moreover, there are divergent
requirements as regards the types of documents to be submitted to the patent register,
certificates, etc.

9 Agreement on the application of Article 65 EPC (London Agreement) adopted in October 2000 _(OJ_
_EPO 2001, 550)._

# EN 2 EN

**3.4.** **Consequence: EU-wide patent protection is expensive**

As a consequence, access to comprehensive patent protection in Europe is so costly and
complex that it is inaccessible to many inventors and companies. In particular, SMEs often
prefer an informal protection of their innovations (i.e. secrecy).

But even when European patents are solicited and granted, they are usually validated only in a
few countries selected by the patentee. Currently, a European patent is, on average, validated
in 5 MS [10] . The number of validations has even decreased over the last 15 years [11] . Moreover,
the administrative burden and complexity of maintaining patents and registering rights and
licences generate unnecessary costs for inventors and businesses, including the ones seeking
patent information.

The fragmentation of patent protection also renders the enforcement of patent rights more
difficult. When goods enter the EU through a MS where a patent is not in force, the patent
holder may not rely on the EU Customs Code to withhold the goods suspected to be in breach
of a patent [12] .

The situation described above has major undesirable effects on the functioning of the internal
market. In addition to maintaining the fragmentation of the market, it also has a negative
impact on innovation, growth and the competitiveness of European business.

**4.** **S** **UBSIDIARITY**

The creation of European intellectual property rights to provide uniform protection throughout
the EU and associated language arrangements is provided for by Article 118 TFEU. The
problems outlined above can only be addressed at EU level by a solution that drastically
reduces translation and administrative requirements compared to the current regime. EU
action is necessary, as without an EU legal instrument MS would not sufficiently be able to
establish legal effects attached to patents that are uniform in several MS. Proportionality was
taken into account in the analysis of the options.

**5.** **O** **BJECTIVES**

Following from the problem definition, the general objectives of this proposal are to enhance
the functioning of the Single Market and foster growth and innovation. These objectives could
be achieved by increasing SMEs' access to patent protection, increasing the scope of patent
validations and knowledge dissemination (specific objectives).

The above objectives can only be reached by lowering the overall costs of patent protection in
Europe, in particular by reducing the translation and publication costs, simplifying the
maintenance of patents (renewal) and simplifying the registration of transfers, licensing
agreements and other rights.

10 Study on the Cost of Patenting by Roland Berger Market Research, August 2004.
11 Economic cost-benefit analysis of the Community patent by van Pottelsberghe, Danguy, 2009.
12 Council Regulation (EC) No 1383/2003 (OJ L 196, 2.8.2003, p. 7–14).

# EN 3 EN

**6.** **P** **OLICY OPTIONS AND ANALYSIS**

The policy options were measured against the following criteria: effectiveness, cost reduction,
simplification and political feasibility. The MS, however, that requested the Commission to
propose enhanced cooperation in the area of unitary patent protection also indicated the scope
and the objectives of such cooperation. These preconditions had to be taken into account
when considering the options.

**6.1.** **Option 1 (Base-line scenario) – the Commission takes no action**

Under this scenario, the current patent system in Europe would remain intact. The only
improvement could be the accession of more MS to the London Agreement. Accession is,
however, not only optional but lengthy and complex. This scenario is ineffective as it would
not address the shortcomings of the current European patent system. It would not result in
cost reduction or simplification as the problems of validation, renewal and registration would
persist. Finally, this option is also not in line with the political engagement of the Commission
and the Council to address the problems in the current patent system.

**6.2.** **Option 2 – the Commission continues to work with the other institutions**
**towards an EU patent covering 27 Member States**

Under this option, the Commission – together with the Council and the European Parliament –
would continue to work towards an EU patent which covers all MS, i.e. would continue the
discussions on the basis of the Commission's proposals on the Community patent [13] and on the
translation arrangements [14] . This option would fully achieve the objectives of the initiative. It
would result in a major cost reduction, as translation costs would amount to € 680 in the entire
EU with no additional cost of validation. The overall savings could reach € 159 million per
year. From the elimination of the cost of technical assistance for the payment of renewal fees,
a saving of € 49-65.2 million in a 10-year period could be foreseen. As the payment and
management of the renewal, as well as the registration of the patents and the related rights
would be managed centrally, this option would achieve major simplification. However, this
option is not feasible politically as the Council had tried and failed on several occasions to
reach a unanimous agreement on the indispensable translation arrangements.

**6.3.** **Option 3 - the Commission presents proposals for regulation implementing**
**enhanced cooperation**

Under this option, the Commission would present the proposals necessary for the
implementation of enhanced cooperation in the area of unitary patent protection. Unitary
patent protection would cover the 25 MS that wish too cooperate in this framework. They
represent 79% of the territory of the EU and over 92% of the applications are filed from these
countries. The unitary patent protection would be optional to the users and would co-exist
exist with the current European and national patent systems. The costs and the complexity of
patent protection would be significantly reduced. All patent holders would equally enjoy the
benefits of this option, no matter whether they are residents in countries inside or outside the
enhanced cooperation.

13 COM(2000) 412.
14 COM(2010) 350.

# EN 4 EN

Although this option would not bring the full benefits of option 2, it would be effective and
have a positive impact on users of the patent system in Europe. The payment and management
of the renewal of the patents, as well as the registration of the patents and the related rights
would be managed centrally by the EPO with respect to the territory of the participating MS.
In a 10-year period, the cost savings from the fees of technical assistance for payments could
reach € 5760-7680 per patent if 25 MS participated in the enhanced cooperation. In the nonparticipating countries patents would still need to be managed one-by-one.

_**6.3.1.**_ _**Sub-option 3.1 - the Commission proposes translation arrangements applicable in**_
_**the area of unitary patent protection that correspond to its proposal of 30 June**_
_**2010**_

Under this sub-option, the Commission would propose translation arrangements applicable in
the area of unitary patent protection that are identical to its proposal for the translation regime
for the EU patent. The patentee would supply to the EPO a translation of the claims into the
two other official languages of the EPO. No additional translations would be required (except
in the case of dispute). The average cost of patents for the area of enhanced cooperation
would be € 680. The cost of protection for the whole EU could be 15% of the costs today
(with 25 participating MS). The overall savings could reach € 58.5 million per year. This suboption would be cost-effective and result in relevant simplification but did not find sufficient
support in Council. The MS requesting the launch of enhanced cooperation wish to include in
the implementing regulations some of the elements proposed by the Belgian Presidency on the
translation arrangements. The proposal for the draft Council decision authorising the
enhanced cooperation contains already a number of substantive elements in this regard.
Therefore, this option is politically not feasible.

_**6.3.2.**_ _**Sub-option 3.2 – the Commission proposes translation arrangements applicable in**_
_**the area of unitary patent protection based on its proposal of 30 June 2010 and**_
_**incorporating elements of a compromise proposal discussed by the Council**_

Under this sub-option, the above translation arrangements would be complemented by certain
elements of a compromise proposed by the Belgian Presidency in 2010, as requested by the
MS demanding the Commission to provide for a proposal to launch enhanced cooperation.
The main set of linguistic requirements would the one under the EPC. In addition,
supplementary translation requirements would be applicable for a transitional period that
would result in additional costs for patentees. Therefore, the total costs of translation during a
transitional period may vary from approx. € 980 to € 2380 per patent in the area of enhanced
cooperation. When high-quality machine translations become available, the cost of translation
would be reduced to € 680. The cost of protection for the whole EU could be 20% of the costs
today (with 25 participating MS). The overall savings could reach € 50 million per year. This
sub-option can be expected to get significant political support.

**7.** **C** **OMPARING THE OPTIONS AND THEIR IMPACTS**

When comparing the options, option 2 has the highest score according to the effectiveness,
cost reduction and simplification criteria. However option 3 also has major benefits and
results in important savings and simplification for the users from Europe and from third
countries.

The creation of an EU patent (option 2) would have the most positive impact on the internal
market, on the users of patent information and on consumers, as it would integrate the entirety

# EN 5 EN

of the internal market in terms of patent protection. But option 3 would also increase the level
of integration not only between the participating MS but also between participating and nonparticipating countries. By implementing enhanced cooperation, the overall costs and
complexity of obtaining patent protection throughout the EU will be significantly reduced,
thus, more inventors can be expected to seek patent protection also in the MS that do not
participate in the enhanced cooperation.

Improved integration will have a positive impact on consumers' access to goods and services.
A better integrated market will ensure better cross-border trade and will facilitate fight against
counterfeited goods. The centralised registration and publication of patents by the EPO would
facilitate the dissemination of knowledge and have a positive impact on innovation.

Easier and cheaper access to patents in Europe is likely to result in an increased number of
innovative SMEs. SMEs have a major role in job creation; they ensure 2/3 of private sector
jobs [15] . The increase in the number of new business, therefore, can be expected to have a
positive impact on job creation.

While it is clear that in economic terms an EU patent would the most effective, 10 years of
negotiation have shown that this option is politically not feasible. The analysis of option 3
shows that its benefits would still be very important. Although the translation regime under
sub-option 3.1 would be the most cost-effective, sub-option 3.2 is likely to have the widest
support among the MS participating in enhanced cooperation. Therefore, option 3 with suboption 3.2 is the preferred option.

**8.** **M** **ONITORING AND EVALUATION**

Five years after the start of application, the Commission will review the application of the
legislation, with particular attention to the transitional translation arrangements. The
Commission will also monitor the relevant indexes on the conditions of innovation, the
number of patents and their cost on an annual basis.

15 [http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/index_en.htm](http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/index_en.htm)

# EN 6 EN