Source: EURLEX
Language: en
Format: md

_**ir**_ _**-it**_

COMMISSION OF THE EUROPEAN COMMUNITIES

**Brussels, 19.07.1995**
COM(95) 370 final

**The Protection of** **Utility** **Models in the Single Market**

**(presented by the Commission)**

**- I** **-**

Contents

_Summary and questions._ .* / -b

I. Introduction 1

II. The need for action at Community level ? 5

A. The establishment and functioning of the single market 6

B. The present situation in the Member States 7

C. The economic significance of utility model protection 9

1. The utilization of utility model protection in the European Union 9

(a) The national applications statistics 10

(b) Cross-border applications 11

(c) A change in the behaviour of applicants in the European

Union 12

2. The significance of utility models in comparison with patents 13

3. The significance of utility model protection by reference to the size of the

firm 14

4. Significance in particular industries 15

5. Reasons cited for seeking utility model protection 16

(a) Quick, simple registration 17

(b) Limited requirements 18

(c) Low cost 19

(d) Temporary protection 22

6. Economic assessment by users 22

7. Prospects for the economic significance of utility models 23

(a) Changes in spending on research and development 23

(b) Changes in product life cycles, times to market and the

lifetimes of inventions 24

(c) Changes in the scale of innovation and the length of

exploitation of inventions in the European Union 29

..••(d) Usefulness of Community utility : model protection to

industrial companies and independent inventors 29

D. Effects of the discrepancies on the common market 32

1. Obstacles to the free movement of goods 33

2. Distortion of competition in the common market 35

3. Effects on industrial companies and independent inventors 36

E. European Union policy and economic need 41

_**~±~**_ **ce**

III. What measures should be taken? 43

A. The appropriate form of legislation 44

1. Aligning the national schemes 44

(a) Introduction of new rights 45

(b) Aligning the substance of national utility model law 47

2. A broader alignment 48

3. The introduction of a Community right 49

4. A combination of alignment of laws and

the introduction of a Community right 50

5. The views of industrial companies and independent inventors 50

6. The views of patent attorneys 52

B. The substance of Community-level protection of utility models: principles 54

1. Basic design 54

(a) Protection of form or of invention? 55

(b) Dispensing with registration 56

(c) Examination to ensure that

requirements are met 57

(d) Principles, 59

2, More detailed rules 60

(a) Inventive step 60

(b) Three-dimensional form requirement 62

(c) Excluded inventions 64

(1) Unprotectable inventions 64

(2) Substances and compositions of substances 65

(3) Process inventions 66

(d) Novelty .'.67

(e) Industrial application 69

(f) Procedure 70

(g) Effects and transfer 73

(h) Duration 73

(i) Infringement 74

. (j) Dual protection .'..•..", 75

(k) Relationship to patent law'. 76

_Bibliography._

**- L - b**

_**Summary and**_ _**questions**_

Legal protection of industrial property (patents, trademarks, design rights and utility

models) in the single market has an important role to play: it has to promote innovative

activity in the European Union, so as to ease the path from the initial idea to the

successful translation of that idea into practice. The simpler and clearer such

arrangements are for the user, the more they will facilitate innovation, providing

effective protection for inventions. At the same time they ensure that competitors are

kept informed of new developments by publication of the protected invention. This

increases the competitiveness of European companies and helps to achieve the objectives

of free movement of goods and undistorted competition.

A "utility model" is a registered right which confers exclusive protection for a technical

invention. It resembles a patent in that the invention must be new - it must possess

"novelty" - and must display a measure of inventive achievement - it must involve an

"inventive step", though frequently the level of inventiveness required is not as great as it

is in the case of patents. Unlike patents, utility models are granted without a prior search

to establish novelty and inventive step. This means that protection can be obtained more

rapidly and cheaply, but that the protection conferred is less secure; Utility model

protection is at" present entirely a matter of domestic law.

The Commission has been looking into whether the establishment and operation of a

single market requires measures to be taken in respect of utility models at Community

level, and if so what measures are needed to harmonize the law on utility models in the

interests of the single market.

**-** **II** **-**

The need for action

Some form of utility model protection exists in France, Belgium, Portugal, Ireland, Italy,

Spain, Germany, Denmark, Greece, the Netherlands, Finland and Austria. There are no

comparable rights in the United Kingdom, in Sweden or in Luxembourg. A comparison

of the national systems shows that there are wide differences between the requirements

for utility model protection; the differences are such that as things stand it would not be

practicable to apply those systems in a cross-border context.

No steps have so far been taken at Community level. This means that for inventions

involving only a small inventive step no Community-wide protection is available; indeed
no proper protection at all is available in the countries where utility models have not

been legislated for. The Commission has accordingly studied the economic significance

of utility model protection in order to establish whether these differences have a negative

impact on the objectives of free movement of goods and undistorted competition.

_The economic significance of utility model protection now_ _and in_ _future_

In order to arrive at an estimate of the economic significance of utility model protection

the Commission has considered the rate of utilization of the existing systems (looking at

frequency, size of firm, and reasons for applying), and developments in innovative

activity.

The first observation to be made is that utility models provide a very popular form of

protection. There are roughly as many applicants for utility models as there are for

patents. A comparison of the various national systems shows that greater use is made of

systems which require only a small inventive step than is made of those where the

inventive step required is the same as what would be needed for a full-scale patent. As

the single market is consolidated we can expect an increase in demand for utility models

and especially in cross-border applications.

**m**

An industry-by-industry breakdown of utility model applications in the European Union

shows that the industries most often concerned are mechanical engineering, electrical

engineering, and precision instruments and optics. Interest is even higher among small

businesses and individual inventors than it is in big industry.

In a study of applications for utility models the main reasons cited for seeking this form

of protection were as follows:

- quick, simple registration;

- less stringent requirements than for patents;

- low cost;

- temporary protection pending the grant of a patent.

The spectrum of reasons is thus very broad. The utility model is sometimes preferred

where the applicant is not at all sure he will be able to market the invention, and

therefore wants to keep his costs as low as possible. But it is also used for inventions

which are particularly exposed to the danger of imitation and consequently of great

importance to the performance and competitiveness of the applicant company. And the

utility model is used where a patent would provide only inadequate protection or no

protection at all, for example because it would take too long to obtain, or because the

inventive step is too small. This means that whatever the size of the firm the perceived

effects of a utility model are very positive: in the first place an improved market position

and in the second place a direct increase in earnings.

An analysis of the perceived importance of inventions reveals that small businesses are

particularly conscious of the need to intensify their innovative activity to stand up to

increased competition. They feel that inventions involving small inventive steps or short

periods of exploitation will grow in importance in future; this would bring an expansion

in demand for protection which can best be met by utility models. Only a small

proportion- no more than 10%- of those questioned in firms of all sizes and in all

industries expected a fall in the proportion of such "petty" inventions in future.

**-** **IV**

In view of the results so far it is not surprising that manufacturers, inventors and patent

lawyers all see a great economic need for a unified system of utility models in the

European Union. A breakdown by size of firm shows that there is particularly strong

interest among smaller businesses with 500 employees or less.

_Effects on the common market_

Member States are basically free to design utility model systems as they will, provided

the measures they take are not a means of arbitrary discrimination or a disguised

restriction on trade between Member States. At present, therefore, different rules may be

enacted in different countries, and Member States may decide to do without utility model
protection altogether.

An intellectual property right conferred by the law of a Member State provides

protection only on the territory of that State. In the absence of any unification of the law,

therefore, the holder of such a right can prevent third parties from importing protected

goods which have been produced and marketed without his consent. Thus the intellectual

property rights conferred by the Member States can of their nature be used to hinder the

free movement of goods.

The differences between the systems of protection are outside the control of the

right-holder- and force him to avoid markets in which he cannot obtain equivalent

protection for his invention. Given the economic significance of utility models, this

erects barriers between markets inside the European Union. Thus the differences which

exist have a direct adverse effect on trade within the Community, and on firms' capacity

to treat the common market as a single setting in which to do business. The free

movement of goods is obstructed, with practical disadvantages for those concerned.

**- v**

**If firms are to take advantage of the fundamental freedoms laid down in the EC Treaty,**

**the intellectual property rules must allow fair competition between them. Given the**

**differences which exist at present, companies or individual inventors** **wanting,** **to exploit**

**an invention in several States have to familiarize themselves with a number of different**

**systems or take expensive advice in each of the Member States concerned.**

**The situation may be bearable in the case of big companies that can invest large sums of**

**money in the promotion and protection of their inventions. For individual inventors and**

**for small businesses the differences they have to deal with and the consequent need for**

**legal advice are an administrative problem and often an insuperable cost factor.** **This**

**restricts innovative activity on the part of such businesses and consequently distorts**

**competition.**

**It is not surprising, then, that companies and individual inventors should complain that**

**they encounter serious difficulties in the cross-border enforcement of utility model**

**protection.** **The problems are growing with increasing export intensity.**

_**Community**_ _**objectives and**_ _**economic**_ _**need**_

**In view of the great economic need the maintenance of the existing situation would not**

**be desirable; it would run counter to the idea of a Europe which is drawing closer**

**together. It would not allow the achievement of free movement of goods and undistorted**

**competition.**

**-** **VI** **-**

**To ensure that the single market becomes a reality and operates smoothly, the**
**Commission must respond to the present and future economic** **need.** **[1]** **The development of**

**innovative activity in the European Union, which has been marked by a trend towards**

**smaller inventive steps, greater cost-sensitivity, shorter production and marketing cycles**

**and a shorter lifetime for inventions, is generating increased demand for a form of**

**protection that offers** **fast,** **simple and inexpensive protection for technical inventions in**

**the European Union.**

**To remedy these shortcomings, measures are needed at Community level, with the**

**following main objectives:**

**•** **protection to be provided for short-lived technical inventions,**

**•** **protection to be provided for technical inventions which involve only a small**

**inventive step,**

**•** **protection to be obtainable rapidly,**

**•** **protection to be obtainable simply,**

**•** **protection** **to** **be inexpensive, and**

**•** **publication to be rapid, so that the public is informed quickly.**

This approach has already produced measures to protect new technologies, as in the case of

biotechnology, and to adapt existing systems of protection to changing needs, as in the case of

pharmaceuticals.

**Vil**

Measures required

The European Commission is required to put forward those proposals. for the

approximation of laws which are needed for the establishment of the internal market.

The Commission has accordingly considered both the form which any legislation might

take and the substance of any Community-level arrangements in respect of utility model

protection.

_pq^m ^legislation to harmonize utility_ _model protection_

Several options are open here.

Firstly* the national systems of protection could be brought into line by means of a

directive. Harmonization of this kind would not be confined to removing the differences

between the existing rules, but would also introduce utility model protection in those

countries where it does not currently exist. This would establish a package of national

rights. Each of these rights would continue to be confined to the territory of one

^emjber State.

The results so far obtained in surveys of patent lawyers acting as advisers and of

companies and individual inventors show that a majority would like to see a

user-friendly system whereby protection could be secured in three to five Member States

by means of a single application. This cannot be achieved simply by aligning national

law.

The Commission takes the view, therefore, that harmonization of national systems would

go some way towards improving the situation, but would not solve all the problems

which arise.

The Commission accordingly feels that consideration should be given to measures which
go beyond straightforward harmonization.

**-** **Vlll** **-**

**One possibility would be to supplement the harmonization of domestic law with mutual**

**recognition of the protection granted by Member States. National rights and national**

**registration offices would continue in** **being,** **but cross-border protection in the**

**European Union could now be obtained by means of a single** **application.**

**Another possibility would be to adopt a regulation establishing a new Community**

**protection right; as Community law, such a regulation would rank above the national**

**systems, but would not replace them. A right obtained under** **Community** **law would be**

**valid directly in** **all** **Member States. Protection throughout a territory comprising all the**

**Member States could then be secured by means of one application and one set of**

**proceedings at one Community office.**

**But** **it** **must be borne in mind that the unification of the common market** **is** **a process**

**which** **is Still** **going on, particularly as the European Union has been recently enlarged to**

**take in** **Austria,** **Sweden and Finland. A combination of different possibilities might be**

**the best way of ensuring that a future system was even better tailored to the needs of the**

**single,** **market As with trade marks and designs,** **then,** **a directive harmonizing national**

**systems of protection might be combined with a regulation establishing a new single**

**utility model right.**

_**Substance**_ _**of**_ _**Community-level**_ _**protection of utility models**_

**Utility model protection exists in twelve out of fifteen Member States. All these systems**

**provide for a registered right for technical inventions without prior search to establish**

**novelty and inventive** **step.** **The Commission is of the opinion that these common**

**features should form the basis of** **a** **Community-level scheme.**

**In other respects the existing systems differ widely, and the Commission takes the view**

**that here all the possibilities will have to be considered. The critical points are the level**

**of inventiveness; the three-dimensional form requirement; excluded inventions; novelty;**

**industrial applicability;** **procedure;effect** **of the protection right; transfer; continuance;**

**infringement; and dual protection (where an invention is protected both by a patent and**

**by a utility model).**

**At this stage in its inquiries the Commission feels it would be reasonable to deal with**

**these points as follows :**

**-** **IX**

The level of inventiveness required could be lower than in the case of patents;

this is the only way of allowing for the changing demands of inventive activity.

The three-dimensional form requirement could be abolished: the reasons for its

introduction are historical, and it does not meet any modern need.

Compositions of substances could be eligible for utility model protection; as

regards substances proper, and process inventions, the Commission proposes to

await the reaction of interested parties.

The novelty of an invention could be determined by reference to the state of the

art; this should not be restricted to the territory of a particular Member State, as

that would run counter to the objective of a single market.

There could be a twelve-month grace period for novelty, along the lines of

Article 8 in the Community design proposal.

Industrial applicability could be regulated in accordance with Article 57 of the

European Patent Convention.

The procedure for the grant of the right could be based on Articles 78 to 85 of the

European Patent Convention; there would be no prior search to establish that all

the requirements are met, but the application would be examined to establish that

_prima facie_ it may qualify for protection.

An optional search would be possible, however, in order to increase certainty as

to the legal position.

Rights of use and of prohibition and their exhaustion could be regulated in line

with what is done in patent law in the Member States; a limit to the number of

claims might be envisaged.

A registered right could be transferred without restriction.

The grounds for extinction and nullity could be regulated in line with patent law

in the Member States.

The term of protection should be short: the maximum duration could be 10 years,

which could be reached by renewal in steps of several years. This would be an

effective way of offsetting the less stringent admissibility requirements.

Where it is claimed that a utility model has been infringed it should be open to

the court to order a search report, in order to establish whether the disputed

invention qualified for protection; this would help to fill the gap left by the

absence of a prior search.

In order to avoid placing the right-holder in too strong a position, there could

either be a prohibition on dual protection by both a patent and a utility model, or

a ban on invoking the two successively.

**- x -**

**The scheme being proposed here is intended for inventions where the innovative element**

**is fairly modest. The inventive step may be small; or the period of protection needed**

**may be short; or the possibility of industrial application may be limited.**

**The Commission takes the view that a system of** **this** **kind would be a useful complement**

**to patent protection, and would help to boost innovative activity and hence the**

**competitiveness of European companies doing business on the single market.This would**

**further improve the operation of the single market.**

**The Commission has not yet reached a definitive view. The results arrived at so far** **will**

**have to be discussed with interested parties before the Commission takes any** **further**

**action at Community** **leveL**

**Questions to interested parties are set out below; full answers to these questions will**

**enable the Commission to make a better assessment of whether any action should be**

**taken at Community** **level,** **and if** **so** **what form it should take.**

**The Commission therefore asks interested parties to take the trouble to answer the**

**questions** **carefully.**

**XI** **-**

_**QUESTION**_ _**1:**_ _**On the basis of its inquiries so far the Commission has come to the**_

_**following**_ _**assessment**_ _**of the**_ _**economic significance**_ _**of utility model protection.**_

_**(a) System of protection: Among the existing systems of protection, the one most readily**_

_**accepted is that**_ _**which**_ _**calls for a smaller inventive step than does a patent and which**_

_**largely dispenses with the requirement that the invention be embodied in**_

_**three-dimensional**_ _**form.**_

_**(b)**_ _**Economic**_ _**sector:**_ _**Utility model protection is most frequently taken advantage of**_ _**in**_

_**the mechanical**_ _**engineering,**_ _**electrical engineering and precision**_ _**instruments**_ _**and optics**_

_**industries.**_

_**(c) Size of**_ _**firm:**_ _**Interest in utility model protection is somewhat greater among small**_

_**and medium-sized**_ _**firms and**_ _**individual**_ _**inventors**_ _**than**_ _**it is**_ _**among large**_ _**companies.**_

_**(d)**_ _**Reasons for applying: Studies have identified the following as the**_ _**main**_ _**reasons for**_

_**seeking**_ _**utility model protection:**_

*** quick, simple registration**

*** less stringent requirements than for patents**

***** **low cost**

*** temporary protection pending the grant of a** **patent.**

_**(e) Future**_ _**developments:**_ _**In the industries which file most**_ _**utility model**_ _**applications,**_ _**the**_

_**protection of**_ _**inventions**_ _**involving only a small inventive step**_ _**and**_ _**with a short lifetime**_

_**will grow in**_ _**importance**_ _**in future, especially for small and**_ _**medium-sized**_ _**businesses,**_ _**but**_

_**for large**_ _**companies**_ _**too.**_

_**The Commission**_ _**asks interested parties to comment**_

_**QUESTION**_ _**2:**_ _**The Commission**_ _**asks interested parties to say**_ _**whether**_ _**in their view the**_

_**wide**_ _**discrepancy**_ _**between the economic significance of utility models in different**_

_**Member**_ _**States,**_ _**and the differing rules governing**_ _**them,**_ _**obstruct the free movement of**_

_**goods and**_ _**distort competition**_ _**in ways**_ _**which**_ _**cause**_ _**them**_ _**practical**_ _**disadvantage.**_

**Xll**

_**QUESTION 3: In the Commission's view the development of**_ _**innovative**_ _**activity in the**_

_**European Union is generating a growing need for a form of protection which would**_

_**complement patent protection by providing a**_ _**rapid,**_ _**simple**_ _**and inexpensive**_ _**form of**_

_**protection for technical**_ _**inventions.**_

_**The Commission**_ _**asks interested parties to**_ _**comment.**_

_**QUESTION4:**_ _**If action is**_ _**in**_ _**fact**_ _**needed,**_ _**there are a**_ _**number**_ _**of possibilities open to the**_

_**Commission,**_

_**(a).**_ _**The**_ _**first course would be to seek an alignment of**_ _**the**_ _**various national systems by**_

_**means of a directive, which would also mean introducing this form of protection in**_

_**countries which do not possess it; this would produce an array of similar national**_

_**systems of utility model protection.**_

_**(b)**_ _**Such a directive might also provide that Member States were to recognize the rights**_

_**conferred by one**_ _**another*s**_ _**systems.**_ _**National protection rights and national registration**_

_**offices would continue to**_ _**exist,**_ _**but dross-border protection valid throughout the**_

_**European**_ _**Union**_ _**could**_ _**be**_ _**obtained by means of a single application.**_

_**(c) A further possibility would be to enact a regulation creating a new Community**_

_**protection right governed by Community law, which would have precedence over**_

_**national systems of protection but would not replace**_ _**them.**_ _**This would allow protection**_

_**which was valid throughout the European Union to be obtained in a single set of**_

_**proceedings at a joint registration office.**_

_**(d)**_ _**Lastly,**_ _**as in the case of trade marks and**_ _**design,**_ _**the**_ _**alignment**_ _**of national law**_ _**could**_

_**be combined**_ _**with**_ _**the creation of a new single protection**_ _**right,**_ _**in order to tailor the**_ _**new**_

_**system even better to**_ _**the requirements**_ _**of the**_ _**internal**_ _**market.**_

_**The**_ _**Commission asks interested parties to say**_ _**which**_ _**of these systems would best**_ _**ensure**_

_**the**_ _**operation of**_ _**the**_ _**single**_ _**market.**_

**-** **Xlll** **-**

_**QUESTION 5: If action is needed at Community**_ _**level,**_ _**and if it is to**_ _**take the**_ _**form**_ _**of\**_

_**European**_ _**Community**_ _**legislation,**_ _**it has to be decided**_ _**what the substance**_ _**of utility model**_

_**protection should be. All of the existing systems provide protection for technical**_

_**inventions by**_ _**means**_ _**of a registered right which requires no**_ _**examination**_ _**of novelty and**_

_**inventive**_ _**step.**_

_**The Commission asks interested parties to say whether these**_ _**common**_ _**features could**_

_**form the basis of a**_ _**scheme**_ _**of utility model protection at**_ _**Community**_ _**level.**_

_**QUESTION**_ _**6:**_ _**The existing systems**_ _**of utility model protection**_ _**differ**_ _**in**_ _**their**_ _**substance.**_

_**The Commission asks interested parties to say whether**_ _**the**_ _**following points should be**_

_**included in a**_ _**Community system**_ _**of utility model protection:**_

_**The**_ _**level of**_ _**inventiveness**_ _**required should**_ _**be**_ _**lower**_ _**than**_ _**in**_ _**the**_ _**case of patents.**_

_**Three-dimensional form should not be required**_

_**Process**_ _**inventions**_ _**and**_ _**substances**_ _**should**_ _**be**_ _**excluded**_

_**The**_ _**novelty required should be determined by**_ _**reference**_ _**to the state of**_ _**the**_ _**art,**_

_**which**_ _**should**_ _**be**_ _**restricted to the territory of**_ _**the European**_ _**Union.**_

_**There**_ _**should**_ _**be**_ _**a twelve-month period of grace for**_ _**novelty.**_

_**There**_ _**should**_ _**be**_ _**an industrial application**_ _**requirement,**_ _**based**_ _**on Article**_ _**§7 of the**_

_**European**_ _**Patent**_ _**Convention.**_

_**The procedure for applications should be**_ _**based**_ _**on Articles 78 to 85 of the**_

_**European**_ _**Patent**_ _**Convention.**_

_**There should be a formal check on**_ _**protectability**_ _**but no general**_ _**examination**_ _**of**_

_**compliance**_ _**with the**_ _**requirements.**_

_**Optional**_ _**searches**_ _**should**_ _**be**_ _**possible.**_

_**Rights of**_ _**use**_ _**and of prohibition and their**_ _**exhaustion**_ _**should be based on the**_

_**existing rules**_ _**of patent**_ _**law.**_ **-**

_**The term of protection should be renewable in steps of several years, the**_

_**maximum term**_ _**being ten years.**_

_**A search report would be drawn up in the event of legal proceedings for**_

_**infringement.**_

_**So as to avoid conferring too great a measure of protection, combined use of**_

_**patent and**_ _**utility**_ _**model rights for the same**_ _**invention**_ _**should**_ _**be ruled**_ _**out.**_

Kùï- -Ks

_- \ -_

I. INTRODUCTION

The achievement of a single market was for a long time the European Community's.main

aim. The conditions for the functioning of the single market were established over a
period which ended on 31 December 1992 [2] . The internal market can and it must be

improved further, if we are to have the certainty that goods will be able to move freely,

and that competition will not be distorted. The date of 1 January 1993 was not the end; it

was the beginning of a long-term process, in the course of which further changes will be

needed in the legal structures and administrative practices we are used to in our own

countries.

At the end of 1993 the Commission took the decision to publish a Strategic Programme
for the single market, in order to establish clear priorities for the years to come. [3 ]

Priorities had to be set if the potential offered by the single market was to be properly
harnessed so as to boost economic growth, competitiveness and employment. [4 ]

Without a common market in goods a "single" market or "internal" market is
unthinkable. [5] A common market in goods requires free movement of goods and fair

competition. But even today free movement can be obstructed and competition can be

distorted by the rules which may apply in this or that Member State. Industrial property

rights, for example, often have to be applied for in the individual country, and confer

exclusive protection only on that country's territory. Member States are free to decide

whether they wish to provide such protection, and if so what form it should take. The

terms of competition may vary as a result, and this can lead to distortion. It can happen,

too, that holders of industrial property rights will avoid certain markets where no

adequate protection is available. This has an adverse effect on trade and restricts the free

movement of goods.

2 Article 7a of the EC Treaty.

3 _Making_ _the_ _Most_ _of the_ _Internal Market:_ _Strategic_ _Programme,_ COM(93) 632 final, 22 December 1993.

European Commission, _The Internal Market in_ _1993_ _- Summary,_ Official Publications Office of the
European Communities, Luxembourg, ISBN 92-826-7644-7.

**5** Judgment of the Court of Justice in Case 78/70 _Deutsche_ _GrammophonvMetro_ [1971] ECR487,
paragraph 6, last sentence.

Given the close cross-border cooperation there is between companies in the European

Union it is particularly important that industrial property rights should be brought more

closely into line. This is the only way to eliminate the difficulties under which businesses

have to suffer if there are wide discrepancies between different systems. In almost all

areas of industrial property, therefore, action has been taken or has at least been initiated
at Community level . [6] Nothing has been done with respect to the "utility model", the

industrial property right which forms the subject-matter of this Green Paper.

A "utility model" is a registered right which confers exclusive protection for a technical
invention. [7] It resembles a patent, in that the invention must be new - it must possess

"novelty" - and must display a measure of inventive achievement- it must involve an

"inventive step", though frequently the level of inventiveness required is not as great as it

is in the case of patents. Unlike patents, utility models are granted without a prior search

to establish novelty and inventive step. This means that protection can be obtained more

rapidly and cheaply, but that the protection conferred is less secure. Utility model

protection is at present entirely a matter of domestic law.

Different Member States have different schemes, which call the rights they confer by a

variety of names: "utility model", "utility certificate", "six-year patent", "short-term

patent", "petty patent" or "utility model certificate". As one might imagine from the

range of terms used, the systems diverge widely, but they all provide protection for

technical inventions alongside what is available under patent law. All the schemes in

existence are intended to boost the innovative capacity of companies.

Legally speaking there is no objection to Member States' operating different systems of
utility model protection, always provided they are not misused. [8] But the present

situation is not consistent with the objectives of free movement of goods and undistorted

competition. And it discourages innovative activity in European companies. A high

E.g. Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ No L 11,
14.1.1994); amended proposal for a Council Directive on the legal protection of biotechnological
inventions (COM(92) 589 final; OJNoC44, 16.2.1993); Council Regulation (EEC) No 1768/92 of
18 June 1992 concerning the creation of a supplementary protection certificate for medicinal products
(OJ No 182, 2.7.1992); proposal for a European Parliament and Council Regulation on Community design
(COM(93) 342 final; OJNo C 29, 31.1.1994).

This distinguishes utility models from design rights, which protect the outward form of an object rather
than a technical invention embodied in it.

See the second sentence of Article 36 of the EEC Treaty.

level of innovative activity gives a business a technological advantage, which is an
important factor in its competitiveness. [ 9] Today, the competitiveness of European

companies is more important than ever before.

It is important, then, that measures be taken to promote innovative activity, so as to ease

the path from the initial idea to the successful translation of that idea into practice. The
legal protection available in the single market has a major role to play. [10] The simpler and

clearer such arrangements are for the user, the more they will facilitate innovation,

providing effective safeguards for inventors while at the same time ensuring that the

public is kept informed of new developments. This would increase the competitiveness

of European companies and help to achieve the objectives of free movement of goods

and undistorted competition.

In the last four years five more countries have introduced a system of the kind under
discussion, [11] thus bringing to twelve out of fifteen the number of Member States in

which such a system exists; and against this background voices have being raised in
industry and trade associations calling for harmonization of utility model protection. [12] In

the course of 1994 the European Parliament's interest in the matter was reflected in
written questions asking the Commission to draw up proposals. [13] In its Strategic
Programme [14] the Commission accordingly undertook to put forward a Green Paper on

utility model protection.

_**This Green Paper seeks to assess the need for action by the European Union with**_

_**respect to utility models, and to set out a number of options; the Commission will be in**_

_**a position to decide between these possible courses once it has had a chance to study**_

_**the comments of interested parties.**_

**9**

**10**

**11**

**12**

**13**

**14**

_European Industrial_ _Policy for_ _the_ _1990s,_ Supplement 3/91 - Bulletin of the European Communities, p.23.

Alongside such things as the technological development programmes of the European Union and of the
Member States.

Ireland, Denmark,Greece, Finland and Austria.

E.g. _Action_ _européenne_ _pour_ _l'Éducation,_ _l'Invention_ _et_ _l'Innovation,_ petition to the European Parliament,
No 1012/93; International Federation of Industrial Property Attorneys (FICP1), Resolution No 6,
September 1994.

Written Questions Nos 1552/94 and 2536/94, Hearing on the petition to the European Parliament,
No 1012/93.

_Making_ _the_ _Most_ _of the_ _Internal Market:_ _Strategic_ _Programme,_ COM(93) 632 final, 22 December 1993.

**- 4 -**

Building on the approach outlined here in Chapter I. Chapter II examines the need for

action at Community level. Bearing in mind the scope of the powers transferred to the

European Community, it studies the economic significance of utility model protection

and the negative impact on the common market of the differences which currently
exist. [15] Chapter III then goes on to discuss the type of legislation which would be

suitable and the form which a Community scheme might take.

The results of two studies are drawn upon throughout the Green Paper to provide

evidence of adverse effects on the free movement of goods and fair competition and an

empirical foundation for the possible form of any Community action. An initial pilot

study asked a total of 905 patent attorneys in Germany, France, Spain and the United

Kingdom for their views on the economic significance of the existing systems and of
possible developments. [16] In the full-scale study which followed, 3 793 industrial

companies and independent inventors were questioned, and statistics were drawn up and
evaluated. [17 ]

The Green Paper begins with a summary of the most important findings and a

questionnaire on the need for Community action and the form any Community action

might take.

_**The Commission asks all interested parties to take an active part in this consultation**_

_**process.**_

See the comparative study of the law in Annex 1.

Weitzel, G., Ifo Institute, _Pilotstudie_ _- Die_ _Wirtschqftliche_ _Bedeutung des_ _Gebrauchsmusterschutzes,_ C.l,
p.9.

**17**

Wei

Weitzel, G., Ifo Institute, _The Economic_ _Impact of the_ _Legal Protection_ _of Utility Models on Enterprises in_

_the_ _European_ _Union,_ 2.1.

**-5**

**IL** **THE NEED FOR ACTION AT COMMUNITY LEVEL**

**The Commission has to assess the need for action at Community level in terms of the**

**establishment and functioning of the single market. It has accordingly considered**

**whether the differences between the national systems of utility model protection hinder**

**the achievement of these objectives.**

**The Commission has likewise studied the economic significance of this type of**

**protection. It has to be determined whether the differences in the schemes operating in**

**some countries, and the absence of similar schemes in others, have adverse effects on the**

**common market; and a finding that utility model protection was of considerable**

**economic significance in the single market would support this hypothesis. In the**

**Commission's view the degree of economic importance of utility models and the scale of**

**any adverse effects on the** **single** **market will affect the answer to the question whether**

**harmonization is needed and if so to what extent.**

**A.** **The establishment and functioning of** **the** **single market**

The Community is required to take measures "with the aim of progressively establishing

the internal market". This internal market (or "single" market or "common" market) is to

comprise an area without internal frontiers in which the free movement of goods,

persons, services and capital is ensured. This definition does not mention undistorted

competition as an objective, but the concept of an internal market itself means that the

provision is comprehensive in scope.

In the field of industrial property the establishment and functioning of a common market

is primarily a matter of removing any remaining obstacles to the free movement of goods
and services, and further improving the system of undistorted competition. [18 ]

Systems of utility model protection which differ from one country to another may

interfere with the free movement of goods and undistorted competition. In that event the

Community is called upon to take the necessary measures to approximate the provisions

laid down by law, regulation or administrative action in Member States in order to

remove the obstacles and further to improve the functioning of the common market.

18 See Article 7a TUE.

**-7**

B. The present situation in the Member States

Some form of utility model protection exists in _France,_ _Belgium, Portugal, Italy, Spain,_

_**Germany, Denmark, Ireland, Greece, Austria, Finland and the**_ _**Netherlands;**_ **these**

systems sometimes differ quite widely. The introduction of a similar system is under

consideration in the United Kingdom, in Luxembourg and in Sweden.

All of these systems protect technical inventions, so that they can be described as forms

**of** _**"additional**_ _**protection for technical**_ _**inventions".**_ **All of them permit registration**

without the need for examination to establish novelty and inventive step, which makes

them quick and inexpensive to obtain.

There are wide differences in their requirements, which allow them to be divided into

three groups.

The first group comprises rights which do complement patent law but whose

requirements are the same as those for patents. The inventive step required here would

also qualify the invention for patent protection ("full inventive step requirement").

Whether or not the invention possesses novelty is determined by reference to the state of

the art internationally ("absolute novelty"). Embodiment in three-dimensional form is not

a fundamental requirement.

Systems of this kind are the French _certificat d'utilité,_ the Belgian _brevet de courte_

_durée,_ the Dutch _zesjarig octrooi,_ and the "second-tier patent" which was at one time

proposed in the United Kingdom.

The second group comprises those rights whose requirements are different from those of

patent law. Here the inventive step required is smaller, allowing protection to be

extended to minor inventions ("diminished inventive step requirement"). The number of

inventions qualifying is reduced by a requirement that the invention be embodied in

three-dimensional form.

Systems in this group are the Greek utility model certificate, the Spanish _modelo de_

_**utilidad,**_ **the Portuguese** _**modelo de**_ _**utilidade,**_ **the Italian** _**brevetto per modelli di utilità**_

and the Finnish _nyttighetsmodell._ These systems can be graded further on the basis of the

                             - 8 

degree of novelty called for: absolute novelty is required in Italy, Portugal, Finland and

Greece, while relative novelty is sufficient in Spain.

The third group likewise has a diminished inventive step requirement. But here the

three-dimensional form requirement plays only a secondary role, or is absent entirely, so

that protection is available both for process inventions and for all those inventions where

the inventive step is only small.

This group includes the German _Gebrauchsmuster,_ which was subject to a

three-dimensional form requirement in the past: the legislation has recently been

amended, and no longer makes any reference to such a requirement, so that the right is

available for all minor inventions, including process inventions. The Danish _brugsmodel,_

the Austrian _Gebrauchsmuster_ and the Irish "short-term patent" fall into the same

category. Unlike the other systems, the German system requires only relative novelty.

These are all systems which grant a registered right without prior examination; but the

differences between them are such that as things stand it would not be practicable to

allow them to apply on a cross-border basis.

No steps to improve the situation have so far been taken at Community level. Nothing is

yet planned in the context of the unification of intellectual property law, nor is there any

other right which might cover the same area. This means that particularly for inventions

involving only a small inventive step no Community-wide protection is available; indeed

no proper protection at all is available in those countries where utility models have not

been legislated for.

The Green Paper on the Protection of Industrial Design describes this as a "lacuna

[which] represents a major problem in establishing a Community system of protection of
industrial property". [19 ]

**19**

Commission staff working paper, point 11.5.2.3, p. 155.

C. The economic significance **of utility model protection**

The study of the economic significance of utility model protection can begin with

innovative activity among firms in the single market. A high level of innovative activity

gives a business a technological advantage, which is an important factor in its
competitiveness. [20] Today, the competitiveness of European companies is more important

than ever before. Innovation as a catalyst of competitiveness has accordingly been made
a component in European industrial policy for the 90s. [21 ]

The level of innovation among firms in the common market is reflected in the rate of

utilization of property rights for technical inventions, which are intended to promote and
reward innovation. [22] This investigation first looks at the utilization of utility model

protection in the individual Member States and across their borders. These figures are

then compared with those for patents, in order to clarify the importance of utility models

in the individual countries.

The study then examines the types of firm and the particular industries which make most

use of utility model protection, and considers the possible reasons.

The section ends with an industry-by-industry analysis of the development of innovative

activity. This allows a forecast to be made of the likely economic significance of utility

model protection in the future.

**20**

**21**

**22**

_European Industrial_ _Policy for_ _the_ _1990s,_ Supplement 3/91 - Bulletin of the European Communities, p. 23.

_Industrial Policy in an Open and Competitive Environment: Guidelines for a Community Approach,_
COM(90) 556.

_Promoting the_ _Competitive_ _Environment for the_ _Industrial Activities_ _based on Biotechnology within the_
_Community,_ SEC(91) 629.

                      - 10

**1.** **The utilization** of **utility model protection in the** **European** **Union**

In looking at the rate of utilization a distinction has to be drawn between domestic

applications and cross-border applications. The latter show the level of interest in utility

model protection in industry in the common market in general, outside the borders of the

particular country.

(a) The national applications statistics

An important indication of the economic significance of utility models in the individual

Member States is provided by the national applications statistics. They show which

systems arouse particular interest among business people. For many countries figures of
this kind can be found in the annual statistics published by WIPO [23] and in the databases
of the European Patent Office. [24] Only for France and Belgium are no such figures
available. [25] This may be due to the different classification in the Paris Convention, in

accordance with which utility model protection in France and Belgium is governed by

the rules on patents and is not classed with "utility models" within the meaning of the
Convention. [26] For this study, however, figures for applications for short-term patents

were been obtained from the Belgian Patent Office. In the case of France the figures for

applications at least in 1988, 1989 and 1990 were assembled by means of inquiries at the

annual meeting of the _Fédération_ _des_ _Conseils_ _en_ _Propriété_ _Intellectuelle._ Ireland and

Denmark introduced utility model protection only in 1992, and no official figures are yet

available. According to the Danish Patent Office, however, more than 1 000 applications

were received between July 1992, when the utility model was introduced, and
1 June 1993. The following picture emerges: [27 ]

**23**

**24**

**25**

The World Intellectual Property Organization, based in Geneva.

The Epidos and Inpadoc bases.

According to information supplied on 4 August 1992 by MrLudwig Baeumer, Director of WIPO's
Industrial Property Division, WIPO's figures for applications in Belgium include patents. France has so far
supplied no data on utility certificate applications and registrations. It can be assumed that the figures for
patents include utility certificates.

See Annex 1, the comparative study, at point A.2(a).

**27** **• •**
The Italian statistics include applications from abroad. The Belgian statistics were kindly provided by the
Belgian Patent Office; the figures for applications in 1990 show the position at 30 November 1990. The
French INPI was unable to supply any figures for utility certificate applications. The statistics for Greece
are taken from the annual reports of the Industrial Property Organization, the OBI.

11

_**Statistics for utility model applications in**_ _**the**_ _**EU Member States**_

(Source: European Patent Office, Epidos/Inpadoc, position at 9.7.1993, and Ifo patent statistics)

It will be seen that Germany, Spain and Italy are the countries with the highest numbers

of applications. The systems in these countries have a diminished inventive step

requirement. Greece also has such a system, but there the figures are less significant, as

the system was introduced only in 1987. All the newer systems have the diminished
inventive step requirement, [28] so that without going any further into the reasons at this

stage one can say that systems with a diminished inventive step requirement have greater
appeal than those where the inventive step requirement is the same as that for a patent. [29 ]

_(b)_ Cross-border applications

Figures showing the extent to which existing systems are used domestically do not tell us

whether applications for such rights are being made across borders. As has been
explained above, [30] given the variations between utility model systems in the European

Union a large number of cross-border applications is not to be expected.

**28**

**29**

**30**

The most recent being those introduced in Ireland, Denmark, Austria and Finland.

The reasons for this preference are considered in Chapter HI at B.2.

See Chapter II at D.3, "Effects on industrial companies and independent inventors"

12

The following table shows the numbers of utility model applications from residents in

the home country in comparison with the number of applications from other EC

countries, from 1987 to 1991:

**1(3608**

**Belgium**

**8000** **10000** **12000** **14000**

**I** **applications** **from** **residents** **Q** **applications** **from** **non residents]**

(Source: Industrial Property Statistics, publication A and B, WIPO, and Belgian Patent Office)

The fact that the number of registrations is so small is to be attributed to the difficulties

which stand in the way of cross-border applications.

(c) A change in the behaviour of applicants in the European
Union

When firms engage in innovative product development as a way of improving their

competitiveness, they will need cross-border protection for their inventions. It can be

difficult to make a realistic estimate of future, long-term sales potential, and at the same

time of any additional competition which may emerge. Questions put to firms here are

for the most part hypothetical. In a survey of patent attorneys, however, questions were

nevertheless asked about the possible repercussions of the single market on the procedure
for utility model applications, in an attempt to obtain some indication of future trends. [31 ]

Despite the present situation the results show that at least in Germany and Spain there is

a majority of patent attorneys which expects the number of utility model applications in

other EU countries to increase as a result of the single market; both large and small firms

would be involved, in roughly equal measures. In the United Kingdom the results are not

quite so clear-cut: 56% of the respondents expected an increase, but 44% said they

expected no increase. French patent attorneys were distinctly sceptical: given the present

**31**
Weitzel, G., Ifo Institute, _Pilotstudie_ _- Die_ _wirtschafiliche_ _Bedeutung des Gebrauchsmusterschutzes_ _in der_

_Europâischen_ _Union,_ 2.6, p. 26.

13

situation 76% expected no increase in applications, and consequently did not anticipate

that the firms they advised would be needing greater protection.

But the patent attorneys expressed very positive expectations in the event that the

fundamental legal position were to change. A clear majority of the German, Spanish and

French attorneys questioned, 82% on average, expected an increase in applications if

protection could be secured in several EC Member States by means of a single

application. A decisive simplification of the process of obtaining utility model rights

along these lines, according to the survey results, would lead to greater utilization of the

utility model, the size of the firm being of little importance. The position was different in

the United Kingdom, where only 56% of the patent attorneys questioned expected a

development of this kind. These are plausible figures, given that there are no utility

models to apply for in the United Kingdom, so that the utility model may be unknown to

firms.

**2.** **The significance of utility models in comparison with patents**

The significance of the utility model as compared with the patent is to a great extent

dependent on the way the system is designed. A comparison of national figures for

applications for patents and utility models in Germany, France, Italy and Spain gives the
following picture: [32 ]

No comparable figures were available for other countries.

14

**Spain**

**Italy**

**France**

**Germany**
17654

(Source: European Patent Office, Epidos/Inpadoc, position at 9.7.1993; Ifo patent statistics; and European Commission calculations)

It will be seen that in the case of Germany, Spain and Italy, where the inventive step

required for a utility model is smaller than what is needed for a patent, the utility model

plays a more important role by comparison with the patent than it does in the case of

France, where the inventive step requirement is the same as that for a patent.

The reason is that in the systems where the inventive step looked for is smaller the

requirements which must be satisfied in order to qualify for protection are lower; each of

the two types of right then has its own _raison d'être._

Utility model systems with the same requirements as patents have less appeal because

they are in competition with patents, which many applicants prefer because of their

greater security.

**3.** **The significance of utility model protection by reference to the size of the**
**firm**

Utility model protection is not equally important to all firms: it depends where the firm's

interests lie. A study of the relationship between the German patent system and

                       - 15

innovative activity in firms has been carried out in Germany, [33] which among other things
looks at the importance of industrial property rights [34] in relation to the size of the firm. [35 ]

The study finds that of these industrial property rights utility model protection is third in

order of importance after patents and trade marks. When applicants are sorted by type of

business, utility model protection is second in order of importance, after patents, among

independent inventors and craft firms. Among industrial and manufacturing companies

and research institutes it ranks at least third. It is striking that for all categories of
applicant industrial design protection came in last place. [36] When applicants are sorted by

size of business, it is found that there is higher demand for utility models among firms

with an annual turnover of ECU 5 million or less, that is to say among small and
medium-sized enterprises. [37] In this category utility model protection comes in second

place after patents. But even among companies with a turnover up to ECU 1.25 billion

and over utility models are in third place. In Germany, then, utility models are of

importance especially to small and medium-sized industry with an annual turnover of up

to ECU 5 million. The reasons cited are for the most part to do with savings in costs,

time and administration. These are arguments which hold good for all the existing utility

model systems, and in the Commission's view it can be concluded that utility model

protection is useful to big industry, but even more so to small and medium-sized

industry.

**4.** **'Significance in particular industries**

After the rate of utilization and the importance of utility models to firms of. different

sizes, the Commission has attempted to establish which industries make particularly

frequent use of utility model protection. The results obtained allow developments in

individual industries to be studied and inferences to be drawn regarding the behaviour of

applicants in future. An industry-by-industry analysis of applications for utility model

**33**

**34**

**35**

**36**

Tâger, U.C.,with the collaboration of Seyler, H., _Problème_ _des deutschen_ _Patentwesens im_ _Hinblick auf_
_die_ _Innovationstdtigketen_ _der_ _Wirtschafi,_ study carried out by the Ifo Institute for the German Federal
Ministry of Economic Affairs, May 1989.

Patents, utility models, industrial designs and trade marks.

_Loc._ _cit.,_ p. 142, at 7.3.

_Loc._ _cit.,_ p. 144.

See European Commission, _Report from the Commission to the Council on the Definitions of Small and_
_Medium-sized_ _Enterprises (SMEs) used in_ _the_ _context_ _of Community Measures,_ SEC(92) 351 final.

16

protection in the European Community, ignoring differences between systems, gives the

following picture:

**•5000**

**•4500**

**•4000**

**3500**

**•3000**

I

**•4500**

### i

**•4000**
##### i i 3500

# i
#### i i •3000

**1500**

**1000**

| ^

| : «
T»

-O re [1] ce- _n_

**1987-1990**

**I** _*****_ _**[f]**_ **.El**

_**n**_ 3 3

:L 1
### m

**—** **o**

(Source: European Patent Office, Vienna Sub-office, position at 8 January 1993)

The industry which makes most use of utility models is thus mechanical engineering.

This also bears out the results of a survey of firms in Denmark which was conducted
with a view to the introduction of such a system. [38] That survey found that utility model

protection would be used mainly in mechanical and electrical engineering. After the

mechanical engineering industry the main users are electrical engineering, precision

instruments and optics, and the motor industry.

**5.** **Reasons cited for seeking utility model protection**

The reasons cited for seeking utility model protection are an important factor in a proper

assessment of its economic significance.They provide concrete evidence of the features

of the system which are regarded as particularly useful. In a survey of industrial

**38**
"Legal and Economic Significance of Protection by Utility Models', in _AIPPI_ _Yearbook_ 1986, 1-4, Q 83,
pp. 45-47.

                    - 17

companies, independent inventors [39] and patent attorneys [40] in Germany, France, Italy, the

United Kingdom and Spain the main reasons cited for seeking this form of protection

were:

 - quick, simple registration

- limited requirements

- low cost

- temporary protection pending the grant of a patent.

(a) Quick, simple registration

An applicant has to wait an average of four years for a European patent, [41] and an average
of two and a half years for a national patent, [42] but the average wait for the registration of

a utility model is sixth months, as no examination has to be carried out to establish

novelty and inventive step. Of the reasons given by firms, independent inventors and

patent attorneys for seeking utility model protection, by far the most frequently cited is

quick and simple registration and protection against imitation.

This reason was most often cited by SMEs (67%), and only half as often by larger

companies (33)%. The result tends to confirm that quick and simple registration is one of

the main features which patent attorneys and firms demand of a serviceable utility model

system. If registration is in fact quick and simple, therefore, that will be the main

perceived advantage over patents.

Rapid protection against imitation is not an end in itself. Its main purpose is to

consolidate a competitive position and to safeguard any competitive lead. This enables

the producers of investment goods and consumer goods to pursue a marketing policy

based on quality. Protection against imitation plays a particularly important role in

Germany (where 58% regard it as "very important"). Spain and France follow. In Italy

**39**

**40**

**41**

**42**

Weitzel, G., Ifo Institute, _The Economic_ _Impact of the_ _Legal Protection_ _of Utility Models on Enterprises in_
_the_ _European_ _Union,_ 2.7.

Weitzel, G., Ifo Institute, _Pilotstudie_ - _Die_ _wirtschaftliche Bedeutung_ _des_ _Gebrauchsmusterschutzes_ _in der_
_Europàischen_ _Union,_ D, 2.1, p. 12.

Annual Report of the European Patent Office 1991, Chapter HI, 1, p. 28.

Where a prior examination is carried out.

                       - 18

and the United Kingdom only a little over a third of respondents cite this reason. This

may be partly due to the somewhat limited protection available under their legislation or

administrative practice. A breakdown by size of firm shows that smaller firms are

especially inclined to cite protection against imitation as a very important reason for

applying for utility model protection.

In the case of large companies protection against imitation is somewhat less important.

This may be because large companies are more often in a position to make effective use

of the whole range of available legal weapons to protect their position against

competitors.

Rapid registration leading to rapid commercial exploitation - whether under licence or by

the applicant himself- is rated as "very important" or "important" by about 40% of

respondents. This is the second most frequently cited reason. The assessment is broadly

the same for all sizes of firm.

_**Utility model protection is**_ _**thus**_ _**a competitive weapon in its own right; it is used by firms**_

_**of all sizes**_ _**primarily**_ _**as an indirect way of protecting or**_ _**strengthening**_ _**a market position,**_

_**but also as a direct way of improving the.**_ _**commercial**_ _**exploitation of inventions.**_

_(b)_ Limited requirements

Among the main requirements for patentability are inventive step and absolute novelty.

Most utility model systems require a smaller inventive step than is needed for

patentability, and also limit the concept of novelty, so that the requirements are easier to

satisfy. This is another important reason for seeking utility model protection.

The survey shows that inventions which involve only a minor inventive step are

important not only to small firms but to large ones too. This was borne out by the patent

attorneys questioned: a large majority considered the lower inventive step requirement an

important reason for seeking utility model protection. The differences in the results here

are reasonable given that patent attorneys are often confronted with legal problems of

this kind in the day-to-day work of handling applications.

In France and the United Kingdom the question on the reasons for applying for utility

models had to be hypothetical: if such a system existed, why might you apply? It was

difficult to answer, because firms and independent inventors only very rarely had any

19

practical experience of applying for utility models abroad. Nevertheless, the answers do

reflect the different legal background in the two countries adequately for present

purposes.

Thus in the United Kingdom, where the only protection available for technical

inventions is the patent, which necessitates prior examination, while functional designs

qualify for the unregistered design right introduced in 1988, 50% of respondents

regarded the less stringent legal requirements as a "very important" or "important" reason

for a hypothetical application.

_**As an important interim finding, then, we can say that there is clearly an economic need**_

_**for**_ _**a**_ _**form of protection with**_ _**requirements**_ _**less**_ _**stringent than**_ _**those for patentability.**_

_(c)_ Low cost

Unlike patents, utility models are granted without a prior examination to establish

novelty and inventive step. This makes them cheaper to obtain than patents. The

following table summarizes the costs which will be incurred under the various national

utility model schemes.

**20-**

_Fees for_ _filing,_ _grant and renewal (for ten_ _years,_ _in ECU)_

_Reneyval_
_(-ECUs)_

**906.5**

**586.04**

**151.2**

**162**

**182.4**

**650**

**136.5**

_Grant_
_(-ECUs)_

**20.9**

**319.8**

**40**

**97.5**

_Zoial_
_(-ECUsIOvearsy_

931

659.15

333.45

170.8

262

230.4

910

271.5

_Qerpumv_

_Spain_

_Italy_

_Portugal_

_Qtëfàç_

_Belgium_

_Denmark_

_France_

_Filing_
_(-ECUs)_

**24.5**

**52.21**

**13.65**

**19.6**

**60**

**48**

**260**

**37.5**

(Based on the national fee regulations [43] ' _[u]_ _'_ [45> 46] ' [47] ' [48] ' [49] ' [50], ECU: 1.5.1993)

**43**

**44**

**45**

**46**

**47**

**48**

**49**

Germany: Patent Office and Patent Court Fees Act of 18 August 1976 as amended on 7 March 1990.

France: Fundamental rules on fees are to be found in various provisions of the Patents Act, an example
being Section 41. These are clarified by Regulation No 79-822, at Article 94 _etseq._ The precise amounts
of fees are determined by on Order of 17 December 1985 on fees charged by the National Industrial
Property Institute (MPI).

Spain: Under Sections 454 and 160(1) of the Patents Act, fees are to be regulated in accordance with the
schedule to the Act.

Italy: under Article 11(1) of the Industrial Models Order, filing and grant fees are to be paid for utility
models. The amounts of these fees are regulated by schedules A and C to the Order. Act No 60 of 14
February 1987 increasecLthe fees substantially. Under Article 12 of the Order the grant fee may be paid in
its entirety or in two instalments, the first providing protection for five years and the second for another
five. Article 12 states that in other respects utility model fees are to be subject to Article 46 of the Patents
Order. Article 46(1) of the Patents Order provides that the filing fee, at least the first half of the grant fee,
and the printing fee are to be paid before the application is filed.

In Portugal the fees for the registration of a utility model are set afresh each year in a special order (Section
255 of the Industrial Property Code). Section 257 of the Code lays down the rule that periodic fees for the
renewal of the registration of a utility model are to be paid every five years.

Greece: Fees Order, DS/A/2/89 of 26 January 1989.

Belgium: Sections 71 and 72 of the Patents Act are supplemented by a Royal Order of 18 December 1986,
amended in 1990.

**50** Denmark: Osterburg, Tindlich ein Gebrauchsmuster- modellgesetz in Danemark', in _GRUR_ _Int._ 6/1993, p.
453.

**-21**

Low cost is the third most frequently cited reason for seeking utility model protection.

Particularly those firms which attempt to protect themselves as comprehensively as

possible against the danger of imitation can find that a large number of applications

generates problems of cost. From patent statistics it is well known that the policy of

submitting large numbers of applications is especially important in the patent field.

Large companies in particular may apply for over a hundred patents in one year at home

and abroad. In Germany, for example, these big applicants account for over 20% of all

patent applications, even though in the nature of things there are not very many of them 
about 30 German and foreign firms. Utility models are completely different in this

respect. With a few exceptions, even large companies apply for no more than thirty
utility models a year. [51 ]

However, uncertainty as to the commercial value of inventions tends to increase the

number of utility model applications, because of the low cost of applying. Putting an

invention to use can involve a considerable commercial risk, because the new product or

process will often fail to establish itself on the market. Where the success of an

invention is very uncertain, therefore, the low cost of applying for a utility model will be

a decisive factor in the choice of this form of protection.

SMEs have particular difficulty in determining the sales prospects of new products, and

thus the value of inventions, because they have inadequate information from market

observation and market research. Big companies can make use of tried and tested

planning and forecasting machinery; this does not mean that they never have product

failures, but they can limit their risk to some extent at least.

The distinctions are clearly reflected in the survey results. Among large companies only

11% of respondents cited the uncertain commercial value of an invention as a "very

important" reason applying for utility model protection, while in small firms with 100

employees or less the figure was 26%.

Because utility model applications are inexpensive, therefore, this form of protection can

serve to reduce the risk of launching an invention, and thus lead to increased innovative

activity.

Weitzel,G., Ifo Institute, _The Economic_ _Impact of the_ _Legal Protection_ _of_ _Utility Models_ _on Enterprises in_
_the European_ _Union,_ 3.1.

**22-**

(d) Temporary protection

Rapid registration means that a utility model can be used to bridge the relatively long

period which passes before a patent is granted, always supposing that the invention

qualifies for both forms of protection. In answers to the survey this reason for applying is

given roughly the same measure of importance as the low cost of application where the

applicant is uncertain of the invention's commercial value.

Temporary protection is useful mainly in countries where a comprehensive examination

is carried out in order to establish novelty and inventive step before a patent is granted.

In countries where there is no automatic examination temporary protection is largely

unnecessary, as it does not usually take long to process a patent application, and a patent

can be obtained almost as quickly as a utility model.

**6.** **Economic** **assessment by users**

In Germany, Italy and Spain, where utility model protection already exists, industrial

companies and independent inventors were asked to assess the this form of protection
from an economic point of view. [52] The question specifically asked respondents to

consider both costs and benefits.

The overwhelming majority of both companies and inventors confirm that the effects of

utility model protection are seen as positive; this applies across the board, with little

variation between firms of different sizes (from 87% to 96%), or between the three

countries (from 73% to 89%).

The main positive effect cited is an improvement in market position. Once again there

are no great differences between firms of different sizes or between countries. An

average 60% of respondents marked the statement outlining this effect "true", 24% as

"partly true", and only 2% "false".

According to the survey results companies and inventors are already aware that they can

hold on to a competitive lead only by invoking legal measures to keep their competitors

Weitzel, G., Ifo Institute, _The Economic_ _Impact of the Legal_ _Protection_ _of Utility Models on Enterprises in_
_the_ _European_ _Union,_ 2.7.

**23**

from imitating their innovations for a certain time, for example by applying to register

their inventions as utility models. Through their innovations in products and processes

they seek to display originality and to distance themselves from the competition, so that

customers develop a positive image of their technological capability. In addition, 40%» of

respondents believe that utility model protection improves earnings directly, which

allows the cost of innovation to be recovered more quickly and makes research and

development more profitable.

7. **Prospects for the economic significance of utility models**

On the basis of the analysis of the existing situation the Commission has considered

changes and developments in innovative activity in order to arrive at a forecast of the

economic need for utility models in future.

Inferences regarding the further development of innovative activity can be drawn from

changes in spending on research and development, the nature of new inventions,

production cycles, the time when a protected product is marketed, and the lifetime of

inventions.

_(a)_ Changes in spending on research and development

Beginning in the United States in the 1950s, research and development ("R&D") in the

individual firm and in the economy as a whole has become a focus of economic research.

It was realized that there was a chain of causality which started with R&D and which

largely determined how much and what sort of innovation would take place; this in turn

to a great extent decided the pace of technological progress and ultimately of economic

growth.One section of this chain stretches between R&D at one end and innovation at the

other.

**24-**

The survey of companies firms and independent inventors [53,54] suggests that R&D

spending will tend to hold firm in future, which is in line with the answers to questions

on the future significance of minor inventions; this firmness is particularly clear in the

case of high-technology industries and big companies. Thus in mechanical engineering,

vehicles and accessories, electrical/electronics and precision mechanics, optics and

medical engineering, between 50% and 58% of respondents felt that the level of R&D

spending would remain the same in future. Given the intensive efforts to cut costs

currently being made in all branches of industry, a stable level of R&D is to be

welcomed.

Scope for increasing R&D spending is discernible in the packaging and materials

handling industry, in the wood and furniture products industry, and among'

manufacturers of domestic appliances. The last two in particular are rather "low-tech"

industries, which according to the respondents have fallen behind in R&D and have some

catching up to do. When the figures are broken down by size of firm a similar pattern

emerges for smaller firms. About one third of respondents in this category expect an

increase in R&D spending in future; the figure for large companies is 17%».

This clear trend suggests that utility model protection will indeed grow more important

in future.

_(b)_ Changes in product life cycles, times to market and the
lifetimes of inventions

A Japanese study has found that product life cycles are shrinking worldwide. Leaving

aside the possible reasons, time-lags between invention, marketing and the next

generation of products are growing shorter. A comparison of product life cycles between
1981 and 1991 gives the following picture: [55 ]

**53**

**54**

**55**

Weitzel, G., Ifo Institute, _The Economic_ _Impact of the Legal_ _Protection_ _of Utility Models on Enterprises in_
_the European_ _Union,_ 2.4.

The Ifo Institute has been carrying out a regular innovation survey since 1979; since the mid-80s this
proportion has remained within narrow bands "around the 5.5% mark" in all the industries studied. In the
other EU countries studied in the survey this average is probably somewhat lower: Schmalholz and
Penzkofer (1993), p. 88.

_Questionnaire relating to Legal_ _Protection_ _of the Fruits of R&D,_ Japan Institute of Intellectual Property,
1991.

**- 2 5 -**

_Chanses_ _in_ _product life cycles between 1981_ _and_ _1991_

**Getting shorter** **No change** **Getting longer]**

(Source : Japan Institute of Intellectual Property, 1991)

This shortening of product life cycles creates a need for rapidly obtainable protection; it

is less important that the protection obtained should last for a long time. In Japan,

therefore, the marketing of articles protected by utility models usually begins in the
interval between application and publication. [56 ]

_Marketing_ _of utility-model protected_ _goods,_ _in %_

Between publication for grant and
registration

Between publication of application
and publication for grant

Between filing and publication of
application

Before filing]

(Source: Questionnaire relating to Legal Protection of the Fruits of R&D, Japan Institute of Intellectual Property, 1991) [57 ]

**56**

**57**

_Questionnaire relating to Legal Protection of the Fruits of R&D,_ Japan Institute of Intellectual Property,

1991.

The total exceeds 100%, as more than one answer was possible.

26

Searches to establish novelty are accordingly to be done away with in Japan in the near

future. This is the only way to meet the need for quick protection of short-lived

***** **SX**
inventions.

In the United States the US Patent Office has carried out a study of changes in the

lifetimes of inventions. The figures are broken down industry by industry, and show

percentage changes in the time in which a firm will replace a generation of inventions by

new inventions. The greater the value shown for the change the more the industry is
tending to shorten the generation replacement time. [59 ]

**58**

_Subcommittee Report on Patent and_ _Utility_ _Models Laws and their Practices leading to International_
_Harmonization,_ Industrial Property Council of MITI, 1991.

**59**

_Business_ _Week,_ _Science and_ _Technology,_ 3 August 1992, McGraw-Hill Inc.

**27**

_Trend towards shorter lifetimes_ _for_ _inventions._ _1987-91._ _in %_ **60**

(Source: _Business_ _Week,_ _Science and_ _Technology,_ 3 August 1992, CHI Research Inc.)

These figures show that in all industries with the exception of fuel, food and chemicals

there is a tendency for new inventions to be developed more rapidly.

The result is that the average lifetime of an invention today is not more than six years. [61 ]

A study of innovation among the world's largest companies confirms these figures: [62 ]

**60**

**61**

**62**

The lifetime of an invention ends with a new invention which technically supersedes the old one. Thus the
lifetime of an invention is frequently shorter than the duration of the patent, which can be maintained for
longer.

_Business_ _Week,_ _Science and_ _Technology,_ 3 August 1992, CHI Research Inc.

_Business_ _Week,_ _Science and_ _Technology,_ 3 August 1992, CHI Research Inc.

**-28**

_Lifetime of_ _inventions,_ _in years_

# mniiiimiBinnnriiinr

**g g g** **S** **W** **K** **J** **W** **W**

**a** **«** **E(**

**s**

**i** **3**
**s,** **a.**
**o**
###### **I**

**1**

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**I** **s** **I** **ô ô** **ë**
5 ^ -g "*

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**a** **i**

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**I** **2** *****

_**eu**_

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_**eu**_ **•I**

**(Source: Business** **Week,** **Science and Technology, 3 August 1992, CHI Research** **Inc.)**

If one tries to bring these shorter product life cycles and invention lifetimes into relation

with the industries which make most use of utility model protection, one finds a striking

degree of correlation. Not only do mechanical engineering, electrical engineering and the

automotive, industry account for the most utility model applications: they are also the

industries in which there is the strongest trend towards further reduction of product life

cycles and the lifetimes of inventions.

In 1991 the time which elapsed between submission of a patent application to the

European Patent Office and the grant or refusal of a patent after examination was 44
months in half of all cases. [63] If we compare this figure with the average lifetime of

inventions,we can conclude that innovation cycles will shorten still further in future, and

that this will increase demand for a form of protection which can be obtained quickly for

short-lived inventions, separately from patent protection. The utility model provides the

best way of meeting this demand.

**63** Annual Report of the European Patent Office, 1991, p. 28.

-29

(c) Changes in the scale of innovation and the length of
exploitation of inventions in the European Union

In order to obtain a clearer picture of the protection needed by industrial companies and

independent inventors, they were asked how they graded the inventive step involved in

their inventions - high, medium or low - and whether short-term protection and short-life

products were involved. [64 ]

Large companies in particular (over 1 000 employees: 6% of those surveyed) expect the

proportion of inventions involving a small inventive step or a short period of exploitation

to remain the same. Thus these companies do not for the most part expect innovative

activity to increase substantially, over and above the regular renewal of their product

ranges, or product lifetimes to fall any further.

Smaller firms take a different view: they accept that they need to do more in this area if

they want to hold their own in competition. A majority consequently expects an increase

in the proportion of "small" inventions and inventions with a short period of exploitation.

SMEs often express the view that given the tougher competition they must intensify their

innovative activities. They therefore feel that inventions involving a small inventive step

or having a short period of exploitation will play a greater role in future, so that the need

will grow for an appropriate form of protection, which can best be provided by the utility

model.

For an assessment of future needs it must be noted that only a small proportion of

respondents in all sizes of firm and all industries (not more than 10%) expected the

proportion of "small" inventions to fall.

_(d)_ Usefulness of Community utility model protection to
industrial companies and independent inventors

Against the background of developments in innovative activity, industrial companies and

independent inventors in France, Spain, Germany, the United Kingdom and Italy were

asked whether they would be interested in a specific form of protection to facilitate

64 Weitzel, G., Ifo Institute, _The Economic_ _Impact of the Legal_ _Protection_ _of Utility Models on_ _Enterprises_ _in_
_the_ _European_ _Union,_ 2.3.

**- 3 0 -**

marketing their "minor" inventions which compared with patents would make less

stringent requirements for protection, which would not involve examination and would
consequently be cheaper, but which would afford protection for a shorter time. [65 ]

The survey results leave no doubt that there is fairly strong demand for such a form of

protection. An average 39% said they would be "very much" interested, 32% said they

would be "moderately" interested and only 20% said they would have "little" interest.

"Don't knows" amounted to 9%, which is a small proportion.

A breakdown by size of firm shows that interest is greatest among smaller firms with up

to 500 employees. Here almost every second firm questioned would be very interested.

Interest is somewhat lower among big companies with over 1 000 employees.

Weitzel, G., Ifo Institute, _The Economic_ _Impact of the_ _Legal Protection_ _of Utility Models on_ _Enterprises_ _in_
_the_ _European_ _Union,_ 2.10.

31

_Interest in utility model protection in the European Union (%)_
Broken down by selected Member State

**B** very much • moderately           - little Qdontkno

**i** **i** **1** **i** **1** **r — — i** **1**
**0%** **10%** **20%** **30%** **40%** **60%** 60% 70% 80% **90% 100%**

Broken down by size of firm

**All classes**

**Overl** **000**

**601-1000**

**101-600**

**Up to** **100**

By export ratio

**I very** **much** _**m**_ **moderately** **•** **little** **•** **don't** **know**

**Total**

**Export** **ratio** **<10%]**

**80%** **100%**

(Source: Ifo Institute survey in selected EU countries in 1993; European Commission calculations, 1994)

(7)

**32**

The country-by-country breakdown shows that interest in a special right additional to

patent protection is particularly strong in Germany. Of German firms and independent

inventors 46% said they would be very interested, and a further 30% would be

moderately interested. The results in Spain are similar. Such a form of protection would

be fairly well received in both countries. One contributory factor is no doubt the fact that

in these countries utility model systems already have long traditions behind them, and

are intensively used. Respondents already have practical experience, and are better able

to imagine an extension of protection to other EU countries and to evaluate its usefulness

in their marketing activities abroad.

In the other selected EU countries respondents who said they would be "very much"

interested in utility model protection are somewhat less well represented. But if we add

the figures for "very much" interested and "moderately" interested together, there is no

appreciable difference between the results for different countries.

Only in the United Kingdom is there a noticeable polarization in views offered. About

one third of industrial companies and independent inventors would be "very much"

interested, and about the same proportion would have "little" interest. This may be due to

the fact that utility models do not at present exist in the United Kingdom. Firms can see

the economic advantages, but are sceptical at the idea of a European arrangement

because they have no experience in the area.

A breakdown by the proportion of exports to the firm's total sales shows that firms with a

ratio of between 10% and 50% are only slightly more likely to be very interested than

firms which export less and have an export ratio of less than 10%. Thus interest in EU

utility model protection is largely independent of export ratio.

This uniform response suggests that regardless of what sales they may have at present in

the single market, industrial companies and independent inventors want at least to keep

open the option of expanding their market in the future, and are interested in EU-wide

utility model protection for that reason.

**D.** **Effects of the discrepancies on the common market**

The economic significance of utility model protection means that the discrepancies

between the existing national schemes have practical repercussions; the Commission has

**- 3 3 -**

accordingly considered whether this causes obstacles to the free movement of goods and

distortions of competition which stand in the way of the establishment of the internal

market called for in Article 7a of the EC Treaty.

**1.** **Obstacles to the free movement of goods**

Free movement of goods and a customs union are the basis of the Community. They are

intended to facilitate the achievement of the objectives set out in Article 2 of the EC
Treaty by establishing a single market [66] in which the markets of the separate countries

are fused and the economic policies of the Member States are gradually aligned. A

common market is inconceivable without a single market in goods. The Treaty

provisions on the free movement of goods seek to promote integration by freeing private

parties to move goods across borders as they see fit, with as little hindrance as possible.

The EEC Treaty therefore listed the free movement of goods among the "foundations of

the Community". The Court of Justice has spoken of "the essential purpose of the Treaty,
which is to unite national markets into a single market". [67 ]

A national intellectual property right registered under the law of a Member State

provides protection only on the territory of that State. In the absence of any unification

of the law, therefore, the holder of such a right can prevent third parties from importing

protected goods which have been produced and marketed without his consent. Thus the

intellectual property rights conferred by the Member States can of their nature be used to

hinder the free movement of goods.

This conflict between industrial property rights and the principle of the free movement of

goods has been resolved by the Court of Justice in its interpretation of Articles 30 and 36

of the EC Treaty. The central finding in this interpretation is that the Treaty does not

affect the _existence_ of the industrial and commercial property rights conferred by

national law, but that their _exercise_ can be restricted by the prohibitions imposed by the

Treaty: the free movement of goods may be restricted only where this is "justified for the

See Article 7a of the EC Treaty.

Case 78/70 _Deutsche_ _Grammophon_ v _Metro_ [1971] ECR 487. paragraph 6, last sentence.

**34**

purpose of safeguarding rights that constitute the specific subject-matter" of the property

right. [68 ]

Utility model protection confers additional protection for technical inventions, and by
analogy with patent protection [69] it can be included in the "industrial and commercial

property" referred to in Article 36 of the EC Treaty. Given the differences which exist

between the protection conferred by the various national schemes, however, there are a

number of special features in the way the free movement principles apply.

Member States are basically free to design utility model systems as they will, provided

the measures they take are not a means of arbitrary discrimination or a disguised
restriction on trade between Member States. [70] A country may do without utility models

altogether, as the United Kingdom, Sweden and Luxembourg have done, and where it

does provide a system of utility model protection it may lay down requirements different

from those of its neighbours. An invention involving a small inventive step is protectable

only in those countries where utility model protection exists. The relative novelty which

suffices in Spain means that inventions which have already been published in other

Member States will nevertheless qualify for utility model protection in Spain. Even a

right acquired under these circumstances falls within the scope of the exceptions to the
free movement principle in Article 30 which are allowed by Article 36 . [71] The

differences between the systems of protection are outside the control of the right-holder,

and force him to avoid markets where he cannot obtain equivalent protection for his
invention. Since the new design right was introduced in the United Kingdom [72] -it has not

been possible to register a right in goods whose form is determined solely by their
technical function. [73] This creates a barrier between the UK and other markets.

_Thus the differences which exist have a direct adverse effect on trade within the_

_Community, and on firms' capacity to treat the common market as a single setting in_

68 See e.g. Case 192/73 _Van_ _ZuylenvHag_ [1974] ECR 731, and Case 15/74 _Centrafarm_ _v_ _Sterling_ _Drug_

[1974] ECR 1147.

E.g. _Centrafarm,_ _supra._

**70**

**71**

**72**

**73**

Case 53/87 _Consorzio Italiano v Renault_ [1988] ECR 6039, paragraph 12.

Case 35/87 _Thetford_ v _Fiamma_ [1988] ECR 3585.

Copyright, Designs and Patents Act 1988.

Cornish, _Intellectual_ _Property,_ 1989, Chapter 14, 14-106.

**-35**

_which to do business._ _[74]_ _The_ _free movement of goods is obstructed and, as the Court of_

_Justice has repeatedly remarked, this is an unavoidable consequence of the lack of_
_harmonization of the_ _law._ _[75 ]_

**2.** **Distortion of competition in the common market**

Article 3(g) of the EC Treaty calls for the establishment of a system ensuring that

competition in the internal market is not distorted. This objective is related to the phrase

in Article 2 which requires "a harmonious and balanced development of economic
activities" throughout the Community. [76] If firms are to take advantage of the

fundamental freedoms laid down in the EC Treaty, the intellectual property rules must
allow fair competition between them. [77 ]

Given the differences which exist at present, companies or individual inventors wanting

to exploit an invention in several Member States have to familiarize themselves with a

number of different systems or take expensive advice in each of the Member States

concerned. The situation may be bearable in the case of big companies that can invest

large sums of money in the promotion and protection of their inventions. For individual

inventors and for SMEs the differences they have to deal with and the consequent need

for legal advice are a source of administrative difficulty and often an insuperable cost

factor. This restricts innovative activity on the part of such businesses and consequently

distorts competition.

In those countries which demand the same level of inventiveness for utility models as

they do for inventions, there is no proper protection for inventions whose level of

inventiveness is small. In the United Kingdom, Sweden and Luxembourg there is no

utility model protection at all. In countries without adequate protection goods can be

imitated, and no redress is available.

**74**

**75**

**76**

**77**

From the Commission's White Paper on Completing the Internal Market, June 1985, paragraph 145:
"Differences in intellectual property laws have a direct and negative impact on intra-Community trade and
on the ability of enterprises to treat the common market as a single environment for their economic
activities."

E.g. Case 53/87 _Consorzio Italiano_ v _Renault,_ _supra,_ paragraph 10, with further references.

Manfred Zuleeg in Groeben, _Kommentar zum_ _EWG-Vertrag,_ fourth edition, Rdnr. 9 zu Artikel 3.

Langheine in Grabitz, Art. 100a, Rdnr. 20; Pipkom in Groeben, Art. 100a, Rdnr. 17.

36

Copies can usually be manufactured more cheaply than the originals,because the

manufacturer does not need to cover the innovation costs, and they can consequently be
sold more cheaply than the originals too. [78] There is thus a danger that in countries with

low levels of protection the imitation may secure a larger share of the market than the

original. And as the single market grows more integrated it may well become easier to

import the imitation into Member States where the level of protection is high. Indeed the

importer may be acting quite innocently, and be unaware of the differences between the

two systems of protection. The right-holder's only remedy is then to bring legal

proceedings against parties who will often have been acting in good faith.

_This runs counter to European Union policy, which seeks to prevent_ _the_

_misappropriation of rights resulting from the creative effort of European inventors and_
_substantial investments on_ _the_ _part of European_ _business,_ _[79]_ _and constitutes a distortion of_

_competition._ _To_ _prevent it the_ _terms_ _of_ _competition_ _must be the_ _same_ _for all enterprises_
_doing business in the common market._ _[80 ]_

**3.** **Effects on industrial companies and independent inventors**

The national patent systems in Europe have generally been aligned on European patent

law. The European Patent Convention was specifically designed to leave the national
systems unaffected, but there followed a process of voluntary harmonization [81] which has

greatly simplified the practical requirements for cross-border applications.

The position with regard to utility models is very different. There is a wide variety of

utility model systems in the European Union..They are used primarily by domestic

applicants, less often by applicants from other countries in the single market, and still

less often by applicants from non-member countries.

**78**

Green Paper on the Legal Protection of Industrial Design, June 1991, 3.3.4, p. 31.

**79**

Green Paper on the Legal Protection of Industrial Design, June 1991, point 3.5, p. 33.

**80**

Green Paper on the Legal Protection of Industrial Design, June 1991, point 3.3.1, p. 31.

**81**

See van Benthem in _Grur Int.,_ 1993.

**- 3 7 -**

Given that international trade in goods is increasing, as the international division of

labour grows stronger, this is not what one might have expected". There ought to be an

increase in the number of applications for patents and other forms of protection for

technical inventions, not just in the applicants' own countries but on foreign markets as

well. Information is also being exchanged more and more rapidly, with international

fairs providing an important platform for the presentation of innovations, and this creates

an even greater need for protection against competitors who are prepared to imitate a

manufacturer's product.

But in fact European Union applicants rarely seek utility model protection on markets

outside the Union, and the same applies in the opposite direction. An analysis of

applications in Asiatic countries which have provision for utility model protection shows

that European firms make no use of it. Asian firms likewise make only very limited use

of the possibilities offered by European utility model schemes. Even on markets in which

they are very interested, such as the German market for example, they account for very

few utility model applications.

_Comparison of domestic and foreign utility model applications in 1991_

From residents From non-residents

Germany 13920 1633

Korea 25125 770

China 33157 125

Japan 113340 1334

(Source: Intellectual Property Statistics 1991, publication A, WIPO, Geneva)

**38**

_Country-by-country breakdown_ _of_ _applications made abroad_

Applications by German Applications by Japanese
firms in firms in '

Germany - 64

Japan 145 

Spain j48 5

Portugal 20 

Brazil 1 5

China 4 14

Mexico 2 

Poland 3 

(Source: Industrial Property Statistics 1991, publication A, WIPO, Geneva)

_In the_ _Commission's_ _view,_ _therefore,_ _utility_ _model_ _protection_ _has to be_ _looked at_ _in terms_

_of the_ _domestic_ _market._ _In the_ _European Union_ _the_ _domestic market_ _is fast_ _becoming_ _a_

_Union-wide single market rather than the market_ _of the particular_ _Member_ _State._

But even in the single market cross-border applications are fairly exceptional. In order to

investigate the causes of the small number of cross-border applications, industrial

companies -and independent inventors in selected EU countries were asked whether the

differences between the national utility model systems gave rise to practical difficulties
when seeking protection. [82 ]

**82**
Weitzel, G., Jib Institute, _The Economic Impact of the Legal Protection of Utility Models on Enterprises in_
_the European Union,_ 2.7.

39

_Difficulties with the protection of innovation caused by varying utility model laws in the_
_European Union (%)_
By selected EU country

**| B s e r l o u** **s,** **so m** **e** **Elfew** Id o n't k no w

**0%** **2 0** **%** **4 0 %** 60% 8 0 % 1 0 0 %

By size of firm

**|** **B s t r i o u s,** **s o m e** **O f e w** **Id** **o n't k n o w**

**0%** **2 0 %** **4 0 %** **6 0 %** **8 0 %** **1 0 0 %**

By export ratio of firm

**L e s s** **t h a n** **1 0 % ]**

**2 0 %** **4** **0%** **8** **0 %** **1 0 0 %**

(Source: Ifo Institute survey in selected EU countries, 1993; European Commission calculations, 1994)

An average 50% of all firms questioned reported "serious" or "some" difficulties with

cross-border applications for utility models in the single market.

**- 4 0 -**

It is striking that the number of "don't knows" is fairly high. This is due to the fact that

the different systems vary so widely in their effects that companies and independent

inventors are unable to form an opinion. The number of don't knows is accordingly

highest in the United Kingdom and France. In the United Kingdom the only protection

available is the patent, which necessitates a prior examination, or the registered design

right for functional designs, and in France the _certificat d'utilité_ takes a form largely

identical to that of the patent; firms in those countries often have no very clear idea of a

scheme of protection which stands alongside the patent system and can be used either

alone or in addition to a patent to protect technical inventions involving a small step in

development or a short period of exploitation.

Despite this there is still a substantial proportion of respondents in the United Kingdom

and France who consider that the current situation causes difficulty (United Kingdom

35%, France 41%).

The breakdown by size of firm shows that there are difficulties with the protection of

innovation in the opinion of something over 50% of firms with up to 1 000 employees,

but only 34% of very large companies with more than 1 000 employees. The smaller the

enterprise the more frequently it considers that the present, situation is causing it

difficulty. The reason may be that small businesses do not have the necessary expertise

inside the firm, and for reasons of cost can have recourse to outside consultants only in

special cases. The patent departments of large companies clearly have less difficulty in

applying for utility models wherever the system exists and the market position makes it

necessary.

It is also true that small businesses are more likely to express no opinion, while large

companies have already formed a view of the question.This suggests that small firms

and independent inventors in the European single market have not yet developed any

great need for protection, because they continue to sell primarily to established local

markets.

This view of the matter is borne out when the answers to the question are broken down

by the export ratio of the firm questioned. As the export ratio rises, the firm will more

and more frequently report difficulties with the protection of innovations. There is a very

strong correlation between export ratio and size of firm, so that it is mainly large

companies which are affected. Nevertheless, even in the category with a low export ratio

(proportion of exports to total sales below 10%), 41% of respondents reported

difficulties.

**41**

_In the view of_ _the_ _respondents, therefore, the variations between utility model schemes_

_make it more difficult to protect innovation in the single market. These difficulties also_

_go a long way towards explaining why the use of the systems which already exist remains_

_confined to domestic markets._

**E.** **European Union policy and economic need**

It has become clear, then, that the Member States have different systems of utility model

protection, and that utility model protection is of considerable economic significance

now and will continue to be so in future. The differences between the national systems

are an obstacle to the free movement of goods and undistorted competition. The present

situation is undesirable, and to maintain it would run counter to the concept of a Europe

which is drawing closer together.

The European Community has a duty to take steps to remedy a situation which is

detrimental to the single market, and thus to improve the operation of the market.

In the Commission's view, however, any harmonization undertaken in order to establish

a single market and ensure that it functions properly must respond to present and future

economic need. The development of innovative activity in the European Union, which

has been marked by a trend towards smaller inventive steps, greater cost-sensitivity,

shorter product and marketing cycles and a shorter lifetime for inventions, is generating

increased demand for a form of protection that offers fast, simple and inexpensive

protection for technical inventions in the common market.

The national schemes of utility model protection do not achieve this. The Member States

are in no way to blame: first, they are free to design their systems as they will; and

second, the difficulties noted here do not emerge clearly inside the confines of the

individual Member State, but rather in cross-border dealings in the single market.

In order to ensure that the single market becomes a reality and operates smoothly,

therefore, steps should be taken to remedy these shortcomings at Community level, with

the following main objectives:

**42**

protection to be provided for technical inventions which involve only a small

inventive step,

protection to be provided for short-lived technical inventions,

protection to be obtainable rapidly,

protection to be obtainable simply,

protection to be inexpensive, and

publication to be rapid, so that the public is informed quickly.

**- 4 3 -**

**III.** **WHAT MEASURES SHOULD BE TAKEN?**

**This investigation has found, therefore, that the variety of the forms taken by utility**

**model protection has an adverse effect on the establishment and the functioning of the**

**single market. The conclusion was that only a harmonization of the different systems of**

**protection would adequately meet the needs of** **the** **economy and satisfy the requirements**

**of** **a** **common market. If it is accepted that Community action is needed, it has then to be**

**considered what options are open; there are two aspects to be looked at here:**

**•** **what form any legislation should take, and**

**•** **the substance of the arrangements to be introduced.**

**44**

**A.** **The appropriate form of legislation**

Harmonization must aim not only at removing the disadvantages caused by the

differences between the rights of protection available which we have noted: it must also

seek to improve the general level of protection of industrial property. Various kinds of

harmonization are possible here.

The Commission is required to bring forward the "measures" needed for the realization

of a single market. The "approximation of laws" is not confined to removing

discrepancies between existing laws: it is concerned with the removal of conflicts
between regulatory systems in general. [83] This may mean introducing a right of protection

in a Member State where no such right existed before, if that will help to achieve a single

market. A harmonization "measure" may take the form of any of the acts listed in the EC

Treaty, especially the regulation and the directive.

In the case of utility models the first option to be considered is a directive aligning the

national schemes of protection, and thereby introducing utility model protection in those

countries where it does not as yet exist. If companies and independent inventors were

interested in being able to secure protection in several Member States at once by means

of a single application, measures would have to be taken which went beyond a

straightforward harmonization of national systems of protection. One possibility would

be to broaden the scope of the alignment by providing for mutual recognition of the

protection granted by other Member States. Another possibility would be to create a

uniform European protection right, which as a Community right would rank above the

national systems of protection but would not replace them. Lastly, a combination of

different options might be envisaged if that would produce an arrangement better tailored

to the needs of the single market.

**1.** **Aligning the national schemes**

In the European single market most industries now operate on markets which stretch

beyond national borders. There is no need to consider the factors at work in detail here.

Since the single market was established and customs borders disappeared in 1993 the

geographic markets for many products have grown larger than ever. This tendency will

**83**

Pipkorn in Groeben, Art. 100a, Rdnr. 25,41.

**45-**

intensify in future. The borders which still exist at present will no longer be an obstacle

in the way of the market. For the time being, however, unnatural borders still exist

between compartments demarcated by intellectual property law. Before one can say that

a single market has genuinely been achieved, it is not enough that physical border

controls should have been abolished; it must be possible to recognize the single market

as such. That is difficult to do when there are differences in respect of particular

intellectual property rights which are so wide that an applicant in one country will see no
point in applying for corresponding rights in other Member States. [84] Differences between

entitlements create administrative problems which all applicants, but especially SMEs

and independent inventors, have difficulty in overcoming. This acts as a curb not only on

the innovative capacity of industry but also on the achievement of a single market.

Harmonization of the existing schemes of protection by means of a directive, so as to

arrive at fifteen similar but separate systems of protection, requires two things: the

introduction of utility model protection in countries where nothing of the sort yet exists,

and the alignment of the substance of the rules which do already exist.

(a) Introduction of new rights

At present there is no utility model protection in the United Kingdom, in Sweden or in

Luxembourg. Harmonization in the European Union would require the introduction of

utility model rights in these countries. In Luxembourg there is no experience with this so

far, but in the United Kingdom a proposal for a "second-tier patent" was abandoned in
1986. [85 ]

In a recent survey, however, UK companies and independent inventors expressed a clear

view that the introduction of such a right would be a valuable addition to patent
protection granted after prior examination. [86 ]

**84**

**85**

**86**

From the Commission's White Paper on Completing the Internal Market, June 1985, paragraph 145:
"Differences in intellectual property laws have a direct and negative impact on intra-Community trade and
on the ability of enterprises to treat the common market as a single environment for their economic
activities."

White paper _on Intellectual Property_ _and_ _Innovation,_ April 1986, 3.6.

Weitzel, G., Ifo Institute, _The Economic_ _Impact of the Legal_ _Protection_ _of_ _Utility Models_ _on Enterprises in_
_the_ _European_ _Union,_ English version May 1994, 2.9.3, Innovation protection in the United Kingdom

-46

_Interest in a utility model in the United Kingdom_

Interest, by size of firm (%

**All sizes**

**Over** **1** **000**

**601-1000**

**101-600**

**0-100**

**10%** **20%** **40%** **50%** **60%** **70%** **80%** **90%** **100%**

Future use of utility models, by size of firm (%)

**B all** **or almost all** **Q most** **I a** **small proportion** **G must** **wait** **and** **see**

**All sizes**

**Over** **1** **000**

**501-1000**

**101-600**

**1-100**

**0%** **10%** **20%** **30%** **40%** **50%** **60%** **70%** **80%** **90%** **100%**

**(Source: Ifo Institute** survey in selected EU countries, 1993; European Commission calculations, **1994)**

An average 53% of the United Kingdom industrial companies and independent

inventors questioned said they would be "very interested"; the distribution between large

and small companies is typical. Small firms (up to 100 employees), at 76%, are a great

deal more interested than very big companies (over 1000 employees), of whom 31%

nevertheless say they are very interested. Only a few of the small businesses questioned 

3% - were "not very interested", while this figure rose to 34% in the case of big

companies.

**47**

Respondents in the United Kingdom also made it clear that utility model protection, if it

existed, would have an appreciable role to play even now . The group which could see it

taking on importance only in the future, at 21%, is relatively small.

Not only did the respondents see a relatively strong economic interest in utility model

protection, they would also make frequent use of the system for their inventions. Here

too there are considerable differences in the proportion of applications depending on the

size of the firm. Small firms were much more disposed to apply than big companies. Of

small firms 24% would actually apply in respect of "all or almost all" their inventions,

while in other categories the number of firms who would seek such intensive protection

amounted to only 3% to 9%.

It is worth noting that in the United Kingdom big companies were more inclined to take

a wait-and-see attitude than small firms were. Of big companies 30% said they would

have to wait and see; the figure for small firms was 18%. This positive reaction among

United Kingdom industrial companies and independent inventors needs to be

complemented by information on Luxembourg and Sweden before a final decision is

taken on the economic interest in the introduction of a system of this kind.

_(b)_ Aligning the substance of national utility model law

If utility model protection is introduced in those countries which do not at present

possess it, and the existing systems in other Member States are aligned, there will then be

fifteen similar national protection rights in existence alongside one another.

A right-holder can be sure that he will find an equivalent right in all Member States, and

will no longer have to concern himself with a multiplicity of different rights. Whether he

applies for protection in one country only or throughout Europe, he will know the main

requirements and the scope of the protection granted. This will reduce costs and simplify

applications in other Member States. Once systems of protection have been harmonized

by directive, so that a portfolio of similar national rights can be obtained, the advantage

to be secured from cross-border applications will be much greater. This should produce a

further increase in innovation.

Such an alignment will doubtless include substantive provisions concerning what is

protected, the requirements to be met, the scope and duration of protection, grounds of

refusal or nullity, and the exhaustion of rights. This should reduce the number of

conflicts in the way of a single market; but it will not remove the cause.

48

2. A broader alignment

Such a directive would align the substantive national law to establish a set of parallel

national rights; it would not remove those restrictions on free trade and competition

which derive from the independent nature of the national rights, and from the way the

territorial principle is consequently understood in the Member States. Even after a

harmonization of this sort borders would continue to exist, as would the possibility of

conflicting rights granted under separate systems.

A more far-reaching directive might go beyond the alignment of substantive law to

provide that the Member States were to amend their own legislation to allow the

applicant to request that the effects of his domestic utility model should be valid in other

Member States - with special reference to creation, application, registration, transfer and

protection - and to give similar effect to utility models granted in other Member States.

Legal steps taken by an authority in any one country would then be given effect in other

Member States on the basis of the harmonized legislation in force there. They would be

mutually recognized. Procedures for application and registration would have to be

aligned completely.

_De jure,_ then, utility models and rights arising out of them would continue to be a matter

of national law. But they would have effect across borders.

Of course the individual Member States have no power to make law with extra-territorial

force in other Member States. But they have got power to provide in the law applicable

on their own territory that as far as that law is concerned utility models granted and legal

acts done under that law are to have extra-territorial effect in the other Member States;

this would amount to a claim that the rights arising out of utility models granted and

legal acts done by their own authority should be recognized in other Member States too.

For these extra-territorial effects to be valid in the law of those other Member States, the

separate Member States would have to recognize them as far as their own territories were

concerned. In practice a directive would be needed to ensure that all Member States

introduced the same system. It would have to provide for far-reaching alignment of

substantive and procedural law.

49

For the practical implementation of mutual recognition of this kind there would have to

be coordination of the work of the relevant authorities in each country, perhaps through
the medium of an advisory committee [ 87] . There might then be a simplified administrative

procedure under which an application could be made to the domestic office responsible

to have a utility model registered in other Member States too.

**3.** **The introduction of** **a** **Community right**

There are a number of difficult problems which would arise as a result of the very

comprehensive alignment of the substantive and procedural law of utility models, and

consequently also of the work of the responsible offices in each Member State, which

would be required in order to ensure that the offices' utility models and legal acts could

have Community-wide effect.

The responsible offices would not readily be able to administer their Europeanized utility

model laws uniformly, effectively and without additional staff and administrative

resources. Both for individual inventors and for industrial companies such a

Europeanized but still nationally administered system might well be a great deal less

attractive than a full-blown Community right. The vital considerations for users are

simplicity, clarity and legal certainty.

Consideration could also be given, therefore, to the possibility of adopting a regulation

introducing a Community utility model right. A right obtained under Community law

would be valid directly in all Member States. Protection throughout a territory

comprising all the Member States could then be secured

- by means of one application to one Community office

- in one set of proceedings

- under one body of law.

This course could secure a steady reduction in the obstruction and distortion which afflict

Community cross-border trade and competition in articles which are the fruit of human

invention, as compared with domestic trade and competition in the same goods.

For a similar view see the legal opinion by Ivo Schwartz, Special Adviser on the Approximation of Laws,
_Can the Draft Council Regulation on the Community Design Be Based on Article 100a of the EEC_
_Treaty?,_ m/5327/91-EN, August 1991.

**-50**

**4.** **A combination of** **alignment** **of laws and the introduction of a**
**Community right**

The integration of the single market is not yet complete. There will continue **to** be

companies which need utility model protection but whose business is confined **to**

regional market. Harmonization is especially important to smaller businesses, **but in** the

first place the advantage they can gain from covering the entire common **market will be**

small.

**But** it must be borne in mind that the unification of the common market is a process

which is still going on. A combination of different possibilities might be the best way **of**

ensuring that a future system was even better tailored to the needs of **the single market:**

As with **trade** marks and designs, a directive harmonizing national systems **of protection**

**might be** combined with a regulation introducing a new single utility model **right.**

There would then be fifteen harmonized national systems of utility models, **capped by a**

Community system. Applicants could choose between one or more purely **national rights**

**and** a Community right covering the whole of the territory of the European **Union.**

**5.** **The views of industrial companies and independent inventors**

That there is commercial interest among companies and inventors in obtaining protection

simultaneously in several Member States of the European Union can be clearly seen

from the study covering France, Spain, Germany, the United Kingdom **and** Italy, **in the**

answers given to a question asking in how many EU countries they would file **utility**
model applications at the same time if that were possible. [88 ]

Weitzel, G., Ifo Institute, _The Economic Impact of the Legal Protection of Utility Models on Enterprises in_
_the European Union,_ 2.10.

51 

_Number of countries designated if there were a Community utility model in the EU_

By selected EU country (%)

**EM to** **2** **13 to S** **Q** **6 or more** **CB** **must wait and see**

**United Kingdom**

**France**

**Spain**

**Italy**

**Germany**

**0%** **10%** **20%** **30%** **40%** **50%** **60%** **70%** **80%** **90%** **100%**

By size of firm (%)

**0 1** **to** **2** **I3to5** **• 6** **or** **more** **I must wait** **and**

**All sizes**

**Up to 100 employees]**

**0%** **10%** **20%** **30%** **40%** **50%** **60%** **70%** **80%** **90%** **100%**

**(Source: Ifo Institute survey in selected** EU countries, 1993; European Commission **calculations,** 1994)

Only a very small proportion (5%) would not apply in respect of any EU country.

Answers most often fall in the three-to-five range (42% of respondents); a further 25%

would apply in respect of six or more countries, while 22% are undecided and say they

must wait and see.

52

6. The views of patent attorneys

The following picture emerges from the survey of patent attorneys in Germany, France,

the United Kingdom and Spain, in which they were asked about the shape to be taken by
utility model protection in the European Union in future. [89 ]

_Assessment_ _of_ _legislative options_ (selected EU countries*)

Germany j Spain France j United Kingdom
_**&**_ **W** **I** **«)** _***L**_ a) b) 1 a) b)

Single European important 77 69 100 67 50 75 50 50
utility model not so important 23 31 33 50 25 50 50
systems 

50
50

75
25

50
50

important
not so important

Germany j Spain
_**&**_ **W** **I** **«)** _***L**_

77 69 100 67
23 31 33

50
50

No. of
respondents

17 16 3 3

Harmonization
of national rules

Harmonization
and single
$ystems

No sueh

measures

important

not so important

No. of
respondents

Important
not so important

No, of
respondents

important
not so important

100 - **100**

78 71 100 100 50 50
22 29 50 50

**100** **100**

79
21

98

68 31

74
26

71
29

34

40
60

69
31

**16**

25
75

83
17

29

14
86

87

13

85
15

20

17

83

88
12

24

25
75

33
67

**No,** **of** 16
**respondents**
***}** **More than oneanswer was** **allowed** **here**
**a)** **Small and** **medium-sized,** **enterprises** **(SMEs}**
_b)_ targe companies

Source: Ifo Institute survey of patent attorneys in selected EC countries, 1992.

There was obviously considerable interest in hearing the views of patent attorneys in the

four Member States surveyed on the question which of the legislative options was most

urgent in terms of the needs of the firms they advised. The answers "important" and "not

so important" were offered rather than "yes" and "no" in order to establish priorities. But

in the event a large majority of the respondents favoured a single European utility model

law and the harmonization of national rules at the same time.

**89**
Weitzel, G., Ifo Institute, _Pilotstudie_ _- Die_ _wirtschqftliche Bedeutung_ _des_ _Gebrauchsmusterschutzes_ _in der_
_Europdischen_ _Union,_ D, 2.7, p.30.

**53**

According to these results only very few patent attorneys in the four EU countries

surveyed are of the opinion that either a single European system of utility model law or a

harmonization of national rules would be sufficient. Clearly a large number of them

could not or would not commit themselves to a single strategy because that might be to

the advantage of only certain categories of applicant. The results do not show any

difference in choice depending on size of firm, so that one cannot say for example that a

Community utility model system is more desirable for large companies and a

harmonization is more desirable for smaller businesses. According to the patent attorneys

questioned both options should clearly be available; there was a very broad consensus on

this point in the four countries surveyed.

_Among patent attorneys and among industrial companies and independent inventors',_

_then,_ _there is agreement on the_ _need_ _for utility model protection in the European Union._

_There is a clear interest in the possibility of a single application which would secure_

_protection in at least three to five countries, alongside the protection available_

_domestically under harmonized national rules._

_In the Commission's view, therefore, an alignment of the national systems would be a_

_sensible first step towards improving_ _the_ _present situation, but_ _it_ _would not overcome all_

_the problems which currently exist. As the Commission understands the matter at_

_present, consideration should also be given to the question whether_

 - _mutual recognition of harmonized national rights,_

_•_ _the introduction of a Community_ _right,_ _or_

_•_ _a combination of the alignment of laws and the introduction of a Community_

_utility model_

_are measures which could help to ensure a steady reduction in the obstruction and_

_distortion of cross-border Community trade and competition in goods incorporating_

_inventions._

**-54**

**B.** **The** substance of Community-level **protection of** utility **models: principles**

On the basis that there is a need for harmonization of utility model protection if the

single market is to work properly, then, a two-tier system could be created consisting of

an array of national utility model rights and a Community utility model right, forming an

effective combination of the instruments available.

Given the economic importance of the existing systems, the changing character of

innovative activity in the single market, and the economic need for such systems, a

system of protection which aimed at ensuring that the single market became a reality and

operated smoothly should have the following features:

 - protection to be provided for technical inventions which involve only a small

inventive step,

protection to be provided for short-lived technical inventions,

protection to be obtainable rapidly,

protection to be obtainable simply,

protection to be inexpensive, and

publication to be rapid, so that the public is informed quickly.

The substance of a utility model system introduced in order to make a reality of the

single market must meet genuine needs, without going beyond them. The Commission

has therefore begun by examining the existing arrangements to establish how suitable

they might be for a future Community-level system.

1. Basic design

Utility model protection exists in twelve out of fifteen Member States; alongside very

wide discrepancies these systems also display similarities which might serve as a basis

for a Community-level utility model.

The core of the various systems is a right of protection for technical inventions,

additional to patent protection, which is registered without an examination to establish

novelty and inventive step. Before studying the differences between the individual

national schemes, therefore, the Commission has considered whether these common

features can provide the basis for a Community-level system or whether new

arrangements are needed which would differ from the existing ones.

**- 5 5 -**

**The points looked at** **here** **are whether the right should protect the technical form rather**

**than the invention;** **whether** **registration can be dispensed with; and whether before the**

**right is granted there should be a prior examination in order to establish that the**

**requirements are met.**

**(a)** **Protection of form or of invention?**

**Bearing the objective in mind, the Commission has considered whether a**

**Community-level system of utility model law should protect the technical form or the**

**technical invention. This is more than just a matter of determining exactly what is**

**protected: the answer will be a fundamental option for the entire system.**

**A comparison of the national arrangements shows that in some countries it can be**
**difficult to determine precisely what is protected.** **[90]** **In Italy and Portugal, for example,**

**the three-dimensional form requirement is so strong that careful interpretation is needed**

**before it can be decided that it is the invention which is protected. It is fair to** **ask,**

**therefore, whether the functional product itself should be protected under a future**

**system. In the course of the development of utility model protection there have in fact**

**been periods in some countries when it was not the invention but the resulting object**
**which was protected.** **[91 ]**

**Whatever view is taken of the** **need** **for embodiment in a three-dimensional form, it is**

**always** **the** **functional character of an object which is protected under the schemes**

**discussed here, rather than its appearance, which may of course be protected by**

**legislation on designs or copyright. This functional character is something intangible,**

**like directions for a technical process, or the solution to a technical problem. Copyright**

**protection is not usually available for functional objects because of the level of**

**originality or creativity it requires.**

**Utility model protection may subsequently be restricted by a three-dimensional form**

**requirement, but this is a further requirement that must be satisfied in order to qualify for**

**protection rather** **than** **the actual** **subject-matter** **of protection. It is difficult to see how**

**90**

See Annex 1, comparative study, A.2.

91 In Germany, for example, the legislature at one stage took a step backwards by declaring that protection
was available for the three-dimensional concept incorporated into tools and utensils (Bl. 36, 116); but in
Germany too it is now the technical invention itself which is protected.

-56

that subject-matter could be protected by copyright, or integrated into legislation on

industrial design. The concept of invention is the only way of doing justice to this

functional character.

_It would_ _appear,_ _therefore, that it is the technical invention which should_ _be_ _protected by_

_a Community-level utility model system._

_(b)_ Dispensing with registration

All the Member States which have a utility model system have made provision for

registration. The introduction of a similar system was suggested but rejected in the

United Kingdom: industry in particular feared that it would leave firms unsure of their

legal position, since it would produce large numbers of registered but untested rights
which conferred no definitive entitlement on the holder or anyone else. [92] The

Government took the view that merely limiting the maximum duration to ten years

would not be enough to mitigate this legal uncertainty.

One might ask whether these difficulties might be overcome by dispensing with

registration. But this would leave inventors even less certain of their legal position than

does the registration of untested rights. It would be very difficult to establish who had

secured protection, when, and for what. Enforceability would suffer enormously.

However, there is no reason to expect a flood of untested rights in a system of

registration. In Member States which already possess such a system there is an

equilibrium between utility models and patents: the absence of prior examination means

that the legal certainty conferred by a utility model is limited, so that a patent will often

provide more effective protection. In most Member States, too, a cursory examination is

made at the time of registration to ensure that the invention is _prima facie_ protectable;

this acts as some sort of filter and avoids the necessity of registering all inventions.

Registration also enables the holder to invoke his rights more effectively. Very often a

protected invention will not be directly recognizable by outsiders, unlike an object which

is protected on the basis of its external form, and the fact that there is a registration to

point to increases the attractiveness of utility model protection. The publication

**97**

White paper on _Intellectual_ _Property and_ _Innovation,_ Presented to Parliament by the Secretary for Trade
and Industry by Command of Her Majesty, April 1986, 3.6.

-57

associated with registration helps to ensure that the public is informed quickly, and

facilitates further innovation.

// _would appear that a Community-level utility model system ought to provide for_

_registration._

(c) Examination to ensure that requirements are met

The absence of any examination for novelty and inventive step was one of the main
objections which led to the rejection of this form of protection in the United Kingdom. [93 ]

It cannot be denied that a prior examination clarifies the legal position considerably.

Indeed Japan, which has a very intensively used utility model system, departed from the

German model when it introduced that system by providing for examination before
registration in order to establish that the requirements were met. [94 ]

But the fees charged for such an examination substantially increase the cost, and prolong

the time taken to register the right. As became clear in the study of the economic

importance of the utility model, there is strong demand in the European Union for a right
which can be obtained quickly and inexpensively. [95] Speed and cost were the reasons

most often cited for applying for a utility model.

A survey of innovative activity on the part of firms in Germany has found that
applications for patents are falling. [96] About 55% of the firms surveyed say that a major

cause of the fall is the time taken for processing applications, which they feel is

excessively long. Small businesses are generally more inclined to criticize the time taken

before the final grant, and consequently do not apply even in respect of inventions which

have a strong chance of obtaining a patent.

**93**

**94**

**95**

**96**

White paper on _Intellectual_ _Property and_ _Innovation,_ Presented to Parliament by the Secretary for Trade
and Industry by Command of Her Majesty, April 1986, 3.6.

_Guide to_ _Patents_ _and Utility Models_ _in_ _Japan,_ Chapter I, p. 12, at (4)(ii).

See above, Chapter II, "The need for action at Community level".

Tàger and Seyler, Ifo Institute, _Problème_ _des deutschen_ _Patentwesens im_ _Hinblick auf die_
_Innovations tâtigkei_ _ten der Wirtschaft_ _(insbesondere_ _kleiner und mittlerer_ _Unternehmen)_ _und_ _Vorschlâge_
_zu deren_ _Lôsung,_ _Schlufibericht,_ May 1989.

                             - 5 8 

The low cost of registering a utility model can be particularly attractive where the

commercial value of the invention cannot be determined with precision. Putting an

invention to use can involve a considerable commercial risk, because the new product or

process will often fail to establish itself on the market. Where the success of an

invention is very uncertain, therefore, the low cost of applying for a utility model will be

a decisive factor in the choice of this form of protection.

SMEs have particular difficulty in determining the sales prospects of new products, and

thus the value of inventions, because they have inadequate information from market

observation and market research. Big companies can make use of tried and tested

planning and forecasting machinery; this does not mean that they never have product

failures, but they can limit their risk to some extent at least. If a patent attorney

represents an applicant for a utility model his fees may be much the same as they would

be for a patent, but the services of patent attorneys are less often engaged here than they

are in the case of complicated patent applications. And because there is no prior

examination the fees payable to the office registering the utility model are substantially

lower.

Introducing a prior examination would bring a gain in terms of legal certainty, but it

would mean giving up the objective of speed and low cost. The many years of positive

experience built up in the countries which possess this form of protection show that the
lower degree of legal certainty has no great practical repercussions. [97 ]

Furthermore, the utility model would now be distinguished from the patent only

provided the inventive step required was lower.Utility model protection would be less

important by comparison with patent protection: it would simply be an extension of the
patent, covering largely the same ground, and could be integrated fully into patent law. [98 ]

The cost and slowness associated with the patent system would be unavoidable.

Lastly, the need for legal certainty can also be provided for by limiting the lifetime of the
utility model in comparison with that of the patent [99] and by providing that in the event of

infringement there would be an examination in order to establish whether or not the

**97**

Union of European Practitioners in Industrial Property, _Bulletin_ No 21, March 1992, p. 9.

**98**

This argument led the Japanese Government to put an end to prior examination.

**99**

This is done in all Member States which operate a utility model system.

-59

requirements were met. Prior examination would run counter to the objective of quick

and inexpensive utility model protection, and would tend to reduce innovative activity

particularly among small businesses.

**//** _**would not appear**_ _**desirable,**_ _**therefore,**_ _**to**_ _**provide for**_ _**an examination**_ _**to**_ _**ensure**_ _**that the**_

_**requirements**_ _**are met**_ _**before**_ _**registration.**_

_(d)_ Principles

The system which has been outlined here provides a form of protection for technical

inventions which is additional to patent protection, and which is registered without prior

examination for inventive step and novelty; these principles should form the basis for

action at Community level.

All of the systems introduced in recent years follow this scheme, which confirms its
effectiveness. [100] The United Kingdom has no such system at present; patent attorneys

there have been asked what would be the attitude of the firms they advise to the

introduction (at domestic level) of a form of utility model protection for technical

inventions which would involve registration without prior examination for novelty and
inventive step. [101 ]

100

In Ireland, Denmark, Greece, Austria and the Netherlands.

Weitzel, G., Ifo Institute, _Pilotstudie_ _- Die_ _wirtschafiliche_ _Bedeutung des_ _Gebrauchsmusterschutzes_ _in der_
_Europdischen_ _Union,_ D,2.7.1,p.32.

**-60**

_United Kingdom: economic need for the introduction of a_ _registered_ _utility model system_

_for technical inventions_ _without_ _prior examination for novelty and inventive step_

by size of firm (%)

**• very important** **s** **not so important** **•** **unimportant**

**Large companies**

**Small and medium sized**
**enterprises (SMEs)**

Source: Ifo Institute survey of patent attorneys in selected EC countries, 1992.

Just under 60% of the UK patent attorneys questioned felt the introduction of such a

right would be "very important" for SMEs (the figure for large companies was 32%), and

only 16% felt that as far as SMEs were concerned a "new" right of this kind would be

"unimportant", that is to say unnecessary. Thus there was a majority in favour of

introducing a utility model, primarily in the interests of small businesses.

**2.** **More detailed rules**

There are substantial differences between the existing utility model systems with regard

to inventive step, three-dimensional form, excluded inventions, novelty, industrial

application, procedure, effects, transfer, duration, infringement, and dual protection. The

Commission has accordingly considered the various arrangements adopted in order to see

which would be most suitable for a Community-level system.

(a) Inventive step

One of the main differences between the existing utility model schemes is the size of the

inventive step they require.

-61

Sometimes the same inventive step is required as for a patent, but in the majority of

cases a smaller inventive step is sufficient. Protection is thus available for inventions
incorporating an inventive step which would not qualify them for a patent. [102] This means

that the vertical spread of inventions for which protection is available is greater than in
the case of patents. [103] Experience in countries with systems of this kind shows that a

sizeable proportion of technical progress is attributable to small inventions.

In Germany and Japan, countries with high volumes of patent and utility model

registrations, the fall in patent applications is partly due to a fall in the number of
patentable inventions. [104] As competition in innovation grows more intense, there is
greater development in the field of continuous improvement. [105 ]

Inventions involving only a small inventive step are frequently very useful and of

considerable commercial importance too: "small" inventions are not necessarily less

important commercially than those involving an inventive step which would qualify
them for patent protection. [106] The innovation these inventions represent can sometimes

be just as great as that of a patentable invention even if they do not qualify for

protection. As we saw when we considered the economic significance of utility model

protection, the importance of "ordinary" technological development can be expected to
grow in future by comparison with "extraordinary" development. [107 ]

In the systems which protect inventions with only a small inventive step, inventions are

publicized which would otherwise have been kept from the public for re'asons of

`102` See Annex 1, comparative study, A(3)(b), "Inventive step".

`103` As opposed to the _horizontal_ spread, which may be more restricted, as a result of a three-dimensional form

requirement for example.

```
104

105

106

```

107

Germany: Tâger and Seyler, Ifo Institute, _Problème_ _des deutschen_ _Patentwesens im_ _Hinblick auf die_
_Innovationstàtigkeiten_ _der_ _Wirtschqft (insbesondere_ _kleiner und mittlerer_ _Unternehmen)_ _und_ _Vorschlàge_
_zu deren_ _Losung,_ _Schlufibericht,_ May 1989, p. 127;

Japan: discussion with specialists in Japanese utility model law, Tokyo, March 1992.

Weitzel, G., Ifo Institute, _Pilotstudie_ _- Die_ _wirtschaftliche Bedeutung_ _des_ _Gebrauchsmusterschutzes_ _in der_
_Europdischen_ _Union,_ 2.3.

Tàger and Seyler, _op._ _cit.,_ p. 55,1.

'Importance juridique et é

'Importance juridique et économique de la protection des modèles d'utilité', in _AIPPI_ _Yearbook_ 1986,

Q 83, Allemagne, p. 6,1.1.

**62**

confidentiality. This enables other inventors to build on the initial invention. They in
their turn have an effective way of protecting their own developments.

Thus a lower inventive step requirement promotes "ordinary" technical development. [108 ]

This is in line with the needs of the changing pattern of inventive activity. It is not
surprising, then, that as long ago as 1986 interest groups [109] in France and Belgium, the

very countries where a smaller inventive step is not acceptable, called for the

introduction of a utility model with an inventive step requirement lower than that of a
patent. [110] And to judge by numbers of applications, the systems which have a lower

inventive step requirement are a great deal more popular than those which demand the
same inventive step as for patents. [111] Surveys of industrial companies, independent
inventors and patent attorneys confirm this picture. [112 ]

// _would_ _appear,_ _therefore,_ _that_ _Community-level_ _measures regarding utility models_

_ought to allow_ _a_ _smaller inventive step than_ _is required for patents._ _The demarcation_ _line_

_between patent_ _and_ _utility model would have_ _to be_ _formulated in_ _a_ _way which_ _meets the_

_needs_ _of_ _users,_ _competitors_ _and_ _the lawcourts in equal_ _measure._

_(b)_ Three-dimensional form requirement

From the comparison of the different utility model schemes in the Member States it

emerges that in a number of systems the invention must be embodied in

three-dimensional form. Systems in this group are the Greek utility model certificate, the

Spanish _modelo_ _de_ _utilidad,_ the Portuguese _modelo_ _de_ _utilidade,_ and the Italian _brevetto_

_per_ _modelli_ _di_ _utilità._

**108** **r** **.,**
_Loc._ _ctt._

**109**

Representatives of the French and Belgian branches of the AJPPI.

1 'Importance juridique et économique de la protection des modèles d'utilité', in _AIPPI_ _Yearbook_ 1986,
Q 83, France, p. 81: "Le modèle d'utilité n'a pas à être soumis au même degré d'activité inventive que le
brevet, mais il doit remplir d'autres conditions que celle d'activité inventive".

See above, Chapter fl\C.l(a) and (b), national and cross-border applications.

**112**

Weitzel, G., Ifo Institute, _The Economie_ _Impact of the_ _Legal Protection_ _of Utility Models on Enterprises in_
_the European Union,_ 2.6; Weitzel, G., Ifo Institute, _Pilotstudie_ _- Die_ _wirtschaftliche_ _Bedeutung des_
_Gebrauchsmusterschutzes_ _in der_ _Europûischen_ _Union,_ D, 2.7.2.

63

The three-dimensional form requirement derives from the history of utility model
protection, which was originally confined to tools and utensils. [113] The intention was to

provide an easily obtainable form of protection appropriate to the technical and

commercial importance of the many innovations developed by independent inventors,

craft firms and small businesses.This was an area which was not covered by industrial

design law or by patent law, so that as well as easing the load on the patent office the
new right was intended to close a gap. [114] Even at that time the possibility of extending

utility model protection to all inventions was discussed, as a more drastic way of
relieving the burden on the patent office. [115] But it was decided to require a

three-dimensional form nevertheless, on the ground that the overwhelming majority of

the small inventions of that time were artefacts: the invention was embodied in an object.
Furthermore, only simple inventions were to qualify for utility model protection. [11] . [6 ]

Complicated inventions which could not readily be understood by the layman or by the

lawcourts had to be subject to prior examination, and would consequently be protectable
by patent alone. [117 ]

This situation no longer obtains today. An invention which is embodied in an object need

not nowadays be a simple one. In Germany the courts have accepted since the end of the
1930s that complex devices may be protected by utility models. [118] On the other hand,

although the utility model was intended for small and short-lived inventions, to serve as

a back-up to patent protection, for a long time now many such inventions have in fact
been excluded as a rule by the three-dimensional form requirement; [119] these include:

`113` Beier, 'Gebrauchsmusterreform auf halbem Wege: die uberholte Raumform', in _GRUR_ 1986, Heft 1, p. 1,

p. 3, left-hand column.

`114` Beier, _loc._ _cit.;_ Asendorf, 'Herkunft und Entwicklung des Raumformerfordernisses im

Gebrauchsmusterrecht', in _GRUR_ 1988, Heft 2, p. 83, p. 84 at point 3.

`115` Shorthand reports of the proceedings of the inquiry into the revision of the Patent Act of 25 May 1887,

footnote 15 in Beier, _loc._ _cit.,_ p. 4, left-hand column.

`116` Beier, _loc._ _cit.,_ p. 4, right-hand column.

`117` Asendorf, _loc. cit.,_ p. 88 at VI. Asendorf argues that the three-dimensional form requirement owes its

existence to Kohler's criticism of the division between design and utility model law. Kohler maintained
that patent law had to do with the use of motive power, while design and utility model law were concerned
with physical form.

`118` Beier, _loc._ _cit.,_ p. 5, left-hand column, with further references in footnote 22.

`119` Beier, _loc._ _cit.,_ p. 6, left-hand column.

64

chemicals and other substances without a solid form;

foodstuffs, drink and tobacco, and medicines;

electrical circuits where the invention lies in a purely functional aspect; and

working methods and methods of use, including new uses for articles which are

already known.

Thus the grounds for introducing the three-dimensional form requirement do not
correspond to present needs. [120 ]

// _would not appear desirable, therefore, to include a three-dimensional form_

_requirement in a future utility model scheme._

_(c)_ Excluded inventions

The changed situation may justify doing away with the three-dimensional form
requirement on the grounds that it is anachronistic; [121] but it does not automatically follow

that all inventions should be eligible for utility model protection. The Commission has

accordingly studied present needs for utility model protection, in order to establish

whether some inventions should not ..continue to be excluded from utility model

protection.

(1) Unprotectable inventions

In all the existing utility model systems there are exclusion clauses which are based on

the European Patent Convention and borrowed from patent law.

Under Article 52(2) of the Convention, for example, the following are not considered

protectable inventions:

120

121

Beier's view is shared by Olbricht, 'Raumerfordernis', in _GRUR_ 1986, p. 435 at 3, and Buhling,
'Gebrauchsmusterreform auf halbem Wege: die tiberholte Raumform', in _GRUR_ 1986, p. 434; for a
different view see Fischer and Pietzcker, 'Gebrauchsmusterreform auf halbem Weg - eine Erwiderung',
_GRUR_ 1986, Heft 3, p. 208, p. 210, right-hand column.

Fischer, '25 Jahre Patent- und Gebrauchsmusterreform - ein Ruckblick', in _GRUR_ _Int._ 1989, Heft 9, p. 717,
p. 722, left-hand column.

                              - 6 5 

_discoveries, scientific theories and mathematical methods;_

_aesthetic creations;_

_schemes, rules and methods for performing mental acts, playing games or doing_

_business, and programs for computers;_

_presentations of information._

And under Article 53 the following are not protectable either:

_Inventions the publication or exploitation of which would be contrary to ordre_

_public or morality, provided that the exploitation shall not be deemed to be so_

_contrary merely because it is prohibited by law or regulation in some or all of the_

_Contracting States;_

_plant or animal varieties or essentially biological processes for_ _the_ _production of_

_plants or animals; this provision does not apply to microbiological processes or_

_the products thereof_

_These exclusion clauses should be taken over in a Community-level system of utility_

_model protection._

(2) Substances and compositions of substances

Alongside these international exclusion clauses, the exclusion of substances and process

inventions has often been discussed.

Examples of _compositions of substances_ are the sealing compounds, adhesives,

compounds of polymer binding agents, sizing agents, emulsions and dispersions which
are widely used in the foodstuffs, pharmaceutical and cosmetics industries, [122] and
additives used with textiles, leather and paper. [123] Such products can be manufactured

quickly and marketed quickly. They need a form of protection which can be obtained
quickly. [124 ]

122 Buhling, 'Zum Raumerfordernis bei Gebrauchsmustern', in _GRUR_ 1988, Heft 1, p. 15, p. 16, right-hand
column.

123

Domes, 'Zum Raumerfordernis beim Gebrauchsmuster', in _GRUR_ 1987, Heft 9, p. 584, p. 589, left-hand
column.

Domes, _loc._ _cit.,_ p. 589 at 2.3.

66

The same applies to _substances_ in general, with the exception of substances which need

long preparation before they can be marketed. Examples of these are plant protection
products, medicinal products, and active pharmaceutical ingredients. [125] But to limit

utility model protection in these cases would be to introduce an unnecessary distinction.

A measure which allows the protection of substances may serve no purpose in some

cases; but that does not mean that protection should be refused in other cases where it
would be necessary and reasonable. [126] There is a further argument against the inclusion

of substances and compositions of substances, which is concerned with verifiability in

the lawcourts. Given the complexity of these inventions and the lack of any prior

examination, it is said, it might be asking too much of the courts to expect them properly

to assess whether the requirements were met. But the difficulty is not specific to this type

of invention: with the rapid rate of technical development it is encountered across all

forms of innovative activity. One can hardly pretend nowadays that a judge should be

able himself to evaluate novelty and inventive step in all classes of invention. The

problem cannot be resolved by refusing protection to particular classes of invention; it

has to be tackled by improving the methods of verification available in the event of

litigation, for example by requiring that a search be carried out in such cases or that the

opinions of specialists or of patent offices be taken.

// _would appear_ _necessary,_ _therefore, to include compositions of substances in the scope_

_of utility model protection. It is difficult to say whether all substances should_ _be_ _covered_

_But there should not be a blanket exclusion of substances in general on the sole ground_

_that utility model protection would_ _serve_ _no useful purpose here._

**(3)** **Process inventions**

The question of "process inventions" is more difficult. "Big" process inventions, those

which are patentable, have already demonstrated their value. In countries which have the

full inventive step requirement, so that utility model protection is available only for
patentable inventions, [127] the protection of process inventions is not in dispute.In

Germany and more recently in Denmark, however, there has been extensive discussion

of this point in connection with the amendment or indeed the introduction of the utility

Domes, _loc._ _cit.,_ p. 588 at 2.2.

For a different view see Domes, _loc._ _cit.,_ p. 588, right-hand column.

127 France, the Netherlands and Belgium.

67

_**>**_

model system, because there a lower inventive step requirement means that "small"

process inventions can be protected too. Small process inventions belong to the technical

expertise usually termed "know-how".The improvement of the efficiency of production

cycles until the optimal process is achieved is often the result of a succession of process
inventions. [128] Very often it cannot be seen from the product ultimately marketed whether

a particular process invention was used in its manufacture. Registered rights in such

processes can lose their practical relevance as a result, because the holder will have great

difficulty in proving any infringement; and process inventions are often kept secret as a
result, in order to avoid direct imitation by competitors. [129] But it is conceivable that small

businesses or independent inventors might nevertheless have a substantial interest in

protecting such inventions. And even in big companies the prospect of reward for

employees' inventions can encourage a greater readiness to innovate. The argument that

applications might be made in blind reliance on the utility model right, and that this

would be followed by an increase in imitation, is unconvincing. Ireland is so far the only

country in which process inventions involving only a small inventive step are

protectable. The possibility has existed only since 1992, so that there is no practical

experience available as yet. Anyone considering an application for an invention of this

kind will tend to be sceptical, and if in doubt will adopt the course taken in the past,

namely that of secrecy. This lack of experience also makes it difficult to judge how

important such protection might be in practice. The behaviour of applicants in Ireland

will doubtless help to clarify the question in time.

_Thus no final judgement can be made on the question whether process inventions should_

_be excluded from utility model protection._

_(d)_ Novelty

Novelty is a requirement in all Member States with a utility model system. In most of

them novelty is to be determined by reference to the "state of the art", a concept
borrowed from patent law. [130] There are differences, however, in what is understood by

the state of the art. According to the patent-law definition in Article 54(2) of the

European Patent Convention, the state of the art comprises "everything made available to

Dôrries, _loc._ _cit.,_ p. 586, right-hand column.

129 _AIPPI Yearbook_ 1986, Q 83, France, p. 82.

130

Portugal is an exception: see Annex 1, comparative study, Chapter A.3(a), "Novelty".

-68

the public by means of a written or oral description, by use or in any other way, before

the date of filing of the European patent application". It is this international state of the
art which is referred to in nine Member States. In Spain disclosure [131] will destroy novelty
only if it takes place on Spanish territory. [132] Only the domestic state of the art will be
looked at. In Germany only a written description will destroy novelty. [133] By contrast with

patent law, merely oral publication is no obstacle. Written descriptions from anywhere in

the world will be considered in determining novelty, whereas an instance of use must be

within the area of application of the German Act. In Portugal the state of the art is

international in geographical terms, but its substance is restricted, in that reference will
be made only to knowledge and use among specialists. [134] In Portugal and Germany,

therefore, the state of the art is international but restricted in different ways.

In a European system, based on the establishment and operation of a single market and

consequently on the unification of separate markets, it would not be desirable to restrict

the novelty criterion to the territory of one Member State. But because the utility model

right is registered without prior examination, there might be difficulties with an absolute
novelty requirement, a requirement referring to the state of the art worldwide. [135 ]

Right-holders and others would have great difficulty in determining whether or not the

invention formed part of the state of the art.

Traditionally utility model protection has been confined to domestic markets, arid thus to

the territory of the individual Member States. As the single market develops into a unity,

markets have-expanded over national borders. The concept of novelty might-therefore

refer to the state of the art in the territory of the European Union.

Disclosure of the invention before a utility model is applied for should not destroy

novelty if the invention is disclosed by the inventor or his successor in title, or in

consequence of an abuse in relation to the inventor or his successor in title. This period

**131**

"Disclosure" here means making an invention available to the public, publication.

132 Section 145(1) of the Patents Act.

133 Section 3(1) of the Utility Models Act.

Section 37 in conjunction with Section 51 of the Industrial Property Code.

135

Such a requirement had majority support at the round table conference held by the Union of European
Practitioners in Industrial Property in March 1992: _Bulle_ tinNo 21, March 1992, at 3.

                             - 6 9 

of grace, borrowed from Article 8 of the proposal on Community design, should last for

12 months.

// _would accordingly be reasonable to apply a concept of novelty which refers to the state_

_of the art, and which is not confined to the territory of a single Member State. A grace_

_period of twelve months should_ _be_ _allowed for_ _novelty,_ _along the lines of Article 8 of the_

_proposal on Community design._

(e) Industrial application

Industrial application is currently a requirement everywhere but in Italy, Spain and
Portugal. [136] In its place these countries have a requirement of "usefulness". The main

reason is that the three-dimensional form requirement is a very important one in their

systems. The usefulness requirement then serves to distinguish the protected matter from
the mere form of the object as such. [137] Industrial applicability is no longer a necessary

requirement, because it must in the nature of things be a feature of an invention which is
embodied in a three-dimensional form. [138] The position is different in countries where

utility model protection is available for all inventions, and a three-dimensional form is

not needed. There is then no need to distinguish the utility model from a right which

protects just the form. But such an invention might not have an industrial application:

inventions without a three-dimensional form, such as electrical circuits for example, may

well need to be converted in some way before they can be marketed. In the

Commission's- view, therefore, the industrial application requirement is necessary in

order to establish a link between the abstract protection of inventions and practical

usability.

_Community-level action on utility models should consequently dispense with any_

_usefulness_ _criterion,_ _and instead require industrial applicability_ _inline_ _with Article 57 of_

_the European Patent Convention._

See Annex 1, comparative study, Chapter A.3(d), "Industrial application".

137 Segade in _GRUR_ _Int._ 1988, Heft 2, p. 99, p. 113.

**138**

The German case may be cited in support of this view. When the three-dimensional form requirement was
relaxed there, industrial applicability was made a requirement at the same time.

**-70**

(T) Procedure

Procedure for the granting of utility models can be broken down into filing, examination

and decision stages. In the existing systems it tends to follow the pattern of the domestic

patent rules, and these in their turn correspond to Articles 78 to 85 of the European

Patent Convention. The same procedure should be adopted in a future utility model

scheme.

As far as the examination and decision stages are concerned, it has to be borne in mind

that none of the existing systems provides for any examination to ensure that the

requirements are met. In the scheme outlined here there would be no examination for

novelty and inventive step. But a check should at least be made to ensure that the formal
conditions for protectability are satisfied. [139] This would also eliminate inventions which
are excluded from protectability by the wording of the law. [140] ' [ 141] The absence of prior

examination for novelty and inventive step means that utility models do not confer the

same legal certainty as patents, which are granted after a comprehensive official
examination has established that the invention is patentable. [142 ]

Between a right conferred after examination and a right conferred without examination,

the Commission feels that a compromise in terms of legal certainty can be achieved by

allowing patent offices to carry out searches on request. Applicants - and if the law so

provides others too - would then be able to have a search carried out to establish the state

of the art; they could then form a better opinion of whether the requirements were met,

and the right obtained would be more secure.

The survey of industrial companies and independent inventors in Italy, Spain, Germany,

France and the United Kingdom shows that weighing the advantage of greater security

against the disadvantage of extra cost only a small proportion (an average 12%) feel that

**139**

**140**

**141**

**142**

This would correspond to the examination for patentability.

Where the law specifically excludes the class of invention from patentability, for example, or where the
law itself declares that that class of invention does not satisfy one of the substantive requirements, see
Article 52 § 4 EPC.

Such an examination for protectability is at present carried out in all Member States but Belgium.

Despite this prior examination, after the patent has been granted an objector may file an opposition against
it or apply to have it revoked, so that here too the fact that the right has been granted does not mean that it
can be relied upon absolutely.

-71

optional searches would not be useful. [143] One third feel that such protection would

generally be useful, and just under half feel it would be useful in certain cases. This

largely positive assessment is shared roughly equally by large and small firms.

_Opinion of optional_ _searches,_ _bearing in mind advantages and disadvantages_

By selected EU country (%)

**I** **very useful** **•** **only** **in** **certain cases** **•** **no,** **because** **of** **cost** **G don't know**

**10%** **20%** **30%** **40%** **50%** **60%** **70%** **80%** **90%** **100%**

**(Source: Ifo Institute survey in selected EU countries,** **1993;** **European Commission calculations)**

By size of firm (%)

**I** **very useful** **G** **only** **in** **certain cases** **•** **no,** **because** **of** **cost** **Q** **don't know**

**All sizes**

**Up** **to** **100 employees]**

**10%** **20%** **30%** **40%** **50%** **60%** **70%** **80%** **90%** **100%**

**(Source: Ifo Institute survey in selected EU** countries, 1993; European Commission **calculations)**

**143**
Weitzel, G., Ifo Institute, _The Economic Impact of the Legal Protection of Utility Models on Enterprises in_

_the European Union,_ 2.8.

**- 7 2 -**

The country-by-country analysis agrees very well with the results of the survey of patent

attorneys in Spain (attorneys 63% "very important"/ firms 55% "very useful"), France

(45%/ 39%), and the United Kingdom (43%/ 38%). In these countries official searches
will not at present be carried out on demand, [144] so that there is no experience available on

this point, and yet in the opinion of the respondents there is an appreciable need for an

optional search system. The widest differences are to observed in Germany. There 78%

of patent attorneys think optional searches are "very important": only 34% of firms

regard them as "very useful", though 50% say they are useful in certain cases. The

opinion of the German companies and inventors surveyed corresponds closely to current

practice. The German Patent Office has been carrying out searches since 1987, when the

Utility Models Act was amended to allow this. The number of requests for searches rose

without interruption from 1 002 in the first year (6.4% of applications) to 1 468 in 199Q
and 2 288 in 1992 (13.5% of applications). [145] Thus the facility offered by the legislature,

allowing the legal security of utility models to be protected to some extent at least, has

been well received by applicants for utility models.

On the question of priority, utility model law can follow the provision in the Paris

Convention. Under Article 4. A and Article 4.C of that Convention, any person who has

duly filed an application for the registration of a utility model in one of the countries of

the Union established by the Convention is to enjoy a right of priority for the purpose of
filing in the other countries; this right is to last twelve months. [146] Article 4.E(2) allows a

utility model to be filed in a country by virtue of a right of priority based on the filing of

a patent application, and vice versa. Here too Article 4.C(1) sets the duration of the

priority at twelve months.

_It would appear necessary, therefore, to base the procedure on the patent-law rules in_

_Articles 78 to 85 of_ _the_ _European Patent Convention. At the examination and decision_

_stage there should be no general vetting to ensure that the requirements are met. But_

_there should be at least a formal check for protectability, and provision for optional_

_searches._

With the exception of France, where a search automatically leads to a patent.

See _BlattJUr_ _Patent-,_ _Muster und_ _Zeichenwesen,_ March 1993.

Article 4.C(1) of the Convention.

**- 7 3 -**

(g) Effects and transfer

All the utility model schemes borrowed their provisions on rights of use and prohibition

and on exhaustion from patent law; they correspond to Articles 29, 30, 31 and 32 of the
Community Patent Convention. [147 ]

Under Article 69(1) of that Convention the extent of the protection conferred by a patent

is to be determined by the terms of the claims made in the application. In the case of

utility models it might be advisable to restrict the number of claims in order to limit the
extent of protection. [148] This could be an effective way of offsetting the absence of prior

examination.

All the national schemes allow the unconditional transfer of rights. There is no reason to

depart from this principle in a Community scheme.

_**Thus**_ _**it would appear**_ _**reasonable**_ _**to design**_ _**the**_ _**rights of use and prohibition and**_ _**the**_ _**rules**_

_**governing**_ _**exhaustion**_ _**along**_ _**the**_ _**lines of the existing provisions of patent**_ _**law.**_ _**As regards**_

_**the extent of protection, it**_ _**might**_ _**be appropriate to restrict the**_ _**number**_ _**of claims.**_

(h) Duration

The grounds for extinction and revocation have been taken over from patent law and are
largely uniform in the Member States, [149] so that they can be regulated in the same way

here; alongside them there is the question of duration, which is particularly important in

utility model protection, because it can serve as a corrective to the lighter admissibility

requirements.

A patent confers protection for 20 years; the term should be substantially shorter for a

utility model. If small inventions are also to be protected, as they would be in the

**147**

**148**

**149**

Germany, Section 12a of the Utility Models Act; Belgium, Section 26 of the Patents Act; Greece, no
explicit provision, but accepted; Italy, application of the patent-law rules; France, Section 28(1) of the
Patents Act; Denmark, information supplied by Mrs Joergensen of the Danish Patent Office; Ireland,
Part m, Section 63(6), and Part II of the Patents Act 1992; Spain, Section 60(1) of the Patents Act.

As is done in Australia, for example.

See Annex 1, comparative study, Chapter A.8(b) "Other grounds of extinction" and (c) "Nullity".

**74**

European scheme proposed here, the term of protection must reflect the short lifetime of

the invention and the small inventive step required. A period of eight to ten years would

be reasonable: it would maintain a sufficient distance from the patent system, and would

keep the utility model system within reasonable limits, without robbing it of its proper

role.

Six Member States already have a term of ten years; [150] we can accordingly rule out the

possibility of a shorter period, in order to keep to a minimum the legal uncertainty

caused to applicants by a change in the present domestic arrangement. Shorter terms

should be renewable up to ten years in steps of several years at a time.

// _would appear reasonable, therefore, that the duration of the right conferred by a_

_future utility model system should_ _be_ _renewable up to ten years._

_(ï)_ Infringement

The European utility model system outlined here would protect technical inventions, as

the patent system does. The types of infringement and the conflicts of interest which may

arise can for the most part be handled in the same way.

There is one feature of utility model protection which has to be borne in mind, however.

The scheme here proposed makes no provision for prior examination to ensure that a

utility model meets all the requirements. This may cause difficulty where a complaint of

infringement is made; a search could be carried out in those cases. As a preliminary step

in such proceedings, then, the protectability of the disputed invention would have to be

clarified. In the Commission's view it should be a matter for the court to determine

whether such a search should be carried out; it should not be an obligation automatically

imposed on the plaintiff or the defendant. In the survey of patent attorneys a majority

was in favour of calling for a search report as a condition for a complaint of
infringement. [151 ]

Spain, Germany, Italy, Ireland, Austria and Denmark.

Weitzel, G., Ifo Institute, _Pilotstudie_ _- Die_ _wirtschaftliche Bedeutung_ _des_ _Gebrauchsmusterschutzes_ _in der_
_Europdischen_ _Union,_ D, 2.7.2, p. 41.

**75-**

_In_ _a Community-level utility model_ _scheme,_ _therefore, it is the Commission's view that it_

_should be open to the court to order a search report, in order to establish whether the_

_disputed invention qualified for protection._

_(])_ Dual protection

The system proposed here would stand alongside the patent system, and would not

replace it. With two parallel systems in operation it might be possible to obtain both

forms of protection in respect of the same invention ("dual protection").

This question of dual protection will arise only where an application is made to register a

utility model for an invention which would also be patentable.

There might be an advantage in securing dual protection if the applicant

- wants temporary protection pending the grant of a patent;

- is not sure whether his invention will qualify for a patent; or

- hopes to secure particularly strong protection for his invention by obtaining two

different kinds of right over it.

In all three case it may happen that a combination of patent and utility model protection

for the same invention will place the right-holder in a disproportionately strong position.

One way of avoiding the difficulty this would cause to aggrieved parties, who might find

themselves having to proceed against two separate rights, would be to lay down the rule

that there may not be simultaneous patent and utility model protection for the same

invention. An applicant might perhaps be permitted to convert a pending patent

application into a utility model application, and vice versa.

But if dual protection is allowed, there would have to be a ban on invoking the two rights

successively. Otherwise a right-holder who failed in an action on the basis of one right

would be free to bring fresh proceedings on the basis of the other.

The same ban on invoking two rights successively might also apply as between national

and Community utility models.

76

_In order to avoid placing the right-holder in too strong a position, therefore, a_

_Community-level utility model scheme should either prohibit dual protection by a patent_

_and a utility model or impose a ban on invoking the two successively._

(k) Relationship to patent law

Patent law and utility model law both set out to protect technical inventions, so that

friction between the two systems cannot be ruled out. The Commission has tried to

design the principles of the European utility model scheme which it has proposed here in

such a way as to ensure a proper balance between the two systems.

A comparison between the proposed utility model system and the existing patent system

will show that the scheme proposed is intended for inventions where the innovative

element is fairly modest. The inventive step may be small; or the period of protection

needed may be short; or the possibility of industrial application may be limited.

The system of patent law and its operation in practice mean that there is no equivalent

protection available for such inventions at Community level. Patent protection demands

a greater inventive step, and the prior examination of applications to ensure that all the

requirements are met increases costs and lengthens the time taken before the patent is

granted.

On the other hand a patent provides greater legal certainty than utility model protection

does, and the term of protection is longer. Where the invention is a major one, or where

development will take some time, the patent remains the most important form of

protection.

_The scheme proposed here would complement patent protection and should help further_

_to improve the operation of the common market and to boost innovative activity._

**- 1 -**

_**Bibliography**_

**A. Legislation, handbooks, proposals and explanatory memoranda**

1. Europe

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Utility Models Act: A consolidated version of the Utility Models Act was enacted on 28 August 1986, entering
into force on 4 September 1986 _(BGBl. I_ 1455); this was subsequently amended by an Act of 7 March 1990
_(Bl.f.PMZ_ 1990, 161).

Applications: An Order of 12 November 1986 introduced new regulations governing utility model applications
submitted from 1 January 1987 on _(BGBl._ _1_ 1739); these were amended by an Order of 4 May 1990 _(Bl.f.PMZ_
1990,215).

Fees: Patent Office and Patent Court Fees Act of 18 August 1986 as amended on 7 March 1990.

_Zur_ _Wahl_ _des_ _Begriffes_ _"Gebrauchsmuster"_ _in_ _Deutschland,_ _Bericht_ _der_ _XI._ _Kommission,_
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Order No 540 of 30 June 1972 on the simplification of administrative procedures for the handling of industrial
inventions, industrial models and trade marks.

3. France

Patents Act: Act No 68-1 of 2 January 1968 (since amended in particular by Act No 78-742 of 13 July 1978
and more recently by Act No 90-510 of 25 June 1990 and Act No 90-1052 of 26 November 1990): _Journal_
_officiel de la République_ _française,_ 3.1.1968.

Applications: Regulation No 79-822 of 19 September 1979 on the filing of utility certificates and the granting
and continuance of this entitlement; Order of 23 September 1979 making detailed arrangements for applications
for the filing of utility certificates.

Fees: Order of 17 December 1985 on fees charged by the National Industrial Property Institute (INPI).

Legislative history: Documents relating to the debates on the introduction of the utility certificate assembled by
Dreier, 9 October 1986.

4. Belgium

Patents Act: Revised Patents Act of 28 March 1984.

Applications: Royal Order of 2 December 1986 on the filing, granting and continuance of patents.

Explanatory memorandum to the Patents Bill, lower house of Parliament, 4 September 1981.

5. Spain

Patents Act: In Spain, protection of technical innovations additional to that of patent law was provided in the
form of a utility model as long ago as Royal Order No 1789 of 26 July 1929 on industrial property, at
Articles 171 _etseq._ The new Patents Act, Act Noll/1986 of 20 March 1986, entered into force on
26 June 1986; utility models are dealt with in Title XIV Sections 143-154: 1986 fl#£No 73, 11188.

Implementation Order: The new Act is complemented by Title II, Sections 41-48, of the Patent Act
Implementation Order.

Fees: Under Sections 154 and 160(1) of the Patents Act, fees are to be regulated in accordance with the

schedule to the Act.

6. Portugal

Patents: Industrial Property Code, published in _Boletim da Propriedade Industrial._

**Ill**

Utility models: Industrial Property Code, Chapter II, utility models and industrial models and designs (in
Portuguese; a German translation can be found in _Blatt_ _fur Patent-, Muster- und Zeichenwesen,_ 47. Jahrgang,
Heft 6, p. 56, and Heft 7/8, p. 101).

Fees: The fees for the registration of a utility model are set afresh each year in a special order (Section 255 of
the Industrial Property Code).

7. Italy

Patents and utility models: Title II on industrial models, _Gazzetta_ _Ufficiale de lia_ _Repubblica_ _Italiana,_ 1987,

No 53.

Act No 60, _Gazzetta Ufficiale_ _della_ _Repubblica Italiana,_ 1987, No 53.

Lower house bill submitted to the president's office on 16 April 1926, opinion of the minister.

8. Greece

Patents Act: Act on technology transfer, inventions and technological innovation.

Fees: Fees Order, DS/A/2/89 of 26 January 1989.

Explanatory memorandum to the Bill on technology transfer, inventions and technological innovation laid

before Parliament.

9. Netherlands

Patents: New Patents Bill, draft of 8 January 1991, Chapter 1.

Explanatory memorandum to the Patents Act 1992.

10. United Kingdom

White paper _on Intellectual Property and Innovation,_ April 1986.

White paper _on_ _Intellectual Property Rights and Innovation,_ December 1983.

Designs: Registered Designs Act 1949, Section 1(3); unregistered design right.

11. Ireland

Patents : Patents Act 1992.

Utility models: short-term patents, Part III of the Patents Act.

12. Denmark

Utility Models Act; Order on the treatment of utility model applications and registered utility models, Patent

Directorate Order No 517 of 18 June 1992.

Legislative history: Patent Office document 89-243-1, _Notât om_ _baggrunden for og_ _konsekvenserne_ _af visse_
_œndringer_ _i den tyske brugsmodellov,_ 21 August 1990.

Report on the economic need for utility model protection in Denmark, PA Consulting group, 21 August 1990.

13. Luxembourg

Patents: Patents Bill submitted to Parliament.

**B.** **Judgments**

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Case 192/73 _Van Zuylen_ v _Hag_ _[_ 1974] ECR 731.

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Joined Cases 55 and 57/80 _Membran_ v _GEMA_ [1981] ECR 147.

Case 12/74 _Commission_ _v Germany_ [1975] ECR 181.

Case 258/78 _Nungesser_ v _Commission_ [1982] ECR 2015.

**IV**

Case 53/87 _Consorzio_ _Italiano_ v _Renault_ [1988] ECR 6039.

Case 119/75 _Terrapin_ v _Terranova_ [1976] ECR 1039.

Case 35/87 _ThetfordvFiamma[\9SS]_ ECR 3585.

Case 45/86 _Commission v Council_ (customs preferences) [1987] ECR 1493.

Case 242/87 _Commission_ v _Council_ (Erasmus) [1989] ECR 1425.

Case 15/81 _Gaston_ _Schul_ _I[_ 1982] ECR 1409.

Case 270/80 _Polydor_ v _Harlequin_ _{_ 1982] ECR 329.

Case C-202/88 _France_ v _Commission_ [1991] ECR 1-1223.

2. National

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Germany, the _Chemical balance (Analysenwaage)_ case, _RGZ_ 120, 224.

Germany, _RGZ_ 99, 211, 212.

Italy, Court of Cassation, 22 October 1979, _Giur. Ann. Dir._ _Ind._ 1979, 1009/1.

Germany, _BGHZ_ 1992, 188.

Germany, _ROHG_ 24, 109.

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**- v**

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**VI**

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                                       - Vil                                       

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                               - vin                               

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**G. Periodicals**

Bulletin of the Union of European Practitioners in Industrial Property

AIPPI Yearbook

Gewerblicher Rechtsschutz und Urheberrecht (GRUR)

Official Journal of the European Communities, L and C series (OJ)

Official Journal of the European Patent Office

Blatt fur Patent-, Muster- und Zeichenwesen (Bl.f.PMZ)

Entscheidungen des deutschen Bundespatentgerichts (BPatGE)

Annual reports of the Greek Industrial Property Organization (OBI)

Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil (GRUR Int.)

International Review of Industrial Property and Copyright law (IIC)

Mitteilungen der deutschen Patentanwâlte (Mitt)

Supplements, Bulletin of the European Communities,

Archiv fur Presserecht (AfP)

Business Week

The Journal, incorporating the Transactions of the Chartered Institute of Patent Agents (CDPA)

**i X**

**ISSN 0254-1475**

COM(95) 370 final

## **DOCUMENTS**

EN **08 06 10**

**Catalogue** **numbpr** **:** **CB-CO-95-431-EN-C**

**ISBN 92-77-92690-2**

**Office for Official Publications of the European Communities**

**L-2985** **Luxembourg**