The growing significance of IP and standards
The last two to three decades have been termed the ‘pro-patent’ era. While there is still a continuing discussion about whether the IP system truly fosters, or actually, impedes innovation, there is no doubt that businesses and policymakers alike have to take IP into account when innovating. But even if this is accepted as fact, the extent to which IP has been increasing in significance may be surprising to many:
- The annual volume of patent applications to the European Patent Office (EPO) has rapidly been increasing. With around 311,000 applications in 2017, this figure is at an all-time high, up 37.5% compared to 2008. Similar trends can be observed also for other IP rights such as European trademarks and designs
- Numerous studies show that the ways of using IP have broadened. Protection against imitation is now only one reason to use IP. Others include enabling collaboration in open innovation environments; use for finance purposes; revenue generation through licensing and business model innovations
- There is a large workforce supporting IP. The EPO has some 6,800 employees. Together with the EU IP Office (EUIPO), there are more than 7,700 persons working directly on IP issues in European institutions alone
- Moreover, the major European IP organisations do not run on taxpayers’ money: EPO and EUIPO are self-financed through fees. This, in turn, raises important questions about how to price and structure the fees, particularly with respect to patents. The right balance must be found, e.g., between the level of overall fees that must not be too high to deter from patenting but also not too low to endanger quality examination; or – in terms of structure – between the up-front examination fees and the later yearly fees to keep the patents in force once granted. Currently, such maintenance fees subsidise the examination costs, which is an issue given that not all patents will (should) make it to grant and the time patents are held in force by a patent holder is uncertain. This has big implications for the patenting October 2018 – N° 18 3 strategies of firms but also for policy when talking about addressing the costs as a deterrent to patenting
- There are also other indicators of the growing significance of IP. Some analyses suggest that the value of certain firms may be as much as 87% based on intellectual assets, compared with about 17% in the mid- 1970s, according to OceanTomo. A single IP litigation case can involve as much money as the entire budget of a basic research council in a smaller European country, as when in 2015 the University of Wisconsin sued Apple for patent infringement and Apple was ordered to pay US$ 506m to the university
Intellectual Property is one way to foster innovation through law and regulation. The Volkswagen ‘Dieselgate’ scandal has brought the use of regulation to support (and to require) innovation to the attention of the general public. Many other regulations such as the paediatric regulation, which seeks to boost treatment options for sick children, have both innovation and well-being goals, too.
Standards provide means through which regulations can be implemented. As with IP, standards have gained considerably in importance. The body of official standards in Germany, for example, has increased from around 5,000 in the 1950s to 33,884 in 2016.
Innovation policymakers and IP
Innovation policymakers struggle to keep up with developments and the growing complexity of the IP and standards system. As for IP, the discussion has traditionally centred on topics such as the role of patents in technology transfer from academia to industry or on the use of patenting as a proxy for innovation performance. Poor policy understanding of IP concepts has led to inadequate design of government interventions. A case in point is over-reliance on counting patents, based on the misleading assumption that more patents are better than fewer patents. The wider scope of IP – encompassing instruments like trade secrets, copyrights, trademarks, designs, issues of IP management – has at best been considered only in shallow ways.
One factor explaining this situation is the existence of ‘parallel universes’, in the sense of disconnection between innovation policymakers/researchers and the IP community. With its traditional focus on legal issues (patent attorneys, legal academics, IP lawyers) and procedural aspects (patent offices), the IP community has difficulty in reaching out to innovation policymakers.
The consequence is that important developments in the IP (and standards) world are not reflected in innovation policymaking. For example, a weak understanding of the working principles of IP instruments may translate into bad performance metrics. An example in the early 2010s was that the Czech Republic’s system of performance-based research funding inter alia provided performance points to universities and institutes for filing Utility Models. These points drove some of universities’ and institutes’ institutional funding. Given that Utility Models are unexamined documents deposited at the national patent office, this led to an undue proliferation of filings, and to a system (since reformed) where research funding could be obtained, basically, by printing paper. The same system also provided points for patent applications – leading to increased filings of essentially useless patents1.
In general, international innovation system reviews such as those of the OECD barely discuss the consequences of new developments in IP like the upcoming Unitary Patent, its new cost structure and enforcement options and how this could affect the various actors in an innovation system. The example of Apple vs. the University of Wisconsin could lead to a discussion about the extent to which European universities can and should enforce their patent rights. Yet such a discussion is barely evident. Many more examples can be given. In effect, innovation policy neglects IP issues that are especially important for the market/commercialisation phases of innovations.
What can be done
Clearly, innovation policy should take much greater account of IP, standards and regulation. Important institutions in the innovation systems like funding agencies, ministries, research organisations need to be trained at the executive level in more depth about the IP and standards system. Teaching of IP should be better integrated into the curricula of higher education institutes and taught from a business (rather than a purely legal) perspective. Innovation policy researchers need to take more account of IP issues in their analyses and policy reviews. This necessitates stronger links between the professional IP community and the actors of the innovation system. After all, it is also in the IP professionals’ interest to have IP properly understood to avoid misperceptions that may hamper their work.
1 – Barbara Good, Niki Vermeulen, Brigitte Tiefenthaler, Erik Arnold, Counting quality? The Czech performance-based research funding system, Research Evaluation: 24(2), 2015