18 July 2010

EU Patent would be Good for Patent Offices (except German PTO) and Applicants but bad for Attorneys

According to this posting, published on VoxEU.org, a policy portal set up by the Centre for Economic Policy Research (CEPR), the autors Jérôme Danguy and Bruno van Pottelsberghe de la Potterie found that "the EU patent would drastically reduce patenting costs for applicants and generate more income for both the European Patent Office as well as most national offices, all the while saving €120 million in legal fees" (see Danguy and van Pottelsberghe 2009).

Below, the outcome of the study is briefly sketched with regarding to the issues "income generated by the EU patent", "increase of income for (most) national patent offices", and "decrese of costs for applicants", whereas the study relied on interesting findings of earlier studies:
  • With the creation of an EU patent and a centralised litigation system, at least €120 million would be lost by patent lawyers (no more parallel litigations), and hence spared by the business sector (see Harhoff 2009).
1.  Income generated by the EU patent. The total revenue generated by a patent depends on renewal fees and maintenance rates, whereas the latter, as a key parameter for calculating a patent's revenue, depends on many other factors (see Cornelli and Schankerman 1999, Harhoff et al. 2009).

The maintenance rate is the higher, (i.) the hight a countrie's GDP, (ii.) the younger a patent, (iii.) the stronger the patent system, and (iv.) the lower the renewal fees, whereas the renewal fees schedule is a key policy leverage in practice and more than a simple way to cover the operating costs of patent offices. Based on simulated maintenance rates and different fees schedules for the EU patent, the authors were able to calculate the renewal fees’ income that would be generated by an average post-grant EU patent over its life time.

Whereas the actual fees income generated by an average current EP patent granted by the EPO is a bit more that €11,000, the total renewal fees’ income generated by an average EU patent would vary with the level of fees from nearly €13,600 up to €16,600.

Consequently, the EU patent would generate at least the same amount of fees’ income as the EP patent, but probably substantially more, thanks to higher fees and higher maintenance rates.

2.  Increase of income for (most) national patent offices. The extent the EU patent would actually affect each national patent office’s (NPOs) income obviously depends on the adopted distribution key between offices.  Among the existing proposals for distribution keys, the (i.) “council proposal” weighting scheme reflects the outcome of political negotiations and is quite complex, the (ii.) population weighting scheme would reward large countries but not their innovation or economic performances, while (iii.) GDP or (iv.) R&D weighting schemes seem to be the simplest, fairest, and most effective distribution keys.

In sum, it appears that the European Patent Office and most national offices would actually gain more with the EU patent than with the EP patent thanks to a much higher total income generated by one average EU patent.

In fact, according to all schemes, the EPO would win 31%, the German Office would significantly lose (-15% to -48%) and Offices of larger countries (e.g. FR, UK, IT, ES) would win between minor and significant amounts as well. However, whether the change of income of Offices of smaller countries (e.g. NL, AU) would be positive or negative, would depend on the actual scheme adopted (see Table 1 of the posting).

3.  Decrese of costs for applicants: The EU patent would also reduce the relative patenting costs since it will cover the European market of about 500 million of inhabitants.

For an EU patent, the cost per claim per capita (size of market) indicator would place Europe between Japan and the US (see Figure 3 of the posting). The 45% decrease in relative prices due to the implementation of the Community patent would therefore induce a 14% increase in the demand for patents at the EPO, all else being equal.

Conclusion: The authors conclude, that the EU patent with a unified jurisdiction would reduce both the costs and uncertainty, while quality in the examination process would be held stable thanks to relatively high absolute renewal fees. The beneficial effects of the Community patent (cost savings, construction of the single market, lower complexity) would make the patent system more accessible for SMEs and for universities in Europe. At the same time it would make the European market much more attractive for both domestic and foreign companies.