Matteo Dragoni on the Effect of the European Patent Convention

Guest post by Matteo Dragoni, Stanford TTLF Fellow

Recent posts by both Michael Risch and Lisa Ouellette discussed the recent article The Impact of International Patent Systems: Evidence from Accession to the European Patent Convention, by economists Bronwyn Hall and Christian Helmers. Based on my experience with the European patent system, I have some additional thoughts on the article, which I'm grateful for the opportunity to share.

First, although Risch was surprised that residents of states joining the EPC continued to file in their home state in addition to filing in the EPO, this practice is quite common (and less unreasonable than it might seem at first glance) for at least three reasons:

1. The national filing is often used as a priority application to file a European patent (via the PCT route or not). This gives one extra year of time (to gain new investments and to postpone expenses) and protection (to reach 21 years instead of 20) than merely starting with an EPO application.
2. Some national patent offices have the same (or very similar) patenting standards as the EPO but a less strict application of those standards de facto when a patent is examined. Therefore, it is sometimes easier to obtain a national patent than a European patent.
3. Relatedly, the different application of patentability standards means that the national patent may be broader than the eventual European patent. The validity/enforceability of these almost duplicate patents is debatable and represents a complex issue, but a broader national patent is often prima facie enforceable and a valid ground to obtain (strong) interim measures.

Second, the current EPC system has established a "regional" patent system which is better than the PCT system, but it is still far from having eliminated all the economic/bureaucratic hurdles to patenting. It is true that European patents, once granted, can be validated/extended—and so recognized—in every single EPC country, but such validation/extension process comes at a cost. The patent often needs to be translated, some other taxes must be paid and the help of a local patent attorney is required. Annual patent fees must also be paid or the even the local patent expires. Once the European patent is granted, the patentee usually has 3 months to decide the validation/extension countries.

Since the grant of a European patent usually happens 3-4 years after the patent application has been filed, this means that an entity might not be ready to extend or validate the patent in many other countries, and if it has to drop some countries, it usually does so with less appealing, small, markets, most of which are the accession States considered in Hall and Helmers's article. Moreover, a European patent usually reduces costs only if the patentee is interested in having patent protection in at least 3-5 EPC Countries (depending on the local costs and fees).

The above also answers a bit to Risch's concern that a "unified" patent protection might not imply a "strengthening" of IP protection. As the situation is now, the European patent merely grants a bundle of nationally regulated patents that, once validated/extended, are governed by national rules and are subject (for some aspects) to the exclusive jurisdiction of national courts. This makes the patent rights obtained through a European patent costlier but also quite strong: it is not so cheap to obtain and validate/extend a European patent, but it is also quite expensive to invalidate the validated/extended European patent in all the single EPC jurisdictions.

Hall and Helmers's article briefly mentions the above issues (in particular those relating to validation and extension), but it seems not to give them much consideration.

Finally, I think that the article confirms that it is very difficult to justify a correlation between easier patenting procedures (and the EPC is doubtlessly easier and cheaper than the PCT) and an FDI increase. However, the real testing ground for such theories will (or might) be the implementation of the European Patent with Unitary Effect (EPUE, or "unitary patent"). It will not be applied in all the EPC countries but merely to the majority of the European Union's member states, but it will be interesting to analyse whether having a EU-wide patent without additional monetary and bureaucratic burdens will incentivize non-resident companies in investing in resident national activities/companies. Such advantage, however, should be analysed not tomorrow but, once again, after at least 10-15 years. One of the major advantages of the unitary patent is of course that even if an entity did not have any intention of (or enough resources for) entering into one market in the early years of patent life, entering at a later stage is not precluded thanks to the EU-wide coverage at no additional cost. This should give time to companies to grow and invest (even if at a later stage) in economies that are not the usual "big" EU economies.