EU adopts pro-IP measures and hints at new SMEs rules as part of the IPRED review

European Commission adopts new IP/patent measures to support access to and use of intellectual property for small and medium-sized enterprises (SMEs) and confirms that SMEs-specific measures will be considered as part of the ongoing review of Directive 2004/48/EC on the enforcement of IP rights.

invention pics.pngYesterday the European Commission adopted a series of policy actions[1] to support access to and use of intellectual property (IP) by start-ups and innovative small and medium-sized enterprises (SMEs). These measures are of primary importance to IP Europe SMEs and they are described below in this note.

Probably for the first time, the Commission formally admits that “smaller businesses do not receive the full value of their IP if they cannot enforce them when needed”. This recognition is fully in line with your individual responses (in April 2016) to the EU consultation on the IPRED Directive. In fact, the policy adopted yesterday by the EU Commission, specifically recognizes that “enforcing IP titles is costly and complex, especially for start-ups and SMEs facing large entities”.  As part of the pro-IP measures for SMEs described below, the Commission states that it “will pay specific attention to SMEs in the context of the on-going review of Directive 2004/48/EC on the enforcement of IP rights”.

Summary of the measures policy actions to support access to and use of intellectual property (IP) by start-ups and innovative small and medium-sized enterprises (SMEs).

Data[2] from the EU Intellectual Property Office (EUIPO) shows that businesses using IP rights perform better and that SMEs owning IP rights have almost 32 % higher revenue per employee than SMEs that do not.

Yet only 0.3 % of SMEs own European patents. SMEs do not use the IP system essentially because they do not see the benefit of it, they lack the necessary expertise and they find that procedures are too costly.

Commission will put in place a package of IP-support measures for start- ups and SMEs, which will have the effect of improving coordination and consistency in addressing sub-optimal use of IP by SMEs across the EU. These measures comprise:

  • streamlining European IP awareness schemes for SMEs and providing a cooperation platform for Member States;
  • developing an EU IP mediation and arbitration network for SMEs;
  • encouraging the creation of European-level insurance schemes for litigation and IP theft, building on a common IP valuation method;
  • improving coordination of IP support funding schemes, including by means of a possible guidance to Member States and by developing monitoring methods their impact.

1 FACILITATING SME ACCESS TO IP 

1.1. INFORMATION AND AWARENESS

The Commission services, in partnership with the EUIPO, will streamline European IP awareness schemes for SMEs and will support exchange of best practice through an EU coordination platform. 

1.2. IMPROVING AND DEVELOPING IP PRE-DIAGNOSTIC SERVICES

Between 2017 and 2019, the Commission services:

  • in cooperation with the EUIPO, will establish a common training programme for IP pre- diagnostic service providers that will be rolled out in 2017;
  • will fund and monitor IP pre-diagnostic services, as provided for in the 2017 COSME work programme, with a view to developing – with Member State authorities and the EUIPO – an EU-wide service for innovative SMEs; and

These measures could be complemented by a Horizon 2020 funded project to deliver further IP services for SMEs and start-ups.

1.3. FUNDING FOR PATENTS

Today, protecting an invention throughout the Single Market can be achieved through the European Patent Office, but only at substantial cost: approximately EUR 5 000 in pre-grant administration fees and potentially more than EUR 30 000 in renewal fees only for the first ten years for 27 EU Member States.

The Commission services will help innovative SMEs and start-ups that want to patent in Europe using European patents. A pilot project will be launched to finance innovative SMEs requesting and being granted patents. The subsidies will cover 50 % of the pre-grant costs for European patents as well as a part of attorney fees.  Attorney fees are estimated around EUR 5 000 and tis EU scheme could subsidise 40-50 % of such a sum.

This will support innovative SMEs in the early years of developing their innovative products by significantly reducing patent costs.  This in turn should facilitate their access to finance and investment. 

  1. FACILITATING THE USE AND ENFORCEMENT OF IP

Small businesses will not receive the full value of their IP if they cannot enforce them when needed. Evidence suggests that enforcing IP titles is costly and complex, especially for start-ups and SMEs facing large entities. In this context, the EU Single Market Strategy announced that the Commission would pay specific attention to SMEs in the context of the on-going review of Directive 2004/48/EC on the enforcement of IP rights. 

2.3 IP LITIGATION INSURANCE AND IP VALUATION

The ability to enforce rights is essential for IP to keep its value, but SMEs do not necessarily have the financial or legal means to do so. Litigation insurance, if it was available for IP, would allow for the sharing or transfer of the financial burden and risks associated with IP litigation. This would be of decisive help to innovative SMEs.

In addition, difficulties in establishing the value of IP, which is highly case-specific, reduce the possibility of using IP to access finance. The EU economy is increasingly centred on services, information and knowledge with the effect that the value of intangible assets owned by business – especially start-ups – is greater than tangible assets (such as real estate and machinery), the only form of assets that are measured. With the help of a well-established and widely recognized valuation method, businesses holding IP would be better positioned to gain recognition of IP assets, and, as a result, would find it easier to obtain access to competitively priced finance.

Specifically, to encourage the creation of a European-level IP litigation insurance scheme, the Commission services will: 

Starting in 2017, encourage the development of IP valuation methods by:

  • together with the EUIPO, identifying methods of IP valuation most commonly used for financial and insurance purposes; and working with Member State authorities and stakeholders to agree on a common valuation method to be used in IP loss insurance and IP backed financial services, as well as for IP valuation under the newly adopted anti-tax avoidance package Directive

Regarding the insurance litigation scheme:

  • in 2017-2018, consult SMEs, insurers and IP experts to identify best practice and obstacles to the emergence of a competitive and dynamic single market for such products;
  • in 2018, encourage the offer and uptake of IP litigation insurance, and set up a platform that will assemble and diffuse information on best practice in IP litigation insurance; and
  • from 2018, use COSME funding to co-finance the initial take-up of patent litigation insurance by innovative SMEs to kick-start this. 
  1. ACTIONS TO COORDINATE IP SUPPORT FUNDING SCHEMES FOR INNOVATIVE SMES

The Commission will encourage Member States to identify new sources of funding to support IP use by SMEs. These sources could include:

  1. the European Structural and Investment Funds (ESIF)
  2. fees generated from EU level IP rights
  3. the Regulation on trademarks which allocates to Member States a share of the fees paid by the IP users
  4. Horizon 2020 program

In practice, the Commission will:

  1. In 2017, with the support of the EUIPO, will set up an EU coordination platform bringing together national IP support coordinators;
  2. In cooperation with the EUIPO and Member State authorities, will streamline European IP support for SMEs and IP support funding

*** end of report ***

[1] Putting Intellectual Property at the service of SMEs to foster innovation and growth

[2] Intellectual property rights and firm performance in Europe: an economic analysis (EUIPO, 2015)

Topics: SME IPRED review