(Comptroller General of Patents 1969-1977)

EU Industrial Property policy for Patents?

EU Industrial property policy lacks coherence. The current

initiative for utility models is a distraction from the more urgent

and important objective of EU©wide patent protection at reasonable

cost and subject to the Union's own administrative and legislative

control: Major reform of the EP and CP patent systems to that end

should have priority.

The proposals in the Green Paper for harmonising utility model law

in the EU and for introducing a Community utility model right have

been subject of comments by British interests submitted by the end

of 1995. The comments of which the writer is aware (varying from

cool to critical) were based on an analysis of the intrinsic merits

and demerits of the utility model system proposed and of its likely

implications for the patent system. This cool reception, coupled

with the evident complexity of the situation at the national level

in the EU, prompts the question: is this the subject on which the

EU's industrial property energies should be concentrating at this

time? In a coherent EU policy for industrial property should not

attention be concentrated rather on patents?

Essential IP Policy Requirements

It should be an essential aim of that policy, as a crucial element

of the EU's policy for industry, to ensure that European industry

enjoys as good protection by industrial property rights as its

American and Japanese competitors. For small and medium sized firms

in particular, prosperity depends on the quality of the incentives

offered by industrial property rights in the home market.

As far as patents are concerned, it is clear that the EU

(hereinafter mainly referred to as the Community for consistency of

terminology) suffers compared with the United States. To compete,

Community patent law needs to be as closely under Community

control as US law is under US government control if it is to be as

capable of adjusting to changing circumstances, particularly

developing technology. And Community control should extend not only

to validity criteria and granting procedures but also to litigation

arrangements. Furthermore, the Community's patent office (the

European Patent Office) should be as open to control by the

Community in the interests of speed and economy as is the US

Office.

In the United States the requisite control is achieved (as is any

national state) via the legislative machinery of the country and by

governmental administration enforcing standards of economy and

efficiency acceptable in a public body. For the Community, the

equivalent legislative processes are Council regulations anddirectives and the equivalent administrative control is by the

Commission. For equivalent litigation control, Community courts are

needed (even if only national courts doubling as Community courts),

plus some element of appeal at Community level. It is all too clear

how far the Community falls short of these conditions.

It is ironic that, in contrast, the conditions have been

established for trade marks (via the Community Trade Mark system)

and are proposed by the Commission for industrial designs and

utility models while they are so notably absent for the

technologically more important field of patents.

Present Shortcomings

It is worth looking rather more closely at the shortcomings of the

Community's patent regime in the three respects mentioned above:

legislation, administration and litigation. As regards legislation,

the Community cannot really be said to be master of its own

destiny. Its patent law is determined by an international treaty

which is not restricted in Membership to Community countries. Of

course, EU countries are in a large enough majority to enforce any

treaty amendment they wish; but that is politically uncomfortable,

it requires all the formality of a diplomatic conference and the

amendment is ineffective until ratified by sufficient national

governments, commonly requiring parliamentary approval.

As regards administration, the European Patent Office is not

subject to control by the Community in respect of either its

finances or its procedures, the controlling body being an

Administrative Council consisting of representatives of member

governments.

As to litigation, European patents suffer compared with US patents

in that infringement actions have to be taken country by country at

added cost and with no certainty of consistent results and with no

certainty of consistent results and with no common appeal court

like the US Court of Appeal for the Federal Circuit or the court

COPAC designed for Community patents.

The above institutional shortcomings have led to serious practical

defects in the protection of inventions in the EU. Considering

first the European patent procedure, there is now a widespread

belief that a European patent is far too expensive in official

charges and too slow. Here it must be said that from the beginning

of the EPO has built up a deserved reputation for quality of

processing and EPO staff deserve much praise for making the system

user©friendly. The procedural shortcomings are institutional, not

personal, in character. The main contributory factors are believed

to be as follows.

The first is the extravagance of continuing with examination by a

division of three examiners. This was built into the original

Convention for reasons which were hard to resist at the time. The

EPO had to be staffed initially extensively by recruits from national examining Patent Offices (mainly Germany, Netherlands and

the United Kingdom) with significantly different traditions of

patent interpretation and examining procedure; and tri©lingual

capabilities were low. Examining groups of three, ideally with

different language backgrounds, were designed to develop uniform

attitudes to examination as well as linguistic communication. No

doubt the system has been successful in this. But the original

problem is now 20 years old. Examiners are now recruited direct and

trained internally. Surely the time has come to switch to single

examiners in accordance with EPC Article 33(3) © though an

amendment of the Convention might be required to make this change

for all classes of patents.

The second factor is the now notorious bleeding by national

treasuries of 50 per cent of renewal fee income. It might be said

that it was a mistake to draft Article 39(1) so as to pave the way

for the present blood©letting; if so it was an excusable mistake

for those not gifted with second sight. Less excusable, perhaps,

are the provisions of the CPC which carry the same arrangements on

the Community patent (Article 24(2) of the 1975 text and 20(2) of

the 1989 version). What is needed for the Community patent is

Community funding as envisaged in 1989 Article 20(6). The effect of

the high level of renewal fee retention by national governments is,

of course, to deny income to the EPO and thus to force EP

processing fees up to a higher level in order for the EPO to

balance its books.

The third factor, and probably the most significant, is the cost of

producing and filing translations of the full text into the

official languages of designated states very shortly following

grant of the patent, producing mountains of largely unread paper.

This folly is compounded for the Community patent, for which there

is no escaping the full range of Community languages.

A fourth factor is the renewal fees themselves which are outside

the control of the Community as such, are in toto very high for the

whole Community and vary widely and irrationally from country to

country.

The present arrangements have implications for Community industrial

property policy generally. The various elements of industrial

property are or will be regulated by unrelated legal systems: most

by Community legislation (Regulations and Directives) and the other

by inter©governmental treaty not restricted to Community countries.

Even the Community Patent Convention, though confined to EC

countries, will not be subject to control and amendment by normal

Community processes. This lack of coherence in the legal systems of

industrial property at Community level makes a coherent overall

strategy for the Community difficult if not impossible to achieve

since the same mechanics of control are not available all round.

Whether for this reason or not, Community action to date has

consisted of isolated expedients (such as national supplementary

protection certificates, which are no substitute for central

extension of term of Community patents; and the draft Biotechnology

Directive) or independent initiatives in areas which are interdependent (patents, designs and now utility models, all of which

provide monopoly protection, to a greater or lesser extent, for

functional technical innovation)

What should be done?

Considered as an academic problem, the answer to all these ills is

simple: takeover the European patent system by the Community with

its re©enactment in the form of a Regulation, accompanied or

followed by a reform of the system itself. The European Patent

Office would then become a Community institution like the Trade

Mark Office and indeed the two could become, as is normal

elsewhere, branches of one establishment. However, one has to admit

that as a practical proposition such a course of action entails

certain difficulties of a political and vested©interest nature.

A route to salvation may be at hand, nevertheless, in the form of

the Community patent. The reason for saying this is as follows.

There is general agreement that the Community Patent Convention in

its present form is of only limited interest since the original

translation requirements were so regrettably undermined in the 1989

amendment. There also seems to be agreement that the way forward is

now to bring the Community system into force and then to amend it

as necessary to make it work satisfactorily. At the time of

writing, ratifications had either been deposited or could be

regarded as in the pipeline from all the necessary states (the

signatories in 1989) except Spain and Portugal for whom no

political obstacles are known. So before long the Community Patent

Convention may be operational and open to revision. The main

amendments needed are quite easy to state:

(1) Delete Article 30 of the 1989 text and replace it by something

along the lines of Article 88 of the earlier texts. It is Article

30 which requires full©text translation into all Community

languages within a short time after grant. This crippling

obligation will of course be compounded as the Community expands

and more languages are added. The old Article 88 made a much more

practical requirement of translations only in the event of

enforcement in a particular country.

(2) Substitute for Article 20 of the 1989 text a Community regime,

following Article 24(3) of the 1975 text, for financial support on

the basis of the EPO breaking even on Community patent work taking

one year with another. Any serious move to this end will involve

jettisoning not only the statebased regime of paragraphs 1 to 5 of

Article 20 but also the obligatory delay (don't even think about it

for five years!) required by paragraph 6.

The change at (1) would make the Community patent much more

economical than the European patent as regards translations and (2)

should permit a Community renewal fee which would significantly undercut national renewal fees for the core countries of the

Community. The Community patent would then outsell the European

patent and the latter would survive mainly to provide for non©EC

countries.

In the situation thus envisaged, the EPO would be operating de

facto essentially on behalf of the Community and it would be

possible to contemplate changing the institutional framework to

reflect the operational reality - that is, to bring it more into

alignment with the Community trade mark. This would mean in effect

an EC Regulation being substituted for the EPC and CPC combined. At

that stage the opportunity could be taken to reform the substantive

patent law in a number of respects which are now well recognised.

These are mostly outside the scope of the present comment, but

mention should be made of the restriction, referred to above, on

the freedom of organising examination work in the EPO imposed by

EPC Article 18(2) and Article 33(3) © it is not clear that the

latter permits the using of single examiners throughout the Office.

In retrospect, it was surely a mistake to try to fix an

administrative expedient as a legal obligation. Why try to bind the

hands of one's successors? If examining divisions of three continue

to be necessary for the efficient operation of the Office, the

Office management at the time will keep them going; if not, why

should the management not be free to discard them?

With such reforms of the CPC and EPC, and particularly with their

integration and rebirth as Community law and their administration

controlled by the Community, one may venture to look forward to a

Community patent which in terms of cost, speed, adaptability and

central litigation arrangements is as closely competitive with the

US Patent as one can hope to get.

The above scenario may be summarised as: bring the CPC into force

as soon as possible; amend the CPC radically; wait for the

Community Patent to sweep the board; then re-enact the reformed EPC

and CPC in terms of an EC Regulation. The road to salvation is

undoubtedly beset by many pitfalls, however, and the first occurs

with the question: is the CPC amendable?

In a recent issue of the Max Planck Institute's publication IIC,

Dr. Otto Bossung, one of the architects of the EPC and the CPC,

writing in celebration of the 85th birthday of Dr. Kurt Haertel,

the grandfather of the Conventions, and evidently reflecting much

of Haertel's thinking, sets out at length and with complete

thoroughness the case for treating "the return of the European

patent law to the EU" as a matter of urgency. The end product is

the same as envisaged above, namely, the take over of the EPC and

CPC by an EU Regulation with reform of the EPC content in respect

of some substantive law and of the CPC content as regards languages

and finances in particular; and of course the EPO becoming a

Community institution. All these changes are envisaged as coming to

pass through one cataclysmic upheaval. The reason for rejecting a

stage-by-stage approach is that Bossung believes the EPC be effectively unamendable because of the draconian revision

provisions in Article 172 of the EPC, whereby any dissenting state

has to ratify a majority-adopted amendment willy-nilly or leave the

Convention. And he believes the CPC to be absolutely unamendable.

because revision requires unanimity.

It may come to that, but this view seems rather defeatist. The CPC

has already been amended twice. Admittedly neither of these

revisions has been ratified by all signatory states but there seems

to be a genuine prospect of the 1989 revision being ratified by all

the necessary states and therefor entering into force. A future

revision would need unanimous ratification by an even larger number

of states. But with the political will, it is feasible; without the

political will, nothing will be done and we shall be stuck with a

European patent that is petrified and a Community patent that is

stillborn. The gradualist approach should at least be considered.

The strategy to be adopted is that which offers the best prospect

of getting Community-wide protection for inventions on sensible

terms in a reasonable time. The full details of the legal and

institutional changes, and the negotiations with third countries,

involved in a complete Community takeover could take rather a long

time to settle.

To sum up so far, the dominant theme of Community industrial

property policy should be the establishment of a common legal basis

for dealing with industrial property as a whole and the provision

of a means of Community-wide protection for inventions which is

internationally competitive in terms of speed, economy and

flexibility. The need is critical and urgent and action should be

given total priority.

If this conclusion is accepted, the Commission's initiative on

utility models begins to look like a distraction that could be

justified only if it had very strong intrinsic merits and was a

matter of urgency. It is not the purpose of this comment to give an

exhaustive analysis of the pros and cons, for which other studies

are available. Suffice it to say that the writer is not convinced.

On the evidence in the Green Paper, interference with free flow of

goods is a problem for the future not the present; for patentable

inventions, national patents seem to be affordable even to SMEs; as

for subpatentable innovations, there is no evidence that firms,

large or small, are failing to prosper for lack of monopoly (as

distinct from protection against copying) of sub-inventive

technical design; and a Community utility model would not be an

economic proposition if it where saddled (as in logic it should be)

with the same language problems as the Community patent.

Altogether, the Green Paper proposals look like being controversial

and timeconsuming.

Conclusion

In these days of the single market, there should be maximum encouragement to protect inventions over the Community as a whole.

What the situation calls for is a major reform of the European and

Community patent systems to make available a Community patent which

is broadly competitive with a federal US patent in terms of price

and delivery. This would meet the real needs of both small and

large firms. If it is thought that small firms need special further

help, they could be given official fee reductions as in the United

States. The idea of diverting small firms into a regime of short-

term, insecure protection surely cannot help the small firms of

today to progress to be the large firms of tomorrow.

The need for such development of the Community patent is urgent and

with the prospective entry into force of the Community Patent

Convention a unique opportunity is on us. All industrial property

efforts at EU level should be concentrated on this. The

Commission's utility model proposals are to be welcomed as showing

a recognition of the importance of industrial property development.

But in focusing on utility models they have, it is suggested, got

their priorities wrong. The Green Paper initiative has neither the

intrinsic merits nor the urgency to justify its standing in the way

of action on the Community patent. The utility model system stands

only on the fringes of the patent system. The Green Paper aims at

perfect order on this fringe while the centre is in some disarray.

To echo the plaintive cry of Professor Higgins in "My Fair Lady":

"Why don't they straighten out the mess that's inside?"

Without joining battle on the Green Paper it ought to be possible

to declare that, pending the outcome of a really serious reform of

the nature and control of Community-wide patent protection, along

the lines suggested earlier, the utility model initiative could be

gently put on one side or at the very least not allowed to

interfere with actions on patents.

The attitude of industry, in the United Kingdom and in the rest of

the EU, will be crucial; only they can say with conviction where

their best interests lie. It is hoped that they will not fail to

speak up.