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Patenting costs cast a shadow on European biotech

German companies are filing more patents than ever before because they have recently started to recognize the strategic value of patent portfolios. But the recent growth, also true in the rest of Europe, is hampered by the cost burden of registering patents in national languages. Meanwhile, biotech companies see their hope to solve costly patenting waning since the proposed ‘community patent’ providing a single patent valid across the European Union (EU) has stalled due to translation issues.

Germany experienced a strong upsurge in patenting between 1990 and 1999, data collected by the Organisation for Economic Cooperation and Development in Paris shows. Measured by the number of applications filed at all three major patent offices worldwide, Germany’s patenting appetite rose by 45 percent, compared to 28 percent for the United States (US) and 14 percent in Japan over the same period.

The biotech sector showed a similar trend: between 1990 and 1999, German patent applications at the European Patent Office (EPO, Munich) grew almost threefold, from 228 to 642, strengthening the country’s prime position in Europe when it comes to biotech patents. (The United Kingdom and France came in second and third in 1999, with 430 and 298 biotech submissions to the EPO respectively.)

According to research (1) by the Fraunhofer-Institut für Systemtechnik und Innovationsforschung (Karlsruhe, Germany) published on March 3, the increase stems from a trend among German companies to file patents for other reasons than just protecting inventions, like Japanese and US companies had started to do before them.

By filing patents, German companies are now seeking to fulfill a number of strategic objectives, says Knut Blind, deputy head of Technology Analysis and Innovation Strategies at the Fraunhofer institute and one of the authors of the report. Pharmaceutical and biotech companies, in particular, use patent portfolios to establish a reputation in the eyes of capital investors, says Blind. Often, patents are used as ‘currency’ in licensing or acquisition deals. Also, the report says, companies are increasingly using patents as internal yardsticks to allocate investments or as a way of obstructing competitors’ product development.

Although small and medium-sized companies are picking up speed, large companies dominated the German patenting boom. But the upswing will soon level off, the report authors predict. “Large companies are complaining of high patenting costs,” says Blind, “so lately they are trying to be more selective.” This trend holds for the rest of Europe as well, suspects patent attorney Bo Hammer Jensen, chair of the Intellectual Property working group of the European bioindustry association EuropaBio (Brussels). Indeed his own company, Denmark-based Novozymes, filed about 70 applications last year, Hammer Jensen says, down from over 100 a few years ago.

But companies have little hopes to cut patenting cost in spite of recent attempts to streamline patenting in Europe. The latest proposal for a single EU-wide ‘Community Patent’ (CP), put forward by the European Commission (EC) in 2000, has stalled. The CP as originally designed would offer the option of filing each patent in only one language, providing protection in all EU member states under the umbrella of one European Patent Court.

By contrast, current practice means companies submit their application to the EPO in English, French or German. Once the patent is granted, companies can register separate translations of their claim into legally distinct national patents in up to 38 countries, bound to the 1975 European Patent Convention. On average, companies strategically register claims in about seven countries, minimizing translation and legal costs while still protecting the bigger European market.

However, attempts to protect the importance of national languages have destroyed the idea of the single patent for the EU, says Ilias Konteas, adviser on Intellectual Property issues at the Union of Industrial and Employers’ Confederations of Europe (UNICE; Brussels).

Last year, the ‘Competitiveness Council’, in which member states negotiate issues impacting the competitiveness of the EU as a whole, agreed to amendments to the CP requiring companies to translate their claims in all national EU languages, soon to be about twenty.

During the latest council meeting on March 11, some countries went even further by demanding those translations would retain legal status in national courts, for instance when judges feel translation mistakes were made. Others, mainly Germany, deemed that idea unacceptable. The impasse has left the creation of a Community Patent “further away than it has been for a long time,” council member and Dutch minister of Economic affairs Laurens-Jan Brinkhorst reported to his national Parliament.

Industry organizations have already called for the deliberation process to start over from scratch. The latest amendments, says EuropaBio’s Hammer Jensen, would create a EU patent that is simply too costly to use, except maybe for really big industries. His own company, for one, would probably just stick to the old route. “The European Commission started out with a reasonably good proposal,” Hammer Jensen says, adding: “Regrettably, sometimes the political process creates a monster.”

(1) Erfindungen kontra Patente, Knut Blind, Jakob Edler, Rainer Frietsch & Ulrich Schmoch, Fraunhofer-Institut für Systemtechnik und Innovationsforschung (ISI, Karlruhe, Germany), December 2003 (published on 3 March 2004 by the German Education and Research Ministry (BMBF)).

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