A study published today by the European Patent Office (EPO) finds that the Unitary Patent could significantly enhance technology transfer in the EU through more trade and foreign direct investment (FDI). Improved harmonisation of Europe’s patent system has the potential to increase trade and FDI in high-tech sectors by up to 2% and 15% in the EU, leading to annual gains of EUR 14.6 billion in trade and EUR 1.8 billion in FDI.
The study, Patents, Trade and FDI in the European Union, carried out by a team of economists from the EPO, the University of Colorado Boulder and the London School of Economics, shows that, while patents already have a positive effect on trade and FDI in Europe, their impact is currently hindered by the lack of truly barrier-free EU-wide patent protection.
“This study provides further evidence of the benefits of patent protection for the European economy,” said EPO President Benoît Battistelli, “It sets out in particular the direct benefits of greater harmonisation of the system for our region.” According to Mr Battistelli, “The Unitary Patent and Unified Patent Court, which are expected to be implemented soon, will be a vital step towards the realisation of an EU single market for technology, and will support productivity growth and economic development in Europe.”
Untapped potential in Europe’s technology market
The study focuses on high-tech manufacturing industries, including ICT, chemicals and medical devices, which make intensive use of intellectual property rights. Compared with other industries, these “high-IP” sectors are found to be major contributors to EU exports and FDI flows to the rest of the world, confirming the results of a previous study by the EPO and the EU Intellectual Property Office. By contrast, the new study shows that the contribution of these industries to trade and FDI flows between EU countries is still limited, suggesting untapped potential to achieve an EU single market for technology.
Measuring the economic benefits of patent harmonisation
The study further finds that trade and FDI flows in high-tech manufacturing industries are particularly sensitive to the level of patent protection in a country: stronger patent protection has a significant positive impact on high-IP imports and on the value and number of FDI deals in high-IP sectors. Against this backdrop, the study identifies certain limitations to the circulation of patented inventions which hinder trade and investment in high-tech industries within the EU.
Greater harmonisation of patent protection in the EU would boost European trade and FDI in high-IP industries, the analysis concludes. A full harmonisation scenario would increase high-IP trade and FDI flows to or between EU countries by 2% and 15% respectively EU-wide, leading to annual gains of EUR 14.6 billion in trade and EUR 1.8 billion in FDI. For the 15 EU countries most affected by the changes – Austria, Bulgaria, Cyprus, Czech Republic, Greece, Hungary, Lithuania, Malta, Poland, Portugal, Romania, Slovak Republic, Spain, Sweden and the UK – this would mean increases of 5% (trade) and 29% (FDI).
Limitations to the circulation of patented inventions are due to the current fragmentation of the European patent system following the grant of a patent by the EPO. In order to save on the costs of the national validation and maintenance fees payable in each country in which protection is required, most companies currently validate their European patents in a small number of EU member states only. In addition, patents are subject to uneven levels of national protection and to the risk of parallel litigation, with the potential for different outcomes in different countries. The Unitary Patent will address these shortcomings, and is thus expected to facilitate technology transfer through trade and FDI within the EU, especially in countries that are currently less attractive for patent owners. By cutting the overall costs by 70%, the Unitary Patent will facilitate the access to the European market of innovation and technology for SMEs, universities and research centres in particular.