The Community patent and the patent system in Europe, with evidence / House of Lords, Select committee on the European Communities.

  • Great Britain. Parliment. House of Lords. Select Committee on the European Communities.
Date:
1998
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Licence: Open Government Licence

Credit: The Community patent and the patent system in Europe, with evidence / House of Lords, Select committee on the European Communities. Source: Wellcome Collection.

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    18 February 1998] [Continued the consent of the proprietor of the patent; included in the list of prohibited acts are make, dispose of, or import a product, or use a process. The right conferred by a patent is that the proprietor can stop the use of the invention without his permission. 1.2 Considering patents as commercial “tools” used by industry to support its competitiveness, whilst correct, tends to obscure the basis of patent law, which is a contract between the state and the inventor. This contract not only encourages the inventive process and the disclosure of inventions but also encourages the efforts of the inventor to commercialise the invention. There have been instances of significant industrial development arising from the work of individual inventors where that work at a very vulnerable stage has been protected by patents. We would cite Ron Higman (WORKMATE), Percy Shaw (CATSEYES), Ken Pickles (CHORLEYWOOD BREADMAKING PROCESS) and George Molyneux (PLASTICS CAVITY CLOSERS). 1.3 Many SMB’s rely on patent protection, particularly in the start-up phase of a product or process. The notion that such small concerns cannot use patents because of the cost of enforcement is a fallacy. The existence of a patent normally tips the scales against copying by competitors who are usually no more able to afford full scale litigation than the patentee. David and Goliath situations are a rarity. 1.4 The value of a patent can be realised in a number of ways. Most patents relate to technical advances of an “incremental” rather than “major breakthrough” nature and it would be difficult to quantify the value of such patent protection, although the existence of the patent system supports the investment of time and money by even small companies to make incremental progress in their field. 1.5 Some industries, such as the pharmaceutical industry, produce products which require huge investments in safety and regulatory tests but can be easily copied; such industries can only justify the huge investment if they are able to recoup the costs by being able to prevent competitors from copying their product. Typically the costs incurred before first marketing of a new pharmaceutical product are £200 to £300 million. Without effective patent protection there would be no way that the company could recover such an investment; research and development would not be carried out because it could not be economically justified. The value of the patents is such industries is illustrated by the reports of lost sales as patents for important pharmaceutical products expire. Recent reports suggest that companies will normally lose from 80 to 90 per cent of their sales of a major product to generic competition shortly after patent expiry. It should also be noted that any prospectus for the flotation on the Stock Market of a company in, for example, the Biotech field gives a detailed review of patent holdings since at the time of flotation its patent portfolio is likely to be its most valuable asset. 1.6 The electronics and computing industry produced products which may incorporate tens or hundreds of patented inventions; accordingly the approach in this industry is for patent proprietors to license their patents on a non-exclusive basis. The approach companies take in this industry depends upon the strength of their patent portfolio. A company will need to balance the value of its own portfolio to a potential licensee against the value of freedom of action under the potential licensee’s portfolio. The most common arrangement in this industry is a cross licence under the patents with a balancing payment reflecting the relative values of the patent portfolios. It is difficult to put a value on patents used in this way because the information is considered to be highly confidential to the parties involved. However IBM has published that it made in excess of $600 million from patent licensing worldwide in a recent calendar year. 1.7 There are some organisations which do not manufacture products themselves but do research and development with the sole aim of funding their work and marking a profit from licensing their patents. The only assets such companies have are their people and their patents; this type of organisation is presently more common in the USA than the UK, and includes Biotech companies such as Genentech Inc., Chiron Corporation, and Kirin-Amgen Inc. 1.8 The value of patents to United Kingdom industry is that they assist the owner in getting a reasonable return on the investment he has made in making the invention. Q2. What purposes do the present patent systems in Europe serve for the United Kingdom? 2.1 The existing patent systems in Europe comprise the national systems by which national patents may be obtained directly, and the European patent system, administered by the EPO, by which national (European) patents may be obtained. The European Commission has recently published a Green Paper on the Community patent and the patent system in Europe to assess whether a unitary Community patent is needed. 2.2 The purpose of the patent system for industry in the United Kingdom is to enable industry to obtain a fair return on its investment in research and development. The value of a patent has been discussed above. The cost of obtaining the patent must be in proportion to its ultimate value; there is little point spending more money on obtaining a patent than will be returned be exploiting the right by use of licensing. 2.3 The present system in Europe enables the owner of an invention to choose in how many countries he wishes to file patent applications, and whether to file national applications or to “put all his eggs in one basket” by filing a single European patent application designating some or all States party to the EPC. Not all inventions have the same value or geographical applicability and the Chartered Institute believes that it is essential that the