Fight for your rights

BY JESPER LØVENBALK HANSEN

Research and invention is happening like never before, and intellectual property rights represent a constantly increasing share of the value of many companies. That puts correspondingly increased demands on the international patent systems, which according to experts should be revised as quickly as possible.

The times when the bulk of a company’s market value was in physical assets such as buildings, fixtures and machinery, have passed. Today, the market value of many companies mainly comprises intellectual property assets, in other words proprietary patent-protected inventions and brands, which are to an increasing extent sold, shared and exchanged between companies.

This trend is seen in the number of patents, which is rising by between four and five per cent annually worldwide, and which in 2006 reached more than six million active patents globally. It is also seen in the increasing numbers of violations and cases of copying, as well as the close attention both industry and governments pay to intellectual property rights (IPR).

“The patent system is the mechanism which ensures exploitation of society’s resources in the best possible way, so as to get as much innovation as possible for the cheapest possible price,” says Peter Lotz, head of the department of industrial economics at Copenhagen Business School, about the logic behind the international patent system.

Patents are not only the important contract between inventor and society, which ensures an individual or a company the right to earn money on new ideas for society’s common benefit and development. Patents are also a vibrant market where innovative companies gain a constantly greater share of their earnings. So explains Lars Pallisgaard Olsen of the Danish IPR firm Zacco, which advises companies on securing, protecting and trading their intellectual property rights.

“For many medium-sized and large companies, sales of patents and licences to use patents today represent a very large share of corporate earnings. Novo Nordisk is one of the Danish companies that generates a large proportion of its overall revenues from sales of patents and rights, and a company such as Rank Xerox has for many years earned more on licences for its products than from selling copying machines, which was their original business area.”

NEED FOR BETTER REGULATION
The rapid inflation in patents on a global level does however have a drawback: the constantly increasing number of patents worldwide puts enormous pressure on the authorities that have less and less time to process the often complicated applications. So says Lars Pallisgaard Olsen of Zacco, who prior to joining the Danish IPR firm, worked for eight years handling cases at the European Patent Office in Frankfurt.

“The danger is that too many patents are issued on too loose a basis, because there is not enough time or staff to go through the applications. It is bad business for everybody since a patent issued on the wrong basis subsequently costs a lot of time and money fighting over rights.”

The European Parliament draws attention to the same issue in a report from January 2008, which was commissioned by its Science and Technology Options Assessment panel.

The report ”Policy options for the improvement of the European Patent System” concludes that the world’s industries, in their pursuit of innovation and dominance, are pressing more and more patents through an ever more rapidly growing and impenetrable system. The international patent systems – and the European system in particular – thus seriously need to be tightened up. Otherwise there is a risk of serious consequences for innovation and welfare in the EU.

“It is difficult for both large and small companies to manage in a world that is gradually becoming extremely rights-restricted. They have to use too many resources on the process, and they become more and more afraid of risking their skins with a new product,” comments Peter Lotz on the report from the EU Parliament, to which he himself contributed.

There is a pressing need to standardise and centralise the patent system so that it becomes faster, easier and more secure for industry and inventors to get their patents through the system.

“Innovation creates growth. And if we didn’t ensure the inventor or the manufacturer their rights, we would not see any innovation,” says Lars Pallisgaard Olsen.