European Patent Office Study Shows Patents Matter for SMEs, Economic Growth

“SMEs that have made use of intellectual property rights have +21% chance of growth in subsequent years compared to SMEs that have not invested in intellectual property rights, and +10% chance of high growth in subsequent years.”

Yann Ménière, chief economist, European Patent Office

“IP matters for the European economy,” said Yann Ménière, the chief economist for the European Patent Office (EPO), who provided the opening keynote presentation at the EPO’s High-growth technology business conference 2019 on November 4 in Dublin, Ireland at Aviva Stadium. Leading off a packed two-day program, Ménière released the results of an EPO study on how Small-to-Medium Enterprises (SMEs) used intellectual property rights, specifically patents.

SMEs typically file European patents for high-potential inventions that find their way to market, the EPO study finds. Therefore, not surprisingly, the EPO report also shows that SMEs that rely on patents have an above average number of employees, and those employees are higher paid and contribute more to European GDP.

“Employees in these industries are more productive, and as a result are better paid, and as a result these employees are truly an engine of the European economy,” Ménière explained. Indeed, 45% of the EU GDP and up to 39% of employment is attributed to SMEs who invest in protecting their innovations with intellectual property rights.

Patents Equal Growth

Perhaps the most remarkable correlation found by the EPO study relates to the likelihood that an SME with intellectual property rights will experience growth or high-growth. The report reveals that SMEs that have made use of intellectual property rights have +21% chance of growth in subsequent years compared to SMEs that have not invested in intellectual property rights, and +10% chance of high growth in subsequent years. Even more remarkable, if the patent portfolio includes European wide rights, SMEs have a +26% chance of growth and a +17% high growth compared with SMEs not investing in patents, which according to Ménière makes sense because these companies are setting themselves up for success on a European wide and global scale.

In the United States, we have repeatedly heard from those calling for increased patent reform that SMEs are holding big tech hostage, and they have been maligned as not being “true innovators” because they do not actually commercialize. This is not what the EPO study found with respect to SME use of intellectual property rights.

Sixty-seven percent of SME patents are, in fact, commercialized, nearly half the time via partnerships. More specifically, according to the EPO report, of those SMEs that do commercialize their patents, some 34% will commercialize their patents in cooperation with external partners. Another 15% will rely on external partners to commercialize the patents. The remaining 51% of those SME patents that are commercialized are commercialized by the SME themselves.

A Holistic Approach

Not only are SMEs commercializing their own patents, themselves and in cooperation with partners, but they also have a holistic approach to the use of patents in general. While 83% of SMEs surveyed use patents to prevent imitation, a majority of SMEs aim to use European patents for “transactional” purposes. More specifically, 69% of SMEs rely on European patents for reputational purposes, 59% rely on patents for freedom to operate, 53% for contracts, 46% for licensing, and 35% for financing. Indeed, there are many valid, legitimate business reasons for SMEs to obtain patents even when they have no interest in offensive patent enforcement in the courts.

Still another of the interesting facts contained within the EPO report is the magnitude of reliance on European patents by SMEs and universities. “SME and universities represent 20% of patent applications filed at the EPO,” Ménière said. He would go on to explain, however, that this is an under representation of the reliance on patents by both universities and SMEs because both SMEs and universities tend to file first in their own domestic patent offices and then file outside their domestic office only for those applications that show the most promise.

Challenges Remain for SMEs

Of course, not all is roses and rainbows for SMEs. There are persistent challenges that need to be addressed, such as SMEs’ lack of ability of to find partners (cited by 31% of SMEs in the EPO study) and the cost and complexity of negotiations (cited by 30% of SMEs). “Given the role that patents play in supporting our economy and bringing forward new technologies, efforts have to continue in finding ways to tackle successfully the challenges revealed in this study,” said EPO President António Campinos in a press release.

The conclusion of the EPO report is that SMEs matter for the European community and patents matter to SMEs, which means that patents matter for growth in Europe, explained Ménière.

Gene Quinn Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people [...see more]

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Join the Discussion

6 comments so far.

Anon
November 6, 2019 04:06 pm
Giancarlo,

I cannot agree with your premise. Supporting enterprises over individuals is anathema to the great US experiment that (at one time) produced the single most innovative nation this world has ever seen.

It may be a bit of an “Ugly Amercian” attribute to “toot that horn,” but what you do not include in the “switch” to advancing enterprises, is that enterprises are non-juristic persons and that such brings (MUST bring) a whole host of other considerations into play – not the least of which is that enterprises are (typically) NOT beholding to a Sovereign (as individuals would be), and patent law was, is and ever shall be, a Sovereign-Centric law.

Bottom line is that your “enterprises” become overpowered by Trans-national Big Corp types who would rather compete on non-innovation terms (the terms by which the individual — as well as small ‘enterprises’ have a distinct advantage with the help of strong patent laws).

Your path is neither desired nor required and is most definitely NOT the strongest path forward for the sake of innovation itself.
Giancarlo
November 6, 2019 10:50 am
If I may combine the above contributions I’d say that history on both sides of the atlantic shows that as markets get more complicated (and global) and competitiveness faster all the time, it is quite logical (if unromantic) to support enterprises more than individuals. But if the regulations are well aimed, allow me to say that the difference is minor… Here in Italy all Non-Base Research funds do go to companies, not individuals. Yet as soon as you have 1 patent or even just 1 license having created a zero cost “innovative corp” you are eligible for all assistance, funding, tax advantages etc. In other words the operating difference becomes nil, while as a corp you do offer creditors and investors a better prospect of recovery if things go wrong.
Today’s issue in my opinion is not the “start up” phase, where most EU countries are doing fine, but rather the “scale up” phase, which is where big corpns especially US come in and buy relentlessly before the Micro or SME entity has had a chance to grow…
The reason for that is another argument in favour of enterprise vs individual: in Europe there is less risk appetite, it is tougher to get funded, so we have to look at every way to reduce risk…which is why I believe IP is a subject destined to grow, at least if courts and chinese excesses do not sink it …!
In brief: a Team with multiple skills and angles to an invention which builds a Start-Up is undeniably a less risky proposition than a genius in his backyard or even in a good university!
Night Writer
November 5, 2019 06:59 am
Reality is that all the countries that have success in innovation have had a strong patent system.

The countries with—by a huge margin–the most success with innovation in Europe are Germany and the UK both of which have strong patent systems.

What is missing from some of the arguments above is what the big corporations are arguing in Congress that the USA will be fine without a big patent system because the big corporations will take care of that innovation problem with their internal research. That is their argument.
Ternary
November 4, 2019 11:08 pm
Gene,

The patent system in Europe is a corporate system, not an inventor focused system. The EPO does not track independent inventors, they track companies and institutions. The examples mentioned in the study report are company owned inventions. The term SME is not a coincidence, it reflects the European way of thinking.

The impression I have from the report, is the same as I have from prior experiences in Europe: first form a company with revenues and then pursue patents. That is: patents in Europe are a corporate/institutional thing. This is reflected in the cost of obtaining a patent in Europe.

There are almost no incentives for independent small inventors in Europe to obtain a patent and start a company based on that.

It is the American independent inventor who has shaken up industries and markets. The American inventor usually started out with an idea and often a patent that was not too costly. The American independent inventor (admittedly a dying breed) is not an SME, he/she is a pre-SME. It is an approach that has served us extremely well. An SME in Europe in not an individual, it is what in German is called the “Mittelstand.” What Europe/EPO is trying to do is convince the Mittelstand/SME to do more R&D and get patents. Not for independent inventors to get patents and start a business. That is (was) an almost exclusively American approach.

Europe and in particular the EPO does not support pre-SMEs. It has no mechanism for that. We do (or did).

That is what lobbyists and established companies in the US want: a patent system that serves the corporate/institutional purpose, not the interests of independent inventors in fields like software. Orderly and expensive to lock out the irritants who have proven to be able to undermine the long-term success of their operations. (I will not repeat the litany of companies/industries that have disappeared because of new technologies often developed by independent inventors.) Bill Gates expressly warned against those independent inventors, because he was one of us and he knew.

It is that “European” approach that many interest groups in the US want to emulate. To achieve it, they complain about quality and continue raising barriers (101s, 112s, vague 103s, IPRs), increase cost and take away potential competitors. Groups in the US have even promoted the need for “harmonization” with Europe. I say, let the Europeans harmonize with us.

We had the best patent system in the world, not perfect, but affordable, with usually (with some notable exceptions) giving the inventor the benefit of the doubt. No more.

That SMEs in Europe should do research and obtain patents to contribute to their economic success is no surprise to me. It is actually one of the classical aspects of “Mittelstand”/SME development. I am all for it. What surprises me again and again is the total absence of any interest in independent inventors.

The change that seems to take hold in this country and the way there is a desire to emulate the EPO, is to follow the European belief that patents are a corporate/institutional thing and that our system should go the same route. I am an independent inventor and I am against it.
Gene Quinn
November 4, 2019 04:44 pm
Ternary-

I don’t see the U.S. emulating the European patent system. Software and biotech and medical diagnostics are patent eligible in Europe and not so much (if at all) in the U.S. Similarly, this study demonstrates that there is a correlation between patent rights and the likelihood that a company will experience growth and even high growth. Those are things that were once believed as truisms in the U.S., but now viewed as falsehoods or at a minimum with skepticism.

Europe is doing remarkably well emulating the former U.S. start-up culture. After all, these SMEs had to start somewhere, and they were not born with revenue or employees. They start somewhere, grow to SMEs and ultimately into large enterprises if they are successful. That used to be the America way.
Ternary
November 4, 2019 10:57 am
The Study reflects the “corporate” bias of the European patent system. Read the study, its corporate bias is striking. They have no way and no interest to identify or to incentivize independent inventors. They understand, in an intellectual sense, that individuals are the alpha and omega of the inventive chain. They try over and over again to emulate the US start-up culture. But they fail, because deep in their hearts they truly believe that governments should support companies and institutions like universities.

The bizarre aspect of this is that the US (under pressure and guidance of corporations and their lobbyists and paid-for academics) now tries to emulate the European patent system, forgoing our own empirically proven and validated patent system that used to be the envy of the world.