TCS Daily

From Inventions to Innovation

By Marcus Stober - April 7, 2005 12:00 AM

Are intellectual property rights crucial to boosting innovation in Europe? That was the question addressed last week at a TechCentralStation Europe Hayek Series debate, where a panel of EU experts convened to discuss the challenges facing Europe's drive to create a competitive knowledge-based society.

One of the main issues covered at the debate was the role of intellectual property rights and their importance to overall competitiveness. "The Lisbon Agenda requires more than just stimulating research and development, more than just generating investment," observed Reinhilde Veugelers, an economics professor at the University of Leuven and adviser to the European Commission. "You have to guarantee that these investments will be translated into wealth." In other words, she said, innovation is not only about inventing, but is rather a continuous process that requires legal frameworks.

If only EU politicians agreed with her. The sad fact is that despite a lot of grandiose words from EU leaders about innovation we still lag behind. We are still a continent of exporters of researchers and inventions. Most of this is lost to the U.S., but more and more Europe is forfeiting the innovation race to booming China. The reason is an increasingly difficult political situation in Europe, which makes it nearly impossible to address competitiveness issues at national level. These days Europe's leaders are more preoccupied with winning referendums on the European Constitution than there are with expanding the internal market.

Another telling example of this is the debate surrounding the 2002 European Commission proposal on the Patentability of Computer Implemented Inventions, better known as the Software Patent Directive. The directive aims to remove barriers and cut red tape throughout the EU. By harmonizing existing practices among member states it would help reduce friction on the internal market.

The proposal has nevertheless stirred up emotions. Some groups attack its text as a threat to civil liberties and say enforcing it will lead to the domination of large companies. One MEP has even suggested an unholy alliance to "rule the world" between the European Commission and a major software company. Regardless of whether they are valid concerns or wacky conspiracy theories, they have proven effective in mobilizing resistance.

But most of the arguments against the Software Patents Directive are easily thwarted when exposed. First, Europe already has a patent system and although it is not a coherent one it does has not resulted in a massive undercutting of civil liberties. Nor has it proven to be a hindrance to competition (in fact, the opposite is probably true). Second, setting common rules, and thus increasing transparency, should draw a clearer distinction between what can be protected by patent and what can not. Patent is a crucial component in making sure that an innovator's investment is not exploited or stolen. It is the only way for a small company or entrepreneur to make it worth risking investing in R&D. Patent, therefore, remains a fundamental component in the process of turning inventions into genuine innovation.

If the EU is serious about becoming the world's most competitive economy by 2010 - and despite all the evidence, we must still believe it is - it must unleash the innovative capacity of the European economy. One way to do so is to ensure that European entrepreneurs and companies are able to make money out of their investments. "SMEs desperately need patent protection in order to gain venture capital that will allow them to grow their businesses," said one of the audience members during the Q&A session at the Hayek debate. The EU should guarantee that the final agreement version of the Software Patent Directive balances an adequate legal protection for investing in R&D, without compromising competition or infringing upon on civil liberties.

Or as Waldemar Ingdahl of Sweden's Eudoxa think tank put it in a TCS Europe article last March; "Intellectual property is necessary for the continued development of not just software technology but anything based on information -- just about everything in the knowledge economy. At the same time striking the balance between protecting it and protecting civil liberties is hard as long as they are viewed as fundamentally opposed. But there is no reason they should be opposed; what remains is to find a workable form."

Striking that balance is the tricky part, especially when the debate is about technicalities. But finding a solution is not made any easier when public emotions run high and are misled by imaginative conspiracy theories.


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