Special Sectoral Report Industrial property BRUSSELS,OCTOBER 1998
INDUSTRIAL PROPERTY Contents 1. Introduction....................................................................................................................... 1 2. The Single Market and industrial property....................................................................... 1 A. The features of Community action in the industrial property sphere........................ 1 a) Harmonisation of national law.............................................................................. 1 b) The creation of industrial property rights at Community level............................ 3 c) The free movement of goods protected by industrial property rights in the Single Market..................................................... 4 d) Subsidiarity and the interaction between protection systems.............................. 5 B. The transposition of Community legislation: current state of play............................. 5 3. Adaptation to technical progress; strengthening competitiveness................................... 5 4. The importance of the innovation process to small and medium-sized enterprises...... 7 A. Access to information................................................................................................... 7 B. Utility models................................................................................................................ 7 5. External action................................................................................................................... 7 6. The outlook....................................................................................................................... 8 A. Follow-up to the Green Paper on the Community patent and the patent system in Europe......................................................................................... 8 B. Combating counterfeiting and piracy in the single market......................................... 9 Annex.................................................................................................................................... 11
1. INTRODUCTION Industrial property is no longer regarded as just a complex area reserved for experts alone, but as a strategic issue of importance to growth in the Community. The Action Plan for the Single Market, which was adopted by the Amsterdam European Council in June 1997, identified industrial property as a sphere in which action needs to be taken in order to render it more effective and user-friendly, thereby making the most of the single market's potential in the field of innovative goods and services. Through its action in the industrial property sphere, the Community intends to make clear that it is taking full account of the importance of the link between innovation, growth and employment. The Community did not, of course, wait for the Single Market action plan before taking a closer interest in industrial property. Numerous initiatives have already been taken, and a number of legislative procedures have resulted in recent years in ambitious Community instruments. To create a genuine Single Market in the Community, restrictions on freedom of movement and distortions of competition must be eliminated or reduced as much as possible, while creating an environment favourable to innovation and investment. To this end, the Community is active in the areas of trade marks, patents, supplementary protection certificates, designs and utility models 1. The Community's action is to be viewed mainly against the background of the completion of the Single Market, but it also has an important external dimension. 2. THE SINGLE MARKET AND INDUSTRIAL PROPERTY A. The features of Community action in the industrial property sphere In the industrial property sphere, Community action is directed either at harmonising national law or creating unitary rights at Community level. It is characterised by the wish to bring about a fully integrated, frontier-free Single Market for goods protected by industrial property rights, and by a dynamic application of the subsidiarity principle. a) Harmonisation of national laws The aim of this type of action is to ensure the establishment of a frontierfree Single Market, transparency in the requirements for obtaining protection, and a high level of protection for innovation. This is the technique that was chosen in, for example, the fields of trade marks or designs. 1 For the latest information, see DG XV's Internet site at the following address: http://europa.eu.int/comm/dg15/fr/index.htm 1
Trade marks First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks Economic importance Trade marks are of considerable importance in modern trade. Identifying the origin of goods and services, ensuring high quality and conveying a firm's image and know-how are just some of the functions trade marks perform. Trade marks thus play an important identifying and guaranteeing role for consumers. Aims of the legislation To remove the disparities which existed between national laws; to ensure the free movement of goods and freedom to provide services. Salient features The Directive contains a non-exhaustive list of signs of which a trade mark may consist, provided they are capable of distinguishing the goods or services of one firm from those of other firms. It standardises the grounds for refusal or invalidity of a trade mark. The key feature of the harmonisation is the level of protection conferred by trade marks registered in the various Member States, which is henceforth identical throughout the Community. Transposition Member States had until 31 December 1992 to transpose the Directive. Recently, the Court of Justice clarified a number of important aspects of the Directive, including the concept of "likelihood of confusion" (SABEL v Puma) and the scope of the rights conferred (Silhouette v Hartlauer). In this connection, a number of questions are currently being examined in greater depth by the Commission's services with a view to establishing whether national laws comply with the Directive. Designs Directive 98/71/EC of the European Parliament and of the Council on the legal protection of designs Economic importance Designs are industrial property rights which protect the appearance of a product, being the result of a combination of lines, contours, colours, materials, etc. Designs are particularly important in certain sectors of industry such as furniture, motor vehicles, textiles, fashion accessories, electrical goods and toys. Aims of the legislation In the past, designs were not protected in all Member States by specific legislation, and such protection as there was had different attributes. These differences in protection had a direct, negative impact on the establishment and functioning of the Single Market in the case of goods incorporating a design. Salient features The Directive lays down a single definition of design and seeks to ensure that the registration of a design confers on its proprietor the same protection in all Member States of the Community. This is essential to the smooth functioning of the Single Market. The term of protection of a registered design is five years, renewable for periods of five years each up to a total term of 25 years. Transposition Member States have three years in which to comply with the Directive. 2
b) The creation of industrial property rights at Community level The second manner in which the Community takes action in the industrial property sphere is more innovative. A form of protection at Community level is placed at the disposal of economic operators through the creation of Community industrial property rights. It was this type of action that led in 1994 to the introduction of the Community trade mark. Talks are still under way in the Council and the European Parliament on the introduction of a Community design right. And there are plans to use the same technique in the patent field to create a Community patent. The Community trade mark Under the Directive mentioned above, trade marks remain national and hence confined to the territories of the Member States in which protection was applied for and obtained. This means that a firm wishing to register a trade mark in all the Member States of the Community must go through as many Offices as there are Member States in which it wants protection. The result is more red tape and higher administrative and translation costs. The approximation of laws is incapable on its own of removing the obstacle of the territoriality of rights. The Commission accordingly considered that it was necessary to supplement the approximation of national laws by the introduction of a system which enabled those firms which so wished to gear their activities from the outset to the scale of the Community. Through the Community trade mark (Council Regulation (EC) N 40/94 of 20 December 1993 on the Community trade mark), it is possible for firms to acquire, by means of a single procedure, trade marks which are immediately valid throughout the Community. The Community trade mark system is administered by the Office for Harmonisation in the Internal Market (Trademarks and Designs), which has its headquarters in Alicante, Spain 2. Economic impact of the Community trade mark: greatly simplifies administration as there is only one property right for the whole Community; makes it possible to ensure immediately the free movement of goods in the Single Market; makes it possible to convert existing national trade marks into Community trade marks; ensures the retention of national trade marks for local/regional needs. 2 Office for Harmonisation in the Internal Market (Trade Marks and Designs), Avenida de Aguilera 20, E-03080 Alicante; telephone: 00/34/6/51.39.100. 3
Statistics on Community trade marks Origin Applications 96+97 Applications 98 (31.7.98) Total % European Union 41.771 10.725 52.496 60.23 % Other countries 27.918 5.962 33.880 38.87 % Total 70.248 16.918 87.166 100 % Number of applications published Number of oppositions Number of trade marks registered 39.958 5.484 8.893 3 c) The free movement of goods protected by industrial property rights in the Single Market The industrial property rights that are granted at national level are territorial in nature. Thus, a trade mark granted in a given Member State has legal effects in the territory of that Member State alone. This being so, a firm which owns industrial property rights in more than one Member State may, in theory, use its rights to partition the Single Market and restrict the free movement of goods. To prevent this from happening, the Court of Justice has developed the principle of the "Community exhaustion" of industrial property rights. According to this principle, where a product protected by an industrial property right has been put on the market in the Community by the right holder or with his consent (e.g. by a licensee), it is no longer possible to rely on the industrial property right in order to limit the product's movement within the Single Market. The Community exhaustion principle has been included in all the legislative measures adopted in the industrial property sphere. In relations with non-community countries, on the other hand, this principle of exhaustion does not apply. As the Court of Justice recently affirmed in Silhouette 4, the Community rules on trade marks do not allow Member States to provide, in their national law, for the exhaustion of rights in products put on the market outside the Community. In other words, trade mark proprietors in the Community can, if they so wish, limit imports of protected products where they consist of parallel imports from outside the Community. This choice was dictated by such considerations as the need to check whether imported products are not counterfeit, consumer protection, and continuity of supply of trade-marked products. Harmonisation of national industrial property laws creates the conditions for greater transparency in protection mechanisms and thus contributes to the completion of a frontier-free Single Market. This is especially true where the national laws are from the outset very different from one another, as is the case with designs, pending transposition of the Community Directive. 3 The large difference between the number of applications and the number of trade marks registered is due to the start-up phase of the Alicante Office, which has been operational since April 1996. According to the Office's activities plan, the processing of the mass of applications that were lodged when the Office started working will be completed by the end of 1999. By then, registrations should number some 1 500 a month and it should take an applicant 12 months to obtain a Community trade mark. 4 Judgment of 16 July 1998 in Case C-355/96 Silhouette International Schmied GmbH & Co. KG v Hartlauer Handelsgesellschaft mbh, not yet reported. 4
d) Subsidiarity and the interaction between protection systems Community action in the industrial property field is ambitious and twopronged, consisting as it does of harmonisation of national law and the creation of industrial property rights at Community level. The harmonisation of national laws takes account of the subsidiarity principle; it is not aimed at every aspect of industrial property rights, but only at those which are necessary to the pursuit of the objectives of the EC Treaty, notably the completion of the Single Market and the introduction of a system of undistorted competition. The creation of Community industrial property rights is intended, for its part, to adapt legal instruments to the economic reality encountered by a significant proportion of industry in Europe. When asked about their strategy, most firms nowadays consider the Community market to be their natural market. The part played by national systems for the protection of innovation is still important, however. National patent and trade mark offices continue to play a very useful role in allowing easy access to the system of protection for firms active in the national or regional market. They also have a hand in disseminating information and promoting innovation, industrial property rights being an instrument in the service of both the protection and the promotion of innovation in Europe. It is interesting to note that a number of national industrial property offices have decided to refocus their activities in order to fully reflect this fact. As part of the Fifth Framework Programme for RTD, the Commission intends to launch a pilot project to support the work being done by national offices in this area. B. The transposition of Community legislation: current state of play Where Community action takes the form of regulations, transposition problems do not arise owing to the direct applicability of regulations in the Member States. This is the case with the Regulations creating supplementary protection certificates and the Regulation on a Community trade mark. With regard to the harmonisation of national laws, two Directives were adopted in 1998 - one on the legal protection of biotechnological inventions and the other on designs - and have therefore not yet been transposed. As stated above, a number of questions relating to the 1989 Directive on trade marks are currently being examined in greater depth by the Commission's departments to see whether national laws comply with the Directive. This is due to the fact that the Court of Justice recently clarified several important aspects of the Directive, including the concept of "likelihood of confusion" and the scope of the rights conferred by a trade mark. 3. ADAPTATION TO TECHNICAL PROGRESS; STRENGTHENING COMPETITIVENESS As part of its activities, the Commission keeps a close watch on technological developments and considers whether adjustments to the industrial property legislation are needed in order to keep pace with such developments and strengthen the competitive position of European businesses. This is the case, for instance, with biotechnology and the information society. Another example is the creation of supplementary protection certificates for medicinal and plant protection products 5. In both these areas, where research is long and costly, investment will continue to be undertaken in the Community only if the legal environment affords sufficient protection. Through the creation of supplementary protection certificates, an innovative firm in the pharmaceuticals or agrochemicals sector can enjoy patent protection for a total of 15 years from the date of the first authorisation to place the product on the market in the Community. 5 Council Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protection certificate for medicinal products, and Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products. 5
The case of biotechnological inventions Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions The Directive seeks to clarify patent law as it applies to biotechnological inventions, and to approximate Member States' laws in order to ensure a homogeneous level of protection, transparency in the conditions of protection and the free movement of products obtained using inventions in this area. Biotechnology nowadays concerns a broad range of sectors including pharmaceuticals, chemicals, agriculture, foodstuffs, environmental protection and engineering. Investment in these high-profile sectors is undertaken only if there are sufficient means of protecting inventions effectively. This is one of the Directive's main aims. But the Directive is not concerned only with technical matters. It also deals with the important aspect of the ethical dimension of biotechnological inventions. For the first time, Community law tackles openly, with the help of specific examples, the concepts of "ordre public" and morality. This point is worth underlining as it is proof that the co-decision procedure (involving the European Parliament and the Council) works, even where the matter being dealt with is sensitive. The Directive is the first international instrument in force to prohibit human cloning and processes for modifying the genetic make-up of human beings. Member States have until 30 July 2000 to comply with the Directive. Ten years of discussions have resulted in provisions that are directly operational. The Directive has come at the right time as it will enable Member States to adopt a coordinated stance during important international talks scheduled to take place soon within the World Trade Organisation and under the Convention on Biological Diversity. It will also exert an influence over the Munich Convention on the grant of European patents, it being doubtful whether the Convention can avoid being aligned with some of the Directive's articles. Trend in the number of European patent applications in the biotechology field 1987 1992 1997 1564 2121 3314 - + 35.6 % + 56.2 % The market in biotechnology products (ECU billion) Medicines Chemicals Agriculture Environment 1997 1.2 0.1 2.4 0.4 2000 (estimate) 23.9 14.6 40.0 2 6
Other aspects of patent law are currently being examined in depth with a view to adapting the legislation to technical progress. These are: the patentability of computer programs, a field in which there seems to be a real need for clarification of the law in Europe; and the scope of patent rights in certain hightechnology sectors such as pharmaceuticals. 4. THE IMPORTANCE OF THE INNOVATION PROCESS TO SMALL AND MEDIUM-SIZED ENTERPRISES A. Access to information Small and medium-sized enterprises play a fundamental role in the innovation process in Europe. Most industrial property studies show, however, that SMEs in the Community are unfamiliar with the means of protecting their inventions and that they have little recourse to them. A number of Commission actions are aimed at improving this situation by increasing SMEs' knowledge of the industrial property system and by placing new information tools at their disposal. Mention may be made here of the Commission initiative to launch an "IPR Helpdesk": this will combine a help line and a web site enabling answers to be obtained to questions about intellectual property which arise in connection with research programmes financed by the Community 6. The main aim is to raise awareness of the importance of intellectual property rights (mainly patents) to the innovation process, particularly among participants in the RTD framework programme (innovating SMEs, new technology-based firms, etc.). Another example is the Quick Scan system 7, a novelty search service set up within the framework of Community RTD programmes. protection for technical inventions, in particular those which have a short lifetime or which involve a small inventive step. Nowadays, technical inventions are at the forefront of industrial development; the numerous technical progresses, despite being of a more limited individual scope, constantly enable products and processes to be improved and satisfy new needs. Owing to their characteristics (flexibility, speed of grant, absence of cumbersome formalities), utility models are well suited to the needs of SMEs. At present, utility model protection exists only at national level. The conditions of protection differ widely, and this rules out any cross-border application of these rights. Without harmonisation at Community level, inventions involving a small inventive step will not enjoy comparable protection in the different Member States and will not be properly protected in those Member States in which there is no utility model system. This is a shortcoming which badly affects European businesses, and in particular SMEs. The proposed Directive should resolve these difficulties. 5. EXTERNAL ACTION The internationalisation of trade has also led the Commission to be highly active externally in the industrial property sphere. It thus played a leading part in the Uruguay Round negotiations which culminated in the conclusion of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the so-called TRIPs Agreement) within the World Trade Organisation. The Commission is likewise active within the World Intellectual Property Organisation, the traditional forum for negotiating international treaties dealing with industrial property. B. Utility models On the legislative front, the Commission recently proposed a Directive aimed at harmonising Member States' laws on utility models. Utility models are registered rights which confer exclusive 6 Tel. +352-477.777. Fax. +352-471.111. Website: http://www.cordis.lu/ipr/src/helpd.htm 7 http://www.cordis.lu/ipr/src/scan.htm#1 7
This prolific activity is due to the need, clearly felt nowadays, to provide European firms doing business in non- Community countries with an adequate legal framework within which to enjoy effective, genuine protection of knowhow and innovations. The improvement of protection in those countries also makes it possible to combat imports of counterfeit goods into the Community more effectively. 6. THE OUTLOOK A. Follow-up to the Green Paper on the Community patent and the patent system in Europe Gradual worsening of the European position with regard to the number of patents held Origin of the holders European patents (86-90) European patents (91-95) American patents (86-90) American patents (91-95) EU (15) 48.88 % 43.94 % 20.73 % 16.77 % USA 26.28 % 31.29 % 52.61 % 54.19 % Japan 17.71 % 17.05 % 20.50 % 22.08 % Average cost of a European patent (8 countries, duration 10 years) Processing fees payable to the European Patent Office Translation fees payable nationally Professional respresentation before the European Patent Office National renewal fees Total DEM 8.900 DEM 22.500 DEM 11.000 DEM 16.700 DEM 59.100 15% 38% 19% 28% 100% The present situation The available statistics on the grant of patents show a steady worsening of the share of European and American patents held by European businesses. Users of the patent system in Europe constantly criticise its expensiveness, the cost of a European patent being three to four times higher than its US or Japanese equivalent. Improving the patent system in Europe will not on its own lead to an increase in inventive activity; this will require a fundamental redirecting of the European research effort, something which has in fact been decided on. The patent system is, however, instrumental in ensuring firms' competitiveness and hence also in maintaining and creating skilled jobs in the Community. 8
Follow-up to the Green Paper The consultation exercise set in train in June 1997 by the Green Paper on the Community patent and the patent system in Europe has been a great success. All the interests concerned (industry, patent agents, inventors, universities, etc.) have participated actively in the consultations, expressing their views on how to improve the patent system in Europe. The Commission intends to publish a communication on the follow-up to the Green Paper on patents by the end of 1998. This will take stock of the contributions from the interests concerned and from the other Community institutions, and will contain a list of priority actions which the Commission proposes to embark on in the months and years ahead. One of the major undertakings that are planned is the introduction of a Community patent. Firms would thus be able to obtain, at the end of a single procedure, a unitary right valid immediately throughout the Community. To this end, a Regulation based on Article 235 of the EC Treaty is to be proposed to the European Parliament and to the Council. A number of important questions will have to be carefully examined in this context, including those of costs and of the judicial arrangements. It is expected that the European Patent Office in Munich will be chosen as the body which grants the new right. The closest possible coordination will have to be ensured between the work being done by the European Patent Office on the European patent and that being done by the Community, with a view to achieving the best possible synergy between the two organisations. A number of other important subjects will be developed as part of the followup to the Green Paper, namely the possibility of patenting inventions in the computer program field, the need to set up an insurance scheme to cover the costs of industrial property litigation, and enhancement of the role played by national patent offices in disseminating information on patents and promoting innovation. B. Combating counterfeiting and piracy in the Single Market Economic importance of the problem In the industrial property sphere the Community has so far concentrated on harmonising national laws and creating unitary rights at Community level. The consistent, effective implementation of the rights and obligations stemming from the legislation now has to be ensured in the Single Market. Counterfeiting and piracy are a phenomenon which affects the proper functioning of the Single Market as, in addition to the deflections of trade and distortions of competition to which it gives rise, it is leading both to a loss of confidence among business circles in the Single Market and in the ability of the authorities to protect their rights effectively, and to a reduction in investment. It has major repercussions not only economically and socially, but also in terms of consumer protection, especially as regards public health and safety. The number of jobs lost in the Community through counterfeiting may be put at 100 000 a year. The phenomenon affects a wide variety of industries and the counterfeiting and piracy rates in relation to the total turnover of the industries concerned are sometimes substantial. The scale of counterfeiting/piracy by industry Industry concerned Data processing Audio-visual Toys Perfumes Medicinal products Clocks and watches Counterfeiting/ piracy rate 35% 25% 12% 10% 6% 5% 9
A Green Paper on combating counterfeiting and piracy in the Single Market 8 The fight against counterfeiting and piracy is an important factor in ensuring the proper functioning of the Single Market. The Commission is consulting all the interests concerned through a Green Paper on combating counterfeiting and piracy in the Single Market. The aim is to assess the economic impact of the phenomenon in the Single Market, evaluate the effectiveness of the relevant legislation, and consider what improvements might be made. These concern four specific aspects: support for private-sector monitoring, the legal protection of security and authentication devices, the sanctions and other means of enforcing intellectual property rights, and the setting-up of suitable machinery for administrative co-operation between the competent national authorities. The outcome of the consultations will guide the Commission in its choice of measures with which to combat the phenomenon in the Single Market. 8 COM(98) 589 final, 15 October 1998 10
Legislative texts already adopted ANNEX Field Measure Deadline Sectors concerned Trade Marks Directive 89/104 31.12.1992 All Community trade-mark Regulation 40/94 14.03.1994 All Designs Directive 98/71/EC 2001 Car, textile, furnishing, electric household appliances, mobile phones, toys, containers... Biotechnology Directive 98/44 30.07.2000 Pharmaceuticals, food industry, chemistry, waste processing... Supplementary protection certificates Regulation 1768/92 02.01.1993 Pharmaceuticals Supplementary protection certificates Regulation 1610/96 08.02.1997 Plant protection products Legislative texts under development Field Community design Utility models Measure Proposal for a Regulation Proposal for a Directive Sectors concerned Car, textile, furnishing, electric household appliances, mobile phones, toys, containers... Optics, precision instruments, toys, mechanical and electrical engineering... Legislative texts in preparation Field Community patent Patentability of the computer programs Measure Proposal for a Regulation Proposal for a Directive Sectors concerned All Software 11