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Klaus-Dieter Langfinger
Global IP - BASF, Ludwigshafen
An adequate IP system providing the right balance between the protection for the creative mind and the interest of society is necessary for companies to be successful in todays global economy. Innovation is the lifeline for companies and the area to gain the necessary competitive edge to survive and to be successful in the long term through sustainable growth and profitability. This is true regardless of the size of the company – SME might be even more dependent on IP rights than multinationals.
In the globalising economy, the patent system has to make progress in achieving a certain degree of harmonisation – what began as a set of national rules has to be adopted to the business world which more and more overcomes national borders. Unfortunately, especially the developments in the EU in the recent years are far from encouraging in this regard and a lot of work remains to be done to achieve the central goal of the Lisbon agenda – to make the EU the most competitive economic region in the world by 2010.
The EPO is a good example that a right concept will have success and we should support the office in its attempts to achieve the appropriate balance to support innovators as well as providing benefits for the society.
Using the IP system to gain a competitive advantage
Differentiation through creative act and innovation – in today’s global economic competition this is a vital need for societies and economies to be successful. As distances seem to disappear and logistics around the globe enables companies to influence their cost structure by selecting the appropriate and most economic production site. Economic regions with cost disadvantages have to compensate by providing and creating intellectual assets.
Thus, research and development are essential for global enterprises to achieve sustainable growth. Intellectual property, and in particular inventions are the immediate result of research and development. However, only innovations, i.e. the successful transfer of an invention to a marketable product provide the required return on investment (in the form of IP rights) for companies to justify R&D expenses for their shareholders or equity partners. From invention to innovation, it is a tedious and costly way with a significant number of failure risks in between. Small and medium sized enterprises regularly need external financing to develop an invention towards an innovation – suitable financing partners, however, require securities. Young companies quite often can only offer intellectual property in the form of IP rights as such a security as they do not normally have appropriate tangible assets to offer. Intellectual property without appropriate protection for such purposes is of no value once it becomes part of the public domain and can be copied and reproduced by everybody, not having had the investment in R&D for their creation.
The lack of protection for inventions through appropriate rights according to Buchanan and Yoon (“The tragedy of the Commons and the Anticommons”) leads, through the possibility of limitless imitation, to an excessive use of the cost-free resource invention and, as a result thereof, to the abandonment of R&D by the innovative and creative companies. If, on the other hand, an excessive protection is provided, this will lead to an inefficient under-usage of inventions as the hurdles for others to enter the market and to compete are to high.
From the foregoing, it becomes clear that an appropriate IP system has to find the right balance to avoid this tragedy of the commons and the anticommons and to render a desirable contribution to the economy for the benefit of mankind and to support R&D driven companies in their desirable activities. Without doubt it can be said that the vast majority of breakthrough-innovations throughout history would not have been made would there not have been a protection available for the creative minds behind them. Furthermore, without the time limited protection through intellectual property rights, there would be no incentive for an inventor to disclose his invention to the public. He would rather try to keep same as his secret as long as possible to gain the necessary competitive edge which would impede the further development by others.
A successful IP system limits the competition by imitation but supports the competition by substitution – which in itself should be desirable. Only the acknowledgement of protection of intellectual property makes a real competition with the protected goods possible.
In view of the foregoing it should have become clear that companies can and must gain a competitive edge through use of the IP system to survive in today’s global economy. The patent system is one of the most important components of a system for managing intellectual property rights. However, what began as a system of national rules – at least in part also designed and used for local protectionism purposes – has to be further developed to accommodate to the changes. Information technologies and distribution channels through the web do not have national borders and thus we need efforts towards creating systems which provide a certain degree of unitarity across and over national borders. Patent law harmonisation is key to achieve the appropriate balance repeatedly mentioned before.
Unfortunately, and this I have to say very clearly at this point, the recent developments in the patent system of the European Union, are not encouraging in this regard. National particulate interests have blocked desirable and necessary amendments to the patent system to support European industry in gaining a competitive edge through use of the IP system. Excessive translation requirements coupled with legal uncertainty in case of litigation are counterproductive and will definitely not help to achieve the goal of the Lisbon agenda – to make the EU to the most competitive economic region in the world by 2010.
Last but not least: Quality has to be an essential part of a successful IP system and quality means appropriate reward without overemphasising the protection of the individual. To cut it short: Quality has to succeed over quantity ! The number of patents as such without an appropriate quality level will lead to the mentioned tragedy of the anticommon – and this will also impede innovative companies in gaining the competitive edge in the long run. In this regard it is necessary for the European patent system, and in particular for the EPO as the central agency to maintain an appropriate level of inventive step in the granting procedure. The EPO has been a success story since its opening in 1977 and we should all use our best efforts to continue this path and to make the necessary improvements. Ever increasing numbers of patent applications are not an appropriate measure to evaluate a system. Although in charge for the IP matters in the greatest chemical multinational company in the world, I am deeply convinced that also in particular for SME’s the foregoing features and characteristics for an IP system are essential and that here is no difference in the desirable goals. Hopefully, the political scene will recognise these needs in the near future and act accordingly – in the interest of the business enterprises as well as in the interest of society. If we are able to achieve this, I am confident that the IP system of 2025 will contribute its part to the development and success of mankind.