© j. straus 2011 -1- ip issues & policy in europe joseph straus, munich/pretoria 2011 tongji...

© J. Straus 2011 -1-

IP Issues & Policy in Europe

Joseph Straus, Munich/Pretoria

2011 Tongji Global Intellectual Property Forum

Tongji University, Shanghai, October 29, 2011

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Points to Consider

• Europe & its present main concerns

• EU & its global economic challenges

• EU commitments to innovation and IP

• EU gaps between commitments and (partial) real approach to IP

• Some final thoughts

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Europe & its Main Concerns

• Desperately in search for the solution of the financial crisis

• Heterogeneous membership playing in different leagues

• Need for new EU governing mechanisms

• Need to improve research and innovation performance of underperforming areas

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Heterogeneous Membership of the EU

Research and Innovation Performance: EU Member States

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• Share of GDP on R&D:– EU: 2%– US: 2.8%– Japan: 3.4%

• Our target = 3% in 2020

• Current national targets only 2.7-2.8%

• In net spending, China will spend more than the EU in 2014

• Share of persons aged 25-34 with a university degree:– EU:34%– US: 42% – Japan:55%

[Presentation of J.M. Barroso to the European Council, 4 February 2011 ]

Europe risks losing ground

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EU research and innovation performance compared to US, Japan and China

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The EU is slowly falling behind on R&D

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• Poor availability of finance

• Costly patenting

• Lack of legal and tax level-playing field

• Outdated regulations and procedures

• Slow standard-setting

• Weaknesses in public education and innovation systems

• Failure to use public procurement strategically

• Fragmentation of efforts


What is wrong in Europe? – According to President Barroso

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• ‘Smart’ fiscal consolidation

• Improved framework conditions

• Steer and monitor at EU level

• A future-oriented EU budget


What can we do about it? – According to President Barroso

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• Current financial and fiscal pressures may lead to cuts in

R&D and innovation

• We need rigorous fiscal consolidation and growth-friendly

expenditure

• Several Member States are managing to maintain or

increase public investments in innovation and R&D


Priority 1: ‘Smart’ fiscal consolidation – According to President Barroso

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Priority 2: Improved framework conditions - According to President Barroso

• Create a true EU market for venture capital funds

• Act on intellectual property rights

• Pool excellence in areas of societal concerns: cf. first Innovation Partnership “healthy and active ageing”

• Faster setting of European standards

• Best practices in using public procurements


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The need for a strategic approach – According to President Barroso

Our key partners and emerging economies follow a strategicapproach to innovation and implement it.

A strategic approach to innovation =• Innovation is the overarching policy objective driving all

other policies (education, labour markets, skills, ICT/infrastructure, tax policy, etc.)

• Innovation policy is steered and monitored at the highest level

• Massive investments in skills, research and innovation especially through « recovery » packages

[Background Information for the European Council, 4 February 2011 ]

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The example of China – as seen by President Barroso

China « Indigenous Innovation Strategy »Promote the development of technological innovation in

domestic firms, leading to ownership of own core IP rightsExplore potential markets through in-house R&D activities

and external knowledge acquisitionBe among the top-5 worldwide by 2020 for patents

granted for domestic inventions and citations of international scientific papers

Implement the “Medium- to Long-Term Plan for the Development of Science and Technology until 2020”

- min. 60% of GDP growth- max. 30% foreign technologies, IPR, standards

1000 Talent programme – to get the 1000 best Chinese researchers back from the US


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EU’s response: Innovation Union – according to President Barroso

• A flagship initiative of the Europe 2020 strategyRadically improving the framework conditions and reducing

time-to-marketPrioritising resources around major societal challenges, i.a.

through European Innovation PartnershipsFully exploiting non-technological innovation (e.g. services,

design)Concentrating on what works, like the European Research

Council, and using public funding to leverage private R&D. For example, one euro put into the EU Risk Sharing Finance Facility triggers some 30 euro of private investment.

Simplifying and streamlining EU and national research programmes, so that scientists can spend more time in the lab and businessmen expanding markets

See: http://ec.europa.eu/research/innovation-union/index_en.cfm


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European Commitment to IP

• “Ensuring the right level of protection of IPRs in the single market is essential for Europe’s economy. Progress depends on new ideas and new knowledge.”

• “There will be no investment in innovation if rights are not protected. On the other hand, consumers and users need to have access to cultural content, e.g. online music, for new business models and cultural diversity to both thrive.”

• “Our aim today is to get the balance between those two objectives right for IPR across the board. To make Europe’s framework for IP an enabler for companies and citizens and fit for the online world and global competition for ideas.”

[Michel Barnier, Internal Market Comissioner (05/2011)]

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EU & its Basic IP Legal Framework

• Directive on the Legal Protection of Computer Programs (1991/2009)

• Regulation on Community Plant Variety Rights (1994)

• Directive on the Legal Protection of Databases (1996)

• Directive on Legal Protection of Biotechnological Inventions (1998)

• Directive on Design Protection (1998)

• Regulation on Community Design (2001)

• Directive on Copyright and Related Rights in the Information Society

(InfoSoc Directive) (2001)

• Directive on Resale Rights in Works of Art (2001)

• Directive on the Enforcement of IPRs (2004)

• Directive on the Term of Protection of Copyright and Certain Related

Rights (2006/2011)

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Pending EU-IP Legislation

• Proposal for a Regulation implementing enhanced cooperation in the area of the creation of unitary patent protection (06/2011) – challenged by Italy and Spain

• Draft agreement on a unified patent court and draft statute (06/2011)

• Proposal for a Directive on certain permitted uses of orphan works (05/2011)

• Proposal for a Council Decision on the conclusion of the Anti-Counterfeiting Trade Agreement (ACTA) between the EU and its Member States, Australia, Canada, Rep. Korea, Mexico, Morocco, New Zealand, Singapore, Switzerland and the USA (06/2011)

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Further EU Planned Actions in IP

• Proposals to modernize the trade mark system at EU & national levels – adaptation to the Internet era

• Proposal to create a legal framework for efficient multi-territorial collective management of copyright – particularly in the music sector → common rules on transparent governance and revenue distribution

• Entrusting the task of the European Observatory on Counterfeiting and Piracy to Office for Harmonization in the Internal Market (OHIM)

[EU Music, Movie, TV and Software Industry in 2008 lost ~ € 10 Billion & more than 185.000 jobs]

• Proposal for a new customs regulation, to further reinforce the legal framework for customs actions

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Some Questionable Imbalances Between Commitments to IP and Reality

• EU Commission: pharma-sector inquiry attack on defensive patents (alleged abuse of dominant position by filing such applications) attack on dispute settlements between ethical and generic drug producers

• ECJ: No patents for inventions related to human embryonic stem cells if generated by destruction of embryo regardless of:– The legality of the original generation of stem cells– That no use of human embryos is necessary for exercising

the invention– That such products may be commercialized– Use of human embryos for purposes of scientific research

= use for industrial or commercial purposes

[ECJ Case C-34/10 (October 2011) - Brüstle]

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Balance = Taking Care of the Goose Laying Eggs We Need!

Drugs Groups Forced to Put Squeeze on R&D

[Financial Times, October 17, 2011, p. 20]

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• Established new int. efficient checks and balances: Introduced mandatory IPR protection standards & imposed removal of many trade barriers & trade distortion measures

• Narrowed the room to maneuver of WTO members in both areas → DSU control → retaliation & cross retaliation measures

• Could, e.g. US or China challenge EU under WTO DSU for violation of Art. 27 (2) TRIPS because of ECJ Brüstle

The New World Economic Order Under WTO

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The Brazil v. USA “Upland Cotton Case”

• 2002 - Brazil requested consultations with the US on prohibited and auctionable subsidies for US producers, user and/or

exporters of upland cotton

- Brazil contended violation of US obligations under Agreement on Subsidies and Countervailing

Measures (SCM) and the Agreement on Agriculture

• 2003 - DSB established a Panel

• 2004 - Panel Report circulated and held

- Agricultural export credit guarantees – subject to WTO export subsidy disciplines – three US export credit

guarantee programs prohibited export subsidies without Peace Clause – in violation of those disciplines

- US grants several other prohibited subsidies for cotton

- US domestic cotton support programs not protected by the Peace Clause – certain result in serious prejudice to

Brazil’s interests through price suppression in world markets

IPRs – Trade Retaliation Weapon

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• 2004 - US appealed

• 2005 - Appellate Body Report circulated – by and large upheld

Panel’s findings

- US stated its intention to comply with the recommendations and rulings of the DBS

• 2006 - Brazil requested establishment of a compliance panel

• 2007 - Compliance Panel Report circulated – found that US

has by and large failed to comply

• 2008 - US appealed to Appellate Body so did also Brazil

- Appellate Body upheld the Compliance Panels findings

• 2005 - Brazil requested the DSB for authorization to suspend

concession or other obligations under Article 4.10 SCM

Agreement and Article 22.2 DSU


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• 2008 - Brazil requested the arbitration proceedings be resumed

• 2009 - The arbitrators determined that Brazil may request

authorization from the DSB to suspend concession or

other obligations under the Agreement on Trade in Goods, at a level not to exceed US $ 147,4 Million per

FY 2006, or for subsequent year, an annual amount

to be determined, and also may request authorization

from DSB to suspend certain obligations under TRIPS

and/or GATT


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• 2010 - Brazil notified the DSB that it would suspend the application to the USA of concessions or otherobligations under the 1994 GATT- Brazil issued Presidential Order on suspension of certain concessions or other obligations under TRIPS- US and Brazil negotiated and informed DSB that theyhad concluded a framework for mutually agreedsolution to the cotton dispute in WTO and Brazilpostponed trade retaliations until after the 2012 farm bill- Under the Framework Agreement US offers, inter alia, a$ 147.3 Million annual fund to provide technicalassistance and capacity-building for Brazil’s cottonsector, near-term modifications to the operation of theGSM-102 program, and special recognition for certainBrazilian beef imports into the US


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Cross sectorial retaliations possible under Art. 22.3 DSU

(c) If the complaining party considers that it is not practicable or effective to suspend concessions or other obligations with respect to other sectors under the same agreement, and that the circumstances are serious enough, it may seek to suspend concessions or other obligation under another covered agreement;

(d) In applying the above principles, that party shall take into account:(i) The trade in the sector or under the agreement under which the panel or Appellate Body has found a violation or other nullification or impairment, and the importance of such trade to that party;

(ii) The broader economic elements related to the nullification or impairment and the broader economic consequences of the suspension of concessions or other obligations.


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Flagship Initiative: "Innovation Union"

• Overdue – lagging far behind China, Japan, USA

• Too fuzzy

• EU has to adopt specific - market oriented legal measures by Regulations and Directives, e.g.:

– Legislation like Bayh-Dole, Stevenson-Wydler, TTA

– Harmonize employees’ inventions laws

– Ensure preferential tax treatment of inventor’s and innovative companies

– Ensure preferential treatment of investments in R&D & infrastructure in disadvantaged areas

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Mutual Interdependence – EU & China Condemned to Succeed

• China No. 1 trade partner of EU - € 35,6 Billion ($ 49,4 Billion) trade exchange in July 2011 - € 800 Million more than with USA

• China & EU – must be interested in swift mastering of the crises in order to preserve markets and maintain & improve global competitiveness

• China & EU - have mutually to contribute by strict observation of WTO rules – GATT & TRIPS – to avoid detrimental backslide in protectionism

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An old but still topical reference

• “I do not want to see impaired the vigour of competition, but we can do much to mitigate the consequences of failure. We want to draw a line below which we will not allow persons to live and labour, yet above which they may compete with all their manhood. We want to have free competition upwards; we decline to allow competition to run downwards.”

Winston Churchill, 1906, Glasgow

• In a globalized economy only innovation can secure this outcome!

• PR China has got this message!

© j. straus 2011 -1- ip issues & policy in europe joseph straus, munich/pretoria 2011 tongji...

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