Europe should wake its sleeping patents

Around one-third of European patents are not used for any industrial or commercial purpose, according to a report published in November by the European Commission.

Roughly half of these unused patents are blocking patents, taken out to prevent rival companies using a particular technology, but the rest are sleeping patents, unexploited by the patent holder. This represents a significant reservoir of technologies that could be exploited, if not by the companies themselves then by other entrepreneurs.

According to the report, the bulk of sleeping patents appear to be in large companies, where substantial research and development programmes generate innovations in all sorts of technologies that are not strategically important but which are patented as a matter of course. As might be expected, both the chemical and electronic-based industries have a high share of unused patents, the report finds. In contrast, small- and medium-sized companies are more focused in their research and do not have the luxury of in-house legal departments, so only take out a patent if they plan to use an innovation.

Just how large companies can be encouraged to wake their sleeping patents is another matter. The report’s authors think that the way forward is to encourage patent licensing and technology markets, in particular by lowering the cost of trading technology. "Other means," they say, "like reducing the patenting costs of small firms, may only induce them to patent less valuable and hence less usable technologies, thereby aggravating rather than solving the problem."

The first important policy target for encouraging technology markets is to reduce the transaction costs. This could be achieved by creating standard contracts for trading technology that reduce contractual ambiguities, or by forming intermediary companies to match up buyers and potential suppliers of technology. It would also be useful to have standard prices for technologies according to their characteristics, the authors say.

A more challenging problem is that large companies tend not to trust technology licensing, either for exploiting their own intellectual property or buying in technology. "Policy cannot do much to increase the actual licensing rate of large firms without important changes in the way they deal or organise their licensing business," the authors conclude. "Our findings suggest that just putting the technologies of large firms into the market is not enough. It has to be accompanied by a more systematic assessment of licensing as a business and a careful definition of the strategies and the organisational models that can make it into a profitable economic activity."

The main aim of the study, carried out for the Commission’s internal market directorate by a consortium led by the CERM Foundation in Siena, was to put a value on Europe’s patents. In other words, what is the premium from having a patented rather than an unpatented invention? Using survey data from 10,000 inventors in eight countries (Denmark, France, Germany, Hungary, Italy, the Netherlands, Spain and UK) the study estimates an average patent premium of €3 million.

But since a few patents account for the bulk of the overall economic value, the median of €300,000 is considered a better guide.

• Ian Mundell is a freelance journalist based in Brussels.

Around one-third of European patents are not used for any industrial or commercial purpose, according to a report published in November by the European Commission.