Munich–Europe's patent capital
Almost 30 years ago, in 1973, a group of powerful men in conservative suits met in Munich to sign an important document: The European Patent Convention (EPC), which laid the foundation for a simplified and harmonized patent application process throughout Europe. As a spin-off, it also ensured significant economic benefits for the city in which it was signed.
It is in part thanks to the wily determination of Franz Josef Strauss, Prime Minister of Bavaria from 1978 to 1988, that Munich was able to snatch up the European Patent Office (EPO) for itself. Although not actually a European Union institution, the EPO is the result of cooperation among EU member states.
The original idea was to base the EPO at Reading, near London, while Munich was to receive the ECMWF (European Centre for Medium-Range Weather Forecasts). Or, that was the case until Strauss began throwing his not inconsiderable political weight around. Strauss was instrumental in turning Munich into a major technological center. The establishment of the EPO in Munich, he maintained, would create a unique technical triangle formed by the Deutsches Museum (the world’s largest technical museum), the EPO and Germany’s own Patentamt. When the political dust settled and the first EPO office was opened in 1977, the scoreboard read, “Munich 1, Reading 0.” Of course the Brits received the consolation prize of the weather station and first access to the latest reports on any potential medium-range storms.
Munich, on the other hand, gained an important institution. “I think the EPO contributes a lot to Munich,” Rainer Osterwalder, press officer at the EPO, comments, “not only because of the international prestige and recognition it has brought the city, but also because of the beneficial impact it has had on the local economy.” Osterwalder can reel off an impressive list of stats. For example, the EPO was created to handle a maximum of 30,000 patent applications per year. In 1999, it handled 121,750 applications and, with new areas of knowledge opening up, such as nanotechnology, new materials research, genetics and biotechnology, this number is steadily climbing. A staff of more than 5,000, half of which are based in Munich, is needed to process this workload and the EPO is scheduled to open its seventh Munich office building in 2005.
Then there are collateral benefits. Since the founding of the EPO, the number of patent agents in Europe has risen from a few hundred to more than 6,000—many of these are located in Munich. The same is true of law firms, which, attracted by the explosion in patent business, are opening offices here. All these businesses provide professional jobs for locals and contracts for Munich service companies.
Worldwide patent applications are now running at almost double that of a decade ago, a development that is spurred on by businesses scrambling to maintain their competitive edge. This dramatic rush of applications has given rise to much criticism, notably that this has resulted in a rash of questionable patents and frivolous court cases. But, in a world gone patent mad, the EPO is one of the few institutions to have consolidated its credibility in the field, emerging as an international champion of high standards and rigorous methodology.
According to the Encyclopaedia Britannica, the first recorded patent for an industrial invention was granted to the architect and engineer Filippo Brunelleschi in Florence in 1421. The patent gave him a three-year monopoly on the manufacture of a barge with hoisting gear used to transport marble. The patent was issued so that his inventions “shall be brought to the light, to be of profit to both—to said Filippo and to our whole country and others; and that said Filippo may be animated more fervently to even higher pursuits.” Notable for wording that anticipates the incomprehensible legalese of today’s patent applications, the document manages to convey its intention; to ensure that the benefits of the invention are readily felt by all and that the inventor receives his just reward.
Over the next few centuries, such privileged grants spread from Italy to other European nations and eventually overseas. In 1790, the US Congress passed the US Patent Statute. Today there are approximately 100 separate jurisdictions regarding patents. “You find that almost anything that sells well and has high market shares is likely to attract patent applications,” says William Torlot, a PR Projects Coordinator at the EPO. “So this includes high-tech products, such as pharmaceuticals, biotechnologies, cars and associated components, electronics, but also mundane, day-to-day household items, such as fibers, zips and fasteners. Velcro, Lycra and Gore-Tex are all products made by companies that have all built their names on patents, for example.”
W. L. Gore & Associates, which maintains a major factory at Putzbrunn near Munich, is a good example of the way in which patents and a solid business strategy can be used to establish a successful business. The company was founded in 1958, when Bill and Vieve Gore set out to explore opportunities for fluorocarbon polymers. Based on patents derived from their initial research, W. L. Gore & Associates has now expanded to become a multi-national business with recorded sales of more than $1 billion and its products are found everywhere, from space technology and circuit boards, to medical implants for neurosurgery and plastic surgery, not to mention filtrations and sealants, as well as the famed Gore-Tex membrane used in clothing.
Patents protect the sizeable investment companies such as W. L. Gore & Associates make in research by granting a right to use an invention for a limited area and time (usually 20 years) and by stopping others from, among other things, making, using or selling it without authorization. “People think of patents as being for earth-shattering inventions. That happens, but it doesn’t happen very often. Many patents are for what you might consider fairly minor improvements in something that already exists,” explains Torlot.
Proponents of the patent system argue that it improves competitiveness and technical innovation by encouraging invention. Because the technology concerning the patent must be published to receive the patent, it spreads new technological knowledge quickly and stimulates further development.
Much of the controversy now surrounding patents stems, however, from areas in which the American and European approaches differ. After 1998, US patent law allowed the patenting of business methods. While the EPO also awards patents on business methods, it is considerably more stringent and requires a business methodology to have a clear technical component and “a tangible effect.” The difference is both complex and subtle, but the results are not. The problem with the American approach is that the US Patent and Trademark Office (USPTO) has no record of specific methods of working before 1998. This means almost anything can now be—and is being—patented. This has left the USPTO mired in controversy.
While amazon.com’s patent on “one-click purchasing” and the subsequent court case with Barnes & Noble for patent infringement is the most famous example, there are many others. Among controversial US patents granted recently is one that uses the idea of undercutting a competitor by checking their prices on the Internet. Others include group buying on the Internet, teaching music via computer, computerizing litigation and, ironically, drafting patents on a computer. Earlier this year, Hugh Harlan of California patented the way the human brain links ideas. The patent on computers that “think” like people (US 6031537) covers processes whose operation can be described by flow charts linking chunks of related information representing close and distant thought.
The situation has become so absurd that Tim Berners-Lee, the man who combined the hyperlink with Web pages in 1990 to create the breakthrough that paved the way for the Internet, was recently moved to criticize patent offices for granting “frivolous patents” that could actually interfere with innovation and development. Singling out the USPTO, he said it was granting “ridiculous patents” to the point where “I maybe could patent going shopping in a yellow car on Tuesdays.”
Critics such as Berners-Lee object to the American-style of patents on two grounds: that they are too broad and keep competitors out of large potential areas of business; and that the work involved in coming up with the idea is not equal to the potential value of the monopoly. EPO employees do not criticize the American patent system but believe that an overgenerous approach to awarding patents risks tainting the image of patents generally. The USPTO, on the other hand, perceives itself as encouraging the entrepreneurial spirit. This is reflected in the fact that patents in the United States are awarded to those “first to invent.” In Europe, patents are awarded to “first to file.” While the American system may seem fairer, it is out of step with the patent approach adopted in the rest of the world and, in addition, often leaves open questions as to the ownership of the invention. In a society known for its reflex action to litigation, this uncertainty naturally results in substantial lawyer fees. The European system also contains a more rigorous, technical-based examining procedure and, for example, contains a right of challenge that the American system lacks. In this way, competitors can challenge a patent even after it has been granted without resort to expensive litigation.
In general, there is more legal certainty in European patents than in patents issued in the US, where a “patent-everything-and-let-the-courts-decide-if-it-is-enforceable” approach is at work. “A patent is a powerful right,” says Torlot, “as it excludes others from an area of technology for up to 20 years. The role of a patent office is to grant fair and legitimate rights and, by doing so, to protect the inventing public from unfair rights. Torlot, who worked as an examiner for seven years before moving into PR Projects, said all EPO examiners are engineers and scientists with technical degrees. “Where we differ with the American approach is in business methods. Recently, for example, the USPTO recruited some 100 MBA graduates to examine their business methods. Now, tell me where the technical content is in that? When you need business graduates to examine patent applications, then I wonder where the technical content can be.”
Yet, despite the differences between the patent systems, a trend towards a more unified patent system worldwide can be discerned. This stems from a new international patent system organized by the United Nations Intellectual Property Organization, as well as from the World Trade Organization, and the growing demand of inventors for patents that are valid worldwide. These developments have further enhanced the reputation of the EPO with nearly 60% of all patents filed under the world Patent Cooperation Treaty (PCT), which stipulates that the international search and preliminary examination be conducted by the EPO.
While Torlot acknowledges these trends, he is skeptical that they will lead to any major advancement in the near future. “There will certainly be further harmonizing of patents within Europe, but I don’t believe that worldwide there will be much change within our lifetime.”
The modern multi-story building of the Munich headquarters of the European Patent Office is located on the banks of the Isar, directly across from the Deutsches Museum, and is the home of an efficient, professional organization full of earnest people firing around like protons in a primeval soup. Tour groups of international scientists and engineers mill around in the foyer, officials pass by carrying piles of impressive-looking documents, the canteen sounds like the Tower of Babel with a polyglot swirl of languages. And even when conversation is in English, its technical complexity can make the topic slippery to grasp.
“Ahh yes, Gyro Gearloose. He’s that Professor Brainstorm type of character, or ‘Daniel Düsentrieb,’ as he is know in Germany. It’s one of the most regular queries we field from the press,” Torlot answers with a weary sigh when asked about the lack of propeller heads in the building. “There are a lot of backyard inventors out there and some are coming up with brilliant ideas. But the cost of filing is expensive, so only those with sound, practical ideas make it this far. The more eccentric ones tend to be filtered out along the way.”
Torlot cites Michael Zocher, who developed an ignition system for aeronautical diesel engines, and Alexander Faller, from Ergolsbach near Landshut, who developed several inventions, including a logistic system for loading trains more efficiently, as examples of successful, independent local inventors. “So, they do clearly exist, but they are not your average applicant,” he explains.
The average cost of an EPO patent is DM 58,000, which includes procedure fees, patent lawyer fees, translation fees, plus the national renewal fees needed to maintain the patent rights. The EPO’s fees make up only approximately DM 8,000 of this. “Now, don’t get the idea that someone comes in and opens up a checkbook and writes out that sum on the first day,” explains Osterwalder. “It is an incremental charge that accrues throughout the process. The initial application plus search is approximately DM 1,300 and applicants can back out of the procedure at any point.”
Although the process is expensive, both Torlot and Osterwalder argue that the charge is valid given the intense research and examination required before an application is approved. They point to the work generated by big businesses—some companies submit applications every day. In 2000, for example, IBM was granted 2,922 patents—averaging almost nine a day. “Big business is not notorious for giving money away for nothing, so if they are investing such large sums there must be a clear value in having a patent,” says Torlot. The value, of course, lies in the monopoly on rights for a specified period of time, which can be parlayed into sizeable economic returns.
The key, however, says Osterwalder, is strategy. “Patents are increasingly becoming strategic weapons. They enable companies to rope off their particular patch and many technology companies are rushing to stockpile patents,” he comments. “One of the things we used to get a few years ago,” adds Torlot, “was small inventors saying, ‘I’ve spent DM 50,000, got my patent, now what do I do with it?’ Our reaction would be to scream in frustration. A patent in itself is not a guarantee to make money. If you receive a patent, it doesn’t automatically help you to produce, sell or market your invention. There has to be a clear strategy attached to it for it to be profitable. Consequently, we have spent a lot of time together with the national patent offices trying to make people aware that patents must be linked to a clear business aim.”
In 1889, the US Patent and Trademark Office reported to the US president that “everything that can be invented has already been invented.” Today, the more than 2,000 patent applications being registered worldwide every day, not to mention the 160,000 EPO applications projected for 2003, attest to the statement’s patent absurdity.
