The European Paradox

The European Paradox refers to the difficulties that European economies have had in transforming their success in basic research into commercial success. One major obstacle is a highly fragmented European patent system – one that policymakers have been trying to harmonise for years. Given recent trends in open innovation, the challenge is taking on new dimensions, and ESADE is proud to be offering guidance to the European Commission about this important challenge.

One of the largest challenges facing the European economy is what has been called the “European Paradox”. Simply put, Europe has long been a leader in basic research, attested to by the numerous Nobel Prizes awarded to the faculties of such famous institutions as Oxford University, Cambridge University and the Swiss Federal Institute of Technology. Yet the ability to take this basic research and commercialise it – to bring it to the market in the form of products and services that people are willing to pay money for – has been elusive to many European economies compared to their competitors in North America, India and Asia.

So what are the best policy tools public officials have to address this? One important mechanism is patenting. Patents are a set of rights granted by a government to an inventor for a limited period of time in exchange for the public disclosure of an invention. The general economic rationale is to facilitate and encourage the disclosure of innovations into the public domain for social value. If inventors did not have the legal protection of patents, in many cases they would prefer to keep their inventions secret. It is best to allow inventors some reasonable economic gain in order to push research discoveries out of minds and laboratories to where they can better serve society. But how much is a “reasonable” return? This varies tremendously from country to country and across products and sectors. Initially, one would think that patents awarding the greatest protection are optimal. But this is not necessarily the case. At some point, it becomes desirable that the invention, once well established, should enter the public domain as common social knowledge. Moreover, society benefits from extending, not constraining, its usage.

However, no real agreement exists on how patents should be structured across countries or industrial sectors. Within Europe, there is tremendous fragmentation across countries concerning patent laws, and this presents a considerable barrier to the commercialisation of research in the EU. Consider that anyone seeking patent protection must file it in each country they are seeking to sell to, and that nearby regions with relaxed enforcement poise a constant threat of dilution of such rights. Consequently, gaining a common EU patent regime has long been a public goal of the European Commission – one that, thus far, has been elusive. A universal patent regime implies increased transparency and competition across national markets, and has not been well received by all member nations.

ESADE is privileged to be providing the European Commission guidance about the formulation of such a Europe-wide patent regime, primarily under the premise of open innovation. An open innovation paradigm may imply little or no patent protection. Paradoxically, in such a paradigm, patents are used to encourage the sharing and recombination of innovations, rather than their concealment. But it is a question of finding balance, and if history offers any guidance, the task is no easier today than it ever has been. We look forward to supporting the European Commission in this difficult endeavour.

Jonathan Wareham

Vice-Dean of Research at the Business School

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