I move: "That the Bill be now read a Second Time."
On a personal note, as this is the first legislation I have introduced as a Minister of State, I wish to say it is a privilege to be able to do so.
The Patents (Amendment) Bill 2011 is a short but very important Bill amending three sections of the Patents Act 1992, to allow for the eventual ratification by Ireland of the London Agreement. I will set out the context in which I am bringing this Bill before the House today. Patents are central to supporting innovative businesses in several ways. Patents add economic value to inventions by giving them a monopoly right for a fixed term to enable the commercial exploitation of ideas in the market place. However, in return for that monopoly the inventor must agree to have the details of the invention published. The publication of patents enables research and encourages research, allows business in technical fields to stay abreast of the state of the art and encourages further innovation. It also helps to create co-operative links between inventors, investors and manufacturers through patent licensing.
Protecting intellectual property rights through patenting is important to Irish industry and business. The Irish Patents Office provides for the granting of patents and registering of trademarks and industrial designs. In 1964, a new Patents Act was passed to bring our legislation in line with that of the main industrial countries. This reflected Ireland's outward looking focus for economic development through international commerce, which has continued to this day. The main body of Irish patent law is contained in the Patents Act 1992 which now serves to meet our national needs and our international obligations.
Over the past decade, it has become clear that Ireland's international competitiveness depends increasingly on goods and services, which have high knowledge content. A recent report shows that enterprises across all business sectors spent almost €1.8 billion on research and development activities in 2010. An effective patent system is the key to converting that investment into economic growth. It is imperative that this knowledge is captured at the early stages, protected and exploited to its full potential. Today, inventions can be protected in Europe either through national patent offices or through the European Patent Office located in Munich. Irish and European companies marketing their products, strategically choose to apply for a European patent rather than a national patent to ensure larger geographical protection for their products.
The European Patent Office, established by the European Patent Organisation, is an intergovernmental institution comprising 38 countries, the EU 27 along with 11 other European countries. The functions of the office are to examine patent applications and grant a European patent if the relevant conditions are met. It is worth noting that patent applications originating in Ireland to the European Patent Office have been increasing steadily, underlining the importance to industry of European patent protection. Patent applications to the EPO have risen by 44% and grants of European patents to Irish applicants have increased by 21% since 2004.
Unfortunately, the European patent process can be expensive and complex which can act as a disincentive, especially for small and medium-sized firms. A company wishing to protect its invention across Europe applies to the European Patent Office for a patent. Once a European patent is granted by the office the proprietor must designate the countries where he or she wants patent protection and then the patent must be validated in each member state. At this stage the European patent effectively becomes a bundle of national patents.
To validate a patent, a full translation of the patent must be lodged in each country designated, in the national language of that country. These translation costs make up a very sizeable portion of the costs of acquiring a European patent and the costs must be borne by the applicant. As a result, the European patent is uncompetitive when compared with the cost of obtaining US and Japanese patents.
Let me put the matter in real terms. A European patent validated in 13 European countries is about ten times more expensive than a US patent and 13 times more expensive than a Japanese patent when processing and translation costs are taken into account. It has been estimated that validating a patent in 27 countries costs €32,000, of which €23,000 is for translations alone. Anecdotal evidence suggests these translations into national languages are hardly ever consulted. Only 1% of patents go down the litigation route and in the event that a court case ensues, the authentic text of the patent before the judge is always the patent text as granted by the European Patent Office. Meanwhile, the national translations required all over Europe remain in the drawer. Moreover, it usually takes four or five years to process and grant a patent in the European Patent Office. Consequently, these translations do not serve the purpose of informing the public about state-of-the-art new technologies, as they are only required to be filed after the patent has been granted.
There are other costs associated with the translation requirements such as filing and publication fees to local national offices. Local patent agents often act as intermediaries between the patent proprietor and the national patent offices where the translations are to be filed. These patent agents take on the role of ensuring formal requirements laid down by national law are complied with and the correct fees are paid. Obviously, the patent agent has to be paid for providing this service and a recent study conducted by the European Commission concluded that these costs varied from around €150 to €600 per validation, depending on the member states involved. If a patent is being validated in a number of countries, we can see how these costs can mount up. They particularly affect small and medium-sized enterprises, young innovative companies, start-up companies and public research universities.
Research shows that Irish industry, as elsewhere, often takes a selective cost effective approach when designating states for patent protection, thus leaving the patent vulnerable in those states not designated. In order to reduce these costs, an intergovernmental conference held in London in 2000 adopted the London Agreement. This agreement, which entered into force in May 2008, set out to reduce the cost to applicants by easing the requirement to file translations of granted patents under the European Patent Convention in those countries that signed up to the agreement. The overall aim of the agreement is to reduce the cost of translations across the 38 member states by 50%. In order to reach this level of reduction, it is vital that all member states of the European Patent Convention become a party to the agreement.
Article 65 of the European Patent Convention provides that any contracting state may require a translation of the text of a European patent into one of its languages, if that language is different from the language in which the patent is granted. Under the London Agreement, the parties to the agreement undertake to waive, entirely or largely, the requirement for translations of European patents to be filed in their national language. In effect, under the agreement, states with English, French or German as an official language will dispense with translation requirements entirely for the patent to come into effect.
Having English as an official language, Ireland would have to dispense with the requirement to seek a translation into English of the detailed specification of European patents drawn up in French or German. However, it is important to note that the claims which are the core part of the patent that defines the limit of the monopoly would continue to be available in English after granting. Section 119(6) of the Patents Act 1992 requires that a European patent designating Ireland and drawn up in either French or German must have its specification translated into English for that patent to be validated in Ireland. It is necessary to delete section 119(6) and corresponding subsections where reference to these translations is made in order to give full effect in our legislation to the London Agreement.
In order to assess the implications for Irish inventors and business, my Department carried out a regulatory impact assessment of the London Agreement in 2009. It concluded that the main advantage of the agreement for Irish inventors seeking patent protection abroad was that they would no longer be required to furnish translations to the extent currently required in those countries which became a party to the agreement. This would lead to significant savings when filing in other non-English language European states. Translation costs, publication fees and patent attorney fees would be reduced, with the greatest saving on translation costs. For example in 2007, there were 126 European patents granted originating from Ireland. Twenty-eight states were designated and the total cost of translations to protect the patents was estimated at €6 million, a significant cost to industry. This figure does not include the filing and publication fees to the national offices or patent attorney's fees.
The London Agreement is an optional agreement and to date 16 countries have signed it. However, our accession to the agreement should encourage other member states to accede, thereby reducing further the cost for Irish inventors when filing in other non-English language European states. The more members involved, the greater the benefit to European business.
I see the Bill as just the first step in reducing the burden of costs involved in protecting patents internationally. On the European Union front, we are working with other member states towards the creation of unitary patent protection that will have the effect of reducing the costs of registration and enforcement of patents for businesses. The Commission's proposal for a single EU patent has been under discussion for over 50 years and we are finally seeing some progress. At the EU Competitiveness Council in March of this year the Council authorised the use of the enhanced co-operation procedure for the creation of unitary patent protection in those member states that wished to join. Ireland is one of 25 member states which are forging ahead to achieve a simpler, cheaper and more robust patent system in the European Union that has eluded us of decades. This measure, when fully implemented, will enable Irish-based holders of patents to seek protection for their patent across the 25 member states supporting the unitary patent protection — representing 79% of the territory of the European Union — for a fraction of current costs. The Commission estimates that by implementing unitary patent protection, the overall savings to European business could reach €50 million per year, even in the early stages. These cost reductions should particularly benefit Irish start-up firms and small businesses. When fully implemented, this measure will facilitate a big reduction in costs and red tape which will provide a stimulus for European innovation and make patents more accessible to all companies in the European Union.
Enacting the Bill, combined with our accession to the London Agreement, will remove the current expensive translation requirements which is likely to lead to Ireland being designated in more patent applications and to more patent-related activity in Ireland. It is expected that more inventors and small and medium-sized enterprises, currently deterred from registering patents because of the high costs involved, will be attracted to protecting their intellectual property across Europe. This will further support Ireland's efforts to generate economic growth through promoting and innovating better processes and products. I commend the Bill to the House.