This critique has been directed primarily at the rapporteur’s statement rather than the Commission’s original analysis, because 18 months have passed since the draft directive was issued. In the interim, there have been substantial additions to the record, such as the Institute for Information Law study, the FTC/DOJ hearings in the U.S., and the noteworthy empirical study of U.S. software patents by Bessen and Hunt. A number of conferences and seminars have been held on the economics of the patent system with special attention to software and services. None of this is reflected in the JURI rapporteur’s statement, which is substantially unchanged from its original draft.
That said, it should be noted the Commission has been regrettably slow to provide balanced background analysis. While DG Internal Market is to be commended for ordering a study on the economic impact of patentability, this was only after the Commission had already taken a poorly explained position on the issue in its 1997 Green Paper and its 1999 Communication. This made it difficult to embark on a study that could address the issue afresh with the resources and scope that it deserved.
Despite the promise implicit in its title, the small contract for the study was not awarded to one of Europe’s many research institutes specializing in the economics of innovation, but to the legally oriented Intellectual Property Institute in London, which has no economists on staff and at best a limited record of conducting economic research. The economist brought in on the study did a respectable review of the literature in 11 pages, a minor fraction of the report, which as a whole dwelt extensively on legal issues. As noted, there were discrepancies between the economics section and the summary, yet the Commission did not provide for peer review, either in writing or through a public event. Nevertheless, the analysis in the memo that accompanies the Commission’s draft directive is largely based on selected statements from the study and basically justifies the direction indicated in the 1997 and 1999 documents.
Most regrettably, Internal Market as the lead DG on intellectual property has failed to address the larger economic and institutional problems inherent in the patent system, even as it moves Europe toward the laudable goal of a community patent. Indeed, instead of making an effort to better understand how the system affects competition and innovation, it has invested resources in unabashedly promoting greater use of the system. In effect, this urges Europe into the kind of strategic portfolio building that operates as a limitation and barrier to small businesses in the U.S. To this end, the Commission jeopardized its reputation for objectivity by awarding a large contract to IBM, a company with a uniquely voluminous portfolio and a famously aggressive licensing program, to make recommendations on how national patent offices should promote patenting.
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