IP promotes European trade and investment, which are set to rise with new EU Patent

By ideas Matter

Trade and foreign direct investment (FDI) among the EU’s national member states are already substantial in intellectual-property intensive sectors such as ICT, pharma, medical devices and other technology based sectors, but are set to rise further as the new EU Patent and Unified Patent Court (UPC) come into effect, according to a new European Patent Office (EPO) study conducted by a team of economists from the EPO, the University of Colorado Boulder and the London School of Economics.

These ‘high IP’ sectors already account for 18% of the internal trade and 16% of the foreign direct investment (FDI) between the EU’s national member states, reports the EPO’s study Patents, trade and foreign direct investment in the European Union. However, the fact that patents are not fully harmonised in the EU, often are not filed in all EU member states, and are subject to inconsistent court decisions, means that companies in these sectors can be reluctant to do business or invest in some EU countries.

The EPO study estimates that following implementation of the EU Patent and the UPC, which will implement patent protections consistently throughout the EU, EU countries will see a 2% growth in incoming trade in high-IP goods and a 15% increase in inflows of high-IP FDI, resulting in annual gains of €14.6 billion in trade and €1.8 billion in FDI. This corresponds to increases of 5% in high-IP trade and 29% in FDI inflows in the 15 EU countries which will be most affected by the new EU patent system.

The study’s methodologies and findings are consistent with the body of economic literature showing that stronger patent protection has a positive and significant effect on trade and FDI in high-IP sectors, and that weaker protection has negative economic effects in these areas.
"This study provides further evidence of the benefits of patent protection for the European economy," said EPO President Benoît Battistelli. “The Unitary Patent and Unified Patent Court, which are expected to be implemented soon, will be a vital step towards the realisation of an EU single market for technology, and will support productivity growth and economic development in Europe."

For further information, see the full report here, and the EPO’s summary, press release and related information here. Graphic credit – EPO.