European Patent Office Gives Staff Bonus For Issuing Bumper Crop Of Patents: What Could Possibly Go Wrong?

from the perverse-incentives dept

The European Patent Office (EPO) is a curious body. Despite its name, it is not the patent office for the European Union (EU) in the same way that the USPTO handles patents in the US. As its history page explains:

In addition to all 27 EU member states, Albania, Croatia, Iceland, Liechtenstein, the Former Yugoslav Republic of Macedonia, Monaco, Norway, San Marino, Serbia, Switzerland and Turkey belong to the European Patent Organisation.
This gives it an independence from the European Union that is problematic for patent law there. For example, back in 2005, the European Parliament voted definitively not to allow software patents in Europe. And yet as an excellent analysis published on the IPKat site explains, the EPO has continued to move steadily towards granting more and broader software patents in Europe.

Given the largely uncontrolled way the EPO has been issuing patents, this story in Intellectual Property Watch is noteworthy:

The European Patent Office Administrative Council in December agreed to award a controversial bonus of tens of millions of euros to EPO staff at the end of 2012, with 24 positive votes and 8 negative votes. Several stakeholders had protested the proposal and encouraged contracting states in the Administrative Council to vote against the measure.
The reason for the bonus? Because of all the extra money the EPO had made recently as the result of granting so many patents. But as a letter written to representatives of the 38 EPO contracting states in the Administration Council, and obtained by Intellectual Property Watch, pointed out (doc):
[The bonus] contributes to adverse incentive structures and conflicts of interest for the employees of the EPO. In linking the staff's wallet to the Office's surplus, it undermines the efforts to raise the bar in patent examination and fosters a mentality to increase fee revenues for the EPO by granting applications of low quality.
The bonus is effectively rewarding the fact that the EPO's employees issued a particularly large number of patents in 2011. Human nature being what it is, the danger is that this will encourage them to issue even more patents in the hope of receiving another similar bonus.

As the letter goes on:

The EPO should not celebrate increases in patent filing rates as a success story but react to the worldwide critique of a global overheating of the patent system jeopardizing innovation and the proper functioning of the social contract with society upon which the patent system rests.
That is, rather than implicitly making the false equation that more patents automatically mean more innovation -- something that Techdirt has written about several times -- the EPO should strive to reduce the number, but increase the quality, and maybe offer bonuses for those who achieve that.

Sadly, it's in the EPO's interests to have more patents issued, regardless of their quality, since this will encourage yet more companies to apply for patents so as not to get "left behind" in the Great Patent Race. And that will produce yet more surpluses for the EPO, and presumably more bonuses for its staff. Everyone wins -- except, of course European businesses and citizens who have to suffer the knock-on effects of yet more unjustified intellectual monopolies.

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Filed Under: bonus, epo, eu, incentives, patent office, patents

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  1. identicon
    bawd, 15 Feb 2013 @ 8:34am

    A little perspective amongst the mouth foaming comment

    Some fact correction in relation to the article itself.

    First, the EPO is not curious. It has never pretended to be an EU institution and just because it includes the word "European" in the title doesn't imply an association with the EU. Look at a map. The EU has 27 (soon 28) member states. Europe includes plenty of countries which are not EU member states. If you can't get your head around that then consider the European Court of Human Rights - not an EU institution, the "Eurozone" - 17 out of 27 EU members, the European Econonic Area - EU + Norway and Switzerland. There are plenty of institutions that are called "European" that we don't immediately assume are synonymous and coextensive with EU membership.

    Second, the European Parliament does not have (and never has had) sovereignty over member states property rights, whether intellectual or real so the vote was a political sham. Anyone who bought it doesn't understand the law and is likely to be one of the mouth foaming community posting here.

    Third, the EPO approach to software patentability has been consistent for almost 10 years now since the COMVIK and Hitachi decisions. As an aside here, why shouldn't an innovative software developer be rewarded for his intellectual output? If that developer writes a programme that is used on an engine management system that, say, doubles fuel efficiency they rightly get awarded a patent. If that same developer writes a programme that causes a computer to consume less power, why should they not get protection for that invention? The effect is the same, the only difference is the machine which the software is operating.

    Fourth, the EPO has not made "extra money" granting patent applications. The reason for the surplus is a combination of increases in official fees for applications and a deadline on the filing of divisional applications which encouraged a temporary increrase in filings in 2010/11.

    Fifth, the letter was signed by anti-GM and open source special interest groups only.

    Sixth, it contains a fundamental error that the bonus is linked to number of granted patents. It is not - it is linked to a fee surplus which arose temporarily for the reasons set out above, not due to an increase in grants.

    Now there is a serious question as to whether or not the bonus should have been paid but it has nothing whatsoever to do with that set out above. It is this - the EPO is effectively insolvent - its liabilities way outstrip its assets. The fee regime introduced by the last President (Alison Brimelow) was intended to plug that gap, not to be given to the very examiners who had created the asset gap in the first place by failing to process applications in an efficient manner. To take the surplus generated and just hand it out to the existing examining staff will do nothing to address the major issue with the EP system - long pendency times. They should have hired more examining staff. Most of the hue and cry around software cases are down to the long period of time between filing and grant. A feature is invented, it is applied for as a patent and the long delay before grant means that the feature feels as though it has been around "forever" by the time it gets litigated. But that is the nature of patents - you have to consider a technological snapshot at the filing date, not what has become well known years later.

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