ComPatibility

The European Union (EU) is an economist’s dream. It was created to synergise the strengths of the European nations and create an economic entity which can have a formidable influence on the world economy. But the very idea of creating a single economic entity poses multiple challenges that must be managed to keep it alive. It involves creating a cordial environment for business, encouraging the individual strengths of the member nations and thus proving the concept of the ‘union’ as the superior model. The most important aspect of creating the right business environment is understanding the nature of the economies of the member nations. In the case of the EU, most of the economies are capital intensive in nature, and thus the future growth of these economies will be driven by innovation. Any future plan for the EU will have to consider creating an encouraging environment for innovators.

An efficient patent system is critical to the development of an innovation-driven industry like biotechnology. The implementation of the long discussed Community Patent System or ComPat (a unitary patent system for the member nations of the EU) is a very important change that the industry is eagerly awaiting, as it competes with the US, Japan and Asian economies to retain and attract innovators. The fact that the present system of patent protection in the EU is four times more expensive than that of the US clearly takes the competitive advantage away from the EU.

Patent protection is one of the most important mechanisms that can help the biotech industry to flourish in any economy. This is especially true for the growth of small- and mediumscale enterprises (SMEs). One way to nurture an innovationbased industry is to provide a limited period of monopoly over an innovation so that the innovators find it lucrative to continue in the industry. This is why an efficient patent system is an absolute necessity to nurture the growth of SMEs, because the most valuable asset these companies own is the patents for their innovations.

EUROPEAN VERSUS US BIOTECH

The implementation of the ComPat will correct various aspects of the biotech industry in Europe. One of the major aspects it will limit is the brain drain – the movement of innovators to the US or other lucrative economic zones in order to secure patents for their innovations. At the same time it will retain and attract investment.

The US biotech industry is a well-developed market with a comparatively efficient patent system, therefore it attracts more investment from multiple sources, including venture capitalists (€2.5 billion in venture capital was raised in 2004 compared to just €1.1 billion in venture capital raised by the European biotech industry). Venture capitalists are a crucial source of investment for the development of the biotech industry and a company’s patent portfolio has great influence over investment from them. A study published by the European Association for Bioindustries stated that the European and US biotech industries both have around 2,000 companies.