New draft EU Innovation Act just published; includes plans to create EU IP valuation excellence centre, push for more IP finance

Photo by Christian Lue on Unsplash

The European Commission (EC) has finally published the details of its proposed European Innovation Act (EIA) – and the valuation of intellectual property (IP), IP monetisation, and its use as collateral to raise finance, feature prominently in it. 

The Act would create an EU ‘centre of excellence’ for IP valuation, a common EU framework to value intellectual property, and “a digital marketplace connecting buyers and sellers of intellectual property and offer expert support to help companies bring their ideas to the market.” 

In a statement, the EC says that the EIA has been crafted to “help Europe's most innovative ideas be developed, financed, and scaled up in Europe. A key initiative under the EU Startup and Scaleup Strategy and the Competitiveness Compass for the EU, the proposal will strengthen the EU's long-term competitiveness, prosperity, and technological sovereignty.” 

The EC argues that ideas developed in the European Union (EU) “are too-often turned into economic success by others, and elsewhere. The European Innovation Act aims to change this by making it easier for innovative European companies to grow across borders and compete globally.” 

As the media site Science Business points out, “the proposal was initially meant to be published in March. No explanation has been given for the delay, but it may be linked to issues with the associated impact assessment.” 

The EC claims that the EIA, if passed by the European Parliament, “will help innovative companies access financing. Many startups and scaleups have innovative ideas, patents, and other intellectual property, but these assets are often difficult to value, which makes it harder to attract investment.” 

The proposals in the EIA would “generate around €35 million in administrative cost savings and unlock €10.2 billion per year in additional financing through IP-backed venture capital and debt.” 

The Act additionally targets public procurement and Research and Development (R&D) in the EU. The EC argues that it would “establish a common procedure for research and development (R&D) procurement, providing greater legal certainty and helping new technologies reach the market faster, including technologies that can help address shared societal challenges, such as health, education and clean mobility. It will also make it easier for public buyers from different Member States to jointly carry out R&D procurements.” 

These measures, the EC claims, “are expected to generate €1 billion per year in savings for public buyers, and €25.92 billion in additional annual profits for companies.” 

Turning to the issue of IP valuation and its use in raising venture or debt finance, the draft EIA proposes “mandating the creation of a competence centre on IP-backed finance at Union level as part of the European Union Intellectual Property Office (EUIPO), a Union-wide framework for IP valuation and a Union-wide IP marketplace for commercialising IP.” 

The EC claims that “different approaches to the valuation and commercialisation of IP constitute barriers for innovators to attract IP-backed finance and scaleup their businesses across the Union” and “impede cross-border movement of goods, services and capital within the Single Market.” 

It further argues that “the development of a Union-wide IP valuation framework and a digital IP marketplace enables innovators, companies, universities and financial investors to lower valuation costs and increase the licensing and transfer of intellectual property rights in the Union.” 

It concludes: 

“Ensuring that the valuation framework is based on best practices for different types of IP rights and that the digital IP marketplace is designed to complement existing ones while offering the additional EU added value, ensures that these measures are proportionate, as they leverage existing structures, thereby reducing additional burden on Member States, and limit EU intervention to what is necessary to improve transparency, comparability and access in IP-related transactions.” 

It should be noted that the EUIPO’s focus is on trade marks and design rights, not patents. European patents are examined and granted by the European Patent Office (EPO), which is not an EU body – it was established under the European Patent Convention (EPC), which came into force in 1973. The EPC has 40 signatory countries in which a European Patent is enforceable, including the United Kingdom and all EU members states (the EU as a body is not a signatory). 

However, the EUIPO and the EPO work closely together, including on a series of reports exploring the financial benefits to companies of owning IP rights.  

Earlier this year, the EPO President António Campinos met with the President of the European Council, António Costa, in Brussels to discuss how to further strengthen support for innovation in Europe. 

After that meeting, EPO President Campinos said:  

“The technology intelligence drawn from our global databases shows that European innovation remains resilient despite economic and geopolitical uncertainty. But Europe needs a robust innovation ecosystem to ensure future prosperity and success. The EPO is committed to supporting EU efforts to act on the 2024 Draghi and Letta reports and strengthen Europe’s capacity to compete on the global stage.”