Wednesday, 18 January 2012
Seanad Éireann Debate
Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy Sean Sherlock): I am pleased to bring before the Seanad for its consideration the Patents (Amendment) Bill 2011, the main purpose of which is to make the necessary changes to the Patents Act 1992 to provide for the ratification by Ireland of the London Agreement. The London Agreement, to which Ireland is a signatory, is aimed at reducing the cost of the European patent process to applicants by reducing the requirement to file translations of the granted patents under the European Patent Convention.
Before considering the provisions of the Bill, I wish to set out the background to it. It is clear Ireland’s international competitiveness increasingly depends on marketable high-value goods and services which have strong knowledge content. In spite of the challenging economic environment, approximately 50% of all enterprises in Ireland continue to engage in significant research and development activities. A recent report shows that enterprises across all business sectors spent almost €1.8 billion on research and development activities in 2010 and to convert that investment into economic growth Ireland needs an effective patent system.
It is incumbent on the Government to provide the very best framework for these resulting innovations to be captured and exploited in a manner that will create high-value employment. Any unnecessary legal or administrative barrier in the intellectual property framework that limits access owing to high translation costs or other factors will not serve its purpose. Providing efficient and affordable access to registering patents is vital to stimulating innovation in Irish enterprises, universities and research institutions. The high cost of obligatory translations of granted European patents acts as a deterrent to filing patents and, as a consequence, to innovation. By lowering the current cost barriers to entry and enhancing SME access to the patent system, the London Agreement represents a significant step forward for the European patent system.
As for the London Agreement, the European Patent Office, established by the European Patent Organisation, is an intergovernmental institution comprising 38 European states, including the 27 EU member states. The office examines patent applications and grants a European patent, should the relevant conditions be met. Patent applications originating in Ireland and granted by the European Patent Office have been increasing steadily, underlining the importance to the Irish research sector, both public and private, of European patent protection. Since 2004, the number of Irish patent applications to the European Patent Office has risen by48%, with grants of European patents to Irish applicants increasing by 34%. However, the patent process at European level is both complex and expensive, acting as a disincentive to innovation, especially for young innovative start-ups with limited resources. An enterprise endeavouring to protect its innovation throughout Europe will apply to the European Patent Office for a patent. At this stage, applicants can file their application in English, French or German, thus saving on translation costs at this early stage. The claim which sets out the limits of the monopoly granted is published in the three languages upon grant.
Once granted, the European patent is, in effect, a bundle of national patents and the proprietor must validate or file the patent in each state in which patent protection is required. In order to validate a European patent in a country, a full translation of the patent must be lodged in each country designated in the national language of that country. These translation costs make up a large proportion of the costs of acquiring a European patent and constitute a cost enterprises can scarcely afford at a vital stage of expensive product development. This process ensures the European patent is uncompetitive when compared with the cost of acquiring US or Japanese patents. Under the current system, a European patent validated in 13 European countries is approximately ten times more expensive than a US patent and 13 times more costly than a Japanese patent. The key cost difference is the processing and translation costs involved with a European patent. In this context, validating a patent in 27 European countries can cost up to €32,000, of which €23,000 alone is for translations. Approximately 75% of the cost differential between the granting of a European and US patent is due to translation costs. It is, therefore, right and proper that this cost, which is functioning as a very real barrier to exploiting innovation in Europe, should be tackled.
The publication of the translations takes place very late in the life cycle of a patent. As these translations are only provided after the patent is granted, they do not serve the purpose of informing the public about new technologies on a timely basis. It can take up to five years to grant a patent, meaning that any cutting-edge technology described in a patent is usually already in the public domain and rendering the translation, as an information tool, obsolete even before it is completed. Research has shown that these costs have forced Irish innovators to take a selective, cost-effective approach when designating states for patent protection. This leaves patents vulnerable in those states where innovators simply cannot afford to validate them.
The advantages arising from implementation of the London Agreement, quite apart from the direct translation costs, can also have a positive effect on research and development and can enable scarce financial resources currently spent on translations to be reallocated to research and development and other business activities. The London Agreement is now in force in 17 of the 38 member states of the European Patent Organisation, including, importantly, major Irish trading markets such as the UK, France and Germany. Ireland hopes to join that number shortly and, in doing so, wishes to encourage other states to follow in order to further reduce costs for Irish patent holders registering their innovations throughout Europe. The overall aim of the London Agreement is to reduce the cost of translations across the 38 member states by approximately 50%. To reach this level of reduction, it is vital that all contracting states to the European Patent Convention become party to the agreement.
I wish to outline how the London Agreement works in practice. Article 65 of the European Patent Convention provides that any contracting state may require a translation of the full text of a European patent into one of its languages, if that language is different from the language in which the patent is granted. Under the London Agreement, countries will, either partly or wholly, waive the requirement for translations of European patents to be filed in their national language. This means that under the agreement, a member state with English, French or German as an official language will dispense with translation requirements entirely in order to for the European patent to come into effect. Ireland, with English as an official language, will no longer require a translation into English of the detailed specification of European patents drawn up in French or German.
In accordance with best practice and to assess the implications for Irish inventors and businesses, my Department carried out a regulatory impact assessment in respect of the London Agreement in 2009. This established that the main advantage of the agreement for Irish inventors seeking patent protection abroad is that it would no longer be necessary for them to furnish translations to the extent currently required in those countries which are party to the agreement. This would lead to significant savings when filing a European patent in other non-English language European states. There would be a significant reduction not only in translation costs but in the context of publication and patent attorney fees. The impact assessment also highlighted that in 2007 Ireland was the origin for some 126 European patents that were granted. The cost of designating these patents in 28 states was estimated at €6 million. If the significant impact of additional publication and patent attorney fees are added, this represents a considerable cost to Irish industry.
To bring Irish law into line with the London Agreement, it is necessary to amend our primary legislation. The core of Irish patent law is the Patents Act 1992, which is designed to meet our national needs and international obligations. We continue to amend this primary Act to ensure that the patent legislative framework remains robust and fit for purpose. The Patents (Amendment) Bill 2011 is a short but very important item of legislation which amends three sections of the Patents Act 1992 to allow for the forthcoming ratification by Ireland of the London Agreement. The other two sections provide standard provisions for legislation.
Section 2 amends the provisions of section 119 of the Patents Act 1992. These changes relate to the translation requirements for official language translations. It is necessary to delete section 119(6) to ensure that a translation in English of a European patent specification no longer needs to be filed in the Irish Patents Office in order for that patent to have effect in Ireland.
Section 3 provides for the repeal of section 119A of the 1992 Act in its entirety. Transposing the London Agreement into Irish law means that this section will no longer be necessary or applicable when section 119(6) is deleted. Section 4 amends section 121(2) of the 1992 Act and deals primarily with what constitutes an authentic text of the patent in cases of dispute.
Section 5 provides for the Short Title, collective citation and commencement provisions of the Bill. The text relating to commencement contained in this section is standard in nature and allows for the legislation to come into operation on a date or dates to be specified in an order or orders. This provides some ministerial discretion with regard to when the Act will become effective in law. The purpose of this provision is to allow for any administrative changes which may be required before the Act can commence. In this instance, it is necessary for the corresponding patent rules to be amended to bring them into line with the London Agreement. The proposed amendments to the patent rules of 1992 are being drafted at present, in consultation with the Office of Parliamentary Counsel.
It is my intention to commence the Act and the new patents (amendment) rules 2012 by way of an order as close to the enactment of this Bill as possible. The legislation, as published, was the subject of one minor amendment in the Dáil in respect of section 5. That amendment altered the title of the Minister following on from the change of name of the Department by Statutory Instrument No. 245/2011, which came into effect on 2 June last.
The Bill before the House is just one of many steps being taken to reduce the burden of patent costs. I take this opportunity to update Senators on a separate development at EU level. We are working with other member states towards finalising legislation for the creation of unitary patent protection that will reduce the cost of registration and enforcement of patents for businesses. Various proposals for a single EU patent have been under discussion for more than 50 years. Just prior to Christmas, 25 member states reached political agreement with the European Parliament on regulations for a unitary patent. This will lead to the introduction of a simpler, cheaper and more robust patent system in the European Union of the type which has eluded it for decades. When fully implemented, the unitary patent will enable Irish-based holders of patents to seek protection for their patents across the 25 member states supporting unitary patent protection — representing 79% of the territory of the European Union — for a fraction of current costs. The European Commission estimates that by implementing unitary patent protection, the overall savings to European business could be up to €50 million per annum, even in the early stages. These cost savings should be of particular benefit to Irish high-tech start-ups and small enterprises. When fully implemented, a unitary patent will mean large reductions in red tape and costs. This will stimulate European innovation and make patents more accessible to all companies in the European Union. I look forward to reporting back to the House when legislation for this unitary patent and its enforcement is finalised.
Until an EU unitary patent comes into force, perhaps in 2014, Ireland will continue to improve the patenting process in any way possible. The Patents (Amendment) Bill 2011 builds on our continuing efforts to facilitate Irish-based enterprises and research institutions in their effort to ensure that their innovations are properly protected in as many states as possible and at the lowest cost. I am confident the House will strongly endorse any initiative which reduces costs for innovation in Ireland in an efficient and inexpensive manner.
The enactment of the Patent (Amendments) Bill 2011, followed by our ratification of the London Agreement, will remove the current expensive translation requirements. In addition, Ireland is likely to be designated in more patent applications, increasing overall patent-related activity here. It is expected that more inventors and small and medium-sized enterprises, currently deterred from registering patents because of the high costs involved, will be attracted to protecting their intellectual property across Europe. This will further support Ireland’s efforts to generate economic growth through promoting and innovating better processes and products.
Senator Mary M. White: I congratulate the Minister of State on his first appearance in the Seanad and on introducing this Bill. It was a great pleasure to know his late father. I used to meet him early every morning in the corridors of Leinster House, and I am sure he is proud looking down on his son today. I also congratulate the Minister of State on the great job he is doing in office. The delivery of his speech was impeccable. It was a pleasure to listen to him.
Senator Mary M. White: I feel like it is a waste of time talking here, because the Minister of State has said it all. Fianna Fáil will be supporting this Bill and it is a pleasure for me as a business person and a nominee of the Irish Exporters Association to support this Bill. As the nominee of that association I was approached by it to draw attention to an intellectual property tax on patents that had a very negative effect on inventors and ideas here. The UK abolished this, but it was under the radar here. I approached the former Minister for Finance, Charlie McCreevy, on it. He brought his two senior departmental officials to the meeting and they said that it could not be done, because they felt that if the tax was not continued, there would be a loss of money to the Exchequer. I told the then Minister that the British had got rid of it, so he decided to deal with it in the Finance Bill. I was delighted with myself and I understood that it was a financial disincentive for people who developed intellectual property. It was a contradiction.
The last Government set up an innovation task force. Innovation is what drives business and patents are part of that. When Deputy O’Dea was speaking on this Bill in the Dáil, he drew attention to the history of patents. Trade has been happening since the beginning of time. There is nothing new when it comes to trade. Innovation and the development of new ideas have been there forever. At the end of the day, this creates employment and keeps society developing and distributes wealth, and young people can participate in the development of new ideas. Deputy O’Dea said: “The first recorded instance we can trace of a patent being granted was in 500 BC when the Greek city of Sybaris granted a patent to people who were developing new refinements of luxury.” He also said that all these luxury goods reminded him of the Celtic tiger. He went on to say:
This Bill will ratify the London Agreement and will mean less bureaucracy and less cost, and therefore a big incentive to foreign innovation in this country. We are committed to transforming Ireland into an innovative hub and increasing innovation and entrepreneurship, which is why we are supporting the Bill. We in Fianna Fáil get a lot of abuse from the parties in government, criticising Fianna Fáil when it was in office. However, multinational companies still come to Ireland, no matter what was going on here, because we had a steady, stable Government. That is a key reason multinational companies come to this country.
Senator Mary M. White: I will not mention names, but other countries have great intellectual ability and much better research facilities than us. In fact, I will mention names. Israel has spent an incredible amount of money on research and invention and has brought new ideas from universities to the market. However, there is political instability in the area. When Fianna Fáil was in government, the message was sent out relentlessly that multinationals are welcome in Ireland and that there is political stability. In spite of the civil war in the North, they still continued to come here.
Senator Deirdre Clune: As the Minister of State said, this is a very small but important Bill, as we try to make it more efficient for businesses to register patents and to access patents and patent information. He outlined in his speech the contents of the Bill and the background to it, which was very informative. I was glad to hear him talk about the legislative changes that are happening at EU level, because that is very important. We often hear how difficult it has been to get intellectual property to patent in Europe, which is seen as being uncompetitive when compared with the US and the BRIC countries. The Minister of State said he would be coming back to this House to explain that legislation once it is published, and I welcome that.
The Minister mentioned in the Dáil that his Department had carried out a regulatory impact assessment on the Bill, as would be expected. The fact that translations are no longer necessary will reduce costs for patents. Any step in that direction is welcome. Patents are very important. They provide certainty to businesses and enterprises. They give them protection for a limited period, which is 20 years in most cases, although they can differ. The fact that the intellectual property is registered means that it is there for other researchers, entrepreneurs and other investors to view and to see what work has been done in a given area. That is very important if we are to collaborate on information and research so that others can benefit. A patent has two sides as not only does it protect the item, process or product, it also provides an opportunity to pool information, which is important. We need an effective patent system that will convert investment in research into economic growth.
The Minister of State is directly responsible for promoting investment in research and development and supporting innovation. This makes him responsible for a very important sector. The innovation task force reported in March 2010 and identified many ways by which we could make it easier to access intellectual property and develop an innovation-intensive economy. It stated we should nurture the creation of ideas and protect them, which we do through the patenting system. However, we need a more efficient and effective approach to identifying and accessing intellectual property through commercial research. This is vital to strengthening the commercialisation focus.
It is possible to make Ireland a centre of international best practice for employment benefits to attract foreign investment. As Senator White mentioned, we need to develop a protocol to give certainty to entrepreneurs and companies in order that there will be clarity on the terms on which they can access intellectual property from third level institutions and take those products, services and processes to customers.
An important recommendation of the innovation task force is that Ireland develop as an international innovation services centre offering intellectual property management, licensing and trading services. It is a niche area we could develop and which is becoming more and more important. Our membership of the European Union and our English-speaking community will help us in this regard. The Bill is a step towards ensuring this process can be put in place.
Every year Forfás produces a strategy for science and technology indicators. If Ireland is to be internationally recognised as a centre for excellence, we need to be at the forefront in generating and using new knowledge. The most recent Forfás report recognised the enhanced contribution of research to economic development and the quality of our research. It stated we should increase economically relevant knowledge, including patents from third level institutions. Ireland is a premier location for carrying out research. The report states the policy for capacity building has been developed and delivered and that we now need to move forward and concentrate on commercialisation and transferring the knowledge we possess into business, job creation and commercial activity. In this regard, the report of Jim O’Hara’s high level group on research prioritisation will be very important.
It is important to note that the Forfás report states private industry is responsible for 66% of research and development activity in the economy. We get the impression it is all about Government and State investment, but it is not. The news provided in the report on citations is very good, as Ireland is ranked eighth of 20 leading economies. The areas in which we really excel are agriculture, immunology and medical sciences. It is a very interesting and important report to read.
I support the Bill, which is very short but important. It allows us an opportunity to focus on research, investment and supporting small and medium enterprises in innovation, research, creating jobs and securing the future economic well-being of the country. Much more could be stated on this topic and I hope the Minister of State will return to the House to discuss the matter of research and innovation and how we will rebuild the economy.
Senator John Crown: I welcome the Minister of State and also his efforts in this area. I have a keen interest in the issue of research, particularly medical research but also more generally. I have a very firm near ideological conviction that the future of the country, its salvation and the solution to many of our problems will be largely linked with investment and the appropriate steps we now take in the realms of research, development, investigation, science, technology and engineering. Anything — the Bill appears to be a very good example — which reduces obstruction and greases the wheels in facilitating innovation is to be welcomed. In this regard, I commend the efforts of the Minister of State and the broader European approach adopted.
The situation in Europe is a little depressing. We must have the historical context and realise that for most of recorded history, certainly the past 600 years, Europe, with our separated brethren in North America in the latter part, has been the driver of research and innovation in chemistry, physics, medicine, biology and weather science. This has translated into technological and economic advances. We reached a stage where one could go to any premises selling goods in the 1960s and find that most of the goods sold were manufactured in western countries, reflecting the translation of scientific advances through engineering, technology and commercialisation.
Something profound is happening. We are in a situation where much of this ultimately science-based wealth creation has been outsourced outside the western world. A cursory inventory of what is for sale in any shop, hardware store, electronics goods store or automobile showroom will indicate that the innovation-driven approach to manufacturing which sustained and developed the economies of the western world and funded the social democracies which are so dear to us is being eroded. If we lose wealth creation and the innovative edge, we will be at a colossal competitive disadvantage compared to countries which have already established a competitive advantage in labour costs.
In this regard, we must take a broad look at things which tend to get in the way. A little aside which I am mentioning for the first time in the House but which I will mention again in several fora in the coming weeks is that there is a view within Europe, as a result of which medical schools in Ireland may be de-recognised because of a bureaucratic imperative, that only medical schools which provide six year educational programmes, as opposed to the four or five year programmes now in place in Ireland and the United Kingdom, should receive recognition. This is an issue I intend to raise at the British-Irish Parliamentary Assembly.
The Minister of State should use his influence with the Minister for Education and Skills and the Minister for Health to try to foster the notion that science education be mandatory until the date students leave school, not because of the primacy of science over the arts or because we should try to develop an entire generation of people who will become professional scientists, but because science is the language of nature, nature being the law of the world and universe in which we live. It would help to foster a pro-innovation and science culture in society if more and more people understood this and did not see science as a peripheral egg-headed minority pursuit conducted by a small elite.
To capitalise on initiatives such as this we will need to take a serious look at providing novel tax incentives for companies which may be winding down their manufacturing processes to ramp up their research and development processes. Senator Mooney mentioned this earlier in the context of Abbott pharmaceuticals in Sligo, and a more general point could be made in that regard.
Specifically with respect to patents, the agencies of the State correctly incentivise people doing research to consider potential intellectual property in patent spin-offs. That is something people like me who have been involved in research sometimes are bad at because we want to publish papers to advance the field we work in and increase our own standing within the field as researchers of stature. Ego, not money, is the oxygen of science and the reality is that many people who are involved in science are not focused on issues such as intellectual property and patents, although that is changing. As a result, the agencies of the State have correctly attempted to educate people in their dealings with outside granting agencies and with the industry about the importance of including that. I would not say that is negative, wrong or should not be done. However, we need to put some thought into the way it is exercised. I have noticed on some occasions that certain unrealistic expectations are raised in terms of asking external companies who may own very promising compounds and who can go to any academic institution anywhere in the world and offer those companies for research but who choose to come to Ireland to surrender future intellectual property on peripheralised discoveries which might be made from their work. A generic example would be a company which has a new drug. It is a good drug and people here want to do research on the drug, which shows great promise. We want to associate ourselves with it. We want to get it for our patients and into our clinical trials. We hope that the halo effect which comes from that kind of involvement may ultimately make that company somewhat better inclined towards siting one of its manufacturing plants for that product here. However, if someone is doing some work on it, say, to decide if a group of patients might derive a particular benefit from it, we found that we were somewhat constrained by the granting agencies which were insisting that we should ask the companies in advance to surrender intellectual property. That does not happen with most of the newer biotechnology companies. Their research and development divisions are equalled only in scope and sophistication by their legal intellectual property, IP, divisions. This is not a criticism. I am extraordinarily supportive of Science Foundation Ireland in particular, and I welcome its new leader, who does an extraordinarily good job, but we might need to think about the way we position ourselves with respect to the demands of intellectual property and patent requests from some of the companies with which we are dealing.
Anything which greases the wheels of innovation can only be good for our society. The future is science and technology, and I include agricultural science, agribusiness, manufacture and novel approaches to energy production in that sector. If we are to get ourselves out of the difficulties we are in I believe most of the improve will come in that area. I thank the Minister of State for his attention.
Senator John Gilroy: I welcome the Minister of State to the Chamber. It is good to see him back again. I thank the Minister of State for his comprehensive explanation of what is a short but important and in many ways a technical Bill. I do not propose to speak too long on this Second Stage of the Bill but will reserve my comments mainly for Committee Stage but in placing Ireland at the forefront of innovation any measure that reduces costs and makes the process more efficient must be welcomed.
I wonder if our cumbersome and expensive process to date in patent application has led to the registering of many patents outside Europe that might not otherwise have been registered outside. I am struck by the fact that multinational companies operating in Ireland, for instance, are sending in excess of €25 billion out of the country each year in royalties and licence fees. How much of that, if any, is related to the current process? This figure gives a good indication of the size of the market for Ireland alone in the patent industry.
It is informative to hear — it is something I did not know until this morning — that it can cost up to €32,000 to register a patent of which €23,000 is for translation costs alone, which are already redundant by the time the patent is granted protection. The London Agreement eliminates that, and that must be welcomed.
It is good to see that the number of Irish applications for patents is fairly high, and we hope we can increase that number. This is one step, albeit an important one, in what is part of a suite of measures introduced and supported by this Government to foster, stimulate and encourage innovation here.
I commend the Minister of State and his Department for their actions in this area and encourage the Minister to continue them. I will make a more detailed contribution to the Bill on Committee Stage, to which I look forward.
Senator Paschal Mooney: I echo the warm sentiments conveyed to the Minister of State, Deputy Sherlock, and wish him continued success in the important brief he holds. I am also indebted yet again to my friend and colleague, Senator Crown, for raising issues of great relevance in the context of this debate. It prompted me to reflect on the earlier comments he made about what can best be described as a shift from Europe to the BRIC countries and to the Far East in terms of innovation. It is relevant in that context that the figure he mentioned of €1.8 billion spent on research and development here gives some hope for the future. I could not help but reflect on a comment made some years ago about the shift in manufacturing, as Senator Crown outlined. For example, Europe no longer manufactures batteries. It seems that batteries have been produced for some decades in the Far East. Why is there not a manufacturing facility in Europe to manufacture batteries? Why should it be shifted to the Far East? That was one of a number of products.
We all welcome this important legislation. I could not help but reflect again on the wonderful talent on display last week at the BT Young Scientist of the Year awards. My congratulations not only to those pupils who won awards but also to their teachers who encouraged them because without the teachers mentoring them in many cases there would not have been the results we achieved. The Young Scientist of the Year award is a wonderful development for this country and one to be cherished. When Ryan Tubridy interviewed the two boys who won this year he asked about patents and their reply was interesting. They said they had patented their innovation which was to do with algorithms, which will be of help in satellite navigation for space travel and so on. It is a very important innovation.
In light of the comments the Minister of State made and the revelations about the high cost of patenting, which is of the order of €36,000, if the young scientists patent their product will they have to pay that? One assumes that the academic institutions pay it. I am not sure what the answer is but it highlights the importance of this legislation.
I have a number of questions for the Minister of State. First, does the current position result in a loss of earnings to Ireland because of the complex nature of registering patents? The Minister made the point that innovators are being selective in the countries in which they register their patents. Does that mean that in those countries where they do not register the patents they are open to exploitation by other companies? I could not help but reflect that there has been a number of incidents across history where patents have not been applied for and, as a result, other people gained from the innovator. Senator Crown may know more about this but I believe penicillin has been ascribed to a particular creator but a BBC documentary on that issue proved that a group of people in a hospital in London, led by a very talented doctor, developed the initial positive results on penicillin. He then refused to patent it because he wanted it to be made available to everybody but a major pharmaceutical company has patented it and it continues to own the rights.
Second, has there been a loss of patents to Ireland as a result of the current regime in that people have found they have not been able to patent a particular innovative product and as a result it was picked up by some other company in another country? What is the difference between the London Agreement and the proposed EU unitary patent initiative? The Minister of State has already outlined that the introduction of the Bill will mean we will become part of the London Agreement which will apply to 37 countries. At the end of his contribution he referred to the ongoing discussions which are leading to a proposed EU unitary patent which would apply to 25 countries. What is the difference in its application? Will the London Agreement become redundant as a result of the initiative in Europe? It is a complex area and perhaps I am asking the wrong question but I am curious to know the relationship between the two.
The Minister of State also said it is vital that all contracting parties to the European patents convention become a party to the agreement. I presume that is in order to reduce costs rather than because of any other administrative obstacle.
This is a vital Bill. As late as yesterday there was a letter in The Irish Times from, I understand, a professor in Trinity College who said there was need for cultural change in Irish society to embrace the sciences, as Senator Crown eloquently put it. Perhaps the Minister of State might comment on that.
Senator David Cullinane: Like previous speakers, I welcome the Minister of State to the House and wish him every success with what is a difficult but challenging and exciting portfolio. He recently visited Waterford Institute of Technology. I will discuss the opportunities which exist there in terms of research and development and links with ITs, universities and so on.
I fully support one line in the Minister of State’s speech, namely “Providing efficient and affordable access to registering patents is vital to stimulating innovation in Irish enterprises, universities and research students”. I mentioned that the Minister of State was in Waterford. I am not sure if he visited the ecolabs or the TSSG. Both are world-class research and development facilities. The TSSG is the Telecommunications Software and Systems Group and has about 100 staff. It is anchored within Waterford Institute of Technology. It has assisted more than 90 companies operating in Ireland, mainly in Waterford and the south east, and has provided solutions to research and development issues. It has been successful in supporting the establishment of 11 new start-up businesses. Research and development, and linking with universities and local entrepreneurs, is an exciting and good way to create jobs and encourage creativity. People can think outside the box and do what they need to do.
I fully support the Bill. The role of intellectual property rights and patents is central to economic growth and job creation because they can be the future drivers of the economy. New ideas, inventions and innovation in existing businesses can lead to greater investment and job creation opportunities and generate profits and tax take. For too long the ideas of our people have been exploited by others. I referred to TSSG and ecolabs — I am sure it is the same across the country — which have provided solutions and come up with knowledge, but unfortunately companies outside Ireland have taken advantage of some of the research that was done. We must protect, as much as we can,much of the research and development that is done here to ensure that whatever job opportunities arise in these areas are maximised for Ireland.
We support the Bill as a step in reducing costs to small businesses. However, we are concerned that the Government, in dealing with the issue of IP and patents, is missing the bigger picture. It is facing two questions that must be addressed. How do we create an innovation ecosystem that stimulates new ideas and how can the State and its people benefit from IP and patents? It is very important that not just individuals but the State benefits from patents. I will deal with that in more detail. These are two issues arising that have not been comprehensively addressed by the Government. How do we encourage Irish-owned businesses to develop and register IP and patents and how can we ensure that the State and its people benefit from this work?
In a previous conversation on this issue, the Minister of State assured people that the small number of patents, approximately 400, was not a true reflection of innovation here as many more patents were developed by Irish people working in large multinationals located in this State, which may be true. This in itself is not a good thing, as the Minister of State indicated, because it is indicative of the lack of imagination of previous Governments and some State agencies on this issue. These patents and the profits from them do not belong to the people who devised to them. They should also be the property of the people and be exploited not just by multinationals but the State and people.
In this state we have invested in education and promoting innovation, yet it appears that the benefits will be accumulated in some areas by multinationals. We do not believe that should be the case. We are, in effect, promoting a form of internal brain drain where the skills and ideas of our people are not directed into developing Irish companies in the global marketplace but servicing the needs of multinationals. What is required is an approach based on developing and promoting Irish-owned companies, and promoting Irish innovation at the global marketplace.
I understand that this is a technical Bill but, as we all know, protecting IP rights is vital to Irish business and I hope this Bill will be a further step in reducing red tape for business in Ireland. I hope it will encourage businesses to file patents by reducing the administrative load, which is one criticism we have heard. The Bill will, it is to be hoped, lead to a situation where Irish businesses will be able to use their patents to protect their businesses much better and across the 25 member states who have signed up.
I will touch on a couple more issues briefly regarding innovation and patents. The Minister, Deputy Noonan, recently introduced changes to the research and development scheme to make it more flexible for companies to claim the research and development tax credit, but what about allowing companies to claim the credit if they take on new graduates? Surely that is investing for the future too and would encourage them to employ these sorts of people. We all agree that ongoing education while at work is critical to future growth. Therefore, to spur greater workforce training and boost productivity we should allow training employees to be claimed as research and development.
Also, according to one consultancy firm, Leyton, other things need to be addressed. The current situation is that the amount of the research and development tax credit that can be received by way of cash refund is restricted to the greater of the payroll liabilities of the company in the claim period or the company’s total corporation tax liabilities for the previous ten years. The cash refund is received in three instalments over a 33 month period. The problem is that many start-up companies can be seriously disadvantaged by this restriction. It seems a long period to wait and the company could go out of business.
If the Government is serious about patents, innovation and start-ups, it should look at this issue as a matter of urgency as it is a very long period to wait to receive the tax benefit for an investment they are required to make now. We could perhaps create more jobs if this provision was changed. Could the Minister look at providing more tax relief on royalties from various other areas?
Should we allow more tax credits for collaborative research? The company I ran for many years had a very successful collaboration with a Trinity College start-up company called IdentiGEN. Such an approach is often more productive than a company going it alone. The company was developed to do DNA testing of food and other products in particular. Other countries, including Japan, Hungary, Spain, Denmark and the UK provide companies with more generous tax incentives for collaborative research and development. I am not just talking about work being done alone but rather collaborative work.
How can we help to change this attitude? There must be a much greater effort and an advertising campaign, for example, to encourage small and medium enterprises, SMEs, to file patents in Ireland, especially given the legislation before us today. Many small businesses simply do not understand the system and may be forced to turn to a consultancy firm which would be extremely expensive, and even more so for a company at the start-up stage. Could we have a training programme for small businesses on patents? What is the Patents Office doing in this regard? Can local enterprise centres tap Government resources to educate people in SMEs? Perhaps patents could be taught at school as part of a new entrepreneurship programme. Could we have a move towards more on-line filing of tax patents? We need real improvements in those areas.
Will the Minister of State comment on the reports that €19 billion of Irish pharmaceutical exports may be affected by the expiration of patents on a number of blockbuster medicines produced here? Senator Crown raised that issue on the Order of Business. Why are more patents issued to Scottish universities than to any other nation in the world, as measured per head? Why is Ireland not in that position? I believe some of the changes mentioned today, along with others, could help us. I hope this Bill will help us towards our goal. I support the Bill but would love to see changes and examples of enthusiasm to recognise what we can achieve with patents.
Minister of State at the Department of Jobs, Enterprise and Innovation (Deputy Sean Sherlock): I thank Senators for their great comments. A number of issues have been raised, all of which indirectly relate to the legislation but are not pertinent to today’s process. Generally, if the starting point for innovation is Government policy interacting with State agencies, there is a very clear sense of purpose in ensuring we do not rest on our laurels. The recommendations of the innovation task force are being dealt with in an ongoing process, with one recommendation relating to tax credits. That was addressed in the recent budget and I will deal with that in further detail.
I thank Senators for their considered contributions, which raise issues that must be taken on board by the Government. A patent is not the only measure of innovation but rather one of a number. The clear purpose of this legislation is to reduce that burden and put in place a European system, where Ireland will play a part and Irish SMEs and other stakeholders can ensure administrative and legal costs are reduced as a result. In its complementary policy, the Government is going through a research prioritisation exercise which seeks to build upon between 12 and 14 core themes or areas of research on which we must concentrate in order to interact with the State agencies which Senator Crown spoke of, including Science Foundation Ireland, Enterprise Ireland, academic institutions and multinational companies. In doing this we try to focus the amount of money spent by the State on research in a way that ensures the basic research requirements and a more applied approach that can drive more economic benefits by creating as many jobs as possible. Complementary to that is a patents process which ensures that where a citizen, researcher or SME wants to invest in a new patent system, the European system will ensure the burden is not heavy in cost. The process should be as simple as possible.
An interesting point was made by Senator Mooney regarding the young scientists’ exhibition. When two people from a school in Dublin or elsewhere can develop algorithms at such a stage in their lives, we must be bowled over by the depth of their imagination and creativity as well as the ecosystem which supports them through their local school. Successive governments have been in this apolitical space and no specific party owns it. As a State we want to ensure the Irish Patents Office — representatives of which attended the exhibition — can provide people with the advice they need. When I attended its stand at the young scientists’ exhibition, there were a phenomenal number of interactions with students.
The €32,000 figure is average or indicative but we want to ensure we get to a stage where people like the students in question plug into the idea that there is a process for their innovation which is not cumbersome. Listening to the radio interviews, the people in question were already plugged into the space of patenting their work.
Deputy Sean Sherlock: That culture is changing in students, who are becoming more aware of the potential. It is not for the State to own all the intellectual property deriving from the research in which it invests. That is not a good direction to take and we do not want to create a disincentive for individual researchers or companies with an investment in labs, for example. They should not have to give intellectual property back to the State and we should foster the creation of such intellectual property or patents.
The Forfás report compiled for the office of science and technology examined the level of support for research and development across all Departments, indicating that total State support for research and development increased from €756 million in 2005 to €941 million in 2008. The slowdown in the economy was evident, with a slight decline in 2009, with total expenditure in 2010 of €872 million. My Department has a 2012 budget which will provide €518 million in capital grants this year, which is an increase on 2011.
With regard to promotion of research and development, Science Foundation Ireland has a pivotal role in enhancing Ireland’s human capital in strategic areas of scientific endeavours relevant to the future competitiveness of Irish industry and enterprise. That body has up to 3,000 researchers in 28 centres throughout the State, with up to 500 industry collaborations. They generate intellectual property, although some is generated within the multinational sector through the existing collaborations. Multinational companies are increasingly coming here not just because of the corporate tax rate but also because of a very highly evolved research and development facility that exists within this country.
The research and development tax credit scheme provides for a tax credit of 25% of the incremental expenditure incurred by a company in an accounting period on research and development activities. That can be off-set against a company’s corporation tax liability. I note the points made by Senator Quinn. Perhaps we could engage further to see whether there are possibilities in terms of graduates. The research and development tax scheme was enhanced in budget 2012, as promised in the programme for Government. A greater proportion of the total spend on research and development is now eligible to be written off by including without restriction the first €100,000 spent for the purposes of availing of the credit. In addition, businesses that outsourced research and development activities to universities or other institutions will be subject to fewer limits in availing of the tax credit — a measure designed with SMEs in mind. Companies will also have the option to use a portion of the research and development tax credit to assist in the employment of key employees to drive their research and development agenda.
Senator Gilroy made a point on the registration of patents here, in the European Union and in Europe in general. Irish companies marketing their products strategically choose to apply for a European patent, an international application by means of the Patent Cooperation Treaty or directly to the country to which they want to export. Increases in the number of filings abroad indicate that export-orientated Irish companies are widening their market reach, expanding into new international markets, opening up new businesses and becoming more competitive and innovative. Direct European patent filings and international filings under the Patent Cooperative Treaty and by Irish resident companies rose from 667 in 2008 to 687 in 2010, an increase of a meagre 3%, but it is an increase. Applications for UK patents from Irish-resident companies filed directly to the UK Intellectual Property Office rose from 278 in 2008 to 289 in 2010, an increase of 3.9%. Applications for US patents filed by Irish resident companies increased from 740 in 2008 to 796 in 2010, an increase of 7.5%. That trend, where Irish-resident companies are filing directly for US patents, is due to the low cost of acquiring a US patent compared to the European patents system. I hope that answers the point adequately.
Deputy Sean Sherlock: On the unitary patent protection and the London Agreement; they are not mutually exclusive. The purpose is that they would be complementary. By instigating a unitary patents system one would hope to drive down further the cost of implementing patents to reduce the cost of registration further and to benefit from an estimated €50 million in savings. It is a mechanism by which one would have a wider European scope. The aim is the same in that it complements the London Agreement. I hope that clarifies the position. If it does not I am happy to return to the matter on the next Stage.
Deputy Sean Sherlock: Senator Crown summed up the legislation very well when he referred to reducing obstruction, greasing the wheels of innovation and improving society. That is key to what we are doing. It is part of that process. While the legislation is technical it speaks to the attempts by the Government to increase our competitive advantage, ramp up research and development incentives, as we did in the budget, and ensure that we can mine more of the intellectual property within our research facilities and institutions, and to encourage the SME sector to ensure it can get on board as well in terms of beginning to think more laterally about whether it wants to engage in research and development and to provide incentives to that end. I hope I have addressed the points in general. If I have not, I am happy to come back to any points that are outstanding on a later stage.
Deputy Sean Sherlock: There is some loss of income. The Senator should forgive me for not responding to the question. The number of applications for patent protection received in 2010 was 792. There was a decrease of 18% from 2009. A total of 243 patents were granted in 2010, a decrease of 26% compared to 2009. A loss of revenue arises in terms of fees for translations in the context of this country becoming a party to the agreement. As part of the validation process an applicant must lodge a translation for a patent granted in French or German in the office within six months of grant of patent together with a fee of €35. In 2010 that came to €33,215. It is worth noting that the figure has been steadily decreasing. In 2006 it stood at €62,000. The crucial point is not necessarily the loss of revenue to the State but the increase in the accessibility of the system to people who are innovating within the system.
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