The recent report from Mario Draghi, The Future of European Competitiveness, makes for grim reading for anyone like me who is invested in Europe’s long-term economic success and status as a driver of innovation.

The report offers several explanations for why the EU has failed to keep pace economically with the world’s other major powers and serves as a warning to policymakers everywhere.

As Draghi points out, Europe has, “many talented entrepreneurs and researchers filing patents.” But, he adds, those entrepreneurs and patent owners are often blocked by onerous government intervention.

“We are failing to translate innovation into commercialization, and innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations,” Draghi states.

At InterDigital, we are a pure research business and our success depends on the commercial impact of our innovation. Without this, we would not be able to re-invest in our wireless, video and AI research, which makes mobile networks more reliable, supports the transmission of vast quantities of data over wireless networks, and enables higher quality video. In recent years we have invested around half of our recurring revenues into our research and the development of our patent portfolio, with much of our investment focused on standardized technologies such as 5G, Wi-Fi and advanced video compression.

Our engineers are some of the best in the world at anticipating how technology trends are likely to shape connectivity for years to come. We also understand that not all of our research will eventually be adopted in standards like 6G and in connected devices and services. But, thanks to the IP protection that we receive for our inventions, we can license the research that does make it into those standards to companies that use our patented technologies and generate the necessary revenue to re-invest in our R&D.

To do this, we don’t expect a regulatory environment that is tilted in our favor, but we do expect policies that balance the interests of innovators like InterDigital with those that implement our technologies in their devices and services. Policy is at its most effective when it provides the right incentives for innovation and encourages industry-led technology development.

SEPs and the proposed EU regulation

Unfortunately, in Europe, the pathway to commercializing innovation is now under threat from the kind of inconsistent and restrictive regulations that Draghi criticized in his report.

Currently a proposed new regulation on standard essential patents (SEPs) is moving through the legislative process in the EU which, if it were to come into force, would place new and particularly heavy burdens on innovators.

The reality of what has been proposed is that the regulation would give implementers who infringe intellectual property, even more leverage over innovators like InterDigital, Nokia and Ericsson. My concern is that, ultimately, it would make the EU a far less attractive place for R&D investment from companies that build the foundational technologies that drive so much of today’s connected global economy.

This interventionist stance is also in stark contrast to the recent shift in approach taken on SEP policy in the U.S. where policymakers have taken a step back from the much more heavy-handed approach taken during the Obama Administration, and have shifted to a more friendly, light-touch approach, which now assesses SEP owners’ and implementers’ behavior on a case-by-case basis. At the same time, USPTO Director Kathi Vidal has advocated for “greater investment in research and development in technologies that may become international standards.”

I would argue that the current U.S. approach is the right one to take. It is also notable that three pieces of legislation – PREVAIL, PERA and RESTORE – were recently introduced in the U.S. Congress and, while they do not directly address standards, all three would help shift IP policy in a more balanced direction.

Recommendations for SEP policy

Given this flurry of activity on either side of the Atlantic, when new SEP and innovation policy is being considered, how can it be crafted to support standards innovation? Here are a few recommendations to consider.

1. Find consensus in SEP policy

I would suggest that any policy under consideration should be subject to a thorough consultation process that takes account of the views of all stakeholders. As much as possible, any proposed reforms should be based on consensus and not simply on weight of numbers. The relatively small number of companies that develop the vast majority of contributions to standards like 5G, Wi-Fi, and the HEVC video standard are always outnumbered by the companies who implement these technologies in their devices and services.

2. Global arbitration can be a better way for resolving SEP disputes

Where disputes do arise between innovators and implementers, effective policy should encourage parties to use binding global arbitration to reach a settlement. Arbitration is more efficient than multi-jurisdictional SEP litigation, and its global scope means that it is far better suited to resolving disputes that involve global patent portfolios.

3. Take a broader view when determining SEP policy

Any policy must be viewed through a wide prism that takes into account areas such as trade and foreign policy, ways to foster R&D investment, and national security. Regulations that impact standardized technologies are about more than just IP rights and need to be viewed through a much broader prism.

It’s clear that we need the right incentives to encourage ongoing investment in foundational R&D, not more red tape like the EU’s SEP regulation. That’s the key to ensuring that innovation and standards development continue to thrive.