European firms can lead the economy of tomorrow if our small and medium-sized companies obtain the necessary support, notably when it comes to innovation incentives and patent litigation, writes Hassan Triqui, the CEO of Secure-IC. This opinion was originally published in EURACTIV. 

We are in the midst of a revolution: the revolution of the Internet of Things (IoT). This will transform the planet, with 75.4 billion connected devices expected to generate annual economic benefits of $11 trillion globally by 2025. This will create countless jobs in innovative companies both big and small who build the technologies and apps that will power this new paradigm.

Europe could benefit greatly. We have excellent universities and research institutes and a deep culture of innovation. Our Achilles heel is our inability to commercialise our knowledge and expertise by creating the right service ecosystem for innovative small and medium enterprises (SMEs) to thrive. In order to do that, we must build the right framework to succeed – or we will miss out to competitors in Asia, the United States and elsewhere.

Some of our most R&D-intensive companies are leading the development of connectivity standards, such as Near Field Communication (NFC) and 5G that will underpin the deployment and success of the IoT. SMEs lead much of this innovation.

As the CEO of a tech start-up with 50 employees, I understand the challenges and opportunities of SMEs first hand. Our companies need to commercialise their knowledge and expertise to thrive – but in order to do that, the EU and its Member States must create the right business and regulatory ecosystem. Realising this, a group of CEOs representing Europe’s most innovation-intensive small and medium-sized companies – including mine – recently delivered an SME Manifesto on ‘Driving growth for European Innovators’ to the European Commission.

The Manifesto calls for tax credit incentives for every euro invested in R&D by innovative SMEs. One example is France’s Crédit Impôt Recherche (CIR), which has been described as “the lifeline” for innovative SMEs. Better financing and loan guarantees can also boost R&D. For example, the European Investment Fund and the SMEG Guarantee provide guarantees to local banks for a portion of  loans made to SMEs (50%). This is certainly a positive, however, these guarantees should be increased from 50% to 80% of the loans for the most innovative SMEs, taking into account the quality of patents and other intellectual property assets held by the SMEs.

Yet SMEs need more than financial incentives – they also need to assurance of adequate protection of their intellectual property. We see two threats emerging: the growing number of patent free-riders- companies often based in Asia and the USA that use SME technologies at very low or no cost, and often unlawfully; and the systemic threat from a small group of Silicon Valley companies that want to replace the international system of open standards development, on which technology interoperability depends, with one based on closed proprietary technologies and platforms. These companies want to dominate the IoT at the expense of European innovators and consumers.

Specifically, for SMEs to protect their patents, they must have access to justice. Most European innovative SMEs do not have the financial resources or the international reach to even consider taking non-European manufacturing giants to court for patent infringement in one, let alone multiple jurisdictions.

For example, the 200 employees European SME which co-invented NFC technology – used today in most smartphone handsets for secure payments – had to spend €24 million to defend its patents in courts in the US and Germany. Three Asian companies were using them in their devices without paying license fees. In this case, thanks to the support of French sovereign fund France Brevets, the company succeeded and managed to survive – but legal costs of this magnitude are often difficult or impossible to bear for SMEs, when such support is not available.

That is why we believe that SMEs must be given greater access to justice and more protection to be able to defend their patents in court. If companies, small or large, cannot protect their R&D investments, they will stop investing and the system of open standards will collapse.

We have the opportunity to lead the world in the IoT revolution and in setting new standards for the digital economy of the future – but we the right framework to seize the opportunity. We have set out what we believe Europe needs to do to ensure a bright future for our companies and create countless jobs across Europe, through our SME manifesto.

Now, it is the job of the European Commission to acknowledge the importance of measures these SMEs measures in the State of the Union and to the Parliament and Member States to act before it is too late.