Summary

• The European Innovation Act proposes common approaches to intellectual-property valuation and financing.
• New research and development procurement measures are intended to make governments more effective early customers for emerging technology.
• Commission modelling estimates up to €452 billion in cumulative GDP effects over ten years, although the result depends heavily on implementation assumptions.

European laboratories produce valuable research with considerable regularity, although far fewer inventions become large businesses, which is why the European Commission is concentrating its latest innovation legislation on what happens between scientific success and commercial scale.

The European Innovation Act, proposed on 9 September, focuses on several barriers that appear after intellectual property has been created: patents can be difficult to value and finance, public authorities are often poor early customers for unproven technologies, and rules differ sufficiently across borders to make commercialisation slower than the research that preceded it.

Rather than relying mainly on another large grant programme, the legislation would establish a common framework around intellectual-property valuation and strengthen research and development procurement. The Commission wants patents and other rights to become easier for lenders and investors to assess while giving public authorities a clearer route to buy technology that is still moving towards commercial deployment.

That distinction reflects a recurring weakness in Europe’s innovation economy. Public funding can carry a project through university research, laboratory validation, or an early company, yet the next stages require customers, working capital, manufacturing capacity, regulatory certainty, and buyers willing to accept a technology without years of established references.

Intellectual property meets the balance sheet

Young technology businesses frequently hold much of their potential value in patents, software, know-how, and other intangible assets. Conventional finance is more comfortable with assets that can be priced and sold using mature markets, which can leave a technically strong company with substantial intellectual property but little collateral that a lender is prepared to recognise.

The Commission proposes a more consistent EU framework for IP valuation, alongside mechanisms intended to improve transactions and commercialisation support. If banks, investors, and companies can place greater confidence in how intellectual property is valued, patents could become more useful as part of financing decisions rather than remaining assets whose worth is only tested during a sale or licensing agreement.

The Joint Research Centre estimates that the measure could unlock between €2.7 billion and €10.2 billion in additional IP-backed finance each year. Those figures are scenario outputs rather than committed investment, and they depend on whether common valuation standards actually change financial behaviour.

The same caution applies to the Commission’s larger economic estimates. JRC modelling suggests the Act’s main reforms could add between about €256 billion and €452 billion cumulatively to EU GDP over ten years, with peak employment effects ranging from 238,000 to 507,000 additional jobs.

Those numbers are not forecasts of revenue already waiting to be collected. They come from modelling different assumptions about how effectively the reforms improve financing and procurement, although they illustrate why Brussels is concentrating on mechanisms that could affect thousands of companies rather than attempting to select another small group of individual winners.

Governments become part of the commercial market

The other major intervention concerns research and development procurement, where public authorities pay suppliers to develop solutions that are not yet available as ordinary commercial products. The Commission estimates European public R&D procurement at about €17.3 billion a year and wants a more harmonised framework for using that spending across borders.

A government prepared to become an early customer can give a young technology business something a grant cannot provide: evidence that somebody will pay for the product. Contracts can also expose weaknesses that remain invisible during research because hospitals, councils, transport systems, laboratories, and other real organisations impose operational constraints that prototypes do not.

Europe has nevertheless struggled to use procurement consistently in that way. Public bodies tend to have low tolerance for project failure, while unfamiliar suppliers face requirements built around financial stability, past contracts, and fixed specifications. Those safeguards protect public money, but they can favour incumbents precisely when a government programme is intended to test a different technological approach.

The Innovation Act therefore arrives alongside the wider Public Procurement Act, which would simplify mainstream purchasing and give authorities more freedom to consider innovation, resilience, security, and quality. One proposal changes the route for developing technologies with public buyers; the other changes the market those technologies could later enter.

This approach complements Europe’s recent efforts to increase scaleup capital. the EU has already created a €5 billion scaleup fund aimed at strategic technology companies, but equity cannot compensate indefinitely for the absence of customers or a fragmented home market.

A company with more capital can hire staff and develop its technology for longer, while a company with credible buyers can begin proving that the technology belongs in an operating budget rather than a research programme. Brussels is increasingly treating both as necessary if more European inventions are to develop into companies capable of competing internationally.

Execution remains national as well as European

Common frameworks cannot remove every barrier because much of the implementation still sits with banks, procurement authorities, regulators, universities, and member states. An EU methodology for valuing a patent will have little economic effect if lenders remain unwilling to use it, while R&D procurement rules will not create markets if public bodies lack budgets or specialist buyers.

Regulatory sandboxes and commercialisation support may help in sectors where product regulation becomes another obstacle, although the same implementation requirement applies there. Technology companies need access to authorities that understand the product well enough to decide what can be tested safely and what evidence will be required afterwards.

The Act still has to pass through the European Parliament and Council, and several institutional details may change before adoption. Even if enacted substantially as drafted, the economic estimates attached to it will take years to test.

Yet the proposal is built around a useful diagnosis: Europe’s innovation deficit cannot be measured solely by how much research it conducts or how much venture capital is available. Commercial scale develops when intellectual property can be financed, products encounter customers, procurement tolerates new suppliers, and businesses can repeat those transactions across a large market. The Innovation Act attempts to work on that machinery rather than assuming another breakthrough in the laboratory will fix it by itself.