Innovative Germans let others make the profits

Germans are innovative European champions but although they created the MP3 audio encoding format and the fax, it is often foreign groups that have profited from their development.

Who remembers that a research laboratory in the southern city of Erlangen holds the patent for MP3, the widely-known format that has earned a fortune for Apple and Microsoft?

"The idea came from a professor at Erlangen at the end of the 1970s," said Matthias Rose, marketing director for the Fraunhofer Institute.

"Competition was fierce, there were 15 processes vying for international certification," added Bernhard Grill, one of six people who invented the MP3 format.

Germany finally won the contest, "but the first five years were not a great success, we were told it was too complicated," Grill told AFP.

"The first clients were small firms that wanted to link radio stations together, for example during the 1992 Olympic Games in Albertville," France.

It was not until computers became more powerful and Internet development progressed that MP3 really took off.

The patent now earns millions of euros for the Franhofer Institute, Rose said, but no major German industrial group has profited from it. That, experts say, has often been the case.

A hybrid motor was created in the early 1970s in Germany, long before Toyota had a hit with its Prius car.

Same thing for the fax, which failed to convince people it could be useful back in the 1950s, or LCD technology for flat-screen televisions which earns plenty of patent profits for the German chemical group Merck but is used mostly by Asian manufacturers.

"We have inventors but we lack entrepreneurs," the business consulting group Ernst & Young said in a German study released this month.

Unlike Asia and the United States, "Europe does not have a spirit of enterprise," Grill added.

Oliver Koppel, who wrote a book on German innovation, said: "The MP3 is a great invention but it does not fit the German industrial structure," which is no longer very active in consumer electronics.

Peter Gruenberg, a German who won the Nobel Prize for Physics in 2007 for work that allowed hard drives to stock a lot more information, learned the same thing.

Germany holds the largest number of European patents, with 18 percent of the total, well ahead of number two France at six percent.

Germany is number three worldwide, behind Japan and the United States, but has focused on traditional industrial sectors.

"Germany is considered an innovative country, but more in ... machine tools or automobiles than in new technologies," Ernst & Young said.

According to the Cologne-based IW economic institute however, the potential of existing dormant German patents is currently around eight billion euros (12.3 billion dollars).

"One patent in four is never used," Koppel said.

Whether because of a lack of risk capital, weak treasuries in small and medium sized enterprises, or budget cuts in research and development ... the experts point to the same reasons.

And issue the same warning.

"We used to think that increasing the population or boosting the industrial sector would create jobs," Koppel said.

"But within the past few years, innovation has become the dominant growth factor."

© 2008 AFP

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