An European Commission report into intellectual property issues in the IT industry has been criticised by patent campaigners as a "mockery and an insult".

The report, "Fostering the Competitiveness of Europe's ICT Industry", is the result of nearly five months of work by a taskforce formed in July, which included Microsoft, IBM, SAP and other large IT companies, as well as some smaller firms. Among other recommendations, it calls for a lower-cost, more unified patent system for Europe's IT industry.

That recommendation represents just the latest volley in an ongoing battle between large (mostly US) IT companies keen to bring in US-style software patents to Europe and a number of small business groups and patent campaigners that claim the proposed patent changes only benefit large business profits at the expense of innovation.

A proposed directive that would have enlarged software patent was thrown out by the European Parliament last year, and the Commission is currently working on an alternative plan that critics say would have much the same effect.

The Foundation for a Free Information Infrastructure (FFII), which lobbies against European software patents, has taken issue with the topic paper "IPR for competitiveness and innovation" [pdf], which was prepared by the EC taskforce. The report promotes the interests of large companies, the FFII claimed, adding that small and medium-sized enterprises need patent protection.

"The report is particularly insulting to small IT firms," an FII statement read, claiming that they "generally reveal an anxious attitude towards the patent system as a whole. Any reform or initiative... is viewed as a potential backdoor for introducing software patents, a concept opposed by a large majority among this Group." The report says small IT firms of having "a relatively inadequate understanding and general knowledge of the patent system".

When the taskforce was formed, the FFII and small business organisations protested that it comprised almost entirely of large companies. FFII president Pieter Hintjens said the taskforce effectively stifled debate and contributions from smaller companies, and expressed disbelief that the European Patent Office was allowed to take part in the study. "It was a farce. This report is and an insult to all those who participated in good faith," Hintjens said.

The EC report's overall focus is on research and development (R&D), which it says must be boosted if Europe's IT industry is to remain competitive. Europe is investing less than other major regions in R&D, the report said. In 2003, the EU invested 1.93 percent of GDP in R&D, compared with 2.59 percent for the US and 3.15 percent for Japan. The figure is higher than China's 1.31 percent, but China's expenditure is growing and will soon catch up with the EU, according to the report.

Among the report's recommendations are tax schemes for supporting research, support of public-private R&D partnerships, developing a European public procurement policy to stimulate business demand for R&D, boosting research funding and creating a more venture capital-friendly environment for start-ups.

The report also calls for better IT interoperability, a stronger internal market, strengthening Europe's intellectual property rights regime and bridging the workforce's e-skills gap. The EC said it will make specific plans for action on these points next year.