Who controls Europe’s technology, and why does it matter?

Europe regulates boldly, sets global norms and talks confidently about digital sovereignty. But the deeper question is - who captures the value from Europe’s digital economy?

For years, policy has focused on physical digital infrastructure in the form of connectivity, fibre, data centres and cloud capacity. But value in the digital economy is increasingly determined by intangible assets - software, platforms and intellectual property. Patent-intensive industries already account for 18.4 per cent of EU GDP.

That creates a structural imbalance. Europe has struggled to match global leaders in digital infrastructure, while also failing to capture enough of the value created on top of it.

A second policy brief from a collaboration between the Vodafone Institute and University of Bonn – Digital Patent Decline: The Economic and Political Costs of Europe’s Shrinking ICT Patent Share – examines the reasons why.

The report shows a marked deterioration in Europe’s relative position in ICT patents. China now accounts for more than 50 per cent of global ICT patents, while Europe’s share has fallen below 5 per cent. Since 2000, EU firms have secured only around 7 per cent of cumulative patents, compared with 39 per cent for China and 24 per cent for the United States.

Why intellectual property ownership matters

ICT patents are no longer confined to the digital sector. Digital technologies now underpin manufacturing, energy, transport, healthcare and defence. Ownership of digital IP increasingly determines who captures value, sets standards and holds leverage in global supply chains.

Patent ownership also shapes technical standards. Those who control standard-essential patents secure long-term income and influence entire markets.

The money flows show the dependence. Global cross-border IP payments exceed US$1 trillion annually. In 2024, the EU paid around US$138 billion more in licensing fees than it received, making it a large net payer for foreign-owned intellectual property.

Much of that deficit is recorded in Ireland, where US technology companies concentrate IP holdings and licensing flows. Ireland alone recorded an IP payments deficit of US$164 billion in 2024. Excluding Ireland, the rest of the EU would have shown a US$26 billion surplus.

The underlying problem is one of scale. Europe owns too few of the ICT patents that sit at the centre of global value creation. By contrast, East Asian economies are rapidly expanding their standard-essential patent portfolios, especially in 5G and digital infrastructure.

Between 2020 and 2023, Chinese companies accounted for around 15 per cent of ICT patents granted by the European Patent Office, while European firms held only 2 per cent in China.

Patent ownership also affects legal power. Courts in jurisdictions with strong SEP portfolios increasingly set global royalty rates. Chinese courts have become important venues for international patent disputes, giving them influence over economic activity far beyond China.

What Europe should do

European policymakers recognise the competitiveness challenge. The Draghi report warned that Europe struggles to translate innovation into productivity and scale. But in digital IP, the problem is more fundamental. Europe lacks ownership of the core technologies themselves.

The EU’s Digital Decade rightly focuses on connectivity, skills and adoption. Yet ICT patent ownership barely features as a policy objective, despite patents being a key mechanism through which research and innovation become long-term economic and political power.

If digital sovereignty is to mean more than regulatory autonomy, three shifts are needed:

First, ICT patent generation should become an EU digital and industrial policy goal. EU strategies track deployment and skills more closely than IP outcomes. Leading ICT patent powers align industrial policy, R&D funding and innovation ecosystems with long-term patent accumulation. Europe should do the same, treating ICT patents as a core output of the Digital Decade and future industrial initiatives.

Second, Europe should manage IP dependence strategically. It will remain dependent on foreign ICT patents, particularly from the United States and East Asia. Those dependencies cannot be reversed through localisation or “buy European” rules. In many critical layers of the digital stack, European firms would face limited choice or subscale alternatives.

A better route is deeper partnership with IP-strong, geopolitically aligned countries such as Japan and South Korea. These partnerships should go beyond market access, covering joint R&D, co-development, technology transfer and workforce training designed to rebuild Europe’s own IP base over time.

Third, Europe should coordinate the inputs that support patent leadership. STEM education, R&D spending and long-term capital investment all matter, but only when pursued together and sustained.

China is the only country to show major gains across all three areas, increasing its ICT patent share by more than 40 percentage points since the early 2000s. Europe expanded some inputs, but lost more than five percentage points of global ICT patent share over the same period.

Delay just locks in dependence. Reversing it will require coordinated, long-term investment, with ICT patent ownership treated as a core measure of Europe’s digital sovereignty, not a secondary output of innovation policy.