11.16.20

Inside the EPO During Corona: The EPO is Silently Shrinking in Vienna and Dictator António Campinos Defends His Bully and Union Buster, Elodie Bergot

Posted in Europe, Finance, Patents at 5:20 am by Dr. Roy Schestowitz

Staff is being muzzled and Benoît Battistelli is still at the EPO, in spirit or by proxy at least

Grave Endings
Battistelli has used the EPO's cash reserves for gambling, for personal gain (a major scandal that should be in the front page of every European paper)

Summary: The erosion of staff financing and the depletion of staff at the EPO isn’t a subject that the European media ever touches; it’s almost as if Europe’s second-largest institution and the abuses inside that institution are totally unspeakable, only to be buried deep inside internal documents

THE regime of António Campinos continues to ignore the advice from staff. It’s more like a kingdom or dictatorship rather than a public institution; just as they ignore European software developers and grant illegal software patents in Europe to basically besiege these developers on behalf of foreign litigation companies and patent trolls…

“Months ago we learned about documents which confirmed layoffs on the way. We published leaks to that effect.”In the spirit of declassification, today we release a 6-month-old report from the GCC, which makes it very explicit that it’s not happy about Elodie Bergot lurking after bullying staff and representatives of staff. Of particular interest, to us at least, is the part which says they “inquired about the situation in Vienna, where staff is depleting quite quickly without any corresponding decrease in work volume.”

Months ago we learned about documents which confirmed layoffs on the way. We published leaks to that effect.

Here’s the introduction/introductory text as posted half a year ago:

GCC meeting on 6 May 2020 – Consultation on the “Salary Adjustment Procedure”

The GCC official agenda contained one main item for consultation, namely the procedure for adjusting the remuneration of permanent employees of the EPO (CA/19/20). The President refused to submit for consultation the other document (CA/18/20) relating to the bundle of measures selected to fill the alleged financial gap.

Management limited the whole discussion on the bundle of financial measures, including the discussion on the salary adjustment procedure, to droning the usual buzzwords and arguments. Quite interestingly, “predictability” was presented as the certainty of saving money quickly regardless of economic developments. It is the overriding principle for the salary adjustment procedure, but a subordinate one for the other measures in the bundle.

The President agreed to discuss additional items relating to the EPO’s current recruitment policy and the (present lack of) consultation on “New normal”.

The corresponding full publication below, as HTML.

Munich, 15.05.2020
sc20084cp – 0.2.1/6.2.1

Report on the meeting of the General Consultative Committee (GCC) of 6 May 2020

The GCC met by videoconference.

The items for consultation

Two items were submitted to the agenda for consultation:

1. Procedure for adjusting the remuneration of permanent employees of the European Patent Office – Amendment of the Implementing Rule for Article 64 of the Service Regulations for permanent and other employees of the EPO CA/19/20 et CA/19/20 Add. 1 (GCC/DOC 5/2020)

2. Public holidays 2020 for the Brussels Office (GCC/DOC 6/2020)

As in the previous GCC meeting held by ViCo1, the members of the GCC did not practice the awkward simultaneous “show of hands” foreseen in the ServRegs. Instead, the President asked us to give him our opinions in writing. In a later email, he asked all GCC members to send their opinion in writing to the GCC Secretariat before Friday, 8 May 2020, 16:00 hrs. We are not aware whether all GCC members appointed by the President sent their opinion. We for our part gave our opinions within the set time limit. They are annexed to the present report and reflect the collective, unanimous, view of the CSC members in the GCC.

The item for information

One item was submitted for information:

Long-term financial stability of the organisation – Bundle of measures for the period 2020-2038 (GCC/DOC 7/2020)

The document will be presented to the Administrative Council for formal approval, i.e. for general political support to the bundle2. However, it is submitted to the GCC for information only although it contains matter relating to the conditions of employment of staff for which GCC consultation is mandatory3. Indeed, it presents the choice and the intensity of the measures selected to fill the alleged financial gap, in particular the share of the burden to be borne by staff. In addition, some specific aspects will touch the working conditions of staff, e.g. an increase in productivity (by 20%) or the prospect of recruiting less employees in future4. We had made further alternative proposals for a bundle of measures improving the sustainability of the Office5. Not a single one of them found its way into the final document (CA/18/20).

________
1 See our report on the GCC meeting on 1 April 2020
2 See points 2 and 3 in CA/18/20
3 See Article 38(2) ServRegs
4 See points 38 to 41 in CA/18/20
5 See as an illustration our fourth proposal


Additional matters

The President agreed to adding two further items to the agenda under Any other business:

1. The EPO’s current recruitment policy

2. Consultation on “New normal”.

When addressing the impact of the pandemic on recruitment, we also inquired about the situation in Vienna, where staff is depleting quite quickly without any corresponding decrease in work volume. VP4 explained her current views: work is to be “re-balanced” among the remaining staff and recruitment should be the exception, to be decided on a case-by-case basis. We argued that the situation in Vienna is specific in that the teams are quite small and highly specialised. This makes re-balancing difficult in our view.

Regarding the “New normal”, the President forecasts that the current crisis will cause a drop in the workload (10% less filings, 10% less fees, 10% more withdrawals). He confirmed VP4’s views and announced that the plans for the “New normal” would consider the specifics for Vienna and Berlin, too. In his view, the crisis has also proved that staff can “work from everywhere”. We think that, depending on its scale, teleworking might entail legal pitfalls and raise expectations amongst staff which cannot be fulfilled. Especially “extended” teleworking6 might require consulting the Contracting States7.

He committed to meeting the staff representation … after he has figured out the way to go. Early involvement of staff representatives is not envisaged, but we could always send him our ideas. Going by past experience, such input will simply be filed vertically.

Conclusion

More than in the first virtual GCC meeting, the President was obviously wary of making the consultation process as “regular” as possible. The videoconference went reasonably well, despite some participants’ connections sporadically failing. Similar to the first meeting, it was actually more an audioconference since most attendees had to switch off video to preserve bandwidth. In that we could not gauge the (lack of) impact of our interventions on the management side and ViCos are still quite far from replacing meetings in person.

Management limited the whole discussion on the bundle of financial measures, including the discussion on the salary adjustment procedure, to droning the usual buzzwords and arguments. Quite interestingly, “predictability” was presented as the certainty of saving money quickly regardless of economic developments. It is the overriding principle for the salary adjustment procedure, but a subordinate one for the other measures in the bundle8.

When asked about the presence of PD43 in the GCC, who conducted abusive disciplinary procedures against GCC members9, the President replied that she was an excellent professional with excellent competences and that she had his full trust.

Whilst continuing to pretend to “meaningfully consult” staff representation, this meeting confirmed our recent experience: Consultation is an obligation to be kept at a minimum. Whilst different in style, he is not different from his predecessor in this respect.

The Central Staff Committee

Annexes: opinions on GCC/DOC 5/2020 and GCC/DOC 6/2020

________
6 I.e. staff working from any country different from the host countries
7 See Articles 33 and 172 EPC
8 E.g. about IT savings (“Digitize the PGP end-to-end”), VP4 announced that she did not have a crystal ball.
9 See for instance ILOAT Judgment 4043 reinstating Ion Brumme.


Opinion of the CSC members of the GCC on GCC/DOC 05/2020: Procedure for adjusting the remuneration of permanent employees of the European Patent Office

The CSC members of the GCC give the following opinion on the proposal to amend the Implementing Rule for Article 64 of the Service Regulations for permanent and other employees of the EPO, documents CA/19/20 and CA/19/20 Add. 1:

On the consultation

The proposal consists of Measure 1 of the Financial Study conducted by Oliver Wyman & Mercer in 2019. The study was organized by a steering committee solely composed of MAC members and upper management, entirely excluding staff representation.

Despite the COVID-19 pandemic, the administration decided to maintain the timeline of the consultation on this reform, shifted to videoconferences with constant technical problems and maintained the ban on mass e-mails hindering staff representatives from keeping in touch with staff during the large-scale implementation of teleworking.

Under these difficult conditions, the staff representatives worked on a counter-proposal1 finalized after several iterations and discussions to bridge the “alleged” gap of the administration. The administration did not move an inch. There is no indication that during the whole “consultation” process our comments and proposals were seriously considered by the administration. The same attitude of management and especially PD4.3 could be observed at the time of the implementation of the New Career System (NCS).

At the time of the GCC meeting of 6 May, several documents are still missing for the
following stated reasons:

• The Advisory Group on Remuneration (the Wise Men) was consulted but the President refused to provide the staff representation with the results of this consultation.
• The Directorate Employment Law was also consulted, but the President refused to provide the staff representation with the legal assessment.

Background documents were sent to the GCC members only 49 minutes before the meeting, after the preparation meeting of the members of the CSC, thereby not allowing for any consideration-time.

In an-email sent to the President and VP4, Mr Curt Edfjäll (President of the EPO Pensioners Association and former VP4) complained that his “repeated requests for the Association to be allowed to take part in the Working Groups with representatives from the Office and Staff Representation to discuss the measures in the Financial Study and the new salary method, both affecting directly the large stakeholder group of Office pensioners were always turned down.” and doesn’t share the conclusion that “the Office’s course of action is transparent and conducive of good cooperation.”

________
1 https://ww.suepo.org/archive/sc20054cl.pdf

On the substance

The choice of scenario

The Base 2 Scenario chosen by the President is not based on an economic forecast but on a theoretical stress test scenario performed by the European Systemic Risk Board (ESRB). The ESRB itself states as a disclaimer for its scenario that the “Scenario presented is not a forecast. It should not be interpreted as the ESRB’s expectations about future economic and financial developments.”

The President chose the Base 2 scenario is based on a global recession, an economic cycle based on a pitch black recession in Europe lasting 3 years, which has not happened since WWII and which is not even factored in to current COVID-19 predictions. In this scenario, the consultants then produced an alleged gap of EUR 3.8bn and the President added on top an arbitrary buffer of EUR 2bn, again without any consultation of the staff representation.

This gap is the result of a balance which is deducting the EPO’s liabilities from the EPO’s assets. It thus does not reveal a cash flow shortage.

Eurostat data shows that a negative nominal GDP growth over two consecutive years was never observed in Europe since they started to capture data. The period available in Eurostat covers both major crises of the recent past, namely the burst of the 2001 dotcom bubble and the 2009 subprime crisis. The extreme Base 2 Scenario should only be selected if and when it actually materialises, and exceptional measures should only be applied in that event. Nonetheless, over time the President moved from wanting to cover the gap in case a base 2 scenario should materialise to covering calculated base 2 scenario gap in any case.

Even the First quarter report for 2020 from the Administrator of the RFPSS (RFPSS/SB 22/20) shows that the RFPSS’ assets after the financial markets shock in the COVID-19 crisis is at the level of before the financial markets shock of the Base 2 scenario (both at EUR 8.2bn, see Q1 report of the Funds Administrator and the assumed asset value at the end of 2019 in the Base 2 Scenario of the Financial Study).

Selecting this scenario as a regular case is entirely unreasonable and illustrates management’s sole intention of cutting staff’s purchasing power.

Forgotten Real Estate Assets of EUR 2.9bn in Financial Study

The gap is the result of a balance which is deducting the EPO’s liabilities from the EPO’s assets. It therefore does not reveal a cash flow shortage. Indeed, in 2038, the RFPSS and the EPOTIF assets together will surpass the basic salaries and pensions several times.

When balancing the assets and the liabilities, one may not selectively neglect either assets or liabilities to achieve a meaningful result. However, this was done.

In any case, this balance disregards some EUR 2.9bn of real estate which under all accounting standards qualifies as an asset. Indeed, the EUR 1bn Building Investment Program agreed by the Administrative Council thus increases the gap although from an economic point of view, it is only shifted from the cash accounts (EPOTIF) to real estate.

Had the Administrative Council decided to invest EUR 3bn in EPO buildings, the gap would have increased by another EUR 2bn. It is however obvious that the asset only was shifted from financial investments in the EPOTIF to real restate and therefore does not affect the overall asset status.

By neglecting the direct real estate (such as a building in Munich or the Hague), it suddenly plays a role in “finding” a “gap” whether the EPO invests money into its buildings or keeps


the money invested in listed real estate (such as Real Estate Investment Trusts) via the EPOTIF, although from an economic point of view, it doesn’t make a difference.

Forgotten income of EUR 6bn in the Financial Study

Pension payments made after 2038 are taken into account when calculating the alleged gap. By contrast, National Renewal Fees paid back to the Office after 2038 are not even considered. Despite our repeated inquiries, management has never been prepared to disclose the Net Present Value of the NRF in 2038.

The staff representation estimates this forgotten income2 to exceed EUR 6bn, yet this balance is totally ignored. The EPO is entitled to national renewal fees also beyond 2038 for work accomplished before 2038. From an economic point of view these EUR 6bn also qualify as an asset. It is emphasised that charging post grant renewal fees is a design feature for the financing of all the patent systems we are aware of and which has continuously worked for decades, even before the EPO existed.

Neglecting this income for merely formal reasons (IFRS) is denying the reality of patent offices since more than a century.

Global cap

The Office pretends that the salary adjustments are highly volatile, which complicates the predictability of the budget. According to them, this is linked to the Specific Indicator (SI).

When confronted with a volatile parameter, the first thing to do is to smooth it without changing the long-term result. However, the current proposal introducing a global cap will not only reduce the volatility but also change the long-term result.

The staff representation therefore suggested an averaging mechanism, as it is also done in the Coordinated Organisations (COs).

Nevertheless, the consultants only propose a cap, which obviously smoothens, but at the same time changes, the result considerably. The proposal, if applied to the prosperous past 6 years from 2014 to 2019, would have cut the salary scales by 7% or the equivalent of some 3 steps in the EPO salary grid, lagging the evolution of the cost of living in our places of employment by around 4%.

It shows that the new salary adjustment method is constructed to systematically erode purchasing power mainly during expansive economic cycles and therefore does not even qualify as a salary adjustment procedure but as a salary erosion procedure with a huge negative effect also on the pensions.

________
2 https://www.suepo.org/archive/sc20014cp.pdf


Double counting

This mechanism avoids that increases in the contributions to social schemes are counted twice, thereby affecting the principle of parallelism with the salary evolution of national civil servants.

It is an important mechanism since contributions to social security, pensions, healthcare insurance and long-term care-insurance in the EPO have increased a lot recently. 3

Removing this long-standing fairness mechanism demonstrates the intent to not only cap but also to make sure that the adjustments do not even reach the cap.

Carry forward of salary adjustments

The proposed carry forward mechanism bears legal risks. It will likely not stand in front of the Tribunal, since it is not adapted for a salary adjustment procedure.

Pensions will be excluded from this mechanism, thereby creating an inequality of treatment in breach of Art. 33 EPC, likely to trigger further litigation by many pensioners.

Shift of pay-out to January

The proposal shifts the date of effect of the adjustment from 1 July to 1 January.

This was also done in the Coordinated Organisations. Nevertheless, a delay in paying an adjustment must be properly compensated. In the Coordinated Organisations this delay was compensated by a one-off increase of the scales.

Instead the Office proposes “to pay out as a compensatory lump sum the adjustment that would have resulted from the application of the new method as from 1 July 2020, in proportion to the basic salaries, pensions and allowances received over that period.” The scales as from 1 January will therefore not comprise the adjustment over the 6 months from 1 July 2020 to 1 January 2021. This adjustment will therefore be missing for ever, leading to a permanent cut in salaries and (future) pensions, constituting a hidden financial measure to the detriment of staff and pensioners.

Reversibility

PD Finance stressed that the Office proposal is for the coming 20 years to save € 2 billion but the President in his letter of 31 March pretended it would apply only to the coming 6 years.

In any case, the Office claims that the reversibility is reflected in the 6 year duration of the salary adjustment procedure. This isn’t reversibility but procrastination. A reversible measure is something which is reversed within the current method. There is no such reversibility in their proposal.

___
3 Explanatory example: Assume that all national civil servants had a 0% salary adjustment at 0% inflation. Assume further, that during this time both the national pension contributions and the EPO pension contributions were increased by 3%. Since in the salary adjustment method only the net income is considered, this increase of the national pension contribution would translate into -3% salary adjustment of the EPO salaries. Combined with the 3% increase of our own EPO pension contributions at the same time, the overall effect is that the net EPO salaries would be decreased by 6% while the salaries of the national civil servants would have decreased by 3%.
The mechanism against double counting exists to neutralise such effects of counting increases in pension and social security contributions twice.


Neglected further proposals to the financial bundle and principles

From start of the discussions on the “financial measures” the staff representatives submitted a series of other proposals adding to the financial measures as proposed by the external consultants in CA/83/19 “Financial Study 2019 (Phase II) – Measures Assessment” of October 2019. These additional measures identified opportunities for saving several billions without the need for cutting on staff benefits. Some of these measures relate to the need of restructuring the EPO procedural and internal renewal fees. Not addressing these issues would constitute mismanagement. The discussions on these additional measures have been postponed by the President to a later date and are not being considered for the time being. When presenting the financial measures to the Council and to staff the President referred to principles underlying the reform, such as gradual implementation, shared effort, proportionality and fairness, affordability, and reversibility. In particular, gradual implementation implied that not everything had to be done at once. Now, the financial bundle presented in CA/18/20 envisages savings of EUR 6.4bn, even more than the alleged gap of EUR 3.8bn plus the arbitrary buffer of EUR 2bn. The consideration of the additional proposals of the staff representation is not foreseen even at a later stage. So, there goes the stated commitment to gradual implementation. Likewise, the shared effort is mainly on staff and no reversibility is foreseen, in particular for the SAP. In doing so, he also reneges on proportionality and fairness and exceeds what staff can afford to contribute.

Conclusion

The counter-proposal designed by the staff representatives strictly respects the equality of purchasing power, it does not entail legal risks as it treats all groups of staff equally, it follows economic cycles under the Base 2 scenario and it preserves the essence of the current salary adjustment procedure, and even the consultants acknowledged it would save EUR 2bn just like the Office proposal in case a Base 2 scenario would materialise. It is therefore fit for purpose.

Instead, the President prefers to insist on a EUR 5.8bn gap which exists only because EUR 9bn of assets were neglected, chooses to mislead the Administrative Council on this fact and continues with the salary adjustment method designed by the same people that previously designed the career system. The Office already has the worst career system of any International Organisations. It will now also have the worst salary adjustment method.

Post grant renewal fees qualify as an asset from an economic point of view. Real estate constitutes an asset in all accounting standards. Particularly neglecting real estate as an asset will make the EPO a laughing stock. It will seriously damage the reputation far beyond the Finance and HR departments. It will certainly damage the reputation of a President who pretends to maintain a social dialogue but doesn’t have the backbone to tell staff that he will just cut their salaries for the sake of it. Instead he chooses to hide behind a study which is so obviously intentionally biased that it insults staff’s intelligence.

We are confident that on such a basis, an erosion of purchasing power is neither justified nor urgent. The social unrest, the legal actions and the damage of the reputation of the EPO following such an exercise will be exclusively attributable to the responsible people and ultimately to the president. Indeed, cutting the salaries of staff because billions of euros in real estate and a vested financing model are ignored will tell stories about both the ethics and competence of our top management and ultimately the attractiveness of the EPO as an employer. It is a missed opportunity to find a common agreement.


In particular on the basis of the incomplete, insufficient documents we had, the CSC members of the GCC are unanimously against proposal GCC/DOC 05/2020.


Opinion of the CSC members of the GCC on GCC/DOC 06/2020: Public Holidays 2020 for the Brussels Office

The CSC members of the GCC give a unanimous positive opinion on the proposed exchange of 11 June 2020 (Corpus Christi in Munich) with 21 July 2020 (Belgium National Day) as public holiday for the Brussels Office. The proposal is a reasonable arrangement of the flexibility provided for in section 3 of Circular No. 398.

There’s lots there (above) about finances and the subject was covered here before; it’s not the foremost matter/issue to us, but it’s a big deal for EPO staff.

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