European naval shipbuilders provide essential hardware for the European defence strategy. In no other area of the armament industry, do European producers hold such a strong world-wide leadership in terms of cost effectiveness. Compared to US naval yards, European shipbuilders are producing platforms up to 2,5 - 3 times more cost efficient. With regard to technologically advanced products, European naval yards are unmatched leaders in some areas such as conventional submarines and fast patrol boats. This lead is due in some measure to the strong cross-fertilisation between naval and highly competitive merchant shipbuilding.

　

 However, compared to other defence sectors, European naval shipbuilding is dominated by national companies. Without increased co-operation and consolidation, European players risk being marginalized in global terms that may reduce future EU defence options. Creating strong integrated European players will assist Europe's competitiveness, also with respect to its current dominant position in international naval export markets. Three key areas merit immediate attention: industrial co-operation between yards and between yards and suppliers, access to export markets and consolidation of the industry.

　

 Wide-ranging co-operation is still hampered by diverging operational requirements coming from the national navies. Standardisation of components and sub-systems could and should be widely enhanced, leading to considerable reduction in total ownership costs. Procurement cycles differ as well, leaving yards with an uneven workload. First experience with common programmes which have been launched with the aim of reducing costs and sharing non-recurring ones achieved encouraging results, but substantial improvements are possible.

　

 Member states and their navies need to agree to a minimum set of common operational requirements and a harmonisation of procurement cycles, in line with the Commission's Communication on "European Defence - Industrial and Market Issues" of March 2003. These minimum requirements should be based on the Petersberg tasks and the "Helsinki Headline Goals". Initial efforts towards common requirements should focus on smaller surface vessels below frigate size, and should exceed this size later. Standardisation of components and sub-systems should be based on a voluntary and systematic approach. Standardisation should to some extent also cover a joint approach to quality assurance and life cycle support. Classification societies have an important role in standardisation, building on their experience in commercial shipbuilding. The ultimate goal of these efforts must be the interoperability of systems, vessels and fleets, leading to significant reductions in ownership costs. Co-operation should be organised around a limited number of major projects, using pooled R&D resources and a single European defence equipment market.

　

 Export markets can be quite narrow and specific. Still, these markets are key to the recovery of up-front development costs. Non-harmonised export rules in the member states, based on different traditions and diverging geo-political objectives, lead to distortion of competition and barriers to increased industrial co-operation. The lack of full application of common market rules to intra-EU trades may have similar negative effects.

　

 Therefore, export rules (and their application and interpretation) need to be harmonised between member states.

　

 European naval yards primarily serve a limited national market, with a high degree of customisation and stringent and specific navy requirements. In a number of member states naval yards are state-owned or state-controlled, whereas this does not rule out that commercial paradigms are employed. There is a need to analyse in more detail the strengths and weaknesses of the EU industry, including the issue of off-sets, i.e. compensatory contractual arrangements related to naval shipbuilding orders. Considerable structural differences exist between European producers, with large state-owned entities competing in the same markets with medium-sized, privately owned yards which claim that private ownership is a pre-requisite to succeed in any consolidation effort.

　

 Against this background privatisation of state-owned naval yards should be supported, although it is fully acknowledged that no particular preference to any form of ownership should be given. Establishing a common market for defence equipment, including the setting up of a joint procurement agency, is key. This would foster consolidation in the longer term.

　

　

 European yards and their suppliers are confronted with increasing international competition. In this environment, competitiveness can only be maintained through innovative vessel concepts, optimised sub-systems and sophisticated design, production and planning methods.

　

 Knowledge-driven technology is created at a very early stage in the relationship between yards and their suppliers. Yards have a need to disclose detailed technical requirements and solutions to their suppliers in order to safely calculate the project both under technical and commercial terms. Furthermore, yards and suppliers have to secure a proper interface management on all levels and closely co-operate in the technical details of each relevant device or sub-system. Shipyards also have to share their knowledge with classification societies, which perform a variety of functions. The relationship between yards and shipowners is equally characterised by a direct and broad exchange of knowledge-based details of the vessel. Owners collect such information by e.g. receiving yard specifications, general plans etc. and circulate such information world-wide for their commercial and technical opportunities. Finally, yards are co-operating closely with universities and other experts, especially in the field of computer aided design, computer integrated manufacturing and other IT components, in order to exploit R & D results and hereby disclose relevant shipyard know how.

　

 As a result, yards are facing a permanent risk of violation of their and third parties' intellectual property rights (IPR).

　

 Today, copyrights, registered designs, trademarks and patents are the main instruments to protect intellectual property rights. Additional measures are non-disclosure and specific collaboration agreements, although the "one-off" features often found in shipbuilding projects can make such agreements costly and appear less rewarding.

　

 In order to exploit these existing instruments to the full, yards and suppliers need to become more aware of the threats to their know how and the resulting competitive disadvantages. The establishment of knowledge databases could become a central activity for European yards to reach this objective. These databases should not only cover specific vessel characteristics and components, they should also indicate key people and important specific customer-supplier relations. Knowledge databases would help to form an IPR-entity that could be charged to safeguard and protect European shipbuilding knowledge. It would provide yards and suppliers with information on the (internationally) available knowledge (documented and non-documented) on specific vessel components, the requirements of an IPR protection of specific technical solutions, the existing patents in the relevant technical fields, the technological position of competitors, and the potential exposure of yards and suppliers to product piracy and other threats. All requests directed to such an entity will naturally have to be treated confidentially. The costs of such an IPR entity would be shared between the European shipbuilding partners. Through an IPR entity yards and suppliers would improve their chances to enforce their intellectual property rights at acceptable costs. The entity may even apply for and hold patents directly, thus further significantly reducing the related costs.

　

 Due to their comparatively long validity and their international recognition, patents are still an essential instrument which European shipbuilders need to exploit to the largest possible extent, including in the countries of their main competitors. In addition shipowners should be prevented from operating ships carrying devices on board built in violation of existing patents. However, the complex and truly globalized shipbuilding market contrasts with the current international framework for the protection of patents (on vessels devices), established in 1925 and never changed substantially since then. Today, many of the rules laid down then appear anachronistic and unjustified. A re-examination of the current framework which does not allow national authorities to take measures against a ship, carrying a device built in violation of a patent, calling at a port where such patent is registered and protected, could give yards the right tool to protect their inventions and innovations, boosting the investments in R&D and stimulating yards' interest in acquiring patents.