knowledge 11 September 2026 |

EU Innovation Act: Proposed New Framework for IP-Backed Finance and R&D Public Procurement

Background

The European Innovation Act is a landmark legislative initiative designed to harmonise the European Union’s innovation ecosystem by regularising public procurement for innovative companies involved in research and development (“R&D”) as well as establishing a framework for innovative businesses to both value and leverage their intellectual property assets as collateral in finance arrangements (“IP-backed finance”).

The Act is a key initiative of the EU’s Startup and Scale-up Strategy to support startups throughout their lifecycle, recognising that while Europe produces world-class research and technological innovations, early-stage companies in this space continue to face fragmented rules across EU Member States and persistent difficulties in attracting funding.

The European Commission identifies “innovative businesses” as any enterprise:

• that has incurred R&D costs of at least 10% of its total operating costs, or 5% of its total net assets, in any one of the three preceding years; or
• that has, is currently, or will be developing products, services or business processes that are “new or substantially improved” in the industry and which “carry a risk of technological or industrial failure”.

As such, this proposal is acutely relevant to innovative startups and scale-ups that require significant early-stage funding, whether from private financing arrangements or public procurement.

What is proposed?

The EU Innovation Act proposes two key measures for the purpose of coordinating and boosting the development of investment measures within the EU:

• Public sector: The creation of a harmonised framework at Union level for R&D public procurement, including for joint cross-border R&D procurement and pre-commercial procurement; and
• Private sector: The promotion of intellectual property-backed finance in the EU by establishing and supporting (1) an EU-wide framework for IP valuation; and (2) an EU-wide digital marketplace for commercialising IP,

which will be established and maintained by a new “Competence Centre” operating within the European Union Intellectual Property Office (“EUIPO”).

The Commission has published an accompanying FAQ document which sets out some initial guidance on the terms of this proposal.

What would change?

R&D Procurement

A substantial amount of R&D procurement falls outside the scope of existing and proposed EU rules and protections on procurement. Existing rules under the EU Public Procurement Directives only apply to R&D procurement where:

• the benefits of such R&D accrue exclusively to the public sector procurers of R&D products and services (being a “public buyer”) for use in its own affairs; and
• the public buyer wholly remunerates the service provided by the relevant innovative company.

Rules for pre-commercial procurement (PCP) have been to date described only in policy documentation, leading to legal uncertainty as to the use of this avenue for R&D purchases.

Additionally, the separate proposal for an EU Public Procurement Regulation to streamline public procurement rules, which was also adopted by the European Commission on 9 September 2026, excludes all forms of R&D procurement from its scope. (For more information on that Regulation, see our briefing from July 2026 here: Proposed EU Public Procurement Regulation: Key Reform Areas.)

A lack of harmonised legislation, fragmented demand between Member States and duplicated national requirements for R&D procurement has severely curtailed both PCP and joint cross-border R&D procurement within the EU, resulting in considerable roadblocks for startup and scale-up innovative companies seeking initial public investment.

The EU Innovation Act proposal therefore sets out a harmonised legal framework with a single common procedure for R&D public procurement that would apply across Member States, bringing clarity to public buyers and innovative companies alike and setting out guidance for joint-cross border R&D procurement, including with parties outside the EU. In common with recent developments in EU policy generally (including in the recent proposal for an EU Public Procurement Regulation), there is an emphasis on EU-preference (aimed at improving EU competitiveness).

The proposal envisages that this harmonised legal framework will result in increases from 0.6% to 3% of total public procurement in the EU being comprised of R&D procurement, which (if realised) would represent substantial new opportunities for startup innovative companies to avail of public procurement streams.  

IP-Backed Finance

IP-intensive industries play a crucial role in the EU economy, accounting for roughly 48% of EU GDP and 31% of employment. While IP and associated IP rights are often the most valuable asset of early-stage or scaling-up innovative companies, innovative companies in the EU have consistently struggled to leverage IP as collateral for the purposes of obtaining finance, largely because these assets are notoriously difficult to value which in turn makes it harder to attract secured financing.

The EU Innovation Act proposal addresses the gap between high-value IP and securing finance by mandating that the EUIPO establishes a competency centre for IP-backed finance, which will (a) regularise the valuation of IP and associated IP rights across the EU, and (b) inform the development of a lending market which recognises tangible value in IP for the purposes of accepting IP as security in lending arrangements, including developing a digital marketplace connecting buyers and sellers of IP.

The leveraging of IP for the purposes of secured lending was a key priority identified by the EUIPO in a report issued earlier this year (IP-backed finance in Europe: state of play and future perspectives), as discussed in our previous briefing: Progress Update: EU Initiatives to Unlock IP-Backed Finance.

Next steps

The current proposal is intended to enable innovative companies to avail of procurement at the earliest stages, as well as to remove significant red tape for small and medium-sized companies as they seek to better-leverage their IP for the purposes of obtaining financing and avail of public financing and support.

Our teams will continue to monitor the progress of this proposal as it develops.