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Remi Caron, a computer programmer and entrepreneur in Amsterdam, thought he had the perfect idea. One of his clients, a researcher, had been collecting the blood pressure, temperature and other vital signs of thousands of livestock acrossEurope.

Now he was looking for an easy, cheap way to store all that data.

Caron suggested cloud computing, which allows people and businesses to store their data on servers managed by big tech companies like Google or Microsoft, at much lower cost than building up their own data storage.

But he ran into a problem: Luxembourg law forbids personal data to be stored on shared servers outside the country, and livestock like cows or sheep might be included in that legislation - or so Caron feared.

He headed for Brussels, the headquarters of the European Union, which oversees data protection on the continent, to find answers, but even there no one could help him, he says.

"The EU itself doesn't really know where to find the legislations of various member states," says Caron.

Roadblocks to innovation like the one encountered by Caron have caught the attention of European policymakers as they scramble for ways to get their economies growing after a financial crisis that has pushed several states to the brink of bankruptcy.

Like U.S. President Barack Obama and his call for a "sputnik moment," the EU is touting innovation as the magic bullet for economic recovery. At a summit in Brussels Friday, the EU wants to get leaders to agree on investing more in education, research and technology, even as they slash spending elsewhere.

"Growth and jobs depends upon bringing research results to market. Our competitors have acted on this," Maire Geoghegan-Quinn, commissioner for research, innovation and science, told journalists this week.

The continent has long lagged behind the U.S. and Japan when it comes to turning bright ideas into money. There aren't many rags to riches stories of businesses starting out in a garage, like Apple, or a dorm room, like Facebook, to become the next big thing on Wall Street - no European Facebook, Google, or Nintendo. And now Brazil and China are quickly catching up by putting more money into innovation, having weathered the financial crisis much better than their more developed rivals.

According to EU data published earlier this week, the EU trails the U.S. in all but two of 13 innovation indicators. China has a higher rate of growth than the EU on all but two of the factors contributing to innovation.

But it's not because Europeans lack creativity, innovation experts insist. Europeans invented biodegradable plastic, the hepatitis B vaccine and the streaming webcam in recent years, not to mention past innovations including aspirin, radio and the automobile.

Rather, they say, putting new ideas into action is much more difficult in Europe, where the money needed to fund risky investments is scarce, patents are expensive and the different legal systems in 27 EU countries have left many aspiring businessmen confused.

Caron and his company Sparked eventually decided to stay out of Luxembourg all together - having tried and failed to figure out if their use of cloud computing would break the law.

Diverging laws, often written in a foreign language, create a burden everyone, says Jonathan Zuck, president for the Association of Competitive Technology, whose members include Sparked. "But it's felt in a more exaggerated way by small-business owners."

Small companies, the traditional birthplace for innovation, are often desperately looking for economies of scale, and shutting entire countries out of their business models can break them.

When the EU tries to get rid of some of the legal hurdles, its efforts are often hampered by national governments jealously watching their sovereignty.

One example for that is the European patent, which could save innovators from getting their patent validated in 27 states and - crucially - having to translate it into each country's official language. That laborious process, the EU says, makes getting a patent 10 times more expensive than in the U.S.

The idea of the European patent was to limit translations to English, German and French, the bloc's most widely used languages, and require only one validation.

But Spain and Italy - the next biggest countries - cried foul. Some EU nations have now decided to go ahead with the European patent anyway, leaving Italy and Spain to fend for themselves.

The move came too late for Mike Sax, the founder of the Association of Competitive Technology. Frustrated with the lengthy patenting procedure in Europe, Sax, whose company SaxSoft makes iPhone apps, left Belgium and has now set up shop in Oregon, on the U.S. West Coast.

Another big obstacle to getting new ideas off the ground is a lack of private financing. Venture capital firms - dubbed "angels" in business-speak for a reason - make money by investing in risky businesses, hoping one of them will strike it rich. But there are far fewer of them in Europe than in the U.S.

Without this private money, which banks are unwilling to provide, it is tougher for new companies to establish themselves.

"Europe is weak on this, so that's definitely a problem," says Reinhilde Veugelers, senior fellow at Bruegel, a think tank in Brussels. Veugelers says the lack of venture capital in Europe has been known for a long time, but so far policymakers haven't been able to do anything about it.

Europe's innovation gap might also have cultural roots, experts suggest. Bankruptcy, for instance, is seen as a greater failure in Europe than it is the U.S. Lenders in Europe shy away from serving entrepreneurs who have already filed for bankruptcy, says Roland Straus, managing director of Knowledge4Innovation, another Brussels think tank.

"We obviously do not honor enough risk taking and entrepreneurship," says Straus. "In the U.S. this is completely different because if you fail twice, then you know how it really goes, and the third time you succeed."

One way the EU works to change this perception is through recognition. For the past four years the EU has given out the European Enterprise Awards to companies that foster entrepreneurship. Categories include encouraging entrepreneurial thinking and raising awareness of entrepreneurs in society.

Last year, for instance, one of the prizes went to Johannes Kepler University in Linz, Austria, for a program that trains art students to run their own companies.

What European politicians need to recognize, the EU insists, is that boosting innovation is not a luxury but an economic necessity. "Innovation is as essential to sustainable growth and jobs as water is to life," Geoghegan-Quinn warned in a recent speech. "Economies that do not innovate will wither away."


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