A recent news item in Variety caught my eye. It said, "Out-of-context theater reviews in advertisements that make a theatrical turkey sound like the second coming of Hamlet are now subject to criminal prosecution in Britain.” Theater owners found guilty of misleading theatergoers can be fined as much as $9,000.

You know what the Brits are after; the ad for a play that attributes the words, “Terrific… Smashing…” to the critic who really wrote, “I left the theater with a terrific headache and felt like smashing the playwright’s face for wasting my time.”

It turns out that this new law is not a British idea. It was enacted in response to a European Union regulation. It is hard to imagine such a law being enacted in the United States, but it is just the kind of thing the EU seems to spend a lot of time and money worrying about. We do have restrictions on demonstrably deceptive marketing in the US. But we don’t try to police the hyperbole which is expected in advertising.

I’ve often thought the EU’s focus on regulation and restraint costs it on the innovation front. Now I have some data to back up that belief. Business Week recently published a list of the “World’s 50 Most Innovative Companies” and I think it makes my point. Not the individual company rankings, but the summary scorecard of the countries they represent.

If American innovation is dead and the torch has passed to other regions, as some critics have claimed, it sure doesn’t show up here. I find it particularly interesting that European companies occupy 10 of the 50 spaces, 8 of those being British and German firms, compared to 31 for the United States.

View those numbers in the light of the EU’s peculiar definition of “competition” as applied by the European Commission against American firms like Microsoft (number 5 on the innovation list). The EU objects when Microsoft adds new features to its Windows operating system. Even though it makes perfectly good sense to build Internet access into the system, or add a media player, the EU sues and fines the company billions for improving its product.

Perhaps if the Europeans spent less money on lawyers and bureaucrats, their companies would do better on the innovation list.

And while considering innovation, note that there are no Chinese companies on the list. What the Chinese have been able to do is to manufacture at low cost products generally invented elsewhere. For all the talk about China becoming a world dominating economic power, there is little evidence that it is ready to assume a leadership position on innovation any time soon.

Remember the days when every pundit was sure Japan would be the rising star as America’s star set? It didn’t happen. Even today, Japan places only four companies on the list to America’s 31.

I’m not saying Americans don’t have to watch their backs. But I’m not throwing in the towel on American innovation and competitiveness just yet.