Patent Reform: Gold-Plating?

In the current issue of Regulation Magazine, Mark Lemley, Bhaven Sampat and I write about patent reform. Our launching point is the simple fact that, at the time patent applications are reviewed, the Patent Office has no way to identify the small number of applications that are likely to end up having real economic consequence. Thus patent applications are for the most part treated alike, with every application getting the same -- and by necessity sparse -- review. We then urge in response three basic reforms.

First, we would weaken the presumption of validity that today attaches to all issued patents. The modern strong presumption does not reflect the reality of patent review; the presumption, in short, is not earned.

Second, because legitimate inventors need as much certainty as the law can provide, we would give applicants the option of earning a presumption of validity by paying for a thorough examining of their inventions. Put differently, applicants would be allowed to "gold-plate" their patents by paying for the kind of searching review that would merit a strong presumption of validity.

Third and finally, because competitors also have useful information about which patents worry them and which do not, we would institute a post-grant opposition system, a process by which parties other than the applicant would have the opportunity to request and fund a thorough examination of a recently issued patent.

As we argue in the piece (available for download here) these reforms would together allow the Patent Office to focus its resources on patents that might actually matter, and they would also both reduce the incentive to file patents of questionable validity and reduce the harm caused by such patents in any event.

Comments

[Michael Martin]

These all look like excellent ideas for reform to me. Moreover, they have the virtue of simplicity, which the last round of proposed legislation lacked. We don't need to rewrite 102 to make improvements to the system.

At least from a birds-eye view, I like how the proposals with the Duffy theory of patents as the result of a Demsetzian auction. Exclusive rights to innovations are not anticompetitive per se so long as there is a vigorous competition for their initial allocation. The second and third proposals have the virtue of promoting that pre-issuance competition.

[Bruce]

Sounds kind of like trademark, with "gold-plating" standing in for incontestability.

[Isaac]

But do you really want to raise the cost of obtaining patents with a "gold-plated" patent? Because the uncertainty in the value of a patent isn't just felt by the patent office, but also by the inventor. So a small-time inventor might be uncertain about the value of the patent and thus not be able to afford the gold-plated patent.

[billb]

No. The big issue is that business method and software patents are complete and total bunk. Get rid of them, and most of the patent problem goes away.

That, and what Issac said.

[Doug Lichtman]

Isaac -

Small inventors not interested in paying for gold-plating would under our model be welcome to apply for a normal patent: a low-cost application that would be lightly reviewed and issue with only a modest presumption of validity. Gold-plating is just an option, not a requirement.

This might be great for small inventors. After all, a small player might not want to spend an enormous sum on perfecting patent rights. Such a player might be better off diversifying his investments -- some toward marketing, some toward commercialization, some toward salaries, and so on. We thus don't want to force everyone to do high-intensity patent prosecution up front. (Hence, gold-plating is not required.)

[billb]

Doug, you talk only briefly about the levels of presumption of validity in your article. Can you expound on how this system would function in a few example cases?

1) No gold plating
2) One challenge successfully passed
3) 50 challenges successfully passed
4) Gold-plated via patent-holder paid examination

Can you even rank these cases?

Where would all previously granted patents fall in the above scale?

How do you define levels of presumptive validity?

[AJTALL]

I just love you academic types and comments such as "the presumption does not reflect the reality of patent review." The reality is that we patent practitioners in the real world are noticing that rejections have increased lately and that it is taking longer to obtain allowance. Also, for most of our clients, patents are very expensive to obtain. More to your point, we don't know what patents are going to "make it" economically and, anyway, the real value of patents is not based on a single patent but rather on a family or portfolio of related patents - the patent suite. Another point, not all examiners are the same. Some do a very thorough job, but others take it even further and see it as their goal to prevent allowance. You feel you've been put through boot camp or a gold standard. And finally, the patent system includes supervisory examiners and senior examiners that also review your applications in certain cases.

[Doug Lichtman]

Bill, AJTALL,

Thanks for the comments. Let speak first to Bill's questions, then AJTALL's.

Bill, I, too, worry about how to set the levels of presumption for different paths. Indeed, I'm now working on a fuller (non-magazine) version of this piece, and I agree that it is tricky to figure out what presumptions would work. Indeed, as we say even in the magazine piece, "stawman" challenges will be a big problem: we can't give out a huge presumption just by virtue of being challenged, because in that case every applicant will have a pal bring a lame challenge just to then qualify for a presumption. In any event, I think this concern is an important one, and I'd welcome suggestions.

Meanwhile, your other two points I think I can answer. Existing patents are likely stuck under the rules that were in effect when they were issued. I worry about retroactively changing the rules on patent holders and upsetting investment-backed expectations. And, in terms of defining levels of presumptive activity, that seems straightforward. All over the law, we have vocabulary for levels of presumptions -- "more likely than not," "clear and convincing error," and so on -- and there is reason to believe that the words do matter on the ground, changing judge and jury perceptions. So on that I'm less worried.

AJTALL, I'm glad to hear that patent applicants are finding the road harder these days. I think I'm not alone in thinking that things have been too lax for a long long time. I doubt the problem is fully reversed -- we can swap war stories if you want -- but I wouldn't be surprised at all if things are a little better today than they were five years ago.

On your worry that your clients already spend a great deal per application, I hear you. And I hear you when you say that clients rarely know if their invention will be valuable. But those things argue in favor of our proposal, not against. For patents of uncertain worth and for patentees with tight funds, let's do a cheap and easy review, let's not give out much or any presumption, and let's just defer it all -- the heavy inquiry, the legal presumption -- to a later time (court? post-grant review?) when we all have a better sense of which patents to look at and how closely to look at them.

[billb]

Thanks, for the response, Doug. Can you suggest a couple levels of presumption and how a jury might be required to interpret them?

Also, do you believe that if we eliminated the business methods and software patents and kept the number of examiners fixed (or raised it) the largest part of the current patent problem would go away (as I do)?

[AJTALL]

Doug,

I also want to "thank you" for your reply. I enjoyed reading your articles on the doctrine of equivalents and prosecution history estoppel. Examiners are making allowability harder. Before, we would file requests for continued examinations and re-open prosecution, now we're filing more notices of appeal. There is a pilot program called a "pre-appeal brief" which is cheaper than filing a full appeal brief, so we'll see how that goes. I'm working on one right now. I'm also noticing more restriction requirements by examiners, even breaking up dependent claims into separate groups. Perhaps we're becoming more like Europe.

[Aaron Feigelson]

Not sure if this thread is still alive, but I'll jump in.

I have no problem with the suggested reforms. They seem like good ways to link a patent's projected value to the amount of investment ex ante.

But I'm not sure how much "certainty" they would provide legitimate inventors. When we start discussing the relative strength of presumptions, and what jury instructions might be, we are skirting the bigger issue of a patentee's right to a jury trial. So long as patentees (and alleged infringers) have such a right, an invalidity question is fair game, and often an unpredictable one. Any certainty gained from the thorough examination is lessened against this backdrop.

Of course, this situation isn't likely to change soon (thanks, Seventh Amendment), so to the extent your suggestions are a second-best solution, I'll accept them. But you might also consider ways of building your dam downstream, such as by moving all patent matters into the jurisdiction of those oft-discussed specialized trial courts.