Friday, September 16, 2005

More confusion on patent reform?

A recent post by Erick Schonfeld about patent reform [HR 2795] is filled with false statements, starting with an assertion of a $100 filing fee: "The cost of filing is low," notes Boston patent attorney Bruce Sunstein. "It is $100. That's the price of a really good dinner." The negligible fee, along with the decrease in legal hurdles, would create an even greater incentive to file patent applications, and the system would become more overloaded than it is now. People would rush to file patent claims even before completely figuring out their inventions. $100 might cover filing for a small entity for a provisional application. But if you don't file a nonprovisional, you don't have anything. And, what about the costs for drafting the application. A "first to file" system, especially with changes to continuation practice, might change a back end system to a front end system, but a flood of applications is probably not the biggest problem. Applicants with more money have been filing more applications, and will continue to do so.

Schonfeld also brought up the relevance of the iPod saga (see also this blog): There's also the concern that awarding patents to those who are good at filling out forms rather than to those who can prove they had an idea first is, well, patently unfair. The process should reward creativity, not paper-pushing ability. Inventors, after all, are not always the most organized individuals on the planet. Even some companies are not as organized as they should be. Take the example of Microsoft beating Apple by a few months to that key user-interface patent for digital-music players. Apple simply was not on the ball with its paperwork. It certainly could have beaten Microsoft to the punch. Microsoft filed the patent after the iPod was on sale (which might mean that Microsoft ultimately won't be awarded the patent). Under a "first to file" system, though, such tussles will become more common. Keep in mind, in the US, there's a one year grace period for on-sale. There are other issues too. In any event, Apple did file a 131 declaration in its prosecution, and got no where.

Schonfeld also states:

What we need is for patents to be more difficult to get. The Patent Reform Act of 2005 does not adequately address this issue. One way to reduce the flood of unnecessary patents would be to simply raise application fees, but that would put struggling individual inventors at an undue disadvantage. A much better solution would be to make the screening process more rigorous and selective.

This could be done in several ways: 1) Hire more patent examiners (the patent office is already doing this). 2) Pay them more to attract the most qualified candidates. 3) Stop Congress from diverting hundreds of millions of dollars in patent fees to other programs. ("There is a history of siphoning off funds from the patent office," Sunstein notes.) 4) Open up the examination system so that knowledgeable, interested citizens can raise objections. The Patent Reform Act takes a step in this direction by allowing opposing comments from the public up to six months after a patent is filed, but more could be done.

Distributing the burden of looking out for bad patents among a wide group of people is a good idea even if most of the objections come from companies that simply want to block their competitors at every turn. A patent should be strong enough to stand up to such scrutiny, and it is much better to have a dispute when a patent is granted than years later, when multibillion-dollar markets are at stake.

Here's another suggestion: Set up a peer review system to assist the patent examiners. Participants could look at patent applications in their field of expertise and flag ones that should be thrown out for being too obvious or derivative. Safeguards would have to be put in place to avoid conflicts of interest, such as making sure peer reviewers are not consultants paid by competitors of applicants. But it would be interesting to inject an open-source culture into the patent review process.
[LBE note: just like in the academic world of grant review/paper review, the guys most likely to be knowledgeable ARE THE COMPETITORS.]

The whole point of the patent system is to encourage invention. That's why the government grants a temporary monopoly on original ideas. The problem is that many of the ideas that are awarded patents these days are not original at all. And more often than not, companies apply for patents as a legal defense against litigation rather than to unleash some amazing new product on the world. The way to fix these problems is simple: Grant fewer patents.

And yes no talk of gloom and doom would be complete without an obligatory reference to Quillen and Webster's inflated patent grant rate numbers:

It's just way too easy to get a patent these days (by one estimate, more than 85 percent of all applications are ultimately approved) and way too difficult to challenge a frivolous one -- courts rule in favor of the patent holder about two-thirds of the time.

Schonfeld is dead wrong about the filing fee for a patent application. For about $100, all you could get is a provisional application, which yields no protection unless a regular (nonprovisional) is filed within one year. The PTO fees for a nonprovisional are on the order of $1000, and the cost for a patent attorney for drafting a nonprovisional will very likely be well in excess of $1000.

Schonfeld trots out the Quillen/Webster figure of 85% for patent grant rate, even though that number has been discredited (do an internet search). The basic grant rate (unencumbered by manipulation) peaked at 70.8% in 1999 and has declined every year since to 62.5% in 2004. A simplistic slogan like "Grant fewer patents" is not the answer. We need to give the USPTO the resources to make sure that the patents that are granted comply with the U.S. patent laws. This number could be anywhere between 0 and 100%, depending upon what is submitted.

Of the repeated use of a disproved number (the 85% used by Schonfeld; the 97% used by the Harvard Law Review), one is reminded of Judge Jack Weinstein, writing of the responsibility of jurists in "When Judges Are Asked to Do Evil," reminding his colleagues on all our courts: "One path is unacceptable: silent acquiescence. The duty to speak up in protest is required of us, the judges, as of every person in this great country who is called on to do evil."

The issue of fee diversion of PTO funds has been an issue for over 10 years, but it is not within the present scope of H.R. 2795. However, issues such as injunctions are being debated, which impact different special interest groups in different ways.

The idea of peer review for patents has been brought up by others (e.g., Rebecca Eisenberg of the University of Michigan) but suffers not only from the obvious conflict of interest issue but also from the proxy issue. That is, on the one hand, one worries that competitors might deep six a patent application and/or steal the idea. On the other hand, some people might tend to rubber stamp work of well-known peers without serious review, which happened in spades with the fraudulent work of Jan-Hendrik Schon of Bell Labs. A patent office with adequate resources is the better bet.

See also discussion by Prof. Merges of patent grant rate in Roadshows/20058/Transcript_6-9-05.pdf.

Cecil Quillen did not obtain the 97% grant rate number by looking carefully through file wrapper histories. Quillen and Webster got the 97% from

(applications allowed)/(applications allowed +abandonments -continuing applications).

Continuing applications include continuations, divisionals, and cips. Because there was no verfication that there was an antecedent abandonment corresponding to a continuing application, Quillen and Webster could, and did, obtain grant rates in excess of 100%.


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