Friday, March 16, 2007

Jaffe/Lerner again: patent reform as three card monte?

In preparing a more detailed paper on errors in Innovation and Its Discontents (Jaffe and Lerner, Princeton University Press, 2004), I revisited the brief of eBay in the eBay v. MercExchange case, which at page 40 was citing to Cecil Quillen (but not mentioning co-author Webster), specifically the FIRST Quillen/Webster paper, 11 Fed. Cir. B J 1 (estimating the rate of patent approvals by the PTO to be 97%). An amicus brief by Yahoo is available through LEXIS, in the form of a paper in the Berkeley Technology Law Journal (21 Berkeley Tech. L.J. 999) which includes the text: The PTO approves between 85 to 97 percent of the applications it receives. C. Quillen and O. Webster, Continuing Patent Applications and Performance of the U.S. Patent Office, 11 Fed. Cir. Bar J. 1, 1-21 (2001). IPBiz finds it interesting to note that they cite to the same paper and reach different conclusions.

The various misdirections in the patent reform debate evoke the game of three card monte. From an upcoming paper:

II. Patent reform as three card monte?

One can find on the internet the text: There is a crisis of patent quality. Vague, overbroad patents lacking in novelty that fail the constitutional mandate of “promoting the progress of science and the useful arts” are being issued. The grant of a high volume of patents (over 350,000 a year [sic]) at a staggering rate (upwards of 90% of patent applications are granted) produces increasing uncertainty about their merit. Low quality patents risk more litigation and confer the economic rewards of monopoly with little benefit to the public.

One can find similar statements, critical of the patent system, in various law review articles, and one can find similar text in the book Innovation and Its Discontents. Nevertheless, one patent attorney wrote: "The critics consist of a tightly knit group of university professors and non-patent attorneys who are critical of the patent system and who favor weakening patent rights. The critics publish countless articles every year and repeatedly cite to one another's work, if not simply to repeat it or provide a synopsis thereof in a different venue, which gives the impression that there are numerous opinions consistently critical of the patent system. This coterie of most frequently published patent critics is so insular and close-knit that no effective independent review of their work is likely." Footnote 1 of the article cites the Jaffe/Lerner book and states "most articles critical of the patent system published since this book [2004] represent synopses of the book in one form or another." [See Patrick Doody, The Patent System is Not Broken, 18 Intellectual Property & Technology Law Journal 10 (December 2006)].

There is merit to the suggestion that the group of legal academics who criticize the patent system are close knit and not entirely imaginative in their analyses. It is also correct that the publications of some accept the conclusions of the Jaffe/Lerner book as a given (for example, 59 SMU L. Rev. 1717). Curiously, however, one of the central "truths" of the patent reform movement, that patents are granted at an excessively high rate (e.g., "upwards of 90%" in the text mentioned above), is based on papers published by former employees of Eastman Kodak, Cecil Quillen (the former General Counsel of Eastman Kodak Company, where he was a Senior Vice President and member of the Board of Directors ) and Ogden Webster (a former Assistant General Counsel of Eastman Kodak Company, where he was the Chief Patent Counsel). The initial paper by Quillen and Webster (11 Fed. Cir. B.J. 1 (2001)) contains the text: "if it is assumed that all of the continuing applications represent a renewed attempt to patent the subject matter of their parent applications, then the number of net abandonments is the total number of abandonments less the total number of continuing applications filed. The overall Grant Rate for the 1993-1998 fiscal years on that assumption is 97%."

The manner in which certain pertain reformers have utilized the statement of Quillen and Webster bears certain resemblances to the game of three card monte.

The hype

At one point in three card monte, the dealer allows the mark to see the target card and to seemingly see where the card is placed on the table. This is called the hype. The target card really is not where the mark thinks it is. In patent reform, the utilization of statements that the grant rate is "near 90%," "approximately 90%," or "97%", is like the hype step in three card monte. First, Quillen and Webster never actually said the grant rate was 97%; this was only a bound under certain assumptions, which assumptions were untrue. [from footnote 17 of the first paper of Quillen and Webster: "The authors have been told that in some circumstances it is possible to file a continuation application without immediately abandoning the parent application, and for the unabandoned parent application subsequently to mature into a patent, even though the continuing application and the parent application (which subsequently becomes a patent) are for the same invention. (…)To the extent there may be such patents, the Allowance Percentages and Grant Rates, as calculated in Tables 2 and 6 respectively, could be affected. "] Second, investigation of the method of Quillen and Webster by Robert Clarke (misidentified as George Clarke by Jaffe and Lerner in footnote 163 at page 222) showed the method was inaccurate. As in the hype step of three card monte, the 90%+ patent grant rate is not really there. One can see examples of the hype step in patent reform papers published AFTER the Clarke work in the Harvard Law Review (116 Harvard Law Review 2164 (2003): “The PTO grants approximately 97% of patent applications…”), in the eBay brief to the Supreme Court (at page 40 citing 11 Fed. Cir. B.J. 1, 3 (2001) for estimating the rate of patent approvals by the PTO to be 97% which information appeared in publication in 21 Berkeley Tech. L.J. 999, 1006 (2006) to recite "The PTO approves between 85 to 97 percent of the applications it receives. C. Quillen and O. Webster, Continuing Patent Applications and Performance of the U.S. Patent Office, 11 Fed. Cir. Bar J. 1, 1-21 (2001), and in 61 N.Y.U. Ann. Surv. Am. L. 317 (2005) at footnote 1, finding the first Quillen/Webster paper "showing a grant rate of approximately 90% in the PTO." PRIOR to the Clarke work, Mark A. Lemley in Rational Ignorance at the Patent Office (95 Nw. U.L. Rev. 1495, 1527 (2001)) had written “The Quillen-Webster study suggests, moreover, that they ultimately issue an astonishing ninety-seven percent of the unique applications filed.”

The Mexican turnover

Sometimes, the mark in three card monte figures out where the target card is. Then, the dealer employs the "Mexican turnover" wherein the target card is removed and another card substituted in its place. Examples of this in the patent reform debate are in papers wherein the elevated grant rate numbers are removed from discussion and, for example, a straight up comparison to rates in foreign patent offices is made.

One notes that the NAS report changed during its evolution, removing reliance on elevated patent grant rate numbers. Similarly, Innovation and Its Discontents has at page 143 an argument substituting for the elevated grant rates of Quillen and Webster:

The OECD calculations indicate that the number of important inventions originating in the United States increased by 51% between 1987 and 1998. By comparison, the number of successful applications to the USPTO by US inventors increased 105% over the same period. If the examination standards in the United States were not changing, we might expect successful applications in the United States by US inventors to grow at about the same rate as our measure of internationally important inventions originating in the United States. The fact that the growth in successful PTO applications was, instead, twice as large as the growth of international families is hard to explain in any manner other than declining standards in the US PTO, producing an ever-growing proportion of US patents the patent holders themselves did not think merited patenting elsewhere.

As of March 2, 2007, Shepard's showed 27 citations to the first Quillen and Webster paper, 11 Fed. Cir. B.J. 1 (2001). Papers criticizing the work of Quillen and Webster include 85 JPTOS 335, 86 JPTOS 568, 88 JPTOS 239, 88 JPTOS 726, 4 CHI.-KENT J. INTELL. PROP. 108 and 4 CHI.-KENT J. INTELL. PROP. 186

Discussion of a crisis of patent quality is based on papers which use invalid numerical and legal methodology. A method which allows a grant rate in excess of 100% is not correct, period. To paraphrase Emerson, the louder she talked of a crisis in patent quality, the more I wondered "whose crisis."

Also concerning Innovation and Its Discontents, Bruce Berman wrote me the following:

Your fellow IP Today columnist's condescending and cumudgeonly comments about Making Innovation Pay, and me, are deserving of some context. I'm planning a response. On the topics of IP books, it may interest your readers to see my review of Innovation and It's [sic: Its] Discontents, which I wrote for Nature Biotechnology. Basically, I thought the book provided much useful background on how IP works but I disagree with its premise that the patent system is "broken" and undermining innovation.

As a disclaimer, LBE never was a columnist for Intellectual Property Today [IPT]. LBE did write articles which appeared in IPT, the last of which appeared in the year 2005. Mr. Berman is referring to an article by Joseph E. Root which appeared on pages 24-25 of the February 2007 issue of IPT. (LBE has never met Berman or Root.)

Of the point about the patent system being about disclosure of inventions, note

Judge Rader stated “Ideas have value. It isn't called intellectual property for no reason.” Noting that it takes hundreds of millions of dollars to bring AIDS drugs and other desperately needed cures to market, he stressed that “Drugs and other inventions have value.” This investment must be protected, or else no one will continue to pay for the development of these inventions, he argued.

Rader recalled that in one speech in 2000, he explained to a gathering that all of the inventions from 1980 and prior are freely available to you, “but not to your fathers.” “The patent system can be viewed as a great generational gift,” he said. In the move toward patent law reform, science leads to technology, and technology leads to solutions to man's problems, Rader noted. One should not lose sight of the tone used in seeking “constructive change” in the quest to protect this “vital generational gift,” he concluded.

See Judge Rader Tells PTO Day Group That Harsh Rhetoric in Patent Debate Needs Toning Down


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