Sunday, October 09, 2005

Cleere on patent reform (HR 2795)

Scott Cleere: The theory at least is larger companies with large R&D departments and legal departments can get to the patent office a lot faster than the guy in the basement or garage. The argument offers more noise than actual impact. Usually the company that files first is also the one to invent it first.

LBE note: In the first-to-invent system, the first-to-file wins about 3 out of 4 patent interferences. Of course, sometimes the second-to-file wins a big case, such as on integrated circuits. Also, as in the integrated circuit case, the two parties, as a result of seeing each other's position in the interference, do a deal.

In contrast, in a first-to-file system, the first to file wins 100% of the cases, and there is no incentive to do a deal.

The loser in the first-to-file system will be the smaller entity. It is true that the smaller entity already loses most of the time in the current system, but the smaller entity will lose basically all of the time in the first-to-file system.

Stephen Nipper: When you have something that might be patentable, you better get it on file right now. In the first-to-invent system, companies may be more inclined to take the time to evaluate an idea to decide if it's worth investing in, he said, noting a race mentality could lead corporations to file for more patents to be on the safe side, creating more work for patent attorneys and the U.S. Patent and Trademark Office.

LBE observes: Judge Posner has already criticized the present system for promoting a race, first to finishing line, mentality, which misallocates resources. The "first inventor to file" approach would make the situation worse. Further, it would put those with the fewest resources to spend on patent filing in a worse situation than they are in now. The proper inquiry to make is not analysis of the present situation (wherein small inventors do lose about 40% of the patent interferences) but where they would be in the proposed situation (wherein they will likely be totally outgunned in a race to the patent office).

Nipper: ...because Congress frequently siphons money from the patent office for other projects,

Ebert says: Fee diversion has been with us for over 10 years, and has been a consistent source of revenue drain for the USPTO, creating many of the problems that Congress now seeks to remedy.

Nipper: The patent reform bill includes other provisions, some of which are equally as controversial as the first-to-file provision,

Ebert says: The injunction provision of the June 2005 version of HR 2795 was far more controversial than the first-to-file provision, pitting the pharma people (who opposed the provision) against the computer/software people (who favored the provision). The opposition provision of HR 2795 (especially the two window version) was far more controversial than the first-to-file provision.

[<--from taken from Idaho Business Review, Boise, Idaho, another Dolan Media publication.]

Gerald J. Mossinghoff, Oblon, Spivak, McClelland, Maier & Neustadt at
Chicago Town Meeting (March 4, 2005)

"the current law is unfair to first to invent."

Burke Wilford is quoted as saying that the second-to-file wins one case in four in patent interferences.

Mr. Mossinghoff on Chico Gholz: one of the deans of the interference bar has come over to become a strong supporter of the first-to-file system.

On patent reform, see comment in the
Boston Herald :

In a July 24 article, Boston Herald writers repeat a variety of falsities to suggest the U.S. Patent system has run aground.

The idea that the U.S. Patent Office grants patents on 85% of submitted applications is false. It derives from papers published by Quillen and Webster, who initially suggested a number as high as 97%, and later whittled down to 85% and repeated by Harvard B-school prof Lerner [In 2003, the Harvard Law Review treated the 97% number as the grant rate!]. Clarke showed the numbers in the first paper of Quillen and Webster were wrong, and later Ebert showed the 85% number was based on faulty math and legal analysis.

If the PTO really were issuing a multitude of bad patents, the courts would be invalidating bad patents left and right. They aren't. Studies show invalidity determinations by the CAFC are down. To correct for this inconsistency, some patent reform advocates shift gears and say the problem is with a faulty definition of obviousness. This idea, repeated in the Boston Herald article, has been addressed in
"Patent Reform 2005: Can You Hear Me, Major Tom?", available

Comments in the Boston Herald like: "Examiners are considered productive if they approve applications. A rejection produces no continuing maintenance fees." are incredibly stupid. First, examiners don't consider maintenance fees in assessing patentability. Second, maintenance fees are a small amount of money. Third, a recent study shows that over half of issued patents from the early 1990's were dropped because maintenance fees (as low as they are) were not paid.

The use of the Smuckers patent (peanut butter and jelly sandwich on
crustless bread with the edges crimped together) is a great sound bite, but doesn't really give a great deal of depth to support a conclusion that the patent system has run aground. The Boston Herald neglected to mention that this patent is currently rejected in re-examination and that two continuing applications were rejected. Kind of a lack of thoroughness in reporting?

Similarly, the Boston Herald gave an incomplete account of fee diversion (About 10 years ago, it started coming under pressure to produce revenue for
the Treasury above its own needs.) In the last ten years or so, funds taken in by the Patent Office (which should be used to meet its own needs) have been diverted to general revenue. Coming under pressure? It's been happening.

To see a more accurate account of patent reform issues, see
Patent Reform 2005: Sound and Fury Signifying What? in the July 18, 2005 issue of the New Jersey Law Journal, also available on LEXIS.

Another paper has taken issue with the Quillen/Webster analysis, and more importantly, its conclusions about an abnormally high grant rate by the USPTO.

See AgBioForum for
William Lesser(2005). Intellectual property rights in a changing political environment: perspectives on the types and administration of protection. AgBioForum, 8(1&2), 64-72.

The paper states:
Our analysis finds no evidence to support the frequently stated conjecture that the USPTO has a flawed and declining patent examination process. That is not to say there are no issues regarding patent management that do not require further scrutiny. For example, errors are clearly made in patent grants, and further steps should be taken to reduce further those errors.1 Or, there may be errors in selecting patentable subject matter. But overall, the principal explanation for the ongoing rise in patent applications seems to be a result of demand factors and not changes in supply requirements or standards.


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