Friday, November 25, 2005

Wagner's patent portfolio theory (?)

Wagner writes: The patent portfolio theory also enables a number of important
predictions about the future course of the patent system. n28 We predict that
patent intensity (patents obtained per R&D dollar) will continue to be high,
that the Patent and Trademark Office (PTO) will face increasing pressure as a
result, that patent "thickets" will proliferate and become a growing
policy concern, and that patent litigation will become more complex and
costly. n29 We also conclude that the portfolio-dominated patent system will have
serious distributional consequences, where large, resource-rich, incumbent
firms will see a mounting advantage because of their ability to more effectively
implement a patenting strategy based on patent portfolios. n30 Companies with
small patent portfolios will find it difficult to compete against firms with large
patent holdings. This, however, does not mean that small innovators will
disappear from the market; rather, we will witness increasing segmentation of the
innovation market, with startups and small firms complementing, or filling "gaps"
in, the portfolios of larger companies.

Elsewhere in the article: Furthermore, patent applications convey little information about the potential commercial value of the invention. For example, patentees do a notoriously poor job of referencing prior inventions in their patent
applications. n75 Without information about competing technologies and
blocking patents, third parties cannot possibly determine the value of the
patented invention. Finally, the potential signaling value of the patent
application is further weakened by the lax and "patent-friendly" review given by the
PTO (which approves nearly all of the applications that it receives). n76
Moreover, after passing this diminished level of scrutiny, a significant percentage of issued patents are declared invalid when challenged in court; hence, third
parties cannot rely too heavily on the validity of issued patents that have not
been exposed to litigation. Indeed, even Long acknowledges [*22] that in
many circumstances patent signals may be ambiguous, in which case their
value becomes suspect. n77

Gideon Parchomovsky, R. Polk Wagner, 154 U. Pa. L. Rev. 1 (Nov. 2005)

Incredibly, footnote 76 is to the first Quillen/Webster paper: See, e.g., Cecil D. Quillen, Jr. & Ogden H. Webster, Continuing Patent Applications and Performance of the U.S. Patent and Trademark Office, 11 Fed. Cir. B.J. 1, 3 (2001) (indicating that once continuing applications are included, the patent approval rate is 95%). Quillen and Webster conclude that the PTO might ultimately approve as many as 97% of all patent applications. Id. at 13.

Even Quillen and Webster gave up on the 95%/97% numbers by the time of the second Quillen/Webster paper in 2002. Parchomovsky and Wagner really need to read the literature before writing things like in footnote 76!

Separately, the patent portfolio/wall of patents insight long preceded the November 2005 paper.


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