Friday, March 23, 2007

Coalition for 21st Century Patent Reform

The NAS report A Patent System for the 21st Century by Stephen A. Merrill, Richard C. Levin, and Mark B. Myers, serves as a patent reform template for the newly-formed Coalition for 21st Century Patent Reform, which includes 3M, Abbott Laboratories, Air Liquide, Air Products, AstraZeneca, Baxter Healthcare Corp., Beckman Coulter, Bridgestone Americas, Bristol-Myers Squibb, Cargill Incorporated, Caterpillar, Cephalon, CheckFree, Corning, Dow Chemical, Eastman Chemical, Electronics for Imaging, E.I. du Pont (DuPont), Eli Lilly, ExxonMobil, General Electric, Genzyme, GlaxoSmithKline, Henkel Corporation, Hoffman-La Roche, Johnson & Johnson, Merck, Millennium Pharmaceuticals, Monsanto, Motorola, Novartis, Patent Café.com Inc., Pfizer, Procter & Gamble, Sangamo BioSciences, Texas Instruments, United Technologies, Weyerhaeuser, Wyeth, and AIPLA. The website is

IPFrontline reports that the NAS study is widely recognized as the most objective report on the current state of the U.S. patent system. Broadly, the NAS made a number of recommendations to strengthen the patent system:

1. Preserve an open-ended, unitary, flexible patent system;
2. Institute an Open Review procedure;
3. Strengthen USPTO capabilities;
4. Modify or remove the subjective elements of litigation; and
5. Harmonize the U.S. patent system with those of our major trading partners

**the patentsmatter website gives some elaboration on points 2-5:

Provide the USPTO with adequate resources to assure quality examination of all patent applications. This may require legislation separate from ongoing efforts aimed at amendments to the substantive patent law.

Significantly limit "subjective elements" in patent litigation.These include the "inequitable conduct" defense to a patent's enforceability, awarding punitive damages based upon "willful infringement," and the "best mode" requirement.As examples of needed reforms, limitations on the unenforceability defense based upon inequitable conduct should, at a minimum, insulate wholly valid patents from "inequitable conduct" allegations and the "best mode" requirement should be repealed outright.

Enact the NAS-recommended harmonizing changes to the U.S. patent laws, i.e., adopt the first-inventor-to-file principle and eliminate the "best mode" requirement.

Provide an "open review" (post-grant opposition) procedure that facilitates challenging questionable patents in the USPTO.The "open review" procedure should be structured to provide adequate incentives for the public to make prompt challenges to patents once issued, protect investors against frivolous challenges or other potential harassment by challengers, and secure "quiet title" for inventors following the opportunity for a patent to be challenged.

The NAS study cites the Jaffe/Lerner book at page 133. The NAS study cites the FIRST paper by Quillen and Webster at page 52 and cites the SECOND paper by Quillen and Webster at page 53.

At page 54, the NAS study notes:

Acceptance rates by themselves ignore how patent claims are modified, nearly always by narrowing their scope, in the course of the examination, surely a key determinant of quality. Moreover, rigor of examination is only one of several factors that may affect allowance rates. The fact is that the examination procedure, allowing an applicant multiple attempts to persuade a critical examiner to approve a patent (see Appendix A), is designed to yield a high “success” rate, at least for persistent applicants.34 The predictability of the standards in a particular technology and the perceived economic value of the patent are some of the factors that affect motivation to pay the costs associated with that iterative process.

The committee believes that high acceptance rates, especially if increasing over time relative to comparable rates in other industrialized countries would be reason to look more closely at examination quality. Under either Quillen and Webster’s or Clarke’s assumptions the USPTO patent approval rate gradually increased in the early 1990s and then declined after 1998 (see Figure 3-2). The European Patent Office (EPO) and Japanese Patent Office (JPO) approval rates peaked at approximately the same time but then declined more rapidly, so that in 2000 the USPTO rate was higher although by a substantial margin only under Quillen and Webster’s assumptions. On the other hand, the Organisation for Economic Co-operation and Development (OECD, 2003) estimates that the USPTO grant rate for U.S. priority applications with at least one subsequent EPO application was consistently higher than the EPO grant rate for U.S. priority applications throughout the 1980s and early 1990s—80 to 90 percent versus 50 to 60 percent.35

Footnote 34: As Lemley and Moore (2004) observe, “One of the oddest things about the U.S. patent system is that it is impossible for the U.S. Patent and Trademark Office to ever finally reject a patent application. While patent examiners can refuse to allow an applicant’s claim to ownership of a particular invention, and can even issue what are misleadingly called ‘Final Rejections,’ the patent applicant always gets another chance to persuade the patent examiner to change her mind.”

Footnote 35: Differences in patent office practices—for example, Japan’s narrower claiming—may affect these comparisons. [IPBiz notes that the NAS study did NOT cite Clarke on this proposition.]

Page 39 of the NAS report states:

Ultimately, the test of a patent system is whether it enhances social welfare, not only by encouraging invention and the dissemination of useful technical information but also by providing incentives for investment in the commercialization of new technologies that promote economic growth, create jobs, promote health, and advance other social goals. Assessing the system’s overall economic impact is no simple task, perhaps an impossible one. For one thing, the dual functions of patents are in some degree at odds with each other. The exclusivity that a patent confers is undermined by its publication, which may help others circumvent the patent. Furthermore, patents entail a trade-off between the incentives provided for innovation and the costs resulting from a monopoly that may curtail competition and raise consumer prices or hinder further incentive efforts. Both sides of that ledger are exceedingly complex. Innovation in any technology area may benefit from the incentive created by a patent on a new product or process development, but it may suffer if patents discourage the combining and recombining of inventions that would have been made absent the patent or inhibit follow-on discovery. Competition may suffer when an inventor is granted a temporary monopoly right or a combination of patents is used to bar entry or to maintain a cartel in an industry. On the other hand, competition will benefit if this right facilitates investment by new, innovative firms lacking assets other than intellectual property. Patents can also foster the creation of markets for technology, enabling efficiencies in the research and development (R&D) process and promoting the transfer of discoveries from entities skilled at conducting R&D to firms potentially better suited to commercializing and marketing innovations.

Page 26 echoes assertions from the 1990 paper of Merges and Nelson:

For a few notable commercial product inventions—Edison’s incandescent lamp14 and the Wright brothers’ airplane stabilization and steering system15—broad pioneering patents were exercised in a manner that at least temporarily deterred competitors from making further improvements. The patent holders either aggressively enforced their rights or refused to enter into licensing agreements. Radio illustrates the possibility that when separate patent holders with broad enabling patents (in this case, Marconi Company, De Forest, and De Forest’s main licensee, AT&T) cannot agree on licensing terms, technological progress may be impeded for a time. Eventually, in all of these cases the obstacles were overcome by industry consolidation or government intervention in or near wartime to compel licensing or patent pooling (Merges and Nelson, 1990; Merges, 1994).

Both Quillen and Jaffe obtained more hits in the NAS study than Edison (2), Shockley (0), Kilby (0), or Hugo Black (0). Page 43 has the text: The first patent on a flying machine was issued to Orville and Wilbur Wright within 30 months of the flight at Kitty Hawk, North Carolina. [IPBiz to NAS: recall the patent application was filed BEFORE the Dec. 1903 flight.]


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