Defensive Patenting and Deferred Examinaton: Lessons From the German Patent Office

There has been a renewed interest in deferred examination for the USPTO, primarily because (a) it appears to enjoy some success overseas, and (b) the current backlog of pending cases at the PTO are at unsustainable levels. As many institutional patent filers recognize, a fair percentage of yearly filings are almost exclusively defensive, i.e., the filings are submitted to create "freedom-to-operate" (FTO) areas and to potentially block future filers in the technological space, and also create uncertainty for competitors analyzing filed applications.

While U.S. companies have long used defensive filings, statistics on this area are hard to find, since the U.S. system makes it almost impossible to gleam the motivation behind any filing.

However, in the EPO, and more specifically Germany, deferred examination creates two "lags" between filing and grant (or refusal): (1) the examination lag - i.e., between filing and examination, and (2) grant/refusal lag - i.e., between examination and grant or refusal. In Germany, examination does not start until it is requested by the applicant. Thus, the applicant controls the examination lag. Accordingly, applicants can achieve a very long, and cost-efficient, period of pendency, since prosecution costs are practically nil, and there is no “risk” of too early termination. As a result, competitors cannot ignore the application (since the examination request can still be made), and the applicant gains a certain leverage in the patent office on the specific technology.

(As EPO president Alison Brimelow put it: "If you spend several years waiting for a decision, you and others can play 'rich man’s poker', taking a bet on what your rights are going to be and discussing your commercial relationships in the shadow of that pending set of applications.")

Under this backdrop, EU scholars Joachim Henkel and Florian Jell looked at the German model to determine how, and how often, German patent filers avail themselves of defensive patent filings, and their motivations for doing so. Analyzing all direct first filings at the German patent office between 1986 and 2000, the authors found the following:

• While 64.7% of all applications in the GPTO were eventually accompanied by an examination request, 35.3% of all applications had no examination started. However, of the 35.3%, 51% of them had subsequent, priority-based, applications filed in other patent authorities.

• In 47.8% of all GPTO direct first filings, the request for examination was filed before the application was published, meaning the applications corresponded to an "accelerated process" pattern. The remaining 16.9% lingered as "optional" filings, presumably to create insecurity among competitors.

• 2% of all applications could turn out to have defensive publishing as their sole purpose, that is, the publication of inventions with the purpose of creating prior art.

• More than 20% of all applications are left pending for the maximum of seven years before examination is requested or the application is deemed to be withdrawn.

• In cases where the filings are withdrawn very early (when first annual fees would have been due), 85.9% of applications actively withdrawn had subsequent filings, thus indicating that the original filing was merely done to secure priority.

Other findings from the study:

[A] surprisingly large share of applications is kept pending without request for examination, in 20% of all filings even for the maximum period of seven years. For applications with low value or low probability of grant, this creates insecurity for competitors and is thus preferable to an early withdrawal or an early, and likely negative, decision by the examiner. Second, a longer pendency period gives the applicant more time to assess the value of requesting examination. We find that for 17% of all GPTO direct filings, a request for examination is made with delay, that is, after publication of the application.

Evidence from interviews suggests that firms strongly benefit from maintaining pendency of patent applications that cover rather abstract technologies whose market is considered strategically important as a whole, but which are not yet embodied in concrete products. It seems that in such cases a pending patent application offers enough protection while at the same time involving lower cost (e.g. no examination fee, no prosecution cost). As soon as “full” protection is required (e.g. when a product will be launched soon), the applicant can easily induce examination of the patent. Our data shows that this strategy is mostly used by firms (in contrast to individuals): 90.4% of all patents that were pending for seven years before examination started were filed for by corporations or institutions.

Our interviews further suggest that individual applicants who keep their filings pending do so in order to save examination cost while searching for licensees. A majority of 54.8% (which is far above average) of all early lapsed patent applications is filed by individuals suggesting low commercial value of the underlying inventions. The remaining 41.6% (more than 2 % of all filings) are early lapsed corporate or institutional filings. They are strong candidates for being DPs [defensive publications], or in any case for having a large value component related to creating FTO. While we can currently not exclude that the applicants did file initially with the intention of obtaining a patent grant, and within two years realized that a request for examination would be of little value (because of a low probability of grant, or a low value of the resulting patent, if granted), interpreting these filings as DPs is very plausible. First, this interpretation is suggested by qualitative evidence. Second, a survey among EPO applicants found that preserving FTO, after preventing imitation, is the second most important motive for patenting.

Read/download "Alternative Motives to File for Patents: Profiting from Pendency and Publication" (link)