Study Concludes U.S. Would Benefit From EPO-Style Opposition
Professors Stuart J.H. Graham and Dietmar Harhoff published a paper recently that analyzed the potential effects of a post-grant review procedure (opposition) in the U.S. One particularly interesting aspect of their paper is the comparison of litigated U.S. patents versus their EU counterparts. The paper found that:
• EPO opposition rates of the twins of U.S. litigated patents are about 3 times higher than for non-litigated patents (20% versus 6%). Not surprisingly, EPO applications relating to litigated patents are broader in scope, have more claims, contain more references to earlier patents, and receive more citations from subsequent patents;
• On the opposition outcomes, between 22.6 and 24.4% of litigated patents are revoked at the EPO. This is lower compared to the 27.6-39.5% of non-litigated patents. Surprisingly, approximately 14% of oppositions are abandoned by the owner.
• EPO applications that directly relate to U.S. litigated patents have a higher grant rate (80.3%) than equivalents of non-litigated patents (67.9%); and
• The European model tends to exclude equivalents of litigated U.S. patents due to an increased likelihood of opposition, and not by virtue of lower grant rates, or less favorable opposition outcomes;
Professors Graham and Harhoff then performed certain societal "welfare calculations" to conclude that instituting a post-grant review (PGR) system in the U.S could have quite a significant impact on social welfare, provided that the cost of the PGR system is kept reasonably low (<$500k):
[O]ur analysis and welfare calculations suggest that the benefit from PGR review in terms of social welfare per year—when put in dollar terms—could be nearly $25 billion. The main parameter affecting this estimate is not savings on the cost of litigation, but the social costs of currently unlitigated patents that bestow excessive market power on some applicants. This market power either allows the patentee to extort licensing fees, or force competitors to invent around the respective patent. But even when we draw a conservative scenario, and assume a very low social cost figure of $1 million on average for these patents, our benefit-cost ratios still indicate that the benefits of such an institution compares very favorably to its costs.
For more information, read/download "Separating Patent Wheat from Chaff: Would the U.S. Benefit from Adopting a Patent Post-Grant Review? " (link)
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The report is flawed since it only discusses the costs associated with incorrectly issued patents, but does not discuss the costs associated with patents that were not issued that should have been issued.
In addition, it appears the professors started with an anti-patent bias. The professors use the language of antitrust law.
“The main parameter affecting this estimate is not savings on the cost of litigation, but the social costs of currently unlitigated patents that bestow excessive market power on some applicants. This market power either allows the patentee to extort licensing fees, or force competitors to invent around the respective patent.”
Antitrust law has proven to be anti-innovation and anti-patent. The economic malaise of the 1970s can be traced to the FTC’s and DOJ’s traitorous use of antitrust law in giving away American technology. For more information see http://hallingblog.com/2009/10/21/jobs-the-economy-and-patents/
Mr Zura, I have to disagree with your title. I think the good professors are saying that PGR would be a disaster for the USA. Here's why:
1. Throughout their Paper they have in mind a low cost PGR process. They think it costs each party at the EPO about USD20k. They say a PGR that costs each party USD 500k would do more harm than good.
2. In their very last paragraph, they note that administrative Decisions in the PTO can be appealed, all the way to the CAFC. What they fail to point out is that, when the EPO revokes a patent in opposition proceedings, that's it. End of story. There is simply no appeal instance beyond the EPO.
3. They should also point out that a patent granted by the EPO is a bundle of national patent rights. The last chance a competitor has, to kill that patent in all 40 EPO countries, in one fell swoop, is in opposition proceedings at the EPO. Omit to do that, and it's a trudge around as many of those 40 jurisdictions as are needed, to discipline the patent owner. A prospective Opponent at the USPTO does not go through the same calculation of "last chance for a central knock-out blow" does he?
Note remarks by Rochelle Dreyfuss on EP oppositions and by Dale L. Carlson and Robert A. Migliorini on the (failed) JPO oppositions within:
http://www.iptoday.com/news-archived-article.asp?id=889&type=
[And, no, Charles Gholz never responded.]
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