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)

Wednesday Shorts: Myhrvold Stalks, EPO Strikes, Lehman Sinks

Nathan Myhrvold and Intellectual Ventures Set for Big Patent Play: over the last few years, Intellectual Ventures (IV) has amassed a whopping 20,000-plus patents and patent applications related to everything from lasers to computer chips. IV now ranks among the world's largest patent-holders -- and the company is ready to press tech giants to sign some of the costliest patent-licensing deals ever negotiated. From the Wall Street Journal: "Tech Guru Riles the Industry By Seeking Huge Patent Fees."

Also read transcript from WSJ interview here. According to Myhrvold, "All of this fear is from people who have guilty knowledge of their own actions. There are lots of major tech companies that grew from zero to gigantically successful in a very short period of time without investing in their own inventions. They got there by using other people's inventions."


EPO Patent Examiners Preparing for Revolt: Tomorrow, EPO examiners are preparing to go on strike for a day, claiming that the EPO Administrative Council "puts profits before patent quality." Furthermore, the examiner union is claiming that "the confidence of the workforce in the EPO President, Alison Brimelow, and her Vice-Presidents is very low. According to internal staff survey conducted in June 2008, only 6% of the workforce have confidence in the management qualities of this body. And only 9% of the patent examiners believe that Brimelow and the Vice-Presidents actively promote patent quality.”

But is the union being completely honest here? Joff Wild, over at the IAM blog, has the complete story here.


RFID Patents Surge In Korea: According to Korea Intellectual Property Office (KIPO), the number of patents filed for RFID technologies has grown by 60%. In 2001, about 70 applications were filed. That number grew to 186 in 2003, 892 in 2005 and 1,201 in 2007. The most active assignees are ETRI (293 patents), Samsung Electronics (209 patents), SK Telecom (140 patents) and LG Innotek (117 patents). Read more here.


Lehman Brothers - What About their Patent Portfolio? after last night's creditors committee meeting, there is a distinct possibility that Lehman will file a motion to approve a break-up fee and bid procedures for an asset sale. So what will they do with their patents and patent applications? Good question.

It appears that Lehman "proper" has only 9 issued patents, but possesses a much larger collection of patent applications (70+). Also, Lehman holds approximately 11 patents as a collateral agent for a company called Serena Software International, and an additional 10 patents as a security agent for Danish company CFS Slagelse A/S. See the PTO listing of Lehman patents and patent applications here. Total Lehman patent holdings are estimated to be over 500 patents and patent applications.

Interestingly, in December 2007, the PTO issued US Patent 7,310,618, titled "Automated loan evaluation system", which disclosed a system that would “… remove some of this guesswork and provide a reliable, fair, and consistent evaluation for all loans, including sub-prime loans.” The assignee? Lehman Brothers Inc. (Hat Tip: Best Mode Blog)

EPO Publishes Helpful Presentations From September Program

The Organization for Economic Co-operation and Development and the European Patent Office recently held a conference on Sept. 3-4 in Vienna, titled "Patent Statistics for Decision Makers" that addressed issues such as patent valuation, patent strategies, business dynamics, and technology markets.

The EPO has been kind enough to make many of the presentations available for download (link), and all of them are worth a read. Some of the papers include:

• Ciaran McGinley, Controller, EPO, "Shining a Light" (link), arguing that the situation with patents is akin to global warming

• Roger J. Burt (Senior Counsel, Intellectual Property Law, IBM Europe): Patent strategies? Just-in-case;

• Nils Omland (WHU Otto Beisheim School of Management): The use of patent data to measure patent value: an overview;

• Jun Suzuki (National Graduate Institute For Policy Studies) [Authors: A. Goto (Japan Fair Trade Comission), K. Motohashi (University of Tokyo), Y. Naito (Artificial Life Laboratory), J. Suzuki, S. Tamada (Kansei Gakuin University and RIETI)]: Patent citations in Japan: database construction for inventor and examiner citations;

• Hugo Pillu (ERASME, Ecole Centrale Paris): Measure of international knowledge flows thorough input-based patent citation indicator;

• Alessandro Sterlacchini [Authors: F. Schettino, A. Sterlacchini, F. Venturini (Universita Politecnica delle Marche)]: Inventive productivity and patent quality: evidence from Italian inventors;

• Bart Leten [Authors: R. Belderbos, S. Kelchtermans, B. Leten (KU Leuven)]: Usage of, or involvement in science: what matters for firm technological performance?; and

• Peter Hingley (European Patent Office) [Authors: S. Bas (LMU Munich), P. Hingley]: Number and sizes of applicants at the EPO.

Thursday Shorts: Asia Patent White Papers, EPO Pendency Continues To Grow

Chinese Patent Statistics - research and analytics company Evaluserve released a white paper titled "Patenting Landscape in China - History, Growth and Utility Model", which discusses various statistics on Chinese patent practice, as well as strategies utilized by patent filers:

Some Chinese companies have adopted a strategy that involves filing 10-year patent applications and 20-year patent applications for the same invention on the same day, thereby ensuring the same priority date with the SIPO. Since a 10-year patent application is granted within a year (without substantive examination), the company can start producing, marketing and selling its “patented” product in China. If the corresponding 20-year patent is granted by the SIPO, the Chinese company can simply abandon the 10-year patent and enjoy a longer period of protection, whereas if the corresponding 20-year patent application is not granted by the SIPO after a substantive examination, then the Chinese company can still continue producing and marketing its product on the strength of the utility model it owns (unless it is challenged by another party and the 10-year patent is re-examined by the SIPO).

Download a copy of the white paper (free registration required) here.

Patenting Landscape in India - Evalueserve also released a white paper on patents in India, and takes a close look at who is filing what in the IPO. Interestingly, of the top 50 patent filers at the IPO, only four Indian organizations appear in the top 50 list. Realizing that the lack of awareness among domestic Indian companies, the Ministry of Industry of India recently announced its plans to launch a "national IP awareness campaign."

Download a copy of the India white paper (free registration required) here.

EPO Filers Seething At Delays - from a recent report from the BBC:

Delays in Europe of up to 10 years have left somewhere between five and ten million inventions globally queuing for approval, according to the head of European Patent Office, Alison Brimelow. She said the delays were bad for business and created uncertainty for innovators . . . patents in Europe were supposed to be granted in 36 months but often took four to five years. Some were dragged out for a decade.

Read "Patent delays frustrate inventors" (link)

EPO Proposes Punitive Fees for Excess Claims

The European Patent Office has announced a new fee schedule that plans to go into effect on April 1, 2009. Under the new schedule, applicants filing more than 15 claims in an application will pay a fee of 200 € ($ 287) per each excess claim. If the claims exceed 50, the "per-claim" fee jumps to 500 € ($ 717) for each excess claim.

See EPO schedule here (link), courtesy of IPEG.

US, EU Patent Examiners Issue More Warnings Over Quality

Butch: You okay?

Marsellus: Naw man. I'm pretty far from okay.

Butch: What now between me and you?

Marsellus: I tell you what now between me and you. There is no me and you. Not no more.

- Pulp Fiction (1994)

As more and more pressure is put on patent offices to increase patent quality, examiners have started to push back, and have expressed a sense of isolation from most patent quality initiatives. For the most part, the sentiment from the examining corps has been that "we know what you want from us, we're just not sure how we are expected to do it."

Back in April, a Coalition of Patent Examiner Representatives from the US, Canada and the EU issued a letter to their respective patent office Commissioners/Presidents, warning that insufficient time and resources were available for effective examination of patents:

Patent offices worldwide continue to focus on their backlogs of applications and ways to increase examiner productivity. Unfortunately, in many patent offices, the pressures on examiners to produce and methods of allocating work have reduced the capacity of examiners to provide the quality of examination the peoples of the world deserve. Quality examination requires skilled, well-trained and motivated examiners, powerful and efficient search and examination tools and, most importantly, the time necessary for examiners to apply those skills, training and tools to the examination of patent applications. The pressure on productivity has greatly reduced the sense of job satisfaction of examiners, who feel unable to take the time to do the job justice. This has damaged the motivation of the examiners with concomitant impact on the operational effectiveness and the quality of output of Patent Offices.

Consequently, we, the undersigned representatives of patent examiners, join together in declaring that the combined pressures of higher productivity demands, increasingly complex patent applications and an ever-expanding body of relevant patent and non-patent literature have reached such a level that, unless serious measures are taken, meaningful protection of intellectual property throughout the world may, itself, become history.

Shortly after the letter was issued, Robert Budens, president of the Patent Office Professional Association (POPA) spoke with Managing Intellectual Property magazine (link), and repeated the call for more time and resources for patent examination. "Everyone except management believes that we need more time to do the job. Their rationale is that if we get more time, then the backlog will grow. I disagree. In the short term that's right, but in the long term it means that the retention level doesn't drop."

In the EU, an interesting development came to light this week as an internal survey entitled "Governance of the EPO: A Staff Perspective" was leaked to the press. The EPO confirmed that the document is authentic, but did not offer any official comment on its findings. After reading the study, it is apparent that the examiners have some serious issues with the logistical workings of the office:

• Only 8% of examiner agreed with the statement that "the MAC is actively supporting the quality development process."

• Only 6% of the examiners agreed with the statement "I identify with the views put forward by the MAC" (down from 12% in 2004).

• When asked to identify "opportunities to improve efficiency," the most frequently
chosen were "better functioning of the computer systems," "clear and consistent instructions" and "better balance between workload and capacity."

• The research group (Research International) concluded in the study that EPO staff perceives their management as “totally disconnected from my reality.”

• In the open comments portion of the survey, 93.7% of the comments were negative, 5.5% neutral (mostly "no comment") and only 0.7% positive.

View/download "Governance of the EPO: A Staff Perspective" (link)

View/download the Coalition of Patent Examiners letter (link)

Notably, Amitrajeet Batabyal and Gregory DeAngelo have conducted theoretical analysis on the issue of stringent examination versus backlog reduction at the PTO. Unfortunatly, the findings in the study were inconclusive:

Our theoretical analysis shows that there is no definite answer to this question [whether there is or isn’t a tradeoff between the twin objectives of backlog reduction and error minimization]. Hence, we use numerical methods and our numerical analysis leads to two conclusions. For many values of the model parameters that describe the stringency of examinations, a more stringent examination process does lengthen the pendency period. In contrast, for most values of the model parameter that describes the volume of patent applications handled by the PTO under study, a more stringent examination process does not lengthen the pendency period.

See: "Average Patent Pendency and Examination Errors: A Queuing Theoretic Analysis" (link)

See also: "Is there a Tradeoff between Average Patent Pendency and Examination Errors?" (link)