Monday, August 17, 2009

Revisiting the Presumption of Validity

Of all the proposed reforms in patent law, one of the most controversial reform measures involves the level of deference courts should give to PTO decisions. More specifically, ever since the Federal Trade Commission's 2003 report (link) on innovation recommended abolishing the presumption of validity of issued patents, a slow but steady measure of support has grown since then (e.g., see "gold plated patents") .

Most recently, Alan Devlin, writing for the Southwestern University Law Review penned "Revisiting the Presumption of Patent Validity" where he expands on previous studies, and provides additional reasoning the "clear and convincing" presumption is validity is not so great:

Who are we kidding with the presumption? Devlin correctly points out that the presumption emanates from the congressional command via 35 U.S.C. § 282 that "[a] patent shall be presumed valid." However, the level of deference to be applied has been left to judicial interpretation - while the current "clear and convincing evidence" standard is settled law, previous standards, such as "a preponderance of the evidence," "substantial evidence," and "clear and cogent showing" have been employed. Essentially, the Federal Circuit explained that the current level of deference is due to a "qualified government agency presumed to have properly done its job . . . [where examiners] are assumed to have some expertise in interpreting the references and to be familiar from their work with a level of skill in the art and whose duty it is to issue only valid patents."

Devlin argues that the ex parte nature of the prosecution process creates informational asymmetries that compromise examiners' ability to distinguish high- and low-quality patents. Additionally, the levels of PTO funding, coupled with the large number of patent applications received each year, leads to an examination process having a "strikingly terse review." The average time spent on a given application by an examiner has been subject to a number of calculations, where the assessed time lies between 16-18 hours. Devlin posits that "[i]t is difficult to understand how a sufficiently detailed examination can take place over a time frame of less than twenty hours . . . especially when one considers the extent of the prior art and the oft-encountered complexity of many claims."

How good is the presumption anyways? Devlin points out that roughly half of all litigated patents are judicially determined to be invalid despite the presumption. Other statistical studies found that 46% of patents litigated on the basis of anticipation were invalidated.

More importantly, Devlin argues that the PTO itself places little stock in its work product. Inter partes and ex partes reexaminations see the PTO revisiting its earlier assessment of an awarded patent and it proceeds without any preconceived presumption as to the validity of its earlier determinations. The same is true of reissuances. Devlin then poses the following:

[I]f the PTO considers its prior decisions to be unworthy of any presumption as to their accuracy, why should the courts? What makes the question all the more intriguing is that the extent of the current presumption is entirely judge-made. The PTO did not request it, and Congress has not required it. Combined with the preceding analysis pertaining to capacity and resource constraints, in addition to the numerous other impediments to effective PTO ex parte review, the presumption must surely be revisited.

As the presumption of validity did not arise from congressional mandate, no legislative action is required for its elimination. Either the Federal Circuit or Supreme Court should hold that one seeking to invalidate a patent face no more than a burden of proof on the balance of probabilities. Alternatively, the PTO itself should emphasize the presumption it deems appropriate given the level of scrutiny it has been able to subject applications to. Given the non-existent presumption that the PTO holds itself to in revisiting its prior decisions, it should request that the courts do likewise, at least insofar as the prosecution process continues to operate in its current form.

Devlin then throws his support behind the concept of a "gold-plated patent," where an applicant would be required to conduct a comprehensive search of prior art, and submit to a "far higher fee" to fund the necessary PTO labor. Additionally, "gold-plated" patents would be barred from any continuations.

While this concept was previously introduced by professors Lichtman and Lemley (see below), Devlin proposes some twists. For one, applicants would be required to search and report only on "analogous arts", where the determination of analogous art is made the same way as for obviousness. Consequently, under Devlin's proposal, a primary initial factor in proving invalidity should be whether "the defendant can point to an anticipatory reference in the analogous art." Furthermore, such invalidation could only take place on the basis of "analogous art that was reasonably within the inventor's potential purview." This way, holders of "gold-plated patents" would have a minimized risk of invalidation based on obscure patents or publications that may cover areas entirely unrelated to the field within which a given invention is discovered.

Devlin concludes:
The two-tier approach would significantly improve the quality of patents granted with presumed validity, would allow for cheaper capitalization and marketing of valuable products by such patentees, would largely deny trolls ownership of strong patents, and would enable the courts to more cheaply, accurately, and effectively invalidate default patents mistakenly granted by the PTO. Combined with a new law depriving obscure prior art of its preclusive force, the gains from implementing such a two-tier system would be compelling. The shortcomings associated with this system are worthy of legitimate debate, but have been shown to be largely unworthy of prohibitive concern.
Read/download Alan Devlin, "Revisiting the Presumption of Patent Validity" (link)

See also, Douglas Lichtman and Mark A. Lemley, "Rethinking Patent Law's Presumption of Validity" (link)

15 Comentários:

Lawrence B. Ebert said...

Your link to the Lichtman/Lemley work takes one to an SSRN abstract. Note that this Lichtman/Lemley work appeared in the Stanford Law Review in 2007: Rethinking Patent Law's Presumption of Validity, 60 Stanford Law Review 45 (2007), right around the time then-candidate Obama started talking about gold-plated patents. Professor Lemley, with co-authors, had already proposed gold-plated patents two years earlier in “What to do about bad patents?” [28 Regulation 10 (December 22, 2005)]. As discussed in Special Feature: On Aspects of Barack Obama’s Technology Policy, published in Intellectual Property Today in November 2008, the plan is neither new nor particularly useful. A patent applicant is free to seek out and identify to the USPTO all relevant prior art, thereby making sure that the application is as strong as applicant can make it.

MaxDrei said...

Is the validity of a patent claim something about which one can have an argument?

Is it not the case that there are always two sides to an argument?

Is it not the case that arguments about the validity of a patent claim are often resolved by evidence?

How then can the validity of any patent claim be credibly settled by anything other than inter partes contested adversarial proceedings?

Or does the PTO have the resources to adduce evidence of its own, on issues such as whether the claimed technical feature combination actually delivers a surprising or unexpected effect?

Does any jurisdiction other than the USA require more evidence than a preponderance, to strike down a claim of a patent? I can't think of one.

Dale B. Halling said...

Patents are the most expensive and time consuming legal process in the world to obtain a title to property. There is a myth that a large number of patents are invalidly granted. Pat Choates’ article Patent Reform is Anything But, see, clearly disproves this myth. Destroying the presumption of validity or placing additional burdens on the applicant is not consistent with “promoting the progress of science and the useful arts.” The U.S. patent system is already becoming an elites system that only large companies can afford to use. This proposal would just continue the process of making the patent system a Byzantine nightmare with little value to true innovators – see

Lawrence B. Ebert said...

If it were true that --How then can the validity of any patent claim be credibly settled by anything other than inter partes contested adversarial proceedings? --, then we are wasting our time with examination of patent applications, and Einstein was merely twiddling at the Swiss patent office. In reality, worrying about preponderance, etc. is applying analog thinking to what is mostly a digital world. As to "where" technology advances, is it the US, or the rest of the world? And, what did the Germans do with the invention of the Wright Brothers?

Anonymous said...

Idk, bottom line, I agree that the cursory review is cause for concern, but then again, clear and convincing evidence isn't all that large of a standard to meet it doesn't seem to me.


Practitioner in Houston said...

For what it's worth, some time ago I authored a paper about the presumption of validity of U.S. patents and the "clear and convincing" standard that it is afforded.

My research found that the origin of the presumption of validity codified at 35 U.S.C. 282 can be traced back to the 1800's, when the U.S. government was engaged in the granting of "land patents," i.e., ownership of land (particularly in the west and southwest) previously not deeded to a U.S. citizen. (Google "Maxwell Land Grant").

The presumption was that the intrepid surveyors (from the U.S. Dept. of the Interior or its equivalent at the time, as I recall) were competent to establish where one person's property ended and another's began. These surveyors often suffered great hardships in mapping out previously uncharted territory, and hence great deference was given to them.

An arugment can be made that the "clear and convincing" standard for utility patents is too high, given the distinction between the relatively objective task of determining the metes and bounds of a piece of tangible real property versus the inherently cloudier matter of defining, with words alone, the scope of one's intangible intellectual property.

Shashank Upadhye said...

the Land grant cases are here:
U.S. Supreme Court
Maxwell Land Grant Case, 121 U.S. 325 (1887)

the query is why a presumption of validity equals a clear and convincing evidentiary standard. the presumption confuses burden of proof with allocation of the burden of proof.

KSR also hinted to this: KSR Intern. Co. v. Teleflex Inc., 550 U.S. 398, 127 S. Ct. 1727, 1745, 167 L. Ed. 2d 705, 82 U.S.P.Q.2d 1385 (2007) ("We need not reach the question whether the failure to disclose Asano [uncited prior art] during the prosecution of Engelgau [the patent-in-suit] voids the presumption of validity given to issued patents, for claim 4 is obvious despite the presumption. We nevertheless think it appropriate to note that the rationale underlying the presumption-that the PTO, in its expertise, has approved the claim-seems much diminished here.").

I discuss the various aspects of prior art submitted and not considered in Sections 3:2-3:6 of my generic pharma patent and FDA treatise. (GENPHARMA database in Westlaw).

MaxDrei said...

Mr Ebert, I'm not convinced. You want to talk about German vehicle technology? Which car has more advanced technology, an American clunker, a Toyota Prius or an S class Mercedes? Is examination a "waste of time"? I think not. The UK until 1978 examined novelty but not obviousness and the system worked just fine. It's about coarse and fine filtering, and intelligent allocation of precious skilled experienced judicial/administrative resources. It's also about fear of the new/unknown.

Lawrence B. Ebert said...

Somehow, the following comment post from early August 19, did NOT "take" onto the 271Blog:

The text --where he expands on previous studies -- perhaps requires expansion. Footnote 16 of Devlin's text alludes to the 2007 SLR paper of Lichtman/Lemley (but not the 2005 paper) and highlights the distinction of his 2008 paper: . In particular, the author believes that a heightened presumption of validity would, in itself, be insufficient to spur optimal use of the "gold-plated" review process. This Article argues that those electing elevated review should also benefit from an immunity from obscure prior art never realistically within their purview. In addition, such inventors should be charged with conducting a full search of the prior art, absent a compelling excuse such as financial hardship. Of the former, with the internet there is increasingly little "obscure" prior art not within a scientist's purview [and how to define such; would the Indian Journal of Chemistry in "In re '639 Litigation" qualify?]. Of the latter, if the applicant has to pay for the USPTO's search, why is there not sufficient practical motivation simply to let applicants who want to fare well later to do a search and prepare a 1449 form? As an overall question, is there any evidence that the differences in legal presumption impact a significant fraction of litigation outcomes? (analog thinking of academic lawyers in a mostly digital litigation world). As a footnote to Devlin's concern about obscure references, contemplate the obscure (ie, nonexistent) 1947 NYT article relied upon in various law review articles. [see WHAT THE STORY OF THE INVENTION OF THE TRANSISTOR TEACHES US

**Separately, as to defining the state of societal technology in 2009 by cars, one wonders if MaxDrei will be going to the best builders of vacuum tubes next[?] One can concede German superiority, but who cares? Also, Toyota has been getting sued over Prius technology. The prime value to society of a patent system is in the public disclosure, a point Lemley, for one, has never understood. We don't want nonnovel and obvious patents for reasons very similar to not wanting nonnovel and obvious science publications. [As to the "fear" remark, those who don't adapt to the "new" tend to get left in the dust. How many vacuum tube-based tv monitors are being sold these days? The Germans did adapt to the aeroplane, although not to the Wright patent, which they considered invalid. The Wright patent was the only patent of his lifetime Justice Douglas thought might be justifiable.

MaxDrei said...

As I have written in another patent law blog, I choose to dip in, comment quickly, then depart and do other things. If that reduces the value of my contributions to diddly squat, I don't care (as long as they nevertheless provoke replies that educate me).

Sory Mr Ebert, I still don't follow you entirely.

Germany is still "export Weltmeister" isn't it? Somebody still wants to buy innovative technological products that carry the "Made in Germany" tag.

If you advocate a system in which Applicants for patents should, in their own self-interest, "be careful what they ask for", then I agree with you. My perception of the present system in the USA is that it is one of "gamekeepers and poachers" each trying to be one step ahead of the other (like in tax law). If you can bamboozle the PTO you can then blackmail the rest. But, unlike in tax law, one can make patent law much simpler, on the basis of "OK, if that's what you want, you can have it. But you might regret it later, in court". Then you arrange that, in court, the loser pays, and if there is one invalid claim in the patent, the patent owner loses. To be fair, you have to give the patentee an equitable chance to amend, by excision of the bad claim, for example when previously unknown prior art emerges, but the American way of litigationg can easily manage that.

Lawrence B. Ebert said...

As to exports, Germany is slightly ahead of China. Are people buying all those Chinese products because they are innovative? An argument that export level implies "innovative" is problematic.

Going back to the theme of the initial post [Of all the proposed reforms in patent law, one of the most controversial reform measures involves the level of deference courts should give to PTO decisions ], I re-state my query: is there any evidence that a significant number of litigation outcomes hinge on "level of deference" to the USPTO?

As to Devlin's paper, Devlin distinguished himself from Lemley et al (whose proposals went back to 2005) on the business of obscure references. Is there any evidence that a significant number of prosecution outcomes hinge on the presence of an obscure reference?

The main sticking point on patent reform since 2005 has been about the way damages are calculated. The talk about "patent quality" was mainly a pretext, and the Quillen/Webster assertions about patent grant rate (eg, 97%) were based on both legal and numerical misunderstandings.

MaxDrei said...

As Mr Ebert notes:

"As to exports, Germany is slightly ahead of China."

Germany is also ahead of China, I might add, on cost of labour, per hour. Remind me Lawrence (as you know all the stats) how much does a production line worker cost i) in socialist Germany and ii) in communist China and iii) in the flexible labour market of the USA? And nevertheless, German goods are outselling the rest!? It can't be the price, can it. Maybe the quality?

Still, I agree with you, it's apportionment of damages that is the deal-breaker.

Lawrence B. Ebert said...

As to MaxDrei's Germany, from eurointelligence:

According to the 2005 theory of Hans-Werner Sinn, Germany export success is not the result of an innate strength but a pathological phenomenon, as it reflects a persistent rise in the value-added of German exports accounted for by intermediate imports. Germany has thus developed into a bazaar, where most of the goods are imported, a relatively minor amount of value-added applied, and exported at a profit. What appears to be a competitive export market is in reality nothing but a reflection of Germany's industry's increasing use of oursourcing and offshoring. With this theory, Sinn also tried to explain why there has been negative employment growth in Germany's manufacturing industry despite the rise in exports.

As to the initial theme of the 271Blog post, there is no evidence that the degree of deference of courts to the USPTO has a significant impact on most patent cases. The papers of Lemley and Devlin are thus not relevant to real world problems.

MaxDrei said...

Good point about offshoring, Mr Ebert sir. I suspect that many of the sub-systems of an Audi or a BMW or even a Mercedes, are imported into Germany, then exported again, inside the real car. Still, it all makes real money for Germany, out of real manufactured goods, doesn't it? Given the ridiculously high quality (and cost) of the universal German healthcare system, something needs to make a lot of real money for the German government. It sets its hopes on innovation in real technology.

Can't really comment on your "deference" point, because I don't yet quite "get" it. Never mind. Maybe others can comment on that.

Lawrence B. Ebert said...

As to MaxDrei, one can read The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle.
As to the deference of courts to the USPTO, another factor that must be included in the discussion is the difference between courts and the USPTO as to presumptions of claim scope. A different 271Blog post brought up this issue. Time To Do Away With "Broadest Reasonable Interpretation?" Paper Says "Yes!" Additionally, it remains true that no one has shown, as a practical matter, that the issue raised by Lemley et al. and then by Devlin, is of great concern to anyone who actually practices patent law. The results of Markman hearings matter a lot; level of deference is not such a big deal.

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