Set Better Standards for Quality to Save the U.S. Patent System

A recent New York Times Editorial Board opinion urged comprehensive reform of America’s patent system by focusing on a few examples of what the Board views as “bad” drug-related patents. Unfortunately, the opinion does not define what makes a patent good or bad. Nor do the sources relied on by the Board provide open access to the underlying data on which such judgments are made.

Calls for improving America’s patent system should be based on more than unverifiable grievances. Real reform will take more than just suggestions that nibble around the edges of our current patent system in response to broad allegations of unfairness. Real reform needs objective standards for measuring patent quality that can guide improvements. Such evidence about patent quality may show that fundamental aspects of our patent system must be updated to keep it relevant for today’s innovation economy.

Tailoring the System to Account for Growth

Patents and copyrights are the only enumerated “rights” initially set forth in the Constitution, rather than the Bill of Rights. Our Founders realized the importance of incentivizing the investments and efforts needed to commercialize the results of our uniquely human penchant for innovation and creativity. As Abraham Lincoln, the only president to be granted a patent, so aptly said, patents add “the fuel of interest to the fire of genius.”

Congress is granted the power to create a system of intellectual property rights that serve as a kind of insurance for profits that encourages businesses and individuals to take the risks required to bring new ideas to market. In this way, the exponential increase in the number of granted patents over the last century represents the growth of our economy — and it is this exponential growth that has overwhelmed the original patent examination system crafted by Thomas Jefferson.

The Editorial Board opinion is correct to criticize the amount of examination time now allocated to examine a patent application. With 600,000+ patent applications filed each year, it is understandable why the 10,000 patent examiners at the U.S. Patent and Trademark Office (USPTO) can only devote around 20 hours to examining each application. Moreover, the total amount of prior knowledge that should be reviewed for each application continues to expand as human knowledge now doubles at least every day. Contrary to the Editorial Board suggestions, no amount of effort to enforce existing standards in granting patents — and no amount of tinkering with how granted patents can be challenged — will change these trends.

What is needed to keep pace with the exponential increases in knowledge and innovation is a more tailored approach to patent examination and protection coupled with clearly defined benchmarks for the quality standards expected from the patent system. The following are some suggestions for how such a more tailored approach might be accomplished.

Create Different Tiers of Utility Patents. Unlike Germany and China, which have both utility and utility model patents, the U.S. has a one-size-fits-all approach for examination and enforcement of U.S. utility patents. Congress should consider enacting statutory changes to create different tiers of examination and protection that reflect different levels of quality of examination. For example, create two tiers of examination — Normal Examination and Enhanced Examination — with each tier having different provisions for proof of infringement and damages and different evidence standards for the presumption of validity. Such a tiered system would grant a level of protection that corresponds to the level of examination that was earned from either a significantly more robust initial examination or a post grant reexamination or review.

The current examination practice would be continued for granting a Normal Examination patent. Such a Normal Examination patent would be presumed valid but could be challenged as invalid either in court or at the USPTO based only on a lower “preponderance of the evidence” standard. Instead of the current approach based on a trespass theory of infringement, a Normal Examination patent could require the patent owner to prove infringement based on a higher level of theft, like the proof required for copyright infringement. A Normal Examination patent could have reduced damages such as only a reasonable royalty, not enhanced damages, and damages could start only upon actual notice, not constructive notice. While a Normal Examination patent would offer a lower tier of protection, it could still allow an inventor to prevent someone from knowingly stealing their invention. It would also allow an option to seek an Enhanced Examination patent by way of reexamination.

If a patent applicant desired a more robust tier of patent protection, the applicant could pay a significantly higher fee to enable the USPTO to spend more time and resources for examination before granting an Enhanced Examination patent. In addition, if a granted Normal Examination patent were to survive a reexamination or review proceeding, the resulting patent could be considered an Enhanced Examination patent as a reward to the inventor for surviving one of these proceedings. Consistent with the increased effort spent on examining or reviewing the patent, an Enhanced Examination patent would have a presumption of validity at the higher clear and convincing evidence standard, with proof of infringement and damages requirements that are the same as under current law.

An advantage of adopting such a tiered protection system could be a reduction in the due diligence burden now placed on third parties by limiting most clearance reviews to only Enhanced Examination patents. Similarly, concerns about patent assertion entities could be addressed by requiring any patents effectively assigned outside of a company merger or acquisition to be reexamined or reviewed in order to become Enhanced Examination patents before such patents could be enforced.

Increase Focus on Continuation Applications. Capping the number of resubmission applications as proposed in the Editorial Board’s opinion was already proposed by the USPTO and rejected by the courts in 2007. Instead, the USPTO could use its fee setting authority to significantly increase fees for non-divisional continuation applications. Increased examination focus on such continuation applications is both warranted and worthwhile. Multiple studies have found that of patents asserted in litigation a higher percentage of such patents are child continuation applications vs. the originally filed parent applications, and that current USPTO practice examination of such child continuation applications by the same examiner who examined a parent application may be more superficial. Having the USPTO increase fees for such child continuation applications would allow for more thorough examination, such as by a panel of three examiners rather than one examiner. Alternatively, Congress could require that a child application be examined as an Enhanced Examination patent application, instead of as a Normal Examination patent application.

Define and Measure a Quality Patent. Even after decades of criticism surrounding poor-quality patents, the USPTO has yet to define what is meant by “quality” in a way that can be used to objectively distinguish bad patents from good patents. The only measures of quality which the USPTO had used in the past relate to the process of examination, not the outcome of that examination. The new director should be committed to providing the public with a defined set of objective standards and targets, including outcome results, by which to measure the quality of patents being issued.

A Need for Objective Standards

The Editorial Board’s opinion emphasizes the need to get the public involved, but there are already numerous ways for the public to provide feedback. The challenges for improving patent quality do not stem from a failure to generate input from the public. Rather, the lack of consistent funding and management teams has hindered the ability of the USPTO to make the continual improvements of IT tools, for example, needed to keep pace with ever-increasing workloads and mountains of prior art. Implementing innovations to the examination process also requires successfully working with the Patent Examiner union leaders to identify and implement reform that can set realistic, transparent and objective examination quality standards.

Saving America’s patent system must start with finding a generally agreed upon initial set of objective examination quality standards that include outcome standards. For if you cannot measure something, as Lord Kelvin said, “your knowledge is of a meagre and unsatisfactory kind.”

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