NCPA - National Center for Policy Analysis


October 28, 2004

The reduction in standards for granting patents has started an arms race among patent holders, say Harvard University economics professors Adam B. Jaffe of Brandeis and Josh Lerner, in their new book, "Innovation and Its Discontents."

The result has been sharp growth in patents and litigation. When patent suits are brought, they can be horrendously expensive, say the authors:

  • One study found that in cases where at least $25 million was at risk, the cost of defending a patent infringement suit was $2 million to $4.5 million.
  • Even with small cases involving less than $1 million, the cost of defending was nearly half the amount at risk.

So what is to be done? The authors recommend:

  • Creating better incentives to discover "prior art"; once an examiner decides a patent might be granted, the Patent and Trademark Office would issue public notice of an "intent to issue," and concerned parties could offer information that could be relevant to the determination of novelty.
  • Offer several escalating levels of patent review, so that trivial patents could be dealt with at lower levels, reserving detailed examination for important cases.
  • Replace jury trials with judges, who could hire special masters, experts who would work for the judge in examining the arcane technological debates that arise in patent cases.

The authors also offer several other suggestions, like moving from the current "first to invent" rule to the "first to file" rule. This would not only align the United States with the rule used in the rest of the world, but would also eliminate legal wrangling about priority.

Source: Hal R. Varian, "Patent Protection Gone Awry." New York Times, October 21, 2004.

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