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Stuart Graham and Dietmar Harhoff have produced a piece of work that is going to cause a great deal of controversy in the United States. Their paper - Separating Patent Wheat from Chaff: Would the U.S. Benefit from Adopting a Patent Post-Grant Review? - goes right to the heart of one of the most controversial aspects of the proposed US patent reform legislation currently before Congress. Although post-grant opposition ahs found many supporters, among which is the current administration, there are many who reject it out of hand. Well, the latter are not going to like the conclusions Graham and Harhoff come to. This is from the abstract:
This paper assesses the impact in the US of adopting a patent post-grant review procedure (opposition). By employing novel methods for matching US patents to their non-US counterparts, we find that the opposition rate is about three times higher among the European Patent Office (EPO) equivalents of a sample of US litigated patents as against control-group (unlitigated) patents. Contingent upon reaching final judgment in EPO opposition, about 70 percent of these equivalent patents are either completely revoked or narrowed. Using these findings to inform a series of welfare estimates, we calculate a range of net social benefits that would accrue to the US from adopting a patent post-grant review. We discover that large social benefits would result primarily from the elimination of unwarranted market power, and less so from litigation cost savings per se. Our results provide evidence that the US could benefit substantially from adopting an administrative patent post-grant review, provided the mechanism is not too costly.
Peter Zura at the 271 Patent blog also notes another section of the report which identifies the benefits post-grant opposition could bring if its costs are kept to below $500,000:
[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.
Of course, just because you claim it and use some maths to back this up does not make it true. But even if it is you have to wonder how the USPTO is going to manage an opposition system when it is struggling financially and already has a huge backlog of applications. Then there is the issue of timeliness. In Europe, opposition procedures can often last for over three years and may be stretched further if one side or the other decides to appeal. The potential for vexatious proceedings is, therefore, pretty large.For a small company or a start-up looking for funding this could be calamitous. That said, the reality is that only 5% or so of EPO grants are opposed each year and far fewer go to appeal. Of course, if you own one of those 5% that is not going to be much of a consolation.
IP management, IP politics, IP litigation, Patents