Moving on from Patent Demand

Background

In my 2008 article Patent Demand, I argued that the US Patent System is in crisis because of the huge volume of patent applications being filed each year.  I suggested a simple approach for reducing the problem: raise the price for large entities filing patent applications to $50,000.  This would cause a large decrease in the number of applications filed, increase the quality of applications all while increasing the budget of the USPTO.  REMEMBER, I was NOT suggesting raising the filing fees of small companies or individual inventors as their applications would be cleaned up by a more thorough examination that all applications would receive.

Well, much has occurred since 2008.   The number of patent applications has continued to rise to over 500,000 each year.  The USPTO continues to use the Patent Switch Off (Dudas) and Patent Switch On (Kappos) approach to management of the patent examination process.  The court system continues to flail away at the patent law because the courts rightly do not trust the quality of patents issued by the USPTO.  And, patent trolls are a much larger part of life with more than 5,000 patent lawsuits filed in 2013.

On the positive side of the equation, the American Invents Act was passed in 2012 and has given us the single most effective tools for fixing the broken patent system: Inter Parties Review (and its close cousin, the Covered Business Method program).  An IPR is a patent re-examination process whereby a company, that is being threatened by a patent assertion, may challenge the validity of the patent in a contested proceeding before patent law experts at the Patent Trial and Appeals Board - while (hopefully) staying any concurrent patent litigation.  The IPR is an expensive option (estimate $350K for the process through decision) and last so far there were over 500 IPRs and 50 CBM reviews filed.  This proceeding is very well utilized already and I believe that we will see a time where all patent litigation include an IPR filing.

I believe that raising the filing fee for large entities would be a big step forward for the patent system. The problem is that the US has built up a huge infrastructure for creating and processing patent applications within the national R&D environment.  For many companies, a large number of patent applications equals an innovative company and R&D employees are often compensated and promoted based upon the number of applications filed.  Therefore, any solution that causes a significant decrease in the number of patent applications filed would be politically impossible to implement.

Patent System 2.0

I believe that the US patent system requires a substantial overhaul to fix the fundamental problem of patent quality and I call this Patent System 2.0.  The best part is that the components of Patent System 2.0 already exist.  Below is an outline of the proposal and I will fill in the details of the outline over the next few months with posts on this blog:

1. Replace the current patent examination system with patent registration at the current fee level.  This would allow the current R&D investment in the current patent system to continue.  There will be no automatic examination of filed patent applications.
2. Require a PTAB-like proceeding to determine the patentability of an invention prior to permitting the patent owner to send patent licensing demands or filing litigation.  The patent owner would have to pay a filing fee akin to the current ex parte fee of $12,000 for large entities.
1. These proceedings could permit intervention by potential market participants for a fee similar to the fee paid by the patent owner.
2. One or two examination and amendment rounds would occur and the proceedings will result in a full claim construction.
3. No damages would accrue to a patent owner until the proceedings are complete.
4. The PTO should develop a group of staff attorneys to advocate for the public interest (similar the ITC)
5. Any party to the proceeding can appeal to the Federal Circuit for a final determination.
3. Eliminate patent validity and claim construction from the patent litigation process.  The PTAB process will be conclusive as to the validity of a patent.  This means that patent litigation would become extremely rare, but much less expensive than the current litigation process.
4. Injunctive relief may only be sought if the patent applicant files immediately to proceed to the PTAB process and notifies any party that they may wish to file an injunction against.