Patent Reform Critic Says Legislation Would Be Costly and Counterproductive

    By Donald Zuhn --

In an article posted on the American.com website (the online version of The American magazine) on Tuesday, Dr. Aparna Mathur (at right), a Research Fellow at the American Enterprise Institute for Public Policy Research, argues that now is the time to begin lobbying against the patent reform bill that was taken off the Senate calendar in April (see "Courting Trouble on Patents").  Dr. Mathur, who co-authored an economic analysis of the apportionment of damages, post-grant opposition, and inequitable conduct provisions of the patent reform bills with Dr. Robert Shapiro (see "BIO CEO Provides Update on Patent Reform and Follow-on Biologics Legislation - Part I"), argues that if "controversial" patent reform legislation were passed by the next Congress, it "would do more harm than good, while leaving the basic contours of the problem unchanged."

In her "Memo to Congress," Dr. Mathur clearly sides with patent reformers who "allege that the USPTO is guilty of issuing low-quality patents that violate the criteria of 'novelty, non-obviousness, and utility,'" rather than the critics who have been seeking significant revisions to the Patent Act.  Dr. Mathur points to U.S. Patent No. 5,443,036, entitled "Method of Exercising a Cat," as but one example of a patent that "violat[es] the criterion of obviousness" and "fails the novelty test."

According to Dr. Mathur, the problem with the Patent Office's issuance of low quality patents is that such patents are difficult to challenge.  While a bad patent can be challenged via reexamination, Dr. Mathur notes that such proceedings are not very effective since only 10% of reexaminations result in patent revocation.  And while the alternative to reexamination -- patent litigation -- is often more effective, it is also quite costly (with estimates ranging from $500,000 to $3 million in costs per suit).

Dr. Mathur contends that a third option that would be created by patent reform legislation -- post-grant opposition proceedings -- would impose costs that far outweigh its benefits.  She asserts that "[i]n a litigious society like the United States, the demand for lawyers and paperwork would drive up costs and make the opposition proceeding extremely expensive."  Pointing to her patent reform study, Dr. Mathur states that "an opposition system in the United States would increase the costs of patent validation by nearly $16 billion over 10 years."

A post-grant opposition system would also "strike at the heart of what the patent system is designed to protect:  the incentive to innovate and invest" by resulting in a higher probability of patent revocation.  In her study, Dr. Mathur estimated that a post-grant opposition system, if implemented, would result in a 2.8% probability of patent revocation, whereas the current reexamination system only results in a 0.02% probability of patent revocation.  Thus, Dr. Mathur concludes that "[a]n opposition regime could significantly reduce investment in R&D and slow the pace of innovation."  More importantly, Dr. Mathur argues that a post-grant opposition system would not fix the "main problem" with U.S. patent system -- the issuance of low-quality patents.  Dr. Mathur asserts that only the USPTO can fix that.

Comments

[stv]

I agree with Dr. Mathur that the proposed bill would severely damage the patent system. What she fails to understand is that bad patents which will inevitably issue from time to time are inconsequential. Bad patents are not litigated because they cannot get funded. It costs about 2-5 million to litigate a patent and no one in their right mind is going to throw good money after bad. The only use to which such patents are made is to paper the inventor’s bathroom wall.

Such is the danger of relying exclusively on educators on matters of critical public policy. If she had working experience within the patent system, R&D, finance, and litigation, she would understand. If Congress truly wants to get this right, all they need do is ask small entities, the parties who more often than not are responsible for major technological breakthroughs. Any bill which would ignore that segment, which the present bill largely has, is destined to make a complete mess of the patent system.

[patent prosecutor]

"Dr. Mathur notes that such proceedings are not very effective since only 10% of reexaminations result in patent revocation."

How about the ones which result in broad claims being either cancelled or narrowed?