Improving Patent Quality with Applicant Incentives

Table of Contents I. INTRODUCTION II. BACKGROUND III. APPLICANT INCENTIVES IN SELECTING CLAIM SCOPE A. A Simplified Model of Claim Drafting 1. Claim Value as a Function of Scope 2. Prosecution Cost Constraints and the Selection of Claims for Filing B. The Presumption of Patent Validity 1. Assumptions About the Presumption of Validity 2. The Effects of the Presumption of Validity 3. Assessing the Presumption of Validity C. Substantive Patent Examination 1. The Effect of Substantive Examination on Expected Costs 2. Counterbalancing the Presumption of Patent Validity 3. The Benefits of a Substantive Examination System D. Other Asymmetries in the Treatment of Validity and Infringement 1. Re-Litigation of Validity and Infringement 2. Procedural Preferences for Narrowing Amendments IV. REFORMS FOR IMPROVING PATENT QUALITY A. Rationalizing Application Fees B. Penalizing Amendments and Abandonment C. Replacing the Presumption of Validity with a Presumption of Infringement D. Penalizing Invalid Claims After Examination V. REFINING THE MODEL A. Some Applicants Have No Intention of Enforcing Their Patents B. Enforcement Outcomes May Di-verge from Expected Litigation Outcomes C. Even Invalid Patents Have Portfolio Value VI. CONCLUSION I. INTRODUCTION Everyone, it seems, wants to improve the quality of issued patents. Over the last decade, legal scholars from every corner have come forward to decry the unacceptably high number of invalid patents issued by the U.S. Patent and Trademark Office ("USPTO") and to suggest reforms to reduce it. (1) Some commentators have sought to improve the USPTO itself, calling for more funding, better administrative oversight, and changes to the way individual patent examiners are compensated. (2) Others have looked to third parties, seeking to make it easier for competitors and members of the public to submit prior art and participate in opposition proceedings. (3) Whatever the means, these reforms share a common and urgent goal: making the examination process more effective at identifying and rejecting low-quality patent applications. (4) However, none of these proposals have focused on improving the quality of the applications themselves. Applications (of whatever form) are taken as a given, and the real work of ensuring patent quality is thought to start when one shows up at the door of the USPTO. Commentators have recognized that patent applicants sometimes possess useful information, (5) but beyond suggesting a few mechanisms to encourage applications to pass that information along to examiners, (6) scholars have not asked applicants to do much else. The possibility that applicants might have a more direct role to play in improving patent quality has gone largely unexplored. This is a significant oversight. Applicants are particularly well-placed to influence and improve patent quality. Applicants, after all, are the ones who draft the claims that will later be examined by the USPTO and litigated by others. They often understand their inventions better than anyone else. (7) They may possess the best knowledge of relevant prior art. (8) And they often have a substantial investment in the outcome of their applications. Indeed, a conservative estimate is that patent applicants spent about $7.5 billion pursuing patents in 2012--dwarfing the approximately $1.4 billion the USPTO spent examining applications the same year. (9) To ignore applicants, then, is to neglect a group that could have a significant effect on patent quality. Perhaps one reason for this neglect is that many scholars assume that applicants want the kind of vague, overbroad, or otherwise low-quality patents that patent reformers are seeking to prevent. Understandably, some commentators regard applicants with suspicion; after all, applicants are attempting to claim private property rights instead of allowing their inventions to enter the public domain. …