Technological Innovation and Intellectual Property

One abuse of the patent system is the practice of “submarine patenting”—keeping a patent application secret for a long time and then springing it on an industry that has already invested heavily in the technology. Stuart Graham and David Mowery examine the role of submarine patents in software patenting.

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Submarines in Software:
Continuations in U.S. Software Patenting in the 1980s and 1990s

by Stuart Graham (Georgia Tech) and David Mowery (Berkeley Haas)
Economics of Innovation and New Technology, Vol. 13 (2004), pp. 443-56

–Summary by Robert M. Hunt

Background

Professors Graham & Mowery write about the combination of two
phenomena: patents on computer programs and an American technique
known as continuations. Inventors use continuations to re-file
a patent application. As long as the second application discloses the
same invention, the inventor can preserve the benefit of the original
filing date and retain credit for inventing first.

Why should we care about such esoteric practices? Because
continuations are one of three ingredients used in a strategy called
submarine patenting. The second ingredient was secrecy—before
2000, pending patent applications in United States were not disclosed
to the public. If an inventor chose not to publicize his or her
pending patent, and did not file abroad, no one would be aware of its
existence. The final ingredient was the definition of patent
term—seventeen years from the date of grant (now
changed, see below).

These three ingredients allowed inventors to apply for a patent,
and delay its prosecution indefinitely, using one or more
continuations. A practitioner of the submarine patent strategy could
file very early in the development of a technology, bide his time
while the technology matured, modify the application to reflect these
developments, and allow the patent to issue at an opportune time to
hold up firms that had already made significant investments of their
own in order to bring the product to market.

The authors cite several potential examples of this strategy.
These include Jerome Lemelson’s 1994 patent, initiated from a
1954 application, for technology we now call bar code scanning. A
second is a 1999 patent on a computer memory design that allegedly
makes an industry standard adopted in 1991 the private property of
the company Rambus.

The Contribution

While other papers examine software patents (e.g. Bessen &
Hunt 2004, Graham & Mowery 2003) and continuations (e.g. Quillen
& Webster 2001, 2002), this paper is the first to examine the
intersection of the two. Graham & Mowery document the prevalence
of continuation applications for patents in general and software
patents in particular.¹
They describe trends in the use of continuations over a 13 year
period (1987-99) and the effect of continuations on the average
amount of time between the date of application and the date of grant
for software patents. They also compare the frequency of litigation
for software patents (those with and without continuations) and
patents in general. What do they find?

First, continuations are a common feature of U.S. patent
prosecution. No fewer than 18 percent of patents granted between 1987
and 1999 involved at least one continuation. In their data, which is
organized by the grant date of the patents, the share of all patents
with a continuation peaks at 28 percent in 1997. Continuation
activity among software patents follows a similar trend, except that
the continuation share peaks at a remarkable 40 percent in 1996. The
share of software patents with two or more continuation applications
rose from 2 percent in 1987 and peaked at 11 percent in 1997 before
falling back to 5 percent in 1999.

Second, if the time required to grant a software patent is
measured from the date of the first application rather than the date
of the final continuation application, average time pending is
considerably longer—by six months in 1987-90, nine months in
1991-4, and nearly eleven months in 1995-9.

Third, Graham & Mowery show that software patents in general,
and especially software patents with a history of continuations, are
several more times likely to be litigated than patents in general.²
The disparity was especially large for software patents issued in the
early 1990s.

Interpretation

The authors point out that these patterns would be expected if
many applicants were engaging in submarine patenting. But they note
that similar patterns might also arise for other reasons, such as
uncertainty about the legal standards for software patents.

Graham & Mowery argue that recent changes in U.S. patent law
may have blunted the effectiveness of submarine patenting. Since 1996
the term of American patents runs 20 years from the application date
rather than 17 years from the grant date. That means that a
significant cost of a submarine strategy today is a shorter patent
life. And since 2001, U.S. patent applications are optionally
published 18 months after they are filed (although patent claims can
still be changed in secret after this publication).³
As for effects, Graham & Mowery point to the decline in the
continuation share of patents after 1996-7, and to a significant
decline in the litigation rate for software patents (continued and
otherwise) granted after the early 1990s.

The authors may very well be right about this, but there are
reasons to think it may be too soon to tell. For example, the peak in
the continuation share of patents in the mid 1990s could also have
occurred because applicants anticipated the change in patent term and
rushed to file under the old system. In that case, the fact that
continuation rates ended the 1990s at levels higher than a decade
before might suggest a return to a steady state where continuations
remain important, perhaps for reasons other than submarine
strategies. Quillen, Webster, & Eichmann (2002) also identify a
spike in overall applications around 1995 but note that continuations
continued to rise after 1996 and began rising again as a share of all
applications in 1998.

Second, a dedicated submariner can avoid the publication of his or
her domestic application by stipulating that he or she won’t
file for similar protection from abroad, or by rewriting patent
claims after publication, while the patent is still pending. (Recently, the PTO has made amended claims for published applications available online, so they are no longer quite so difficult to detect.) Even so,
the change in U.S. patent term should have made submarine strategies
less attractive than before.

Conclusion

Graham & Mowery show that, using their definition of software
patents, continuation applications are now at least as common for
these inventions as for all others. They also show that such
practices considerably lengthen the actual time such applications are
pending. They find that software patents are more likely to be
litigated than patents in general, and that this is especially the
case for continued software patents.

These are important findings, but, as the authors point out, we
need to learn a good deal more about how inventors actually use the
patent process before we can be sure how to explain such behavior.

References

Bessen, James, and Robert Hunt. “An Empirical Look at Software Patents,” Federal Reserve Bank of Philadelphia Working Paper 03-17/R, March 2004.

Graham, Stuart J.H., and David C. Mowery. “Intellectual Property Protection in the U.S. Software Industry,” in Wesley M. Cohen and Stephen A. Merrill, eds., Patents in the Knowledge-Based Economy, National Research Council, Washington, D.C.: National Academies Press (2003), pp. 219-58.

Quillen, Cecil D., Ogden H. Webster, “Continuing Patent Applications and Performance of the U.S. Patent and Trademark Office,” Federal Circuit Bar Journal, Vol. 11 (2001), pp. 1-18.

Quillen, Cecil D., Ogden H. Webster, and Richard Eichmann. “Continuing Patent Applications and Performance of the U.S. Patent and Trademark Office – Extended,” Federal Circuit Bar Journal, Vol. 12, (2002), pp. 35-55.