--Summary by Mickey Davis
Cleveland State

Introduction
Among the arguments in favor of a patent system is the claim that the benefits of a patent monopoly outweigh its intrusion upon the free market. But this intrusion is only really beneficial if the Patent and Trademark Office (PTO) subjects each application to rigorous scrutiny. A rough measure of that rigor can be derived by comparing the number applications filed to the number of patents granted. The patent office figures claim that between 60 and 70 percent of patent applications result in patent grants, which suggests that the examination procedure is indeed rigorous.

Quillen and Webster observe that these data are misleading, because they do not account for continuing applications—essentially, resubmitted versions of earlier applications, a feature unique to the U.S. system. The authors correct the figures and conclude that virtually all patent applications are successful in the end, and that the examination process lacks any real rigor.

Summary
The U.S. patent office issues an annual summary of its performance from which it is possible to derive two measures: the number of total applications allowed by the PTO divided by the total number filed, or the “allowance rate,” and the total number of applications granted in a year divided by the total number of disposals, including abandonments, during that year, or the “grant rate.” In theory, this data should give a rough estimate of the PTO's rigor, since it shows the percentage of applications that the PTO believes to contain a legitimate claim of inventorship. As noted, about a third of patent applications seem to be rejected, a percentage comparable to the performance of patent offices in Europe and Japan.

But the PTO does not account for the effect of continuation applications, a feature unique to U.S. law. Under U.S. procedures, a patent application may be temporarily abandoned and then continued at a later date. Applicants often make use of this system because U.S. law grants patent rights based on the initial filing date. The PTO cannot dismiss an application as long as proper continuation procedures are followed, unless it actually grants a patent. Quillen and Webster point out that according to the rules, applicants can refile to “ensnare innovations commercialized by others after the filing date of the original application.” The PTO statistics are thus misleading, because the number of purportedly new applications includes continued ones, as does the number of abandoned applications. As Quillen and Webster observe, the allowance figure becomes inflated. Many abandonments and other non-grant disposals of applications are also misleading, because though these applications are abandoned, they are immediately replaced by a continuation. These complications make the grant rate equally deceptive. Furthermore, because of continuation applications, the PTO staff must repeat the same examination in over a quarter of their exams. Quillen and Webster observe, however, that this work constitutes "moneymakers" to the PTO, since the patent office collects additional fees on the continuations.

The authors attempt to incorporate the missing data on continuing applications to produce a useful measure of the PTO's rigor. Taking account of continuing applications and adding a two-year time lag as a rough estimate of when those applications would have matured, Quillen and Webster examine the period from 1993 to 1998 and arrive at a startling maximum allowance rate of 95 percent. In Europe and Japan, comparable rates were 68 percent and 65 percent, respectively. Grant rates were just as high, reaching a maximum of 97 percent once corrected for the distorting effect of continuations and the attendant abandonments. In Europe and Japan, the corresponding rates were 67 percent and 64 percent, respectively. The authors conclude that “the PTO is by far the least selective of the patent offices analyzed.”

This discrepancy is important especially because patent courts use two special evidentiary rules, both based on the assumption that the examination process is truly rigorous. The statutory presumption of validity reverses the traditional burden of proof that a plaintiff must normally bear: in a patent infringement suit, the patentee need not prove that his patent is valid; instead, the defendant bears the extraordinary burden of disproving plaintiff’s case. The second rule, a judicial one, requires a higher standard of evidence. The defendant must demonstrate not merely a preponderance of evidence—the normal standard of evidence—but, rather, the defendant must meet the much higher standard of “clear and convincing evidence.” The authors wonder whether the statutory presumption of validity and the special judicial burden of proof are warranted given the adjusted PTO statistics.

Conclusions
By abolishing continuations, the PTO could reduce its workload by 25 percent and use the extra resources that it gains to increase its rigor. If a rigorous system is undesirable, the authors argue, the present grant rate of 97 percent may be appropriate, but in this case, the PTO should admit that it issues a patent "for virtually every original application.” In that event, the authors ask, “why maintain an examination system at all?”

See Also
The authors have extended their study with additional data in “Continuing Patent Applications and Performance of the U.S. Patent and Trademark Office – Extended” by Cecil D. Quillen, Jr., Ogden H. Webster, and Richard Eichmann.