CARROTS AND STICKS TO CREATE A BETTER PATENT SYSTEM
By Jay P. Kesan, Assistant Professor, College of Law and the Institute of Government & Public Affairs, University of Illinois at Urbana-Champaign


Berkeley Technology Law Journal, Vol. 17, No. 2, pp. 763-797, Spring 2002
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Does the Patent Office face an impossible task? According to Professor Kesan, it is widely recognized that the U.S. Patent Office issues many patents that are invalid, or that are broader than the actual invention specified in the patent application. Both problems result because the Patent Office cannot accurately determine the “relevant prior art”—that is, determine whether features claimed in the patent are already in the public domain, or are the subject of other patents. Such oversights do not necessarily stem from incompetence according to Professor Kesan. The inability of the Patent Office to find such information is to be expected given the localized nature of scientific and technological knowledge. Such knowledge is not widely shared and is typically intelligible only to experts in specific scientific or technical fields or sub-fields. The problem is especially acute in fields such as computer software.

Professor Kesan identifies sources of social costs of improvidently granted patents, and argues that a greater investment in information gathering by the Patent Office would be beneficial. He also argues that under the current system, patent applicants and their competitors do not have sufficient incentives (“carrots”) to disclose prior art, nor do they face specific penalties (“sticks”) if they fail to disclose prior art. Two questions suggest themselves: (a) how can we increase the quantity and quality of information obtained by the Patent Office from patent applicants and their competitors, and (b) how can we create disincentives for patent applicants to take advantage of the information asymmetries between themselves and the Patent Office?

Professor Kesan proposes five strategies for addressing these questions:

(1) Give patent applicants the opportunity to furnish the Patent Office with an expanded information disclosure statement—one that discloses all relevant prior art and includes an analysis of how the claims are patentable in spite of the disclosed prior art (patent claims are specific features listed in the patent that delineate the scope of what is covered). In exchange, any patent granted on the application would have a "specific presumption of validity" with respect to the disclosed prior art. That is, the patent could not be successfully challenged in court on the basis of the disclosed prior art (unless the court is convinced that no reasonable examiner would have allowed the patent in light of the disclosed prior art). This would provide an incentive to disclose more prior art than under the current system.

(2) Provide that there is no presumption of validity with respect to patents granted on applications in which no information disclosure statement (or only the current PTO Form 1449 information disclosure statement) was filed. That is, no disclosure, no “carrot.” Ideally strategies (1) and (2) would be adopted together, or, as an alternative, only strategy (2) would be adopted.

(3) Allow third parties to challenge a patent applicant’s claim during a ninety-day trial period before the patent is actually granted.

(4) Require the use of "representational languages" for computer software inventions, so that patent claims are described in precise, computer-implementable form rather than in vague, high level terms that may be interpreted too broadly.

(5) If patent claims are found invalid (or are revoked) based on prior art that should have been known to the patent holder when he applied or discovered in a reasonable prior art search, the patent holder should be required to pay a “fee shifting” penalty to the challenger and to the Patent Office. Specifically, the patent holder should reimburse the successful challenger for some or all of his litigation fees, reimburse the Patent office for expenses incurred in prosecution of the invalidated patent, and possibly forfeit any supra-competitive profits resulting from the patent. Such regulations would help to discourage patent applicants from withholding information about relevant prior art that could invalidate their patent claim.

Professor Kesan discusses each of these five strategy proposals in depth, however, his analysis only considers the effect of prior art disclosure on patent validity and patent breadth. Yet other factors may be responsible for current concerns about patent quality, e.g., for software patents. For instance, Federal Circuit court decisions appear to have lowered the non-obviousness standard (see Lunney reviewed in issue 2002-2). Professor Kesan does not address whether adoption of his reforms might overcome such factors.