The Myth of Patent Quality

Abstract

The U.S patent system has been under attack for about a decade. One of the main justifications for changing the patent system has centered on the issue of patent quality. According to patent critics, patents are bad or low quality, justifying major changes to the patent examination and review system. I argue that patent quality is a proxy for attacking patent validity, which has a complex history. Patent critics, particularly market incumbents, obtain a free ride when the bar is set low to attack patent validity. The changes to standards for patent obviousness have been a core source of lowering the standards for patent validity. The recent Inter Partes Review (IPR) program has overzealously applied the weak obviousness standards, causing a broad range of problems for innovators. The false big-tech narrative that attacks patent quality has unduly undermined the patent system, with numerous adverse consequences. The introduction of IPRs pushes patent validity determinations out of the federal courts, which enable due process, into a politicized administration agency that generally denies due process for patent holders after a patent is presumed to be valid from the original PTO examination and grant. The introduction of after-grant reviews, based largely on the myth of patent quality, have been used to justify wholesale changes to the patent system that deviate dramatically from validity tests the courts have applied for over a century. The increase in transaction costs to defend a patent in after-grant reviews and in enforcement, after challenging free riding efficient infringers, alters the economics for innovators and market entrants, with a tendency to diminish patent valuation. While once market forces were key determinates of an invention’s value, artificial factors associated with reproving patent validity that originate with the false narrative of bad patent quality, have altered technology economics and have ultimately diminished incentives to invest in technology, with adverse consequences to productivity growth and aggregate economic growth.