Bad Patents Research Articles

What Litigators Can Teach the Patent Office About Pharmaceutical Patents

Pharmaceutical patents listed in the FDA’s “Orange Book” are some of the most valuable patents in the world. Accordingly, for this valuable subset of patents, it is paramount that the Patent & Trademark Office (PTO) correctly issue valid patents and preclude invalid patents from issuing. In this paper, we study what happens to those patents in litigation, reporting the results for every Orange Book patent case that resulted in a merits decision. We find that about 25% of active Orange Book patents were invalidated in court. Since these invalid patents could wrongly increase the costs of prescription drugs, we investigate what happens during prosecution of these patents at the PTO. Our study is the first to link the prosecution of Orange Book patents directly to litigation outcomes. Our goal is to determine if there are ways to identify and prevent the issuance of these later invalidated Orange Book patents. We find that litigated Orange Book patents have unique characteristics that distinguish them from other pharmaceutical patents. They are issued by a relatively small number of examiners. Most litigated patents (90%) are “secondary” patents – patents on smaller tweaks to an existing drug rather than a patent on a new chemical. The owners of these later-litigated patent applications treat them very differently than they do other patents in the same field. They are part of large patent families, suggesting that the applicants are trying to build a patent fence around a known product. They frequently employ a procedural device known as “Track One” to obtain quicker patent prosecution. They are more likely to be subject to rejections based on double-patenting. When initially rejected by the patent examiner, owners of these applications are more likely to fight back rather than amend their claims. All of this suggests that applicants enter prosecution with these patents knowing that they are important and likely destined for litigation, and that they are deliberately creating patent “thickets” to make it harder for generics to enter the market. Remarkably, we find that while patent examiners already have more time to spend on Orange Book patents than on other patents, the prosecution history of many of these invalidated patents are identical. That is, many of these invalidated patents have the same assignee, the same examiner and the same prosecuting attorney cut and paste rejections as well as responses, thus creating identical or very similar prosecution histories. We also find that while the patents that end up being litigated are clearly distinguishable from other pharmaceutical patents during patent prosecution, there is little difference in the PTO between the patents that end up surviving a court challenge and the ones that are invalidated. Our data offer important guidance for reforming the process of prosecuting Orange Book patents. We can and should take advantage of advance knowledge about the importance of these patents to give them a more thorough examination early on. At the same time, the experience with cut-and-paste rejections suggests that we cannot simply give examiners more time and hope that they will do a more thorough job. That not only helps inform the policy suggestions we offer, but it sheds light on a long-standing academic debate about how much time and money we should spend examining patents. Further, our data highlight the importance of secondary patents and patent thickets in Orange Book litigation. We offer a number of suggestions to simplify and streamline patent prosecution and litigation to make it harder to exclude generic entry with a thicket of bad patents.

Optimal Standards of Proof in Patent Litigation: Infringement and Non-Obviousness

We build a model of innovation and patent adjudication under two forms of uncertainty; uncertainty regarding whether the original invention merits protection (non-obviousness), and uncertainty as to whether a particular competitor's product should be barred (infringement). We find that when it is practical to increase the rewards from innovation by extending patent length, the standards of proof for non-obviousness should be high. The intuition for this is that patent length should be set so that the increase in innovation from extending patent length is balanced by the increase in deadweight loss from extending monopoly pricing. In this situation, the ex-ante cost of failing to protect a good patent is minimal, but there is substantial deadweight loss from protecting a bad patent. In contrast, if non-infringing competing inventions substantially decrease the original inventor's profits, it might be desirable to have a very low standard of proof for infringement, since the deadweight loss from an incorrect finding of infringement is mostly balanced out by the increased ex-ante incentive to invent.

Inter Partes Review and the Design of Post-Grant Patent Reviews

Inter partes review (IPR) is one of a number of mechanisms for eliminating improper patents through “post-grant review.” Challenging an issued patent is expensive and paid for by the challenger, but all who practice the patent benefit from its invalidation, creating a free-rider problem. While post-grant review has widely been heralded as a cheaper, more expert alternative to litigation for screening out bad patents, little attention has been paid to the particular design of post-grant review systems. These design choices matter tremendously, as arguably small changes to the pre-existing inter partes reexam system, leading to the inter partes review system, have had a big impact, the expanded uptake of reviews. As the US weighs making additional changes to the IPR system created by the America Invents Act just a few years ago, it is worthwhile to consider the experiences of other countries whose systems are older. One particularly important feature of IPR relates to the interplay between invalidity and infringement. District courts more often than not stay their cases when parallel IPRs are filed, meaning that the USPTO decides novelty and obviousness based on a subset of prior art, leaving infringement and remaining invalidity issues to the district courts to decide. This creates a bifurcated system that resembles the system that Germany has had in place for decades, in which validity and infringement are decided by different venues. Much can be learned by considering the two countries’ systems, and the similarities and differences in their designs and their outcomes. In the first several years that IPRs have been available, an estimated 84 % of decided IPRs resulted in partial or total invalidation of the patent, raising great concern. But this number must be understood in context. The patents that get reviewed in IPR are those that are highly selected, both by the Patent Office as reasonably likely containing an invalid claim, and by the public as justifying the considerable expense of a challenge. Many claims drop out along the way, because they do not meet these thresholds. Thus, only about 25% of challenged claims (as opposed to reviewed) claims end up being canceled. Accordingly, IPR decisions are likely to be issued in that tiny fraction of issued patents where the case for invalidity is particularly strong. In most cases, the invalidated patents represent Patent Office mistakes; patents that should never have been issued in the first place, they also may be the product of a change in law. Post grant proceedings are a well-recognized way to correct Patent Office error – for example, in Europe, opposition proceedings at the European Patent Office (EPO), which are used to review 5-8 %% of issued patents, have resulted in the partial or total invalidation of patents close to 70 % of the time, and in German revocation proceedings, which in many ways resemble IPRs, 73 % of patents are partially or fully revoked. Within EPO opposition and German revocation proceedings, chemistry patents have been the most likely to have been revoked or amended (71 % in EPO, and 84 % in German revocation); in US IPRs, medical device (93 %, N=29) and biopharma and chemistry patents (87 %, N=23) have fared the worst, but based on relatively small sample sizes.Another key metric is the share of instituted reviews that are actually decided, rather than settled. In the US, a high stay rate of parallel litigation, as facilitated by clear and predictable timeframes and outcomes, contribute to a high decision rate on validity and the efficient staging of disputes. This provides a benefit to the public, the clarified status of the claims. In Germany, in contrast, infringement proceedings do not wait for the validity decision. This leads to validity challenges often settling, for example when the infringement decision is handed down. As a consequence, the status of the patent claim is left unclarified. We examine these and other key aspects of post-grant review as well as various factors, including claim construction standards, litigation stays, and the timing of reviews, to consider some general lessons for the design of post-grant inter partes patent reviews.

The Unified Patent Court and Patent Trolls in Europe

Healthy organisms inevitably produce cancer cells, and vibrant patent systems inevitably let bad patents slip through. These patents are harnessed by entities that leverage the uncertainty and expense of litigation to extract licenses from technological practitioners. Postissuance patent review (PIPR) has emerged as an invaluable errorcorrecting mechanism to prevent the socially harmful assertion of improperly issued patents. The United States, with the America Invents Act, established a new system for PIPR, expanding administrative routes to curtail bad patents. Europe is going a step further with the Unified Patent Court Agreement (UPCA). The UPCA enables a lowcost patent revocation action on a broad range of grounds and with a relaxed standing requirement. But this is an opt-in system with a loser-pays fee-shifting arrangement. Thus, although the structure of the Unified Patent Court (UPC) appears to be set up to facilitate efficient PIPR, the disincentives for opting in suggest that the UPC will be a less effective troll-fighting vehicle than expected. Indeed, patent trolls may simply opt for national patent systems.

Will the Supreme Court nix reviews of bad patents?

Considering the longer-term implications of a soon-to-be-decided U.S. Supreme Court case.

Brief for Amici Curiae Eighteen Intellectual Property Law Professors in Support of Petition for Certiorari in Eve-USA v. Mentor Graphics

This brief addresses the correct measure of lost profit damages after a finding of patent infringement. An unbroken line of Supreme Court precedent holds that apportionment analysis is required in all damages calculations. See, e.g., Yale Lock Mfg. Co. v. Sargent, 117 U.S. 536, 552 (1886). Though the Federal Circuit facially acknowledges the force of this precedent, see, e.g., Mentor Graphics Corp. v. EVE-USA, Inc., 851 F.3d 1275, 1287 (Fed. Cir. 2017), both the panel and the Federal Circuit en banc fail to apply it to the instant case. The panel decision inappropriately conflates apportionment analysis with the causal analysis described in Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978), and the Federal Circuit en banc denial of rehearingincorrectly applies the entire market value rule, see Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1550 (Fed. Cir. 1995), to carefully elide the Court’s apportionment requirement and avoid repeating the panel’s error. Furthermore, the precedent set by the instant case is bad patent policy and discourages innovation in the high-tech industry. Certiorari should be granted to restore apportionment’s proper place in lost profits damages calculations.

IEEE-USA Opposes Patent Office Review of Issued Patents [Patent Reviews

The IEEE-USA has filed a brief in a case pending before the U.S. Supreme Court [Oil States v. Greene’s Energy (Supreme Court 2017)] arguing that Congress does not have the power to permit the invalidation of patents by the U.S. Patent and Trademark Office (USPTO). Patents issued by the USPTO have traditionally been considered the property of the patent owner. When questions of patent infringement or validity came up, they were tried in federal courts with a few exceptions in re-examinations at the USPTO. In 2012, the U.S. Congress passed the America Invents Act that changed the rules at the USPTO; these rules have dramatically changed the way a patent’s validity is tested. With the goal of making the purging of bad patents easier and less expensive than federal court litigation, the AIA prescribed procedures and standards for the USPTO that are more streamlined than those of the courts.

Brief for 72 Professors of Intellectual Property Law as Amici Curiae in Support of Respondents in Oil States Energy v. Greene's Energy

This is a brief of 72 IP professors opposing the claim in Oil States that the IPR procedure is unconstitutional. Petitioner argues that only a court – indeed, only a jury – has the power to decide that the United States Patent and Trademark Office erred in granting a patent. That argument flies in the face of the history of patent law and this Court’s precedents. Patents are a creature of statute: as early as 1834, this Court specifically recognized that there is no “natural” or common law right to a patent. Rather, under its Article I power to establish a patent system, Congress is charged with determining the contours of the patent grant. Congressional power to establish the terms and conditions of the patent grant includes the power to establish a system for administrative correction of erroneously granted patents. PTAB error correction is also narrow in scope, targeted towards bad patents that district court litigation would not address, and only a modest extension of prior administrative correction proceedings. Moreover, even this narrow scope is subject to significant appellate court control. PTAB review thus addresses the social cost of erroneous patent grants without threatening Article III values. The Seventh Amendment does not compel a different conclusion. While patent infringement cases were tried to juries at common law, both the government and judges retained the power to revoke patents in England and in the early United States. When patent validity questions were considered in American courts throughout history, they were frequently considered by judges, not juries. And court consideration of patent validity issues coexisted with actions by the legislative and executive branches to revoke patents, actions which of course did not require a jury. While this Court need not reach the Seventh Amendment issue in order to dispose of petitioner’s claims, should it reach that issue it should make clear that the Seventh Amendment does not create a right to jury trial on patent validity.

Inventor Sued for Infringing His Own Patent. You Won't Believe What Happened Next

The Supreme Court and the Federal Circuit have repeatedly emphasized the public interest in testing the validity of patents, weeding out patents that should not have been issued. But there is one important group of people the law systematically prevents from challenging bad patents. Curiously, it is the very group patent law is supposed to support: inventors themselves. The century-old doctrine of assignor estoppel precludes inventors who file patent applications from later challenging the validity or enforceability of the patents they receive. The stated rationale for assignor estoppel is that it would be unfair to allow the inventor to benefit from obtaining a patent and later change her tune and attack the patent when it benefits her to do so. The Supreme Court has traditionally disfavored the doctrine, reading it narrowly. But the Federal Circuit has expanded the doctrine in a variety of dimensions, and applied it even when the benefit to the inventor is illusory. Further, the doctrine misunderstands the role of inventor-employees in the modern world. More important, the expansive modern form of assignor estoppel interferes substantially with employee mobility. Inventors as a class are put under burdens that we apply to no other employee. If they start a company, or even go to work for an existing company in the same field, they will not be able to defend a patent suit from their old employer. The result is a sort of partial noncompete clause, one imposed without even the fiction of agreement and one that binds anyone the inventor comes in contact with after leaving the job. Abundant evidence suggests that noncompetes in general retard innovation and economic growth, and several states prohibit them outright, while all others limit them. But assignor estoppel is a federal law doctrine that overrides those state choices.It is time to rethink the doctrine of assignor estoppel. I describe the doctrine, its rationale, and how it has expanded dramatically in the past 25 years. I argue that the doctrine is out of touch with the realities of both modern inventing and modern patent law, and that it interferes with both the invalidation of bad patents and the goal of employee mobility. Should the Supreme Court take up the doctrine, it is unlikely to survive in its current form. Rather, it should – and will – return to its much more limited roots.

Overclaiming is Criminal

For some time patent law has been criticized for a flood of bad patents. Patents of questionable validity are being issued with broad often-nebulous boundaries. A majority of the blame for these bad patents has fallen on the shoulders of the Patent and Trademark Office (PTO). Bad patents exist, so the argument goes, because the PTO has improperly issued them. In response the PTO has launched a major initiative to improve patent quality. Our singular focus on the PTO though threatens to overlook the other major player responsible for patent quality – patent applicants. Currently patent applicants are not seen as having any particular duty to seek only good patents. Today applicants can seek excessively broad claims if they want to. It is the PTO’s job to police against such excessive claims. This article shows this prevalent practice of overclaiming is dangerously mistaken. Though not generally appreciated, the patent statute includes powerful features that put a significant duty on applicants and their patent attorneys to file only properly sized patent claims. As shown, applicants have a duty to file claims that do not exceed their invention. And though it likely comes as a surprise to much of the patent bar, that duty is enforced by criminal sanctions. Simply put, willful overclaiming is criminal; it is a felony.

How many patents does it take to signal innovation quality?

In this paper, we offer a novel explanation to the surge in patenting observed during the last few years. When PTOs (Patent and Trademark Offices) award bad patents, not only do “false innovators” have the incentive to file applications but also, and more interestingly, “true innovators” are forced to patent more intensively in an attempt to signal their type. However, if they are liquidity constrained, true innovators may fail to separate and this fact reduces the incentives to exert effort in R&D. In addition, drawing on the signaling role of patents highlighted by the model, we investigate some of the proposals that have been put forward in order to mitigate the bad patent problem. We provide an intuitive condition under which a tightening of the patentability standards (“raising the bar”) reduces the distortions caused by bad patents. Moreover, we show that introducing a two-tiered patent system is unlikely to improve market outcomes.

Deploying pre-grant patent opposition mechanisms in Africa to monitor abuse of the patent system

This article examines the extent to which African countries could deploy pre-grant patent opposition provisions in their domestic patent regimes to mitigate the abuse of the patent system. The author argues that the public has the right to participate in the patent system in order to oppose the grant of bad patents. Therefore, if African countries were to strengthen legislative provisions on pre-grant opposition civil society and non-governmental organisations that represent the interests and will of citizens would be able to invoke key provisions to challenge any abuse in the patent system in order to protect the public interest.

Inter Partes Review and the Design of Post-Grant Patent Reviews

Inter partes review (IPR) is one of a number of mechanisms for eliminating improper patents through “post-grant review.” Challenging an issued patent is expensive and paid for by the challenger, but all who practice the patent benefit from its invalidation, creating a free-rider problem. While post-grant review has widely been heralded as a cheaper, more expert alternative to litigation for screening out bad patents, little attention has been paid to the particular design of post-grant review systems. These design choices matter tremendously, as arguably small changes to the pre-existing inter partes reexam system, leading to the inter partes review system, have had a big impact, the expanded uptake of reviews. As the US weighs making additional changes to the IPR system created by the America Invents Act just a few years ago, it is worthwhile to consider the experiences of other countries whose systems are older. One particularly important feature of IPR relates to the interplay between invalidity and infringement. District courts more often than not stay their cases when parallel IPRs are filed, meaning that the USPTO decides novelty and obviousness based on a subset of prior art, leaving infringement and remaining invalidity issues to the district courts to decide. This creates a bifurcated system that resembles the system that Germany has had in place for decades, in which validity and infringement are decided by different venues. Much can be learned by considering the two countries’ systems, and the similarities and differences in their designs and their outcomes. In the first several years that IPRs have been available, an estimated 84 % of decided IPRs resulted in partial or total invalidation of the patent, raising great concern. But this number must be understood in context. The patents that get reviewed in IPR are those that are highly selected, both by the Patent Office as reasonably likely containing an invalid claim, and by the public as justifying the considerable expense of a challenge. Many claims drop out along the way, because they do not meet these thresholds. Thus, only about 25% of challenged claims (as opposed to reviewed) claims end up being canceled. Accordingly, IPR decisions are likely to be issued in that tiny fraction of issued patents where the case for invalidity is particularly strong. In most cases, the invalidated patents represent Patent Office mistakes; patents that should never have been issued in the first place, they also may be the product of a change in law. Post grant proceedings are a well-recognized way to correct Patent Office error – for example, in Europe, opposition proceedings at the European Patent Office (EPO), which are used to review 5-8 %% of issued patents, have resulted in the partial or total invalidation of patents close to 70 % of the time, and in German revocation proceedings, which in many ways resemble IPRs, 73 % of patents are partially or fully revoked. Within EPO opposition and German revocation proceedings, chemistry patents have been the most likely to have been revoked or amended (71 % in EPO, and 84 % in German revocation); in US IPRs, medical device (93 %, N=29) and biopharma and chemistry patents (87 %, N=23) have fared the worst, but based on relatively small sample sizes.Another key metric is the share of instituted reviews that are actually decided, rather than settled. In the US, a high stay rate of parallel litigation, as facilitated by clear and predictable timeframes and outcomes, contribute to a high decision rate on validity and the efficient staging of disputes. This provides a benefit to the public, the clarified status of the claims. In Germany, in contrast, infringement proceedings do not wait for the validity decision. This leads to validity challenges often settling, for example when the infringement decision is handed down. As a consequence, the status of the patent claim is left unclarified. We examine these and other key aspects of post-grant review as well as various factors, including claim construction standards, litigation stays, and the timing of reviews, to consider some general lessons for the design of post-grant inter partes patent reviews.

Patent Quality and a Two‐Tiered Patent System

In this paper, we study the determinants of patent quality and volume of patent applications when inventors care about perceived patent quality. We analyze the effects of various policy reforms, specifically, a proposal to establish a two‐tiered patent system. In the two‐tiered system, applicants can choose between a regular patent and a more costly, possibly more thoroughly examined, ‘gold‐plate’ patent. Introducing a second patent‐tier can reduce patent applications, reduce the incidence of bad patents, and sometimes increase social welfare. The gold‐plate tier attracts inventors with high ex‐ante probability of validity, but not necessarily applicants with innovations of high economic value.

Defensive publishing by a leading firm

I consider the use of defensive publishing by a firm with a patentable innovation in hand. Such publishing discloses technical information to rivals and foregoes the publisher’s legal right to exclude, but also prevents rivals from patenting. My analysis identifies why firms choose defensive publishing over patenting and trade secrecy. I present summary data suggesting that defensive publishing has become more common recently, that the composition of firms using it is changing, and that it has emerged especially as a response to the fear of bad patents being issued in the area of software and business methods. These data are consistent with my theoretical results.

Debugging Software's Schemas

In computer terminology, a schema is a model to describe structures for containing and processing data. A flawed schema in the computer world is a bug; the result may be unexpected behavior or even system shutdown. In cognitive theory, a schema is a structure or framework that helps organize and interpret information. Incorrect schema in this realm can lead to flawed decision making or understanding. These two worlds – computer science and cognitive science – have collided at the intersection of eligibility for patent protection of software and computer-related inventions; unfortunately, the resulting system is in dire need of debugging. The frameworks that are currently influencing decision making about software patents include the analysis that software patents are generally bad (the bad patent schema) and that software patent holders are problematic (the troll schema). These schemas have been created and maintained through various cognitive biases, resulting in flaws that are negatively impacting the conversation about patent eligibility for software and computer-related inventions. With awareness of these biases, it is possible to minimize the negative impact. But even if we are able to eliminate the biases, there exists an even bigger bug in the system: the framework underlying the discussions about software patents is incorrect. Although the primary question affecting the patent eligibility of these inventions is whether they are abstract ideas, the framework has very little, if anything, to do with that question. With an incorrect structure driving the discussion, reaching a correct result is unlikely.

How Many Patents Does it Take to Signal Innovation Quality?

In this paper, we offer a novel explanation to the surge in patenting bserved during the last years. With low patentability standards at PTOs (Patent and Trademark Offices awarding so-called bad patents), not only “false innovators” have the chance of being granted patents but also, and more interestingly, “true innovators” are forced to patent more intensively trying to signal their type; however, if they are liquidity constrained, true innovators may fail to separate and this fact reduces the incentives to exert effort in R&D activities. Then, drawing on the signaling role of patents highlighted by the model, we investigate some of the proposals that have been put forward in order to mitigate the bad patents problem. We provide an intuitive condition under which a tightening of the patentability standards (“raising the bar”) reduces the distortions caused by bad patents. Moreover, we show that introducing a two-tiered patent system is unlikely to improve market outcomes.

Breaking Bad Patents: The Formula for Quick, Inexpensive Resolution of Patent Validity

Breaking Bad Patents: The Formula for Quick, Inexpensive Resolution of Patent Validity

Creating a Lenient Gatekeeping Approach: Optimizing the Exclusion Potential of Subject Matter Eligibility

Today, patents that fail the constitutional mandate “[t]o promote the Progress of Science and useful Arts” are frequently issued. Patents are granted irrespective of whether they are actually needed to incentivize innovation. Consequently, many patents fail to reflect an appropriate balance between the ex post costs of short-term monopoly and the benefits of higher ex ante incentives to innovate. Other patents are issued albeit having no prospected commercial use. Meaning, no one actually makes an economically beneficial use of them. The worst of these are those that are sought solely for the purpose of initiating infringement lawsuits and extorting licensing fees from competitors. To prevent the issuance of such bad patents and maximize section 101’s exclusion potential, this article suggests a new gatekeeping approach to subject matter eligibility. Rather than proposing a strict gatekeeping approach of categorical exclusion, it advocates a lenient approach of flexible, policy-based exclusions. In particular, it identifies two unique characteristics of bad patents: the first refers to patents that cover inventions whose development is not depended on the incentives provided by the Patent Act, and the second refers to patents that lack any prospected commercial use. Such patents are economically valuable, and therefore, are particularly vulnerable to abuse by patent trolls. Observing that neither the current doctrine of subject matter eligibility articulated by the three common law exceptions, nor the other statutory requirements for patentability, indulge these unique characteristics, this article proposes to supplement the current doctrine of subject matter eligibility with two additional policy-based requirements. The first requirement is a showing sufficient to convince a person having ordinary skill in the art, that the invention would not have been developed “but for” the incentives afforded by the Patent Act. The second is a showing sufficient to convince a person having ordinary skill in the art that, a) there is a market for the invention, and that b) the invention can be manufactured at a cost sufficient to fulfill market demand. These requirements, this article suggests, should effectively exclude bad patents for violating the policies underlining our patent system without falling into the trap of over-exclusiveness or under-exclusiveness associated with per se rules of categorical exclusions.

Fixing the Patent Office

Executive Summary How can we allow patent examiners to effectively distinguish between patentable and unpatentable inventions without slowing the process to a crawl or wasting a bunch of money? This essay reviews the recent literature and considers a number of proposals and their limitations. It concludes that the system can be improved but that we are unlikely to solve the problem of bad patents altogether. The focus in reform discussions should be on understanding and changing applicant and examiner incentives rather than simply spending money.