To summarize most of the story so far, the USPTO has no incentive to reject applications on obvious claims. It’s easy to find places where the USPTO refers to applicants as customers, and where its rhetoric leans more toward serving those customers than promoting Progress. Remember all that during the election campaign where President Obama promised to maintain balance at the USPTO and ensure that it serves Progress, not maximizing patent count? You don’t, because it didn’t happen.
This time we’ll consider the incentives of the applicants themselves.
For concreteness, I’ll name our patent applicant after a character from the old Batman TV series, the world-famous inventor Pat Pending (but please note well that Pat could be an individual, or he could be IBM). By applying for an obvious patent, Pat is making a simple gamble that makes a lot of sense: if he doesn’t get the patent on his obvious extension of the existing literature, then he’s wasted some time and lost several thousand dollars in legal and application fees. If he does get his obvious patent, then that investment on the order of tens of thousands of dollars allows him to implement his villainous plan to send letters demanding licensing fees from anybody implementing his obvious step. This is an increasingly common plan. It is often the case that each letter has a demand in the tens of thousands of dollars—too cheap to be worth challenging in a full trial, but sufficiently large that a few dozen might make you a millionaire.
The USPTO’s concept of obviousness has largely disappeared, so can we write down incentives for the applicant to pre-reject the application and just not file? Can we develop a system where, if a claim is close to obvious, the applicant suffers some sort of punishment? A mechanism like this is especially valuable because rational applicants (as opposed to those deluded by visions of greatness) probably have a better handle on whether an application is really innovative or a minor step forward than the examiners at the patent office.
First pass: re-assignment
If a patent is re-examined during a lawsuit, and a patent claim is found to already exist in the prior art, then the claim is invalidated, as if it hadn’t existed.
This might make some legal sense based on the premise that one can rule that a patent is obvious if “others invented the invention at roughly the same time”. I cut and pasted that phrase from the obviousness section in this PDF of recommended jury instructions from the Federal Circuit Bar Association (text p 60, the 80th page of the PDF), which is intended to be a layperson introduction to the complications of modern U.S. patent law. If we found that the item was invented just a few months before Pat’s filed for his patent, then we could apply this rule to just invalidate the claim. In fact, if we applied this rule more often, we’d cut through the patent docket with great rapidity: both plaintiff and defendant have documentation of independently inventing a claimed invention within a few months of each other? Great—patent invalidated, and let’s move on to the next case.
But invalidating the patent in court doesn’t do much to change Pat the inventor’s calculus, especially because he can send out those letters that demand payment without going to court.
I mentioned last time that patent lawyers tend to think that patents should be justified in terms of a physical property metaphor. Again, this isn’t Constitutionally correct, and the metaphor itself is correct only if you bear in mind that physical property rights aren’t all that monolithic (as I’ve written before), and are really about promoting progress themselves.
But there’s an amusing implication to the physical property perspective regarding the detail about invalidating claims: if the patent is granted to an inventor, and a certain claim is later found to have been originally invented by somebody else, then that claim shouldn’t be invalidated—it should be re-assigned to the original inventor. When somebody misappropriates physical property (even by accident), we make an effort to find the rightful owner, rather than declaring that the object is now in the public domain.
I’m tickled by this implication of the physical property perspective, because it gets the incentives right. If a patent is reassigned, that’s a real burden on the prior owner, because now they have another party to negotiate with. Patents are divided into claims, and if somebody else is assigned claim #8, and claims #1-7 are closely tied to claim #8, then using claims #1-7 may now require permission from the new owner of claim #8.
Wind back the clock to when Pat has what he thinks is a new claim, and is debating whether to request a patent or simply blog about the invention. The blogging part is not trivial: a blog post that an ordinary person could Google is sufficient to invalidate a later patent, so blogging can prevent being sued for future infringement on a future patent. If a patent doesn’t already exist on the claim, then Pat knows that any prior thinkers who developed the claim either didn’t bother with the annoyance of filing for a patent, or tried and somehow failed. If Pat thinks that there are good odds that such a sleeping dog is out there somewhere, then Pat will let them lie and just blog about the patent; if Pat thinks that there are good odds that nobody else has worked out the claim, then Pat will file for the patent.
My suggestion of reassigning patents to the original inventor will never get implemented. But the important part is in the mechanism design, and getting applicants to use their information to pre-reject obvious patents.
A few more passes
How else can we bake in the right incentives to the applicants?
Patent law has a concept of inequitable conduct, describing the situation where an applicant is somehow dishonest in prosecuting the patent through the examination process, such as failing to disclose relevant information to the examiner. There are typically fines associated with inequitable conduct. This provides another useful venue to fix the incentives: Pat’s application for an obvious extension of the prior art is a waste of the USPTO’s time, and the rest of us see it as gaming the system, so it is not far-fetched to class it as inequitable conduct.
This mechanism is also unlikely to ever be seriously used.
We could enforce a reputation mechanism: there is discretion and uncertainty in the determination of whether an invention passes all requirements, and I’m more likely to trust that somebody disclosed everything required if they haven’t tried some sort of passing off in the past. This should apply to both attorneys and applicants. In world one, Pat has applied for fifty patents that were all struck down as obvious, and now patent 51, on the borderline of obvious, is under consideration; in world two, Patricia has a record of a small number of patents that have all been granted and has submitted an application for that same borderline claim; do we really believe that the Progress is promoted equally by granting this imaginary patent in both the case of Pat and the case of Patricia? Again, setting overall incentives to not game the system can lead to overall promotion of Progress.
Or maybe we can set a short-term bar: if Pat gets a final rejection on obviousness (which is not an initial rejection, but a rejection after several statements from an examiner that the claim is obvious), then he is barred from filing for a new patent for 180 days.
We can keep playing this game all day, but there is of course a larger problem that prevents anything from happening: the Patent Office’s incentives all point toward granting a patent to anybody with a patent attorney and a pulse, and it is the Patent Office that would have to implement whatever mechanism that potentially punishes applicants for over-applying and encourages them to pre-reject. So we are back at the same problem: until the USPTO has some incentive that is not maximizing application count, we’re going to keep having lousy patent applications come through, and some percentage of them will inevitably be granted.