Saturday, February 4, 2012

Jason Rantanen & Lee Petherbridge - Toward a System of Invention Registration: The Leahy-Smith America Invents Act

Does the America Invents Act create a process for patent amnesty? The economic ramifications of the newly created supplemental examination process are discussed by Professors Jason Rantanen and Lee Petherbridge in their highly engaging article, Toward a System of Invention Registration: The Leahy-Smith America Invents Act.

Section 12 of the America Invents Act outlines a new method for supplemental examination. During the supplemental examination process, a patent owner may request that the Patent Office consider, reconsider, or correct information believed to be relevant to an already issued patent. Importantly, the patent will not be held unenforceable based on conduct relating to information that was incorrectly, inadequately, or not considered during the initial examination, so long as the information is provided during the supplemental examination.

Rantanen and Petherbridge categorize section 12 of the AIA as a means for patent amnesty. The authors persuasively argue that this new ability to “cleanse” a patent through supplemental examination will allow attorneys to violate their duty of candor during the original prosecution with little fear of later being sanctioned. Patent owners might be tempted to intentionally leave out prior art that would be detrimental to the prosecution of their application, knowing that they can later protect themselves with a supplemental examination. The repercussions of this amnesty will inevitably jeopardize the commercialization of patents by increasing the costs of competition, research, and market entry. This prediction stems from the idea that, at the foundation of patent law, is the need for the Patent Office to efficiently gather, record, and apply information. Only when this process is at its most efficient can the PTO issue the highest percentage of “valid” patents. By having an avenue that threatens the complete and honest disclosure of information, market participants may take a pessimistic view towards the validity of issued patents.

The article highlights the importance of practitioner disclosure by addressing the tradeoff between the costs of administering “correct” patents versus the economic impact of issued patents. The authors contend that close to half of all issued patents have a monetizing effect on the marketplace. Monetized patents include patents that are litigated (1-2%), licensed (5-29%), or deter the market entry of a competitor. Because only a small percentage of these patents are litigated, the patentability decision made by the PTO is usually the final say. If a poor quality patent is issued, the mistake will rarely be rectified. Therefore, it is vital that the costs and benefits of the patent system do not become unstable.

Rantanen and Petherbridge assert that in the first years of issuance, patent owners are likely to take their overly broad claims and monetize the patent as quickly as possible. If a competitor or licensee threatens litigation, the owner may simply request a supplemental examination and remove potential grounds for a lawsuit. Patent owners may also use the supplemental examination process to bolster the quality of their patents by adding art to the patent file. Low quality patents will force valid technologies to either pay “rent” or defend against nuisance litigation that should not exist. This will inevitably lead investors and market participants to look with skepticism at the quality of patents that have not been through supplemental examination.

Rantanen and Petherbridge touch on an interesting topic that deserves more consideration: Should market participants and courts distinguish between patents that have gone through supplemental examination and those that have not? I think several observations are important to this discussion. Under the new law, it is the right of the patent owner and not the practitioner to request a reexamination. Thus, a licensee might be justified in conducting a prior art search if the owner prosecuted his own invention. But, market participants should be less skeptical of patents that have not been prosecuted by the owner of the patent. Without the ability to initiate supplemental examination, it is less likely that a non-owner practitioner would risk violating his or her duty of candor without the guarantee that he or she would be able to rectify the omissions.

Second, research has shown a correlation between a patent’s economic value and the number of prior art citations listed on the patent. See Hall, Bronwyn H., Jaffe, Adam B. and Trajtenberg, Manuel, Market Value and Patent Citations: A First Look, Vol. 7741 NBER Working Paper Series (2000). This seems to indicate that investors value the information offered by an increase in cited prior art. In an era of supplemental examinations, will patent owners sacrifice the value associated with upfront disclosure for a potentially quicker examination process? Interestingly, data also suggests that examiners are reluctant to utilize the information provided by disclosure statements. See Cotropia, Christopher Anthony, Lemley, Mark A. and Sampat, Bhaven N., Do Applicant Patent Citations Matter? Implications for the Presumption of Validity, Stanford Law and Economics Olin Working Paper No. 401 (2010). If disclosure is as important as the article suggests, should Congress allow courts to apply a lower standard of proof for references not considered by the PTO to protect the creditability of patents that have not gone through the supplemental examination process?

Posted by Bryan Parrish (, a registered patent agent, research assistant to Sarah Tran, and a 2014 Juris Doctor candidate at SMU Dedman School of Law.

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