How to fix the patent quality crisis

The United States has a serious problem – arguably a full-blown crisis – in patent quality: a flood of bad patents devaluing the good ones and reducing the benefit of patenting for true inventors. That’s a threat to the viability of the entire system, yet some are suggesting weakening standards for receiving patents as a solution – the exact wrong thing to do.

Patents are supposed to be hard to get. They aren’t participation awards. This isn’t a kids’ soccer league, and not every applicant should get a patent just for showing up.

Now, patent quality rarely gets the attention it deserves, so Sen. Thom Tillis (R-N.C.) should be commended for addressing it at a hearing this week. It’s the high-tech industry’s hope that the hearing makes clear that instead of lowering the bar, we need to apply existing standards more rigorously to improve patent quality.

What is “quality?” It’s simple: Good patents satisfy the requirements of the Patent Act – that the invention be new, disclosed with specificity and clarity, and appropriate subject matter. Bad patents do not and were erroneously issued by the Patent and Trademark Office (PTO).

The impact of these patents is similarly simple: Valid patents generally benefit innovation and economic growth. Invalid patents harm them. A great example is MPHJ’s famous “scan-to-email” patent: it should never have been granted and was ultimately invalidated, but not before MPHJ asserted it against 16,000 targets, almost all of them small businesses.

How pervasive is the quality problem? A study by a University of San Diego law professor estimated that 28 percent of all patents are partially or entirely invalid. For patents on software and business methods, the estimate ranges from 39 to 56 percent. While that’s remarkably high, these figures are incomplete and do not reflect the full magnitude of the problem.

The study looked only at patents that are invalid because the invention they claim is not really new, and therefore is not an invention at all. For the real rate, you’d have to add all the patents that are invalid because they claim ineligible subject matter or fail to adequately describe or explain the invention.

So, about a third of all patents and half of software and business method patents are likely invalid. That means around 1 million invalid patents are currently in force, with another 100,000 issued each year. What would we think if the U.S. Postal Service lost or misdelivered a third of all mail?

For most of us, a one-third failure rate is concerningly high, whether for patents or packages. How can such a system succeed? The short answer is it cannot, and the long-term viability of the system is in jeopardy unless we make some much-needed fixes.

First, examiners of patent applications need more time and better tools. The PTO spends less on examining patent applications than other major patent offices. According to one study, on average the PTO spends about 18 hours examining each patent application. The authors found this results in more invalid patents being granted in the U.S., while Europe and countries like Japan denied patents for the same invention.

Second, more of the cost of examination needs to be paid out of patent application fees. Currently, patent application fees don’t even come close to covering the costs of examination, and the PTO makes up the shortfall using renewal fees for granted patents. That creates two problems: Any unexpected rise in applications or drop in renewals causes a shortfall in resources for examination. Further, it also creates a financial incentive to issue patents because a grant will result in collection of additional fees while a rejection produces zero.

Third, the ability to challenge invalid patents needs to be strengthened. Improving quality going forward doesn’t address invalid patents already granted. The 2011 America Invents Act created Inter Partes Review (IPR) to address this problem. These proceedings work well, yet critics argue that too many patents are being invalidated and are fighting to weaken IPR. Hobbling IPR is like addressing high crime rates by telling the police to stop making arrests. It would improve the statistics while making the underlying problem worse.

The solution to poor quality isn’t to lower the bar. We need to address quality head on by making it less likely invalid patents are granted and by strengthening the ability to challenge them when they do.

David W. Jones is a former IP Counsel to the Senate Judiciary Committee and currently executive director of the High Tech Inventors Alliance.