“[T]he [Sunwater Institute’s] report concludes that the USPTO erroneously rejects patent claims more frequently than the agency erroneously grants claims.”
On October 30, the nonpartisan think tank, Sunwater Institute, published a policy report on patent quality in the United States including suggestions for U.S. policymakers to better address errors in examining and adjudicating patents for validity. The policy report finds that the rate of erroneous patent grants in the United States is less than half the rate of erroneous patent abandonment, undercutting narratives that the nation’s economy faces major issues related to poor quality patents being issued by the U.S. Patent and Trademark Office (USPTO). The report’s findings will be announced at a briefing of the Council for Innovation Promotion held at the National Press Club in Washington, D.C. on Wednesday.
Tech Centers for Computer Inventions See Higher Rates of Erroneous Abandonments
The Sunwater Institute’s report focuses on two types of errors that occur during patent prosecution: Type 1 errors, which occur when examiners grant patents with claims that are invalid under existing statutory and judicial criteria for patentability; and Type 2 errors, which occur when a patent application containing valid claims is wrongly rejected or abandoned. The Sunwater Institute notes that both types of errors create economic costs, with wrongly granted patents leading to higher priced products and litigation costs, while wrongly rejected or abandoned patents create costs for inventors and discourage the development of other inventions that would create social value.
Analyzing occurrences of both kinds of error at the level of individual patent claims, the Sunwater Institute finds that only 7% of U.S. patent claims are granted erroneously. By contrast, 18% of abandoned U.S. patent claims are valid under patentability criteria. These findings are based on a dataset of 20 million independent claims from about 980,000 patent applications filed between 2011 and 2013, with analysts using natural language processing techniques to assess patentability based on their proximity to claims from other patents.
When assessing both types of patent examination errors across different technology centers, the difference between error rates grows even more stark in tech centers related to computer technologies. The greatest discrepancy was seen in TC2400, which includes computer networks, multiplex communication, cable and cryptography/security inventions. While 6% of patent claims granted in this technology center during the study period were erroneously granted, 30% of the abandoned patent claims from the study were erroneously abandoned. Similar outcomes were seen in TC2600 for communications inventions (5% of claims erroneously granted, 24% of claims erroneously abandoned) and TC2100 for computer architecture, software and information security (5% of claims erroneously granted, 22% of claims erroneously abandoned).
Higher rates of erroneously abandoned patent claims are also seen when assessing patent examiner compliance rates as calculated by the USPTO’s Office of Patent Quality Assurance (OPQA). Looking at OPQA’s compliance review metrics for fiscal year 2023, 7.6% of examiner allowances were non-compliant with at least one of the patentability statutes for inventions patentable, novelty, non-obviousness and specification. By contrast, the Sunwater Institute’s report found that more than 20% of final rejections and non-final rejections were non-compliant for improperly rejecting patent claims under the patentability statutes. While more detailed data is required, the report concludes that the USPTO erroneously rejects patent claims more frequently than the agency erroneously grants claims.
Patent Invalidation Rates are Not a Useful Indicator of Patent Quality
The USPTO has the second-lowest rate of erroneously granted patent claims of any major patent granting office, a finding supported by analysis of twin patent applications filed in the IP5 offices of China, Korea, Europe, Japan and the U.S. Among these offices, the 1.1% of patent applications erroneously granted by the USPTO is only bested by China’s National Intellectual Property Administration, which improperly granted 0.2% of patent claims during the study period. When looking at patent claims that were erroneously rejected by the world’s major patent granting offices, the 5.1% of erroneous rejections at the USPTO is only outpaced by the Korean Intellectual Property Office, which erroneously rejected 6.3% of patent claims during the study period.
Although patent invalidation rates are often cited as an indicator of patent quality, the Sunwater Institute’s analysis of validity adjudications shows that those statistics are often a red herring in the patent quality context. Recognizing that adjudicated patents are not representative of the entirety of U.S. patents, the Sunwater Institute found that rates of petitions for inter partes review (IPR) proceedings at the Patent Trial and Appeal Board (PTAB) were higher than the distribution of all issued patents filed within TC2400 and TC2600. The report also concludes that IPR proceedings are disproportionately targeted against small entities, which own 19% of all issued patents yet account for 27% of all IPR-challenged patents.
While the economic harms of erroneously granted patents are relatively easy to assess through litigation costs, the Sunwater Institute notes that it’s much more difficult to assess the costs of failing to commercialize inventions due to erroneously abandoned patent claims. The organization further points out the moral harm to inventors denied an important property right. The report finishes with several policy recommendations, including calling on Congress to correct a policy dialogue that is overly concerned with improperly granted patents, and asking the USPTO for more granular claim-level data on patent examiner compliance metrics for both types of errors.
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Author: Olivier26
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