What about Trolls?

How would raising the filing fee impact patent trolls? If you are not familiar with patent trolls, check out this excellent blog Troll Tracker. Patent trolls are companies that are set up with the sole purpose of suing other companies for patent infringement on patents that tend to be acquired from individual inventors and companies that have gone out of business.

In a recent post, Troll Tracker reviewed patent lawsuits filed against the Fortune 100 based upon the industry of the defendants in the lawsuits. The most interesting distinction was between the Pharmaceutical Industry and the High Tech Industry. Pharmaceutical had 28 total lawsuits, with 24 coming from competitors and 4 coming from Universities (etc.) but none from patent trolls. High Tech, on the other hand, had 192 lawsuits, with 35 from competitors, 24 from Universities (etc.) and 132 from patent trolls.

What is the distinction between the Pharmaceutical and High Tech industries around patents? Well, first the Pharmaceutical Industry depends on patents to survive because they tend to have a single innovation (the chemical compound used to treat disease x) the price of making a pill is next to nothing and anyone can follow a formula to make a chemical compound. High Tech companies tend to have differentiated products composed of lots of improvements that are very complicated to put together. Second, Pharmaceutical companies spend $800,000,000 to get one new product to market so the consequence of having a weak patent is huge. High Tech also spends a lot of money on new products, but they tend to grow incrementally from one product version to the next.

Pharmaceutical companies tend to have a relatively few number of extremely valuable patents that, were a company go out of business, would quickly be snapped up by a competitor, investor or other interested party, who would produce the compound. High tech companies have lots of patents on small features and if the business should cease, no one really knows the value of the patents. These patents fall through the cracks and end up with the trolls.

If the patent filing fees were raised, then High Tech companies would only file patents on their most important innovations and fewer patents would be more valuable. Thus, they would be less likely to fall through the cracks, and the patent troll market would dry up.

So, What Happens to the Patent Lawyers?

This is an interesting question. When we reduce the number of patent applications by three quarters, where do all the patent lawyers go? The answer for the best and the brightest is nowhere. There will always be a very competitive market for high-end patent drafting and litigation services. Perhaps even more so, with fewer patent applications that are far more valuable than the current crop. I think that raising the application fee to $50,000 will allow the legal bills for obtaining those patents to rise as well. I believe that this will be the end of the $5,000 flat-rate patent application drafting services.

What happens to all of those folks who are currently writing the thousands of patent applications for a single company? Well, they are already highly-trained engineers and lawyers....They should return to the workforce and do something that is productive. Like invent something!!! Think about it, we have thousands of highly-trained professionals working on patents that don't include any innovation. And then we waste millions fighting over patents that should not have been issued in the first place. Increase the fees, reduce the number of patents filed and we will see an end (or at least a massive reduction) in the waste.

Two Sides To Patent Quality

Most people think that poor patent quality refers only to patents that are improvidently granted. For example, the patent examiner did not adequately search for the prior art, or failed to appreciate a reference that was before them, or did not apply a reference correctly, or was outgunned by the applicant, or ... Improvidently granted patents are the more important type of poor patent quality, however, I believe that a second and important type of of poor patent quality is patents that should be immediately granted, but are delayed or damaged by inappropriate office actions (I refer to this second type of poor patent quality as Damaged Patents).

Damaged Patents are the product of the USPTO being overwhelmed by the nearly half-million patent applications it is tasked with reviewing each year. How does the Patent Office deal with examining this number of applications? The office has two basic choices: (1) let everything through with minimal examination (characterized by the era when examiners were told it was their job to get patents for their "customers") or (2) let nothing through (unless the examiner is "embarrassed" into issuing the patent - it seems the office is in this mode now). This second approach by the USPTO exacerbates an already huge backlog, creates a much longer patent pendency and Damages patents that should immediately be issued.

Let's assume that an inventor has created a new way to produce hydrogen from water by using RF energy to break down the molecular bonds of the water and a patent application is filed. First, of course, the application is not even substantively reviewed by an examiner for at least two years. Next the examiner, who has just graduated from the 8-month training course, misunderstands the invention and does a search for electrolysis and finds a huge amount of "prior art" to cite in the first office action (3 months later). The applicant requests an interview wherein the invention is made clear to the examiner, who signals that some dependent claims might be allowable. The applicant files amends the main claims to include the dependent limitations (3 months later). The examiner does a new search and finds a reference on a RF generator and cites that plus the electrolysis reference as 103 and goes final (3 months later). The applicant files a RCE and argues over the reference and the examiner issues the patent -- now Damaged (6 months later).

The applicant finally has a Damaged patent that should have been allowed by the USPTO on the first office action based on the first search that the examiner did. Of course, the applicant may file a continuation case to attempt to get the proper scope of claims, but that will delay the process for years to come.

Let's look at a similar case under a scenario where the number of patent applications has been reduced because of an increase of the filing fee. Obviously, in this hypothetical, the applicant would choose to file the application on a technology this important. The examiner, with 5 years of experience in the current Art Unit, having received the application 6 months after filing reviews the application carefully for technical issues -- recognizes the importance of the application and does a careful prior art search. Finding nothing relevant to the claims of the application, the examiner allows the case in three months. The applicant has the patent in under one year.

Again, the fault here is not entirely, nor even primarily the USPTO's, rather the fault is shared with Congress and large corporations filing thousands of unimportant patent applications because the fees for filing allow this abuse of the patent system.

A Two Filter System

When most people consider patent quality, they focus on examination “filter” that the USPTO provides. This misses what I like to call the “First Filter”, that is the work that the applicant does (or should have done) prior to filing the patent application. The first filter should begin when an invention is made – the inventor is responsible to determine whether the invention is novel. And, of course, the inventor is in the best possible position to determine exactly that because presumably they are one skilled in the art and they have some knowledge of the prior art. The first filter continues through the patent review committee where senior R&D folks review the proposed submission to determine whether it merits a patent application. Then, it’s on to the lawyers to do a patent search and a final determination of whether to file.

Of course, this first filter will only perform its function if there are appropriate economic incentives in place to motivate the individuals to create a quality patent application. If the cost for filing a marginal patent application is so low as to be irrelevant to the filing decision, then the first filter is removed for practical purposes. The inventor is motivated to file every patent application by his bonus structure; the senior R&D folks don’t have a cost to balance the benefit of filing the application; the patent attorneys are motivated to file another case because that’s how they make money. The result is the first, and I believe the most important filter leaks like a sieve, or it seems in recent years, it is entirely missing.