Aleksandar Stojkov, PhD Spring 2016

Transcription

1 Aleksandar Stojkov, PhD Spring 2016

2 Global Patent Warming Traditional Economic Literature on Patents Recent Economic Literature on Patent Systems and Procedures Quality of Patent Systems The European Patent System Conclusions

3 Global Patent Warming Figure 1: Absolute number of patent applications (direct and PCT national phase entries) by filling office, ,000,000 Global patent warming from the 1990s onwards 2,500,000 1 World 2 Asia 2,000,000 1,500,000 3 Europe 1,000,000 4 Latin America and the Caribbean 500,000 5 North America Oceania Source: WIPO, 2016.

4 Global Patent Warming Figure 2: Absolute number of patent applications (direct and PCT national phase entries) by filling office, ,000 European Patent 600,000 Office 500, ,000 Japanese Patent Office 300, ,000 United States Patent 100,000 and Trademarks Office Source: WIPO, 2016.

5 Global Patent Warming The global patent warming is also called a strategic upsurge in patent filings From a geographical perspective, it is mainly driven by the impressive growth of patent applications in Asia and moderate growth in North America

6 Global Patent Warming There are at least five explanations behind this phenomenon: 1. Emergence of new and more patent-intensive technologies (e.g., biotechnology or information and communication technologies) 2. Increase in internationalization of markets and higher importance of securing IPRs abroad 3. Extended use of patents to actively and passively block competitors (e.g., sleeping patents, licensing or crosslicensing agreements). 4. Legal decisions that have allowed the granting of patents for software and business methods. 5. Universities are relatively new actors in the patenting arena. Academic patenting activity increased substantially since the early 1980s in the US and the early 1990s in Europe.

7 Global Patent Warming Increased backlog at many patent offices Increased time periods from patent applications to decisions (pendency time) Problems in retaining patent examination staff Increased litigation, and Allegations of low quality patents being granted (Bessen and Meurer, 2008; van Pottelsberghe, 2011).

8 Global Patent Warming Today, global patent warming is a major concern for policymakers, who try to address it by improving patent office internal efficiency in tackling the examination proceedings as well as, through international agreements between patent offices as witnessed by the current Patent Prosecution Highways (PPHs).

9 Traditional literature Traditional economic literature Role of patents in encouraging invention and the disclosure of technology Optimal design (length and scope) of patent rights Recent economic literature Internal working of patent offices The impact of patent systems and procedures on patent examiners, patent applicants, and third parties

10 Traditional literature Traditionally, patents have been seen as a necessary evil, involving a tradeoff between providing incentives for innovation and disclosure on the one hand, and the creation of a temporary monopoly on the other hand. The main advantages of patents are that they may: (i) promote new discovery, (ii) assist in the dissemination of knowledge, (iii) encourage technological transfer and commercialization, (iv) facilitate entry of new small firms, and (v) allow the trading of knowledge (Hall, 2007).

11 Traditional literature Disadvantages of patents include: (i) social inefficiency of monopoly, (ii) a duplication of spending (patent races), (iii) increased transaction costs that may delay new inventions (Langinier and Moschini, 2002). A patent provides only an imperfect protection since monitoring to detect infringement must be done by the patent holder (Crampes and Langinier, 2002).

12 Traditional literature Recent studies in the area of economic of patents focuses on: Grant rates Pendency time: timeliness of patent grant procedure Patent examiner behaviour Patent applicant behaviour

13 Recent economic literature Calculating the grant rate as the number of patents divided by the number of applications in a given year does not account for the lag between filing and granting. Using a 3-year lag for the number of applications (average pendency time) provides only a rough estimate, because pendency times vary across technological fields. Quillen and Webster (2001, 2006) report that 87 95% of US applications are granted a patent.

14 Recent economic literature The duration of examination varies across offices, using the number of pending patents as a measure of the backlogs provides a biased proxy. In some countries applicants may choose to delay the examination, meaning that longer pendency times may be due to applicant behavior rather than to the patent office. London Economics (2010) indicates that average pendency time has increased over the 1996 to 2008 period in: the USA from 20 to 40 months, Japan from 22 to 27 months Canada from 60 to over 90 months; In contrast, at the EPO it has fallen to an average of 28.9 months (EPO, 2016).

15 Recent economic literature Unclear applications will affect the ability of the examiner to identify prior art. The outcome of the patenting process may thus depend upon: the availability of relevant information, the examiner s experience, skill and familiarity with the field, and his/her incentives. to complete examinations thoroughly.

16 Recent economic literature Availability of relevant information The examiner s experience and skills In the USA the applicant must disclose the entire prior art he is aware of, whereas in Europe disclosure of the prior art by the applicant is not obligatory. The effort required to search for prior art might then differ across countries. Cockburn et al. (2003) use US data from a survey of 187 examiners of patents invalidated by the Court of appeals from 1997 to 2000 and find evidence of significant heterogeneity among examiners, particularly in the search stage of the examination process. Lemley and Sampat (2012) use data on pending US applications and find that experienced examiners cite less prior art and have a significant higher grant rate.

17 Recent economic literature How examiners respond to the incentives provided by different patent offices? Historically, the USPTO has used a formal bonus and award system based on whether examiners exceed predetermined production goals. The effectiveness of the incentive system within EPO has been analyzed in Friebel et al. (2006), who provide a survey of EPO examiners. Explicit incentives based on quantity will likely push examiners to process more patent applications, so that the quality of examination process may suffer.

18 Recent economic literature A high attrition rate of examiners at the USPTO has resulted in a lower overall level of examiner experience (van Pottelsberghe, 2011). One possible explanation for this turnover is career concerns; examiners may be leaving the patent office to work at firms on the other side of the patent process that might value their experience and their understanding of the patent system.

19 Recent economic literature Filing strategies Stevnsborg and van Pottelsberghe (2007) divide application filing strategies into four broad categories, based largely on the considerations of duration and information revelation: good will and fast track, good will and slow track, bad will and slow track, and deliberate abuse of the system.

20 Recent economic literature Filing strategies A longer filing duration can be encouraged through: application under the Patent Cooperation Treaty (PCT), and drafting of a complicated application with too many claims. Shorter durations can be achieved through: national applications; drafting of a clear and accurate document; early requests for examination, and quick responses to agency feedback.

21 Recent economic literature Filing strategies Why would a company be interested in delayed granting of patent? Delaying the granting of a patent may be attractive to an applicant, because: it allows further time to study the commercial value of the patent, it extends the uncertainty of rivals regarding the patent, and it delays certain fees associated with its granting.

22 Recent economic literature In general, applicants pay filing, examination, granting and maintenance fees. Changes in patenting fees will likely change the applicants behavior, which, in turn, will affect the examination process. It has been empirically shown that there exists a negative relationship between patent cost per claim per capita and the number of claims (van Pottelsberghe and Francois, 2009). It has also been argued that the reduction of fees in Europe has contributed to increased propensity to patent (de Rassenfosse and van Pottelsberghe, 2011).

23 Recent economic literature Another way of altering the fee structure could be to make the applicant choose between two types of examinations (more expensive and more thorough examination or normal and cheaper). The introduction of a two speed system (or goldplate system), which will affect the quality of examination through the behavior of the applicant, has been under consideration at the USPTO (Lemley et al., 2005). Such a policy could reduce the total number of applications as, in equilibrium, only good applicants will apply for the gold-plate whereas those who apply in the regular system will signal that it is more likely they have bad applications (Atal and Bar, 2011).

24 Quality of Patent Systems Quality is defined as the extent to which patent systems comply in a transparent and stringent way with their legal patentability standards: the novelty and inventiveness conditions (de Saint-Georgesa and Pottelsberghe de la Potterie 2013). These two legal standards might be similarly codified in patent systems but their implementation, or the extent to which they are fulfilled, varies significantly across countries.

25 Quality of Patent Systems # Variable Rationale 1 Ownership of an invention 1 if the prevailing system is "first-to-file and 0 if the prevailing system is first-toinvent. The "first-to-file" rule improves the quality of patent systems through two mechanisms: the faster diffusion of knowledge and the lower uncertainty on the market for patents. 2 Intermediate search report during the examination process 1 if the patent office provides and publishes a search report, and 0 if it does not. 3 Allotted period for an examination request The presence of a request for examination requirement has a positive influence on the patent systems, as it allows for a selfselection process and reduces the number of examinations that are performed for patents that will not be used.

26 Quality of Patent Systems # Variable Rationale 4 Post-grant opposition The period during which third parties can file an opposition varies across countries included in the sample from 3 to 12 months after the final publication of the granted patent. The longer the post-grant opposition period, the higher the quality of the system 5 Grace period A grace period is a period during which the inventor is allowed to file a patent after the publication of the invention. In the absence of a grace period, a published invention cannot be granted a patent because it fails to meet the novelty condition. A system with no grace period has a value of 1. 6 Hidden applications 1 if the applications are published after a period of maximum 18 months from the filing date and there is no possibility to hide the application, and 0 otherwise

27 Quality of Patent Systems # Variable Rationale 7 Adaptability As technology evolves, patent owners try to adapt their claims to fit the latest design of their invention. Value of 1 if the system allows: - patent of addition (an accessory of an earlier patent and expires at the same time as the original patent) - continuation-in-part application (repeating some substantial portion or all of the earlier application and adding matter not disclosed in the earlier application) Value of 0 otherwise. 8 Incentives It is assumed that a higher ratio (a higher budget per employee) translates into better incentives and, hence, into more motivated and experienced examiners, and lower turnover 9 Workload If the workload per examiner is too high, it could have a negative impact on the quality of the examination process, as examiners would be forced to perform their task faster

28 Quality of Patent Systems Office Index High ranking European Patent Office UK Sweden Norway Denmark Finland Medium high ranking Austria Poland China The Netherlands France Japan Switzerland Chile Russia Colombia Office South Korea Turkey Malaysia Medium low ranking Australia Greece Germany Singapore Spain Brazil Thailand Mexico Low ranking India United States South Africa Canada New Zealand Index

29 European Patent System The cross-country comparison reveals that the European Patent Office provides high quality examination. Still, the European Patent System is a fragmented system with two implications: (1) Prohibitive cost of patent protection in Europe In contrast to other large regional or national patent offices in the world, payment of national validation and renewal fees, and the translation requirements must be multiplied by the number of countries, where the applicant wants to have an effective protection. European patent is still at least five times more expensive than in the United States (van Pottelsberghe de la Potterie and Mejer 2009).

30 European Patent System Comparison of costs Cumulative cost of patenting and patent enforcement. Approximation of cumulative costs is based solely on procedural and renewal fees and does not include the cost of legal advice. EPO-6 stands for the patent validation in six EPC countries: France, Germany, Italy, The Netherlands, Switzerland and United Kingdom; EPO-13 stands for the validation in: EPO-6 and Austria, Belgium, Spain, Denmark, Finland, Ireland, Sweden. Source: Mejer and van Pottelsberghe de la Potterie (2011).

31 European Patent System (2) Fragmented system of enforcing patent rights Patent validity can be challenged independently at both the European and national level. Within 9 months following the decision to grant by the EPO, third parties can file an opposition to the grant before the EPO in order to revoke or amend a patent. Once the patent is validated in a patent office, the national jurisdiction has the competence to decide on patent litigation cases (infringement and validity cases) with effect on their own territory.

32 European Patent System Essentially, there are three different routes by which a patent application may reach the EPO: EPO-direct filing routes (1) national first filing, subsequently filed directly at the EPO under the Paris Convention, with the vast majority of priorities filed in the home country of the applicant first, (2) EPO first filing - an application that claims no priority at any other office; (3) Euro-PCT filing route Applications under the Patent Cooperation Treaty (PCT) administered by the WIPO entering the regional phase at the EPO

33 European Patent System 28% 10% 62%

34 European Patent System In 2014 roughly a third of the filings came from the EPO member states and two-thirds from outside Europe. The analysis is based on the European patent filings (Direct European filings under the EPC) and international filings under the PCT)

35 European Patent System The share of international filings under the Patent Cooperation Treaty (PCT) has increased significantly over the past five years. In 2014, total filings at the EPO included close to direct European filings under the European Patent Convention and international filings under the PCT.

36 European Patent System National first filing: The majority (95%) of applications in the 1980s reached the EPO as a subsequent filing to a national first filing. This share dropped very quickly during the course of the 1990s to a level below 50% and fell even further to about 28% recently EPO-first filing: Rather small - but increasing numbers and shares of applications entered the EPO system as a first filing. It has meanwhile increased well beyond the mark of 10% recently Euro-PCT filing route: The patent upsurge in the second half of the 1990s was almost exclusively driven by an increase in the number of Euro-PCT applications (around 62% of all filings)

37 European Patent System Non-EPC members use Euro-PCT filings much more often than EPC member states United States, Canada, United Kingdom, Finland, Sweden and the Netherlands mostly prefer the Euro-PCT route Euro-PCT, by now being the most frequently used filing route to the EPO, is more often used by SMEs, individual inventors and especially applicants from academia EPO first filing as well as national first filings are more frequently used by EPC members Sweden and Switzerland Large countries mostly claim national priority first, which can be explained by the fact that they have a larger domestic market. Japanese and South Korean applicants prefer national first filings subsequently transferred to the EPO under the Paris Convention

38 European Patent System Euro-PCT filings have a higher grant rate than EPO first filing and national first filings. The information provided by the preliminary examination seems to be a benefit for applicants regarding the grant decision at EPO. Euro-PCT applications are a tool for strategic patenting, also using the 30 month period in the PCT system as well as the PCT search report to gather additional information about own patent application

39 European Patent System The cost to file an opposition before the EPO varies between 6,000 and 50,000 (including patent lawyers fees). However, in case of multiple litigations in national jurisdictions, the costs must be cumulated over the number of countries where litigation is initiated.

40 European Patent System The United Kingdom is by far the most expensive jurisdiction among EPC member states. The cost is much higher than in the three other jurisdictions (France, the Netherlands and Germany), and is nearly as high as their cumulated costs.

41 European Patent System In the early 1980s Epilady invented its famous device: a hair remover for use on ladies legs. Once having been granted a European patent for its invention in 1986, Epilady successfully marketed it in eleven EPC contracting states. During the first 2 years of marketing and selling, Epilady sued 28 competitors who infringed its patented invention by producing one-toone products and won in all cases. In 1988, Remington entered the European market with Smooth and Silky, a device that performed exactly the same function as Epilady but with a slightly different mechanism (the former used a rotating helical spring system whereas Smooth and Silky used a rotating rubber bar with slits in it).

42 European Patent System Within the same year it had filed an opposition at the EPO questioning the validity of Epilady s patent. In order to maintain its monopolistic position within Europe Epilady brought a patent infringement action against Remington in Austria, Belgium, Germany, France, Italy, the Netherlands and the United Kingdom. Meanwhile, in 1991 the EPO upheld the Epilady patent. Despite the harmonised laws on interpretations of the extent of protection granted through European patents, the subsequent rulings of the national courts on infringement differed across jurisdictions.

43 European Patent System Courts in Austria, France and the United Kingdom judged that there was no infringement of the Epilady patent, whereas courts in Belgium, Germany, Italy and the Netherlands ruled that infringement took place.

44 European Patent System 20 January 2013: Entry into force of two EU regulations. They will only apply from the date of entry into force of the Agreement on a Unified Patent Court (UPC): Regulation (EU) No 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection Council Regulation (EU) No 1260/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements. Regulations (EU) No. 1257/2012 and (EU) No. 1260/2012 are now in force for 26 of the 28 EU member states (exceptions: Croatia and Spain).

45 European Patent System The unitary patent is a European patent with unitary effect. The unitary patent will co-exist with national patents and traditional (classical) European patents. The Unified Patent Court (UPC) will be a court common to the Contracting Member States and thus part of their judicial system. It will have exclusive competence in respect of classical European patents and European patents with unitary effect.

46 European Patent System Innovation National Patent Office European Patent Office National Patent Office European Patent Office National Patent Office National Patent Office National Patent National Patent Office National Patent Office Classical European Patent European Patent with a Unitary Effect

47 We are witnessing a global patent warming, mainly due to strategic increase of patent filings. Traditional economics of patents focuses on pros and cons of patent protection, whereas recent economic research examines the implications of internal working of patent offices. Recent economic studies have also attempted to measure the quality of modern patent systems. Significant heterogeneity is observed across countries. The EPO and the patent offices of the UK and several Nordic countries have the highest-quality metrics.

48 Over the years, the PCT system has become more and more prominent, with the number of EuroPCT applications increasing over the whole time period. National first filings, on the other hand, declined over time. EPO first filings are still the most rarely used filing route to the EPO. The European Patent System is a fragmented system with two implications: (1) prohibitively high cost of patent protection in Europe, and (2) (2) fragmented system of enforcing patent rights. Recent legislative reforms towards unitary patent protection promise brighter days and lower costs for the European inventors and entrepreneurs.

49 de Saint-Georgesa, M. and B. Pottelsberghe de la Potterie (2013). A quality index for patent systems. Research Policy 42 (2013): Bessen, J. and Meurer, M. (2008) Patent Failure: How Judges, Bureaucrats and Lawyers put Innovators at Risk. Princeton, NJ: Princeton University Press. van Pottelsberghe de la Potterie, B. (2011) The quality factor in patent systems. Industrial and Corporate Change 20: Mejer, M. and B. van Pottelsberghe de la Potterie (2011). Economic incongruities in the European patent system. Eur J Law Econ (2012) 34: Eckert, A. and C. Langinier (2014). A survey of the economics of patent systems and procedures. Journal of Economic Surveys (2014) Vol. 28, No. 5, pp Frietsch, R., P. Neuhäusler, and O. Rothengatter (2013) Which road to take? Filing routes to the European Patent Office. World Patent Information 35 (2013) 8-19.