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October 13, 2007

Post-Grant Pogrom

The Patent Reform Act of 2007 carries an effective presumption of patent agency incompetence by offering a post-grant opposition challenge, a more hellish version of the current reexamination action that works just fine. An innocent inventor with a newly minted patent faces a corporation hell-bent on taking the patent out of the picture, so the corporation files a post-grant opposition, a process that ties up the patent for five years or more while costing the inventor up to a half million dollars to defend his patent grant; not a cheery prospect many inventors could afford.

Europe already has a post-grant opposition (PGO) process. If opposition patterns in the US are similar to Europe's, between 5% and 6% of issued patents would be challenged each year. Based on 2006 US patent issue rates, we're looking at about 8,910 US PGOs annually. (165,000 U.S. patents issued annually; assume a 5.4% challenge rate, consistent with EPOs for 2005)

Estimates of how much a PGO challenge would cost each party range from $100,000 to $500,000. Bruce Bernstein, chief IP officer at InterDigital, in Senate testimony: "People have talked about the opposition process in Europe being cheaper. It's not. I mean, we've spent half-a-million dollars on opposition proceedings and they've taken five, six-plus years. And that doesn't do people any good -- patent holders any good."

Since the existence of the patent is on the line, and the corporation trying to kill the patent thinks it fearsome enough to spend the money, the patent holder would have the motivation to spend serious money to protect it, IF the funds could be had; a fat-chance "if" for most inventors.

A mid-point estimate of $250,000 per wrangle would result in a national PGO patent tax of $2.2 billion per year. Things usually end up costing more than you'd think reasonable if lawyers are involved, so, if Bernstein is right, figure a US PGO inventor tax heading well over $4 billion per year. 

In 2005, the EPO revoked 38% of patents that were challenged at the trial level, although many of those decisions were reversed on appeal; an effective kill rate of less than one-third. If the pattern is repeated in the US, over 60% of the patents involved in PGO would move forward and likely generate the costs of patent litigation, as their value is proven, so total PGO legal expenses are not going to be offset by a reduction in infringement litigation expenses. About 2,700 infringement cases are filed each year in the US, but the vast majority settle before trial. Only about 100 infringement cases go through trial each year, so giant defense legal bills only happen about 100 times.

The post-grant pogrom program is a thinly veiled dagger to drive through the heart of valuable patents held by small inventors.

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Data
Estimated Cost per Participant for Post-Grant Opposition Proceeding
$100,000 -  Comment: patent reform 2005: HR 2795 and the road to post-grant oppositions, by Christopher L. Logan 74 UMKC L. Rev. 975 (2006)
$500,000 - Testimony of Bruce Bernstein before Senate Judiciary Committee, June 6, 2007

EPO Opposition Proceedings - percent of patents issued
2005 5.4%
2004 5.3%
Source: Statistics on EPO Oppositions, Wilding & Bridle, Managing Intellectual Property, March 2007
Note: The EPO provides for a 9-month first-window opposition proceeding

US Patents Granted
2006 164,115
2005 152,088
2004 170,637
Source: USPTO Annual Reports

A big hat tip of thanks to David Vandagriff at Helius.

Posted by Patent Hawk at October 13, 2007 12:55 PM | The Patent System

Comments

Three cheers for PatentHawk for looking at the flawed experience of post-issue opposition at the EPO. See how common law England, under the umbrella of civil law Europe, manages to balance the rights of the patent owner for quick and cheap enforcement with the legitimate expectation of the public not to be intimidated by issued claims that are very likely invalid. England does it by by-passing opposition at the EPO. The English experience is that it takes specialist and savvy patent judges who have a technical degree level education and were patent litigators before they became judges, armed with Civil Procedure Rules of the court that stand no nonsense from the barristers or their clients.

Posted by: MaxDrei at October 14, 2007 4:58 AM