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Is the Jaffe/Lerner Analysis of Patent Law Correct?

Feb 12, 2007
Lawrence B. Ebert

Some issues not raised by Professor Dreyfuss

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In response to my article concerning the book "Innovation and Its Discontents", one reader noted that I had not discussed the lengthy review of the Jaffe/Lerner book given by Professor Rochelle Dreyfuss in 104 Michigan Law Review 1559, which review comprised 20 pages and 92 footnotes.

In the context of my article, I was illustrating favorable reviews of the Jaffe/Lerner book which had appeared in the intellectual property literature. The Dreyfuss review is not wholly a favorable review. On the one hand, the Dreyfuss review states that "Adam Jaffe and Josh Lerner have given us a wonderfully timely book -- and also one that is beautifully executed," perhaps not the sort of thing Professor Field had in mind when he wrote in IPFrontline. The Dreyfuss review has some interesting lines (e.g., [The Jaffe/Lerner book] "uses as examples patents on inventions that are accessible to even the congenitally innumerate--the ubiquitous peanut butter and jelly sandwich..." On the other hand, the Dreyfuss review suggests that Jaffe/Lerner may have misunderstood the source of the problems, and Dreyfuss states there might be an institutional failure to keep patent law and policy abreast with developments at the technological frontier.

I have commented on the Dreyfuss review elsewhere "Rochelle Dreyfuss on Jaffe/Lerner Innovation and its Discontents" In the following, I will include some issues not raised by Professor Dreyfuss.

I. Why do we have a patent system?

If one can't agree on fundamental premises, later discussion about issues is difficult. Jaffe and Lerner lost me at "hello" when they stated: But at its heart, the patent system is about three things. It is about technology. It is about people. It is about how the rules and procedures established by Congress and the courts affect how the people interact with the underlying process of technological progress. [page 23] The patent system may involve technology, people, and laws and regulations, but the patent system is about DISCLOSURE OF INFORMATION. In return for disclosing information which meets the requirements of patent law, information disclosers (patentees) obtain certain rights. One notes that there has never been a requirement in patent law that a disclosure be of an invention that is commercially successful or changes the way we live (i.e., be an innovation). Scientific progress can be promoted by the disclosure of useful, novel, and nonobvious things which are not of commercial value. However, merely because an invention is not commercially successful does not mean one should build a repository of information of things which are not useful or not novel or are obvious. Thus, even when Jaffe and Lerner reject the "rational ignorance" approach of Lemley at pages 174-175, they do not place any value on having an accurate repository of information ["We agree with Lemley that it would be inefficient to provide thorough examination for all applications at the current rate of patent application. We disagree, however, that the current situation is acceptably efficient."] Jaffe and Lerner are more concerned with the economic disadvantage of bad patents then of the economic advantage of good patents. ["The intangible cost of a system with pervasive low-quality patents is much higher than just the cost of paying lawyers to file and defend patent cases."]

It is difficult to analyze the validity of a book which does not acknowledge the fundamental purpose of the patent system.

II. Did Jaffe and Lerner make their case about recent problems?

The thesis of Jaffe and Lerner is that two recent changes in the patent system have created current problems. At page 2, since 1982, the U.S. Congress made two adjustments in the way the patent system operates: creating the Court of Appeals for the Federal Circuit AND changing the financing of the PTO so that costs of operation are covered by fees paid by clients. Seemingly mundane procedural changes have produced the most profound changes in patent policy since 1836.

In a book trying to argue that two recent changes have created new problems, it is interesting to note the scarcity of information on "the way things used to be." One notes that Phyllis Shafly is mentioned 4 times (on pages 21, 158, 159, 162) as is G. Gordon Liddy (on pages 21, 151, 158, 159). The invention of the transistor (and the inventors Shockley, Bardeen, Brattain) and the invention of the integrated circuit (and the inventors Noyce and Kilby) are never mentioned. Charles Dickens and Robert Frost are mentioned, but Hugo Black, who might be deemed a philosophic godfather of the book, is never mentioned. Patent trolls are treated as a new development [A second worrisome development has been the emergence of individual inventors who seek to hold up established firms in their industries. In many cases, these individuals have received a patent of dubious validity, often with overly broad claims. p. 15], but there is no mention of the Selden patent or the Ford litigation.

Even when some history is presented, the discussion is flawed. Jaffe and Lerner refer to Edison and the light bulb in the following way: Edison was granted the basic patent on incandescent lighting in 1880 - Now, surely Edison's invention was about as novel as they get. [p. 49] The actual story of Edison and the light bulb shows that the invention was NOT as novel as they get, with an interference lost by Edison, deliberation at the Supreme Court (unmentioned by Jaffe and Lerner) and rights to earlier patents on light bulbs later bought by Edison.

Jaffe and Lerner get the story of the Wright Brothers wrong. They state: ">After the Wright brothers patented their basic design (p. 50) for an aircraft stabilization and steering system, there were many others who wanted to work on a wide variety of different ideas for aircraft. But the Wright brothers refused to license anyone, and engaged in protracted litigation with a number of designers."

First, one notes that the Wrights did NOT refuse to license; they sought a royalty which many deemed too much. Second, at all times, the Wrights did NOT litigate against people who experimented with designs that might infringe their patent claims. They only went after people who sought to make money by infringing their patent claims. Jaffe and Lerner enter the land of make believe when discussing the later patent pool: The rapid development of numerous different aircraft concepts in the years after the establishment of this 'patent pool' suggests that the unwillingness or inability of the inventors to cooperate with their technological followers temporarily retarded the development of technology. Because this fanciful view of history later infected intellectual property discussions on stem cells at CIRM, one should note a more accurate history. LOOK HERE for Patent thickets and the Wright Brothers The "rapid development of aircraft concepts" in this time period happened in Europe because of World War I. By then, Wilbur Wright was dead and Orville Wright had sold his interests, so the "inventors" were out of the picture and disgusted with the patent system.

By ignoring and/or inaccurately depicting the past, Jaffe and Lerner did not make their case about present problems being of recent origin.

III. Bad patents

The theme of "bad patents" appears frequently in Innovation and Its Discontents. For example, at page 20, The patent office has therefore found it difficult to attract and keep highly skilled individuals to do their important work. The result has been a torrent of poorly reviewed patents, pouring out onto a legal landscape in which even trivial patents can be wielded as potent litigation threats. At page 22, The patent office has been granting patents on old ideas because it has inadequate examination resources and also because it is not very good at finding information about the relevant existing technologies, particularly in new, fast-moving technological fields.

Apart from anecdotal sound bytes, Jaffe and Lerner rely on some studies to support the idea of bad patents.

Beginning at page 142, Jaffe and Lerner write:

Cecil Quillen and his associates find evidence in support of this characterization of the situation in two recent studies. They point out that while the rejection rates for US patents appear impressive at first glance, these numbers are illusive. The false impression arises from the fact that when patent applications [sic] refile their proposals in response to an initial rejection by the PTO, in many cases this is counted as a fresh application. Fully one-quarter of the seemingly new applications are actually refilled rejected filings (more technically known as continuations), which means that the success rate is considerably higher. Because of ambiguities about the exact circumstances surrounding these additional filings, it is difficult to sort out exactly what is going on. (163). But putting aside the details behind the precise calculations, it seems clear that a very large fraction of applications are ultimately issuing.

Besides grant rates, there is another form of evidence for declining US patent quality that can be derived from international comparisons. Dominique Guellec and his colleagues at the Organisation for Economic Cooperation and Development (OECD) in Paris have been integrating data on patents granted by the U.S. PTO, the European Patent Office and the Japanese Patent Office.

And at page 143:

The OECD calculations indicate that the number of important inventions originating in the United States increased by 51% between 1987 and 1998. By comparison, the number of successful applications to the USPTO by US inventors increased 105% over the same period. If the examination standards in the United States were not changing, we might expect successful applications in the United States by US inventors to grow at about the same rate as our measure of internationally important inventions originating in the United States. The fact that the growth in successful PTO applications was, instead, twice as large as the growth of international families is hard to explain in any manner other than declining standards in the US PTO, producing an ever-growing proportion of US patents the patent holders themselves did not think merited patenting elsewhere.

Of the work by Quillen and Webster, there have been challenges to the methodology which produces grant rates in excess of 100%, first by Robert Clarke (not "George" Clarke as referenced by Jaffe and Lerner), and later by this author, at 86 JPTOS 568, 88 JPTOS 239, and 88 JPTOS 726. Although Jaffe and Lerner were a bit vague about grant rate numbers in Innovation and Its Discontents, one notes a March 2006 editorial in the Wall Street Journal which was more specific: The editorial "Patently Absurd" (A14, March 1, 2006) depicts an out-of-control Patent Office approving almost 90% of submitted applications and a powerless court system constrained by a "clear and convincing evidence" standard. Of the OECD work, one notes that there can be many reasons, other than declining standards, to account for a change in a rate of growth.

In the end, the evidence for bad patents put forth by Jaffe and Lerner is less than convincing.

IV. Bad proofing

One wonders how carefully the book was proofed. For example:

The CAFC has interpreted patent law to make it easer [sic: easier] to get patents, easier to enforce patents against others, easier to get large financial awards from such enforcement, and harder for those accused of infringing patents to challenge the patents' validity. The new orientation of the patent office has combined with the courts legal interpretations to make it easier to get patents. [p. 2]

The false impression arises from the fact that when patent applications [sic] refile their proposals in response to an initial rejection by the PTO, in many cases this is counted as a fresh application. [p. 142], true opportunity to prove invalidity before open-mined [sic] re-examiner. [p. 206]

In addition to citing to "George" Clarke, Jaffe and Lerner repeatedly misspelled the name of (later reviewer) Rochelle Dreyfuss. (for example, notes 33 and 67 refer to "Dreyfus".)

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