The Non-Obvious Problem: How the Indeterminate Non-Obvious Standard Produces Excessive Patent Grants

Abstract

The dominant current perception in patent law is that the core requirement of nonobviousness is applied too leniently, resulting in a proliferation of patents on trivial inventions that actually retard technological innovation in the long run. This Article reveals that the common wisdom is only half correct. The nonobviousness standard is not too low, but both too high and too low. It is indeterminate. Three principal factors produce nonobviousness indeterminacy: a failure to identify the quantum of innovation necessary to satisfy the standard, a failure to define the baseline level of ordinary skill against which to measure an innovation, and the epistemic infeasibility of requiring a technologically lay decision maker to judge from the perspective of a more highly trained and educated person of ordinary skill in the art.

This Article introduces a mathematical model of innovation and patenting to analyze the effects of nonobviousness indeterminacy. Based on the model, indeterminacy in nonobviousness decisions has several unexpected consequences. First, indeterminacy results in an excessive total number of patent grants, and in many patent grants on obvious inventions. Second, indeterminacy leads to too many patent applications on obvious inventions and too few applications on non-obvious inventions. Third, uncertainty causes more patent litigation than is optimal and leads to incorrect litigation outcomes. Fourth, indeterminacy leads to inefficiently low incentives to research and develop great advances, and excessively high incentives to invest in mundane innovation. All of these effects occur even assuming that decision makers apply the nonobviousness standard correctly on average.

That many of the current patent system ills may result from indeterminacy rather than from too low a nonobviousness standard has significant consequences for the patent system and for current recommendations for reform. Perhaps most critically, arguments for raising (or lowering) the nonobviousness threshold, a mainstay of recent legal and economic analysis, may be somewhat inapposite, unless and until we can establish greater specificity in the standard. This Article concludes with several recommendations for improving determinacy in nonobviousness decisions, including differentiating nonobviousness analysis and developing a substantive nonobviousness standard.

Keywords: patent, non-obvious, nonobviousness, indeterminacy, federal circuit, PHOSITA

JEL Classification: O31, O33, O34