Does the U.S. Patent & Trademark Office Grant Too Many Bad Patents?: Evidence from a Quasi-Experiment

91 Pages Posted: 18 Apr 2014 Last revised: 13 Aug 2015

See all articles by Michael Frakes

Michael Frakes

Duke University School of Law

Melissa F. Wasserman

The University of Texas at Austin - School of Law

Date Written: April 17, 2014

Abstract

Many believe the root cause of the patent system’s dysfunction is that the U.S. Patent & Trademark Office (PTO or Agency) is issuing too many invalid patents that unnecessarily drain consumer welfare. Concerns regarding the Agency’s over-granting tendencies have recently spurred the Supreme Court to take a renewed interest in substantive patent law and have driven Congress to enact the first major patent reform act in over sixty years. Policymakers, however, have been modifying the system in an effort to increase patent quality in the dark. As there exists little to no compelling empirical evidence the PTO is actually over-granting patents, lawmakers are left trying to fix the patent system without even understanding the root causes of the system’s shortcomings.

This Article begins to rectify this deficiency, advancing the conversation along two dimensions. First, it provides a novel theoretical source for a granting bias on the part of the Agency, positing that the inability of the PTO to finally reject a patent application may create an incentive for a resource-constrained Agency to allow additional patents. Second, this Article attempts to explore, through a sophisticated natural-experiment framework, whether the Agency is in fact acting on this incentive and over-granting patents. Our findings suggest that the PTO is biased towards allowing patents. Moreover, our results suggest the PTO is targeting its over-granting tendencies towards those patents from which it stands to benefit the most through allowing. Our findings not only provide policymakers with much needed evidence that the PTO is indeed granting too many invalid patents but also provide policymakers with the first empirical evidence that the Agency’s workload woes are biasing the PTO towards allowing patents. Our results also suggest that the literature has overlooked a substantial source of Agency bias and hence recent fixes to improve patent quality will not achieve their desired outcome of extinguishing the PTO’s over-granting proclivities.

Keywords: Patents, Patent and Trademark Office, Overgranting, Bias, Continuations, RCEs

Suggested Citation

Frakes, Michael and Wasserman, Melissa F., Does the U.S. Patent & Trademark Office Grant Too Many Bad Patents?: Evidence from a Quasi-Experiment (April 17, 2014). Stanford Law Review, Vol. 67, 2015; Illinois Program in Law, Behavior and Social Science Paper No. LBSS14-32; Illinois Public Law Research Paper No. 14-36. Available at SSRN: https://ssrn.com/abstract=2426321

Michael Frakes

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Melissa F. Wasserman (Contact Author)

The University of Texas at Austin - School of Law ( email )

727 East Dean Keeton St
Austin, TX 78705
United States

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