'Loser Pays' in Patent Examination

Abstract

Many scholars and practitioners believe there are too many “weak” patents — those that should not have issued but somehow get approved by the U.S. Patent and Trademark Office (PTO). To the extent they exist, such patents unnecessarily tax real innovation and generate welfare losses for society.

Some commentators have focused on the PTO’s failure to exclude weak patents, or the damage caused by these patents in litigation, often by patent trolls. But this scholarly discussion misses the point. The present Article argues that weak patents largely stem from a pricing problem: namely, a patent applicant pays higher patent fees when she succeeds (i.e., receives PTO approval) than when she fails (i.e., is rejected by the PTO).

The Article explains why such pricing is precisely backwards, penalizing good patent applications instead of bad ones. It then proposes a novel remedy: import “loser pays” concepts from litigation into patent examination. By forcing unsuccessful patent applicants to pay more, a loser pays system disincentivizes weak applications and improves application quality.

The Article also describes how a loser pays system could lower patent examiners’ burden and discourage continuation applications, both of which slow down patent examination. In doing so, the Article sketches out a new patent system that is at once more efficient and more effective in weeding out weak patents.

Keywords: fee shifting, loser pays, weak patents, bad patents, patent examination, patent prosecution, patent trolls, NPEs

JEL Classification: Q31, Q34