Irrational Ignorance at the Patent Office

Posted: 13 Nov 2018 Last revised: 5 Dec 2018

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: November 13, 2018

Abstract

There is widespread belief that the Patent Office issues too many bad patents that impose significant harms on society. At first glance, the solution to the patent quality crisis seems straightforward: give patent examiners more time to review applications so they grant patents only to those inventions that deserve them. Yet the answer to the harms of invalid patents may not be that easy. It is possible that the Patent Office is, as Mark Lemley famously wrote, “rationally ignorant.” In Rational Ignorance at the Patent Office, Lemley argued that because so few patents are economically significant, it makes sense to rely upon litigation to make detailed validity determinations in those rare cases rather than increase the expenses associated with conducting a more thorough review of all patent applications. He supported his thesis with a cost-benefit calculation in which he concluded that the costs of giving examiners more time outweighs the benefits of doing so.

Given the import of the rational ignorance concept to the debate on how best to address bad patents, the time is ripe to revisit this discussion. This Article seeks to conduct a similar cost-benefit analysis to the one that Lemley attempted nearly fifteen years ago. In doing so, we employ new and rich sources of data along with sophisticated empirical techniques to form novel, empirically driven estimates of the relationships that Lemley was forced, given the dearth of empirical evidence at his time, to assume in his own analysis. Armed with these new estimates, this Article demonstrates that the savings in future litigation costs associated with giving examiners additional time per application alone more than outweigh the costs of increasing examiner time allocations. Thus, we conclude the opposite of Lemley: society would be better off investing more resources in the Agency to improve patent quality than relying upon ex-post litigation to weed out invalid patents. Given its current level of resources, the Patent Office is not being “rationally ignorant” but, instead, irrationally ignorant.

Keywords: Patent Office, cost-benefit analysis, ex ante versus ex post, rational ignorance, invalid patents, patent litigation

JEL Classification: KO, O30, O38

Suggested Citation

Frakes, Michael and Wasserman, Melissa F., Irrational Ignorance at the Patent Office (November 13, 2018). Vanderbilt Law Review, Vol. 72, 2019, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3284109

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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