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Separating patent wheat from chaff: Would the US benefit from adopting patent post-grant review?

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  • Graham, Stuart J.H.
  • Harhoff, Dietmar

Abstract

This article assesses the impact in the US of adopting a patent post-grant review (PGR) procedure similar to one provided in the America Invents Act (AIA) of 2011. We employ novel methods for matching US patents to their European counterparts to find that opposition rates are about three times higher among European Patent Office (EPO) equivalents of US litigated patents as against control-group (unlitigated) patents. Contingent on reaching a final judgment in EPO post-grant opposition, we find that about 70% of these equivalents have challenged claims that are either completely revoked or amended. Using our empirical findings to inform a series of welfare estimates, we calculate benefit-to-cost ratios that the US may expect from implementing PGR in the range of 4:1–10:1. We also discover that these large social benefits result primarily from eliminating unwarranted market power in the current stock of granted patents, and much less so from litigation cost savings per se. Our results provide evidence that the US may benefit substantially from adopting the AIA post-grant review, but only provided that costs are controlled and that administration and appeals are not allowed to become too costly.

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  • Graham, Stuart J.H. & Harhoff, Dietmar, 2014. "Separating patent wheat from chaff: Would the US benefit from adopting patent post-grant review?," Research Policy, Elsevier, vol. 43(9), pages 1649-1659.
    • Handle: RePEc:eee:respol:v:43:y:2014:i:9:p:1649-1659
    DOI: 10.1016/j.respol.2014.07.002
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    1. Lanjouw, Jean O & Schankerman, Mark, 2001. "Characteristics of Patent Litigation: A Window on Competition," RAND Journal of Economics, The RAND Corporation, vol. 32(1), pages 129-151, Spring.
    2. Graham, Stuart J.H. & Hall, Bronwyn H. & Harhoff, Dietmar & Mowery, David C., 2002. "Post-Issue Patent “Quality Control:” A Comparative Study of US Patent Re-examinations and European Patent Oppositions," Department of Economics, Working Paper Series qt7931q79x, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    3. Bronwyn H. Hall & Stuart Graham & Dietmar Harhoff & David C. Mowery, 2004. "Prospects for Improving US Patent Quality via Postgrant Opposition," NBER Chapters, in: Innovation Policy and the Economy, Volume 4, pages 115-144, National Bureau of Economic Research, Inc.
    4. Richard Gilbert & Carl Shapiro, 1990. "Optimal Patent Length and Breadth," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 106-112, Spring.
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    6. Harhoff, Dietmar & Scherer, Frederic M. & Vopel, Katrin, 2003. "Citations, family size, opposition and the value of patent rights," Research Policy, Elsevier, vol. 32(8), pages 1343-1363, September.
    7. Lanjouw, Jean O & Schankerman, Mark, 2004. "Protecting Intellectual Property Rights: Are Small Firms Handicapped?," Journal of Law and Economics, University of Chicago Press, vol. 47(1), pages 45-74, April.
    8. Harhoff, Dietmar & Reitzig, Markus, 2004. "Determinants of opposition against EPO patent grants--the case of biotechnology and pharmaceuticals," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 443-480, April.
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    Cited by:

    1. Nagler, Markus & Sorg, Stefan, 2020. "The disciplinary effect of post-grant review – Causal evidence from European patent opposition," Research Policy, Elsevier, vol. 49(3).
    2. Arianna Martinelli & Julia Mazzei, 2022. "Death squad or quality improvement? The impact of introducing post-grant review on U.S. patent quality," LEM Papers Series 2022/34, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Nagler, Markus & Sorg, Stefan, 2019. "The Disciplinary Effect of Post-Grant Review," Rationality and Competition Discussion Paper Series 155, CRC TRR 190 Rationality and Competition.
    4. Dietmar Harhoff & Georg von Graevenitz & Stefan Wagner, 2016. "Conflict Resolution, Public Goods, and Patent Thickets," Management Science, INFORMS, vol. 62(3), pages 704-721, March.
    5. Fabian Gaessler & Dietmar Harhoff & Stefan Sorg & Georg von Graevenitz, 2024. "Patents, Freedom to Operate, and Follow-on Innovation: Evidence from Post-Grant Opposition," Rationality and Competition Discussion Paper Series 494, CRC TRR 190 Rationality and Competition.
    6. Kruppert, Rabea, 2017. "Dispute the patent, short the stock: Empirical analysis of a new hedge fund strategy," International Review of Law and Economics, Elsevier, vol. 50(C), pages 25-35.
    7. Talia Bar & Brendan Costello, 2017. "Patent Validity Challenges and The America Invents Act," Working papers 2017-21, University of Connecticut, Department of Economics, revised May 2018.
    8. Gaessler, Fabian & Harhoff, Dietmar & Sorg, Stefan, 2019. "Bargaining Failure and Freedom to Operate: Re-evaluating the Effect of Patents on Cumulative Innovation," Rationality and Competition Discussion Paper Series 220, CRC TRR 190 Rationality and Competition.
    9. Joachim Henkel & Hans Zischka, 2019. "How many patents are truly valid? Extent, causes, and remedies for latent patent invalidity," European Journal of Law and Economics, Springer, vol. 48(2), pages 195-239, October.
    10. Arianna Martinelli & Julia Mazzei & Daniele Moschella, 2022. "Patent disputes as emerging barriers to technology entry? Empirical evidence from patent opposition," LEM Papers Series 2022/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    11. Karin Beukel & Minyuan Zhao, 2018. "IP litigation is local, but those who litigate are global," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 53-70, June.

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