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19 Berkeley Tech. L.J. 1017 (2004)
Patent System Reform: Economic Analysis and Critique

handle is hein.journals/berktech19 and id is 1039 raw text is: PATENT SYSTEM REFORM: ECONOMIC ANALYSIS AND CRITIQUE By Carl Shapirot ABSTRACT Considerable recent research suggests that the U.S. patent system is out of balance: the PTO's typically brief review process is allowing too many questionable patents to be issued that would likely be found in- valid with more thorough review. When patents are issued for inventions that are not truly novel, or are obvious, consumers are harmed, competi- tion is restricted, and innovation is hindered-all contrary to the underly- ing purposes of the patent system. Critics of the current system claim that questionable patents are indeed having significant, adverse effects on consumers, competition, and innovation. The Federal Trade Commission and the National Academies of Science recently issued extensive reports suggesting that major reforms to the U.S. patent system are needed to re- duce these adverse effects. This Article reviews some of the evidence on the prevalence of such questionable patents, diagnoses their commercial impact, and then critiques a number of the FTC and NAS patent reform proposals. A strong economic case can be made for proposals to strengthen the PTO to improve the speed and accuracy of the patent ex- amination process; to publish all patent applications after eighteen months; to establish a new administrative procedure to allow post-grant review of patents; to strengthen prior user rights; and to restrict the abil- ity of patent owners to seek treble damages for willful infringement. TABLE OF CONTENTS 1. IN TRO DU CTIO N ..................................................................................................... 10 18 II. THE ROLE OF THE FTC-PATENT POLICY AND COMPETITION ADVOCACY .......... 1021 III. PATENT REFORM IS PREFERABLE TO COMPULSORY LICENSING ........................... 1023 IV. EVIDENCE THAT PATENT REFORM IS NEEDED ...................................................... 1027 V. WHAT IS THE COMMERCIAL IMPACT OF QUESTIONABLE PATENTS? ..................... 1031 VI. FTC AND NAS PROPOSALS REGARDING PATENT PROSECUTION .......................... 1035 A. Provide More Funds to the USPTO (FTC Recommendation 4, NAS R ecom m endation 4) .................................................................................... 1035 B. Reforming the Operations of the USPTO (FTC Recommendation 5, NAS R ecom m endation 4) .................................................................................... 1037 © 2004 Carl Shapiro t Transamerica Professor of Business Strategy, Haas School of Business, Univer- sity of California at Berkeley. I thank Joseph Farrell for comments on an earlier draft.

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