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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