Patent Inflation

by Stephan Kinsella on January 23, 2012

Interesting argument from law professor Jonathan Masur, in his paper Patent Inflation:

Abstract:
For more than two decades, the Patent and Trademark Office (PTO) and the Federal Circuit have exercised nearly complete institutional control over the patent system. Yet in recent years their stewardship has been widely criticized, largely on the basis of two particular failings. First, the PTO grants significant numbers of invalid patents, patents that impose substantial costs on innovative firms. And second, over time the Federal Circuit has steadily loosened the rules governing patentability, allowing ever more patents over a greater range of inventions. This Article argues that both of these modern trends may be attributable in whole or in part to the asymmetric institutional relationship between the PTO and the Federal Circuit. If a patent applicant is denied a patent by the PTO, she can appeal that denial to the Federal Circuit. However, if the PTO grants the patent, no other party has the right to appeal. Accordingly, the PTO can avoid appeals and reversals, both of which are costly in monetary and reputational terms, simply by granting any patent that the Federal Circuit might plausibly allow. Because the PTO will grant nearly any plausible patent, the vast majority of rejected applications that are appealed to the Federal Circuit will concern boundary-pushing inventions that are unpatentable under current law. Occasionally, a particularly patent-friendly panel of Federal Circuit judges will elect to reverse the PTO and grant a patent that the Agency has denied. The Federal Circuit’s decision will create a new, inflationary precedent. The boundaries of patentability will expand slightly, as this new precedent exerts influence on the other circuit judges. And as the Federal Circuit’s conception of what may be patented expands, the PTO will similarly inflate its own standards in order to maintain an adequate margin for error and avoid denying a patent that the Federal Circuit is likely to grant on appeal. Patent law will thus be subject to a natural inflationary pressure.

Seems plausible to me. And not completely dissimilar to the way the FDA has an incentive to deny approval to new drugs if there is any chance it might be harmful: people who die from an approved drug give the FDA bad press. But you never see the victims of denials of a given life-saving drug. Masur quotes one scholar with a somewhat related observation about the FDA:

FDA regulators care about their own professional reputations and the reputation of the agency because these reputations may influence their career prospects in and out of government.

Update: Masnick’s post.

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