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					A Patent System for the 21st Century
                          Richard Levin
                          Yale University

Committee on Intellectual Property Rights in the Knowledge-Based Economy
          Board on Science, Technology, and Economic Policy
                         Policy and Global Affairs
                        National Research Council

  Recent evolution of the U.S. Patent System
• Patenting extended to
   – new technology (biotechnology)
   – technologies previously without or subject to different
     forms of IP protection (software)
   – upstream scientific research tools, materials, and
• Emergence of new players (universities and public
  research institutions)
• Position of patent holders strengthened vis-à-vis
  alleged infringers
• Antitrust constraints on patent use relaxed
    Strains on the patent system
• Patents are being more zealously sought and
  aggressively enforced
• Volume of patent applications to the USPTO
  threatens to overwhelm the examination corps,
  degrading the quality of their work or creating a
  case backlog or both
• Costs of acquiring and defending patents and
  securing licenses to patented technology are rising
• Benefits of patents in stimulating innovation
  varies across industries and technologies, but these
  differences have not been analyzed

         Committee Composition
    Patent policy will benefit from the insights of
    economists, scientists, engineers, inventors, business
    managers, and legal scholars, as well as practioners.
•   Technical experience spans biotechnology,
    pharmaceuticals, chemicals, bioengineering, software,
    microelectronics, and telecommunications
•   Judicial and executive branch experience
•   Three members recently involved in the management
    of entrepreneurial startup companies
•   Three patent holders

 Research Supported by the Project
• Patent quality and examination (two
• Patent challenges in Europe and the United
  States (two studies)
• Litigation (two studies)
• Patenting software
• Patenting internet business methods
• Licensing in biotechnology
          Subjects Excluded

• IPRs in LDCs
• USPTO management and personnel
• Fee structure
• Industry-specific provisions (Hatch-
  Waxman Act)
• Relationship to antitrust policy (FTC)

        Seven Criteria for Evaluating
             the Patent System
1. The patent system should accommodate new
2. The system should reward only those inventions that
   meet the statutory tests of novelty and utility, that would
   not at the same time they were made be obvious to
   people skilled in the respective technologies, and that are
   adequately described.
3. The patent system should serve its second function of
   disseminating technical information.
4. Administrative and judicial decisions should be timely
   and the costs associated with them should be reasonable
   and proportionate.

     Seven Criteria for Evaluating
     the Patent System, Continued
5. Access to patented technologies is important in
   research and in the development of cumulative
   technologies, where one advance builds upon one
   or several previous advances.
6. Greater integration of or reciprocity among the
   three major patents systems would reduce public
   and private transaction costs, facilitating trade,
   investment, and innovation.
7. There should be a level playing field, with all
   intellectual property rights holders who are
   similarly situated enjoying the same benefits
   while being subject to the same obligations.
     Seven recommendations to improve
              the patent system

1. Preserve an open-ended, unitary, flexible patent system
2. Reinvigorate the nonobviousness standard
3. Institute an Open Review procedure
4. Strengthen USPTO capabilities
5. Shield some research uses of patented inventions from
   liability for infringement
6. Modify or remove the subjective elements of litigation
7. Reduce redundancies and inconsistencies among
   national patent systems

      1) Preserve an Open-ended, Unitary,
             Flexible Patent System
    The USPTO and the Federal Circuit should preserve
    flexibility to deal with new technologies and remain open
    to expert advice from all sources
    For example, via:
•   Examination guidelines developed through a public
•   Amicus briefs
•   Exchanges of judges with other courts
•   Judicial appointments from a variety of backgrounds

  2) Reinvigorate the Non-obviousness

• Assiduously observe the nonobvious standard
• Develop an open review procedure to determine
  the state of knowledge in fields (e.g., business
  methods) where general knowledge may not be
  not published
• Revise Federal Circuit ruling on relevance of
  obviousness to gene sequence patents

    3) Institute an Open Review Procedure
•   Third parties may challenge a patent under any standard
    in a USPTO administrative proceeding conducted by an
    Administrative Patent Judge
•   Outcome: confirmation, cancellation, or amendment of
    any claim
•   District Courts may refer validity questions in
    infringement suits to Open Review
•   Appeal to the Board of Patent Appeals, and then to
    Federal Circuit

  3) Institute an Open Review Procedure
• Improve the quality of commercially significant
• Faster, cheaper resolution of validity issues
• Focus judges and juries on infringement issues

• Design features to make OR more attractive than
• Rules limiting duration of proceedings to one year

 4) Strengthen USPTO Capabilities

• Hire and train additional examiners
• Fully implement an electronic processing capability
• Create a strong multidisciplinary analytical capability to
   – provide early warning of new patentable technologies
   – conduct reliable, consistent, reviews of office and examiner
     performance in improving patent quality
   – analyze management issues and proposed remedies
• Increase USPTO budget to accomplish these objectives
  and finance an Open Review procedure

 5) Shield Some Research from Patent
             Infringement Liability
… in light of the Federal Circuit’s decision in Madey v.
• Legislation preserving ability to experiment on an
  invention and with inventions in non-commercial
  research, but preserving incentives to develop research
• Administrative action shifting infringement liability
  from some or all publicly funded research to the
  federal government
 6) Modify or remove the subjective
           elements of litigation
  To increase predictability of patent litigation
outcomes and reduce expensive discovery, modify or
eliminate litigation issues requiring an assessment of a
party’s state of mind:
 – Issue raised by patent holders
    • Willful infringement
 – Issues raised by accused infringers
    • Failure to disclose best mode for
      implementation of invention
    • Intentional failure of an inventor or attorney to
      disclose prior art (inequitable conduct)
7) Reduce redundancies and inconsistencies
      among national patent systems
   US, Europe, and Japan should further harmonize patent
   examination procedures and standards, moving toward
   mutual recognition of results
 • Some issues for harmonization:
    – Application priority (first-inventor-to-file)
    – Other countries adopt a grace period for filing an application after
    – Drop “Best mode” requirement of US law
    – Eliminate U.S. exception to the rule of publication of patent
      applications after 18 months
   Pursue on a trilateral or bilateral basis if multilateral
   negotiations do not progress


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