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Study Concludes U.S. Would Benefit From EPO-Style Opposition

By Peter Zura

Professors Stuart J.H. Graham and Dietmar Harhoff published a paper recently that analyzed the potential effects of a post-grant review procedure (opposition) in the U.S. One particularly interesting aspect of their paper is the comparison of litigated U.S. patents versus their EU counterparts. The paper found that:

? EPO opposition rates of the twins of U.S. litigated patents are about 3 times higher than for non-litigated patents (20% versus 6%). Not surprisingly, EPO applications relating to litigated patents are broader in scope, have more claims, contain more references to earlier patents, and receive more citations from subsequent patents;

? On the opposition outcomes, between 22.6 and 24.4% of litigated patents are revoked at the EPO. This is lower compared to the 27.6-39.5% of non-litigated patents. Surprisingly, approximately 14% of oppositions are abandoned by the owner.

? EPO applications that directly relate to U.S. litigated patents have a higher grant rate (80.3%) than equivalents of non-litigated patents (67.9%); and

? The European model tends to exclude equivalents of litigated U.S. patents due to an increased likelihood of opposition, and not by virtue of lower grant rates, or less favorable opposition outcomes;

Professors Graham and Harhoff then performed certain societal "welfare calculations" to conclude that instituting a post-grant review (PGR) system in the U.S could have quite a significant impact on social welfare, provided that the cost of the PGR system is kept reasonably low (<$500k):

[O]ur analysis and welfare calculations suggest that the benefit from PGR review in terms of social welfare per year?when put in dollar terms?could be nearly $25 billion. The main parameter affecting this estimate is not savings on the cost of litigation, but the social costs of currently unlitigated patents that bestow excessive market power on some applicants. This market power either allows the patentee to extort licensing fees, or force competitors to invent around the respective patent. But even when we draw a conservative scenario, and assume a very low social cost figure of $1 million on average for these patents, our benefit-cost ratios still indicate that the benefits of such an institution compares very favorably to its costs.

For more information, read/download "Separating Patent Wheat from Chaff: Would the U.S. Benefit from Adopting a Patent Post-Grant Review? " (link)

Full post as published by Two-Seventy-One Patent Blog on October 26, 2009 (boomark / email).