Working Paper: CEPR ID: DP15301
Authors: Mark Schankerman; Florian Schuett
Abstract: Critics claim that patent screening is ineffective, granting low-quality patents that impose unnecessary social costs. We develop an integrated framework, involving patent office examination, fees, and endogenous validity challenges in the courts, to study patent screening both theoretically and quantitatively. In our model, some inventions require the patent incentive while others do not, and asymmetric information creates a need for screening. We show that the endogeneity of challenges implies that courts, even if perfect, cannot solve the screening problem. Simulations of the model, calibrated on U.S. data, indicate that screening is highly imperfect, with almost half of all patents issued on inventions that do not require the patent incentive. While we find that the current patent system generates positive social value, intensifying examination would yield large welfare gains. The social value of the patent system would also be larger if complemented by antitrust limits on licensing.
Keywords: innovation; patent quality; screening; litigation; courts; patent fees; licensing
JEL Codes: D82; K41; L24; O31; O34; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| current patent screening system is highly imperfect (O38) | almost half of all patents issued for inventions do not require a patent incentive (O31) |
| screening problem persists even with perfect courts (K40) | litigation costs prevent all low-type patents from being challenged (K41) |
| current system issues approximately 60% of patents for low-type inventions (O34) | leading to unnecessary social costs (D61) |
| removal of negative fixed fees (G21) | potentially leading to a 36% welfare gain (D69) |
| introduction of PTAB (Y20) | net positive welfare effect (D69) |
| overall impact on social value remains ambiguous (F69) | due to trade-offs involved in litigation costs and challenge credibility (K41) |
| intensifying examination (Y50) | significant welfare gains (D69) |
| enhancing examination intensity (C91) | increase the share of high-type patents among grants from 56% to 83% (O38) |