PATENTS IN THE KNOWLEDGE-BASED ECONOMY
Wesley M. Cohen and Stephen A. Merrill, Editors
THE NATIONAL ACADEMIES PRESS
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NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance.
This study was supported by Contract No. NASW-99037, Task Order 103, between the National Academy of Sciences and the National Aeronautics and Space Administration, the Department of Commerce, Andrew W. Mellon Foundation, Center for Public Domain, Pharmacia Corporation, Merck & Company, Procter & Gamble, and IBM. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project.
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The cover design incorporates original illustration from the following U.S. patents issued over a nearly 160-year period:
U.S. Patent 6,506,554; Core structure of gp41 from the HIV envelope glycoprotein; Chan, David C. (Brookline, MA); Fass, Deborah (Cambridge, MA); Lu, Min (New York, NY); Berger, James M., (Cambridge, MA); Kim, Peter S. (Lexington, MA); Granted January 14, 2003.
U.S. Patent 6,423,583; Methodology for electrically induced selective breakdown of nanotubes; Avouris, Phaedon (Yorktown Heights, NY); Collins, Philip G. (Ossining, NY); Martel, Richard (Peekskill, NY); Granted July 23, 2003.
U.S. Patent 6,313,562; Microelectromechanical ratcheting apparatus; Barnes, Stephen M. (Albuquerque, NM); Miller, Samuel L. (Albuquerque, NM); Jensen, Brian D. (Albuquerque, NM); Rodgers, M. Steven (Albuquerque, NM); Burg, Michael S., (Albuquerque, NM); Granted November 6, 2001.
U.S. Patent 821,393; Flying machine; Wright , Orville (Dayton, OH) and Wright, Wilbur (Dayton, OH); Granted May 22, 1906.
U.S. Patent 223,898; Electric lamp; Edison, Thomas A. (Menlo Park, NJ); Granted January 27, 1880.
U.S. Patent 4750; Improvement in sewing machines; Howe, Jr., Elias, (Cambridge, MA); Granted September 10, 1846.
THE NATIONAL ACADEMIES
Advisers to the Nation on Science, Engineering, and Medicine
The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences.
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Committee on Intellectual Property Rights in the Knowledge-Based Economy
Board on Science, Technology, and Economic Policy
National Research Council
Richard Levin (Co-chair) President
Yale University
Mark Myers (Co-chair) Visiting Executive Professor of Management
The Wharton School University of Pennsylvania
John Barton George E. Osborne Professor of Law
Stanford University
Robert Blackburn Vice President and Chief Patent Counsel
Chiron Corporation and
Distinguished Scholar
Berkeley Center for Law and Technology
Wesley Cohen Professor of Economics and Management
Fuqua School of Business Duke University
Frank Collins Senior Vice President for Research
ZymoGenetics
Rochelle Dreyfuss Pauline Newman Professor of Law
New York University
Bronwyn Hall Professor of Economics
University of California, Berkeley
Eugene Lynch Judge (retired)
Federal District Court of Northern California
Daniel McCurdy President & CEO
ThinkFire, Ltd.
Gerald J. Mossinghoff Senior Counsel
Oblon, Spivak, McClelland, Maier & Neustadt, P.C.
Gail Naughton Dean, School of Business
San Diego State University
Richard Nelson George Blumenthal Professor of International and Public Affairs
Columbia University
James Pooley Partner
Milbank, Tweed, Hadley & McCloy LLP
William Raduchel
Great Falls, Virginia
Pamela Samuelson Professor of Law and Information Management
University of California, Berkeley
LIAISONS WITH OTHER NRC PROGRAMS
Science, Technology, and Law Program
David Korn Senior Vice President for Biomedical and Health Science
Association of American Medical Colleges
National Cancer Policy Board
Pilar Ossorio Assistant Professor of Law and Medical Affairs
University of Wisconsin Law School
STAFF
Stephen A. Merrill Project Director
Craig Schultz Research Associate
Camille Collett Project Associate (until September 2002)
George Elliott Commerce Science and Technology Fellow (until September 2001)
Board on Science, Technology, and Economic Policy
National Research Council
Chairman
Dale Jorgenson Samuel W. Morris University Professor
Harvard University
Vice Chairman
Bill Spencer Chairman Emeritus
International Sematech
M. Kathy Behrens Managing Partner
RS Investments
Bronwyn Hall Professor of Economics
University of California, Berkeley
James Heckman Henry Schultz Distinguished Service Professor of Economics
University of Chicago
Ralph Landau Senior Fellow
Stanford Institute for Economic Policy Research Stanford University
Richard Levin President
Yale University
David Morgenthaler Founding Partner
Morgenthaler Ventures
Mark Myers Visiting Executive Professor of Management
The Wharton School University of Pennsylvania
Roger Noll Morris M. Doyle Centennial Professor of Economics and Director,
Public Policy Program Stanford University
Edward E. Penhoet Director,
Science and Higher Education Programs Gordon and Betty Moore Foundation
William Raduchel
Great Falls, Virginia
Alan Wm. Wolff Managing Partner
Dewey Ballantine, DC
Staff
Stephen A. Merrill Executive Director
Charles Wessner Deputy Director
Russell Moy Senior Program Officer
Sujai Shivakumar Program Officer
Craig Schultz Research Associate
Tabitha Benney Program Associate
David Dierksheide Program Associate
Chris Hayter Program Associate
Preface
Over the past 25 years a series of court decisions, legislative and administrative actions, and international agreements has extended and strengthened intellectual property rights (IPRs) in the United States and elsewhere. In turn these policy changes contributed to more zealous acquisition and vigorous exercise and defense of IPRs. Curiosity about the effects of these developments on innovation and economic performance led the National Academies’ Board on Science, Technology, and Economic Policy (STEP) in 2000 to embark on an extended inquiry that encompassed workshops, conferences, commissioned research, and committee deliberations focused on the operation of the patent system, especially in two areas, information technology (IT) and biotechnology.
The need for specialized legal and technical expertise to carry out a study leading to policy recommendations in these areas led the STEP Board to propose to the Academies the creation of the Committee on Intellectual Property Rights in the Knowledge-Based Economy, composed of economists specializing in intellectual property and technology development, legal scholars, practitioners from corporations and private law practice, a former federal judge and a former Commissioner of the U.S. Patent and Trademark Office (USPTO), biomedical scientists, and managers of research and business development in the IT sector. We were asked to co-chair this committee, whose report, A Patent System for the 21st Century, accompanies this volume.
At the same time the need for additional analysis and data to inform recommendations in these areas led the STEP Board to commission eight research projects. With one additional chapter, the results of this work comprise this volume, edited by Wesley Cohen, professor of economics and management at Duke and a member of the study committee, and Stephen Merrill, executive director of the STEP program and director of the project.
The process of selecting the topics and authors of this collection was unusual for STEP and for the Academies. We decided to solicit proposals via a formal
request for proposals that in March 2000 was widely circulated to the academic, consulting, and legal communities. The solicitation specified four policy-related areas of interest—the patent examination process and its bearing on patent quality, the incidence of patent litigation and its costs, and patent acquisition and use in two technologies—software and biotechnology. It further stipulated that the work involve original empirical research or data analysis, that it fall within a narrow range of costs, and that it be completed within approximately12 months.
We received more than 80 proposals, necessitating a more elaborate review and selection process than we had originally planned. After an initial screening by staff we recruited a group of economists and legal scholars to help review more than 60 proposals. The reviewers included Bronwyn Hall, Berkeley economist and member of the STEP Board, Wesley Cohen, then at Carnegie Mellon University; John Barton, Stanford professor of law; and Robert Merges, professor of intellectual property law at Boalt Hall, Berkeley. Each proposal was read by at least one economist and one legal scholar. Three reviewers recused themselves from considering proposals on which they were listed as principal or co-investigator. The evaluation criteria included 1) policy relevance and conformity to the issues discussed in the request for proposals, 2) quality of issue framing and methodology, and 3) feasibility of the research. As co-leaders of the project for the STEP Board, we assumed responsibility for the final selection from among 25 highly ranked proposals. Although the final selection included proposals by Hall and Cohen, other proposals by these two investigators were not selected. Negotiations with individuals and their institutions consumed several weeks so that the work commenced in the late summer of 2000.
Preliminary results were presented at a Washington conference in October 2001, where attorneys, judges and former PTO officials, and corporate managers were able to comment on the methodology and the findings. Audio tracks, slide presentations, and transcripts of this and two other STEP conferences are available on a CD accompanying this volume. Following the meeting, papers were reviewed by the editors and in most cases by the external reviewers listed below and were in all cases revised before publication in this volume. In the meantime they were available at various stages on the project website and to the Committee on Intellectual Property Rights in the Knowledge-Based Economy. The Committee has found them useful and in a few cases directly relevant to its findings and recommendations but in no way has been constrained from considering other research and commentary.
The generosity of two foundations made the research element of the project possible. The Andrew W. Mellon Foundation supported the February 2000 STEP conference, Intellectual Property Rights: How Far Should They Be Extended?, at which many of these ideas germinated as well as the subsequent preparation of the papers and their publication. In addition to supporting the research, The Center
for the Public Domain enabled us to develop a dedicated website that has been indispensable to our efforts to keep a wide community of interested people informed of our progress and enabled them to express their views. Naturally, most of the contributions to this volume represent parts of larger and longer research projects supported by other sources, including the National Science Foundation, Brookings Institution, and the Wharton School’s Reginald H. Jones Center for Management Policy, Strategy, and Organization. These organizations’ sponsorship of work in this important area deserves to be highlighted and commended.
Two contributions to this volume received no funding from the STEP Board. Jonathan King’s chapter, although selected as a result of the solicitation and review described above, is part of important ongoing analytical work on intellectual property policy at the Economic Research Service of the U.S. Department of Agriculture. We are grateful to the Service for making it available to us. The chapter exploring the theoretical benefits of a patent opposition process by Rich-ard Levin and Jonathan Levin evolved independently of the STEP project but is included here because of its close relevance to the empirical comparison of European oppositions and U.S. patent re-examinations by Graham, Harhoff, Hall, and Mowery. Both papers were nevertheless subject to the Academy review process.
Individual chapters in this volume have been reviewed in draft form by people chosen for their technical expertise, in accordance with procedures approved by the National Research Council’s (NRC) Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality. The review comments and draft manuscript remain confidential to protect the integrity of the process. We wish to thank the following individuals for their review of selected papers: Mildred Cho, Stanford University; Robert Cook-Deegan, Duke University; Jeffrey Kushan, Sidley, Austin, Brown, and Wood LLC; Joshua Lerner, Harvard Business School; Arti Rai, University of Pennsylvania Law School; F.M Scherer, Harvard University (emeritus); and Brian Wright, University of California, Berkeley.
Although the reviewers listed above have provided constructive comments and suggestions, they were not asked to endorse the content of the papers. Responsibility for the final content of the papers rests with the authors, and statements made in them do not necessarily represent positions of the National Research Council or the Committee.
Finally, we want to thank all of the authors and the editors, who worked successfully to produce these results under rather severe constraints of time and limited budgets. Their collective work not only aided the Committee but, more importantly, advances our common knowledge of the patent system and demonstrates the value of continuing efforts to understand its operation and effects. We
Contents
Introduction |
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Are All Patent Examiners Equal? Examiners, Patent Characteristics, and Litigation Outcomes |
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Patent Examination Procedures and Patent Quality |
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Patent Quality Control: A Comparison of U.S. Patent Re-examinations and European Patent Oppositions |
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Benefits and Costs of an Opposition Process |
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Enforcement of Patent Rights in the United States |
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Patent Litigation in the U.S. Semiconductor Industry |
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Intellectual Property Protection in the U.S. Software Industry |
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Internet Business Method Patents |
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Effects of Research Tool Patents and Licensing on Biomedical Innovation |