Nice Jotwell review of former Petrie-Flom Fellows’ article “Does Agency Funding Affect Decisionmaking?: An Empirical Assessment of the PTO’s Granting Patterns”

Over at Jotwell, Michael Carroll (American) has a very nice review of a new paper that is a collaboration between two of our former fellows at the Petrie-Flom Center, Michael Frakes (Cornell) and Melissa Wasserman (Illinois).

Their article is Does Agency Funding Affect Decisionmaking?: An Empirical Assessment of the PTO’s Granting Patterns, 66 Vand. L. Rev. (forthcoming, 2013).

Here is the abstract of that paper:

If the PTO’s budgetary structure on the most important decision made by the agency: whether or not to grant a patent. It begins by setting forth a theoretical model predicting that certain elements of the PTO’s fee schedule, such as issuance and maintenance fees, which are only collected in the event that patents issue, create incentives for the PTO to grant additional patents. Using a rich database of patent grant rates, we then empirically test the predictions of the theoretical model by comparing the agency’s granting patterns before and after 1991, the period at which the agency became almost exclusively funded by user fees.

Our findings suggest that the agency’s fee structure biases the PTO towards granting patents. Moreover, we find the distortion in PTO decision-making has a differential impact across technology and entity size. For instance, with respect to those types of patents for which the PTO is likely to profit the most from granting patents, we estimate a relatively stronger sensitivity to the PTO’s funding structure. Furthermore, we also find that these distortions are more likely to occur when markers indicative of an underfunded PTO are present. As such, a more general implication of this analysis is that the PTO does not appear to seek a universal expansion of its budget. Rather, the evidence is more consistent with a view that distortions in the PTO granting patterns are more likely to occur when the agency is financially constrained.

From a social welfare perspective, our results are discouraging, as they suggest that the PTO’s financial incentives, and not solely the merits of the invention, may be, in part, driving patentability decisions. While patents attempt to push society towards a socially optimal level of innovation by providing inventors with a mechanism to recoup their research and development expenses, they do so only at a cost — consumers pay higher prices and have less access to the patented invention. A PTO that is applying the patentability standards in a patent-protective manner is likely to be routinely granting patents on inventions that were either already known or represent only a trivial advancement over the existing scientific knowledge. As a result, a grant-biased PTO is likely to systematically issue patents that end up imposing significant costs on society without bestowing the commensurate benefits of innovation.

I. Glenn Cohen

I. Glenn Cohen

I. Glenn Cohen is the James A. Attwood and Leslie Williams Professor of Law at Harvard Law School and current Faculty Director of the Petrie-Flom Center. A member of the inaugural cohort of Petrie-Flom Academic Fellows, Glenn was appointed to the Harvard Law School faculty in 2008. Glenn is one of the world's leading experts on the intersection of bioethics (sometimes also called "medical ethics") and the law, as well as health law. He also teaches civil procedure. From Seoul to Krakow to Vancouver, Glenn has spoken at legal, medical, and industry conferences around the world and his work has appeared in or been covered on PBS, NPR, ABC, CNN, MSNBC, Mother Jones, the New York Times, the New Republic, the Boston Globe, and several other media venues. He was the youngest professor on the faculty at Harvard Law School (tenured or untenured) both when he joined the faculty in 2008 (at age 29) and when he was tenured as a full professor in 2013 (at age 34).

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