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Archived updates for Monday, August 02, 2004

The Design and Expected Impact of Post-Grant Patent Review in the U.S.

In "Post-Grant Reviews in the U.S. Patent System–Design Choices and Expected Impact," Economists Bronwyn H. Hall and Dietmar Harhoff take a look at the European Patent Office's experience with the patent opposition proceedings and conclude that "a properly designed U.S. post-grant review could generate high welfare gains."

According to the article, 7.9% of all patents granted between 1980 and 1995 at the EPO were opposed, and roughly one third of these opposition cases were then appealed. The median duration was about 1.9 years for opposition and 2.1 years for appeals (in addition to the 4.3-year median examination period). Roughly one-third of the appealed patents (34.7%) are revoked, and roughly another third (32.7%) are maintained in amended form with narrowed breadth. Only 27.4% of all cases lead to a rejection of the opposition. In 5.3% of all oppositions, the case is closed by withdrawal or lapse of the application.

The authors calculate a cost benefit analysis for consider four opposition scenarios in the U.S.: two with an opposition cost of $100,000 and two with a cost of $500,000. For each cost scenario, a first case has an avoided cost for patent revocation of two million dollars, an avoided cost for patent amendment of $300,000, and a rejection probability of 25%. A second case assumes the same avoided cost for patent revocation, but a social cost for the rejection of opposition of $200,000, and a rejection probability of 35%.

They conclude from their calculations that costs exceed benefits only when the revocation probability is extremely low, or the cost of an opposition is $500,000 its rejection leads to increased litigation costs.
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