How can we allow patent examiners to effectively distinguish between patentable and unpatentable inventions, without slowing the process to a crawl or wasting a bunch of money? This essay reviews the recent literature and considers a number of proposals and their limitations. It concludes that the system can be improved, but that we are unlikely to solve the problem of bad patents altogether. The focus in reform discussions should be on understanding and changing applicant and examiner

more »

... s rather than simply spending money. I. The Problem of Bad Patents The Patent and Trademark Office (PTO) finds itself caught in a vise. On the one hand, it has been issuing a large number of dubious patents over the past twenty years, particularly in the software and electronic commerce space. It issues many more patents than its counterparts in Europe and Japan; 1 roughly three-fourths of applicants ultimately get one or more patents, a higher percentage than in other countries. 2 Complaints about those bad patents are legion, 3 and indeed when they make it to litigation they are quite often held invalid. 4 Even the ones that turn out to be valid are often impossible to understand; in the information technology industries, there is no lawsuit filed in which the parties don't fight over the meaning of patent claim terms. 5 The natural reaction is to say that the PTO needs to do more than it does to make sure it is awarding patents only to those who deserve them. In fact, however, only some -not all -of these bad patents have significant social costs. Most patents don't matter. They claim technologies that ultimately failed in the marketplace. They protect a firm from competitors who for other reasons failed to materialize. They were acquired merely to signal investors that *