On the Price Elasticity of Demand for Patents

In a recent working paper, two European economists studied the price elasticity of demand for patents based on data from past twenty-five years. Their empirical result – the demand for patents is responsive to price, but relatively inelastic. I have created the following table showing where their result fits in the overall elasticity schema of goods and services.

Good

Estimated Elasticity

Description

Salt

0.1

Highly Inelastic

Patents

0.4

Inelastic

Legal Services in General

0.4

Inelastic

Utilities

0.4

Inelastic

New Tires

1.0

Moderate

Restaurant Meals

2.3

Elastic

Chevrolet Automobiles

4.0

Elastic

Elasticity is simply a way to measure (or estimate) the how the demand for a good changes in response to a change in the price of that good. Their results essentially show that pricing mechanisms could be effective in shaping applicant behavior, but that a significant result would require a dramatic change in fees. From a historical perspective, the authors attribute at least part of the “boom” in patent filings to a relative fee reduction and generally “very inexpensive” fees. “Higher fees would … [help] reduce the upward trend in propensity to patent.”

Notes:

  • Read the paper: On the Price Elasticity of Demand for Patents by Gaetan de Rassenfosse and Bruno van Pottelsberghe de la Potterie. [LINK]
  • Historical data is only available for a limited range of pricing schemes.  In his paper on Patent Demand Tim Wilson proposes raising the patent filing fee to $50,000 with the assumption that the demand for patents becomes more elastic as the price becomes dramatically higher.  
Dennis Crouch

About Dennis Crouch

Law Professor at the University of Missouri School of Law. Co-director of the Center for Intellectual Property and Entrepreneurship.

71 thoughts on “On the Price Elasticity of Demand for Patents

  1. “…that did not appear on examination…”

    um, isn’t that the Examiner’s job? Isn’t that rather hard to do, that is, examine for patent entitlement prior to filing?

    6, there is laughter (and tears) now, but it’s not laughter WITH you…

  2. “A government peon’s hubris at its very worse. Applicants FUND the “gov’s time” with their fees. It isn’t the gove’s time … it is applicant’s time — because they paid for it.”

    Hilarious. You know as well as I do the fees only recently started directly paying for office administration. And even so, there’s a line in case you didn’t notice, by wasting our time you’re wasting everyone’s time. Ridiculous bs you spout on here pds.

    “Do you know how many applications there are for dugs that don’t get granted? for funding for research projects that don’t get granted? for school loans that don’t get granted? for drilling rights that don’t get granted? for any number of a wide variety of government-issued licenses that don’t get granted?”

    Lots? What does it matter? We’re discussing the PTO. My “insular view” is only insular because of the topic at hand. If you want to discuss other people wasting the gov’s time too, then by all means, lets expand our topic. Until such a time, stop throwing straw men on the bon fire MM wanna be.

    You avoid the actual issue like the plague, afraid that if you saw the light it might burst your entire view of what you do day in and day out.

    One day, when you’re 80 and you don’t need the money anymore, you’ll be like, hmmmm, if only I and my brothers had stopped filing things that did not appear on examination to be entitled to a patent then the backlog would have never gotten so bad.

    I’ll be laughing, somewhere.

  3. “idk what you mean by ‘rail against’, all I’m saying is that making the fee higher will make them consider wasting the gov’s time a little more before they file nonsense that, while perhaps patentable, nobody cares about from a $ point of view, at the time of filing.”

    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?
    “will make them consider wasting the gov’s time”?

    A government peon’s hubris at its very worse. Applicants FUND the “gov’s time” with their fees. It isn’t the gove’s time … it is applicant’s time — because they paid for it.

    Do you know how many applications there are for dugs that don’t get granted? for funding for research projects that don’t get granted? for school loans that don’t get granted? for drilling rights that don’t get granted? for any number of a wide variety of government-issued licenses that don’t get granted?

    No? I didn’t think so. Let me clue you on something — it happens ALL THE TIME. Your insular view of the USPTO is pathetic.

  4. Ah, Mr Drafter, the counsellor of despair. Registration only is a system good only for those second class countries where patent litigation is as rare as hens teeth. Must every single patent dispute in the USA be run up to the CAFC? Come on America, you can do better than that. Yes, you can.

  5. Rather than raising fees to handle the backlog, why not accept the inept examination available under the current workload, acknowledge the existing practical abandonment of any presumption of validity for granted patents, and move to a de facto registration system? Then the backlog would rapidly diminish.

    Spurious threats of litigation could be handled quite well under existing state laws and bar disciplinary rules … every state has some equiv. to Fed. R. 11, and every state has a civil action for abuse of process. (afaik, ymmv).

  6. “6 you have one small passing reference to big corporations and proceed to rail against all applicants”

    idk what you mean by “rail against”, all I’m saying is that making the fee higher will make them consider wasting the gov’s time a little more before they file nonsense that, while perhaps patentable, nobody cares about from a $ point of view, at the time of filing.

    As to the law supporting it, idk what you’re talking about either, I’m talking about amending the law.

    Finally, the reason we’re talking about large entities only is because that is the topic of this discussion, how to curtail fillings by large corps. At the pto we make exception for the little guys all the time. Currently they get a 500$ lower fee than large apps, so if we change large apps to 50k, then their fee is 49,500$ lower and maybe stays at 500$.

  7. “And remember pds, we’re talking about big corps, not individuals.”

    more 6 backpedaling…

    6 you have one small passing reference to big corporations and proceed to rail against all applicants. I’m not sure you know what you are talking about or how you correlate the size of the applicant with the quality of the application.

    And please show me where the Law supports this nonsense you spout.

  8. “The fact that a patent may not be granted does not mean that the disclosure is worthless.”

    No, the fact that a patent my not be granted does not mean that the disclosure is worthless, but an app not wanting to pay more than x dollars to file means that at the time of filing the application is not worth x dollars, and if we consider anything worth less than x dollars worthless then it follows that at the time of filing the application is worthless if not worth x. Simply fill in a number for x. 50k, 10k, 1$ etc.

    My point is not that if you don’t get a patent then the app was worthless (although that might also be true), but that we can define a level of worthwhileness to an app that can be used to filter worthless from the worthwhile, letting the applicants be the judge.

    And remember pds, we’re talking about big corps, not individuals.

  9. “Let’s say I want it to block a competitor. If his competition hurts my business by meh, 1$, no reason to fool with a patent. If on the other hand it might be, meh, 60k+, then filing a patent might be worth it.”

    To say that you, 6K, are ignorant about business strategy/planning is to put it mildly. The numbers you are looking for (i) do not miracuously appear from thin air; (ii) cost quite a big obtain — possible even more than your $50K filing fee; and (iii) come with the caveat that any estimate is just that — an estimate.

    The statistics for small businesses that fail the first year is somewhere around 50% — which means that 50% of the people, at least, who thought they had a good and viable business plan didn’t value their business plan correctly. You think someone valuing their patent is going to do so anymore accurately?

    Also, your comparison between 50K investment and 60K value evidences so little experience in business decision making that it is difficult for me to pick a place to begin. There are so many factors that you didn’t take into account — return on investment, timing, risk (all kinds of risk) that makes your simple exercise far more difficult (as well as time consuming and costly) than you can imagine.

  10. “There are three reasons I can think of why you should review the prosecution file.”

    It all depends upon what you mean by “review.” There are brief/casual reviews, detailed reviews, and other types of reviews in between. I took the question to mean a detailed review, where I would, for example, review each argument by both the attorney and examiner, to make sure it was supported. To me, that isn’t necessary.

    Only the current claims, current rejection, and the client’s view of the current claims are really important. Prior estoppel — water under the bridge. This is different where there are a lot of related applications, but that isn’t the facts in most situations.

    One last point, from my experience, most rejections (and most responses) are so deficient in analysis that you really cannot get much out of them in the first place. The vast majority of examiners don’t provide explicit claim construction and few attorneys really get into much detail during their arguments.

    If I thought providing a detailed review of the prosecution history would help, I would do it — I just don’t see the value added when I could be otherwise spending the time reviewing the art.

  11. “Also, there is no quid pro quo for something worthless in exchange for something decently valued. The public gets nothing, while the applicant gets the chance to overbroadly claim their invention. In fact, the public gets less than nothing since that app will be published and go into a database that could be full of things that actually seem worthwhile to other applicants and glut the whole thing up with worthlessness.”

    The fact that a patent may not be granted does not mean that the disclosure is worthless. An application can disclose something that is absolutely novel, but may be deemed to be obvious. However, many things deemed to be “obvious” by the USPTO may be undiscovered for years and years (as evident from the 103 art I’ve seen cited). Additionally, most applicants don’t just include a generic description of the data but preferred embodiments, test data, etc., which still could be useful even if the invention isn’t patentable.

    Simply raising the filing fee from around $1K to $50K is not going to filter bad ideas from good ideas. It will simply filter well-healed inventors from poorer inventors. Case in point, I’m not poor by any stretch, but I would be extremely hesitent to file a $50K patent application no matter how good I think the idea is. Additionally, that $50K patent filing fee won’t be associated with a small legal fee. Given the likely consequence that a client will sue the attorney if the application does not lead to a patent, the once $5K-$10K prepartion fees will likely increase to $25-$35K — not including the costs for an extensive search. All of this will further reduce accessibility to the patent office.

    Regardless, as I noted before … it isn’t going to happen. There isn’t now (nor will be in any near furture) enough political desire or courage to disenfranchise so many potential inventors.

  12. “The modern day patent merry-go-round runs largely on greed, not ‘progress’ and it certainly does not exist for the benefit of the average American citizen, unless you’re one of those braindead trickledowners.”

    Welcome to capitalism MM. I know, with your left-leaning tendencies, you would prefer a communist state, but that isn’t the set of facts we are working with.

    Moreover, contrary to your assertion, it does work with average American citizen. What major drug company would be investing the billions they are today into new treatments if patent protection was not available?

    If you wanted to live in a time without much signficant patent protection, we should devise some way to send you back to the 1700s. However, back then, life expectency was only around 35 so you would probably be dead already.

  13. PDS, January 2 10:51

    There are three reasons I can think of why you should review the prosecution file.

    First, clients are often unable to evaluate patent-attorney work and may blame the attorney without justification. If you review the file you may get a feel as to whether the previous attorney could have done something differently or simply the client has a misperception.

    Second, you should be aware of any already-generated file-wrapper estoppel when planning your response strategy.

    Third, you really need to get to know the Examiner and why he/she is rejecting the claims. Is it an Examiner that agreed to allow claims, but then changed their mind after amendments were made? Is the current Examiner the third or fourth handling the case? Would an interview help?

  14. “So, tell me, how is raising the filing fee going to discourage someone from filing that application over something that you deem “more worthy”? ”

    I almost forgot the best part. Before I lol a bit, let me try to squeeze out the answer.

    Because making me pay a fee makes me think objectively about the VALUE of obtaining a patent on the idea. Let’s say I want it to block a competitor. If his competition hurts my business by meh, 1$, no reason to fool with a patent. If on the other hand it might be, meh, 60k+, then filing a patent might be worth it. That is the value of the patent. Alternatively I could want one to decorate my walls at home with beribboned documents. If I really want one it could be worth 50k. Otherwise it isn’t all that valueable.

    Bottom line is that it brings the inventors own judgement into play. Or, “more into play” since we already have 1k filing fees and sky high attorney fees. And you know this already, I don’t know why you bothered asking.

    Ok, now lolololololololol

  15. “Raising filing fees simply discrimates against inventors will little funding and/or ideas from which it may take a long time to realize a profit.”

    If they’re a “large corporation” something tells me that they are not someone that has “little funding”. All it means is they need to put more funding towards their IP dept if that is where their interests lay.

    “Every generation, probably since the Renaissance, thought they were experiencing “information glut” — however, they all perservered.”

    Lol wut? The magnitudes involved are on a totally different scale. That said, sure we’ll persevere. A lot folks do this by “unplugging” on a regular basis.

    “Regardless, you have no policy arguments to support less disclosure beyond the fact that the USPTO is having a big spotlight shined on it, which is exposing all of its glaring deficiencies, to which both you and USPTO management appear uncomfortably and/or unwilling to admit, and the proposal to increase fees is simply an attempt to divert the spotlight elsewhere.”

    Tell you what PDS, what if, let’s say, what if, Dudas came out tomorrow and gave a speech addressing every point that you have ever made on here, and saying that we are so horrible for all of that. What then? There is no way it will be fixed, no manager will come in with a golden finger and make the ills go away. Those problems are in place because of reality. The reality is like my SPE put it to me the other day, he, as a manager, likes to try to encourage us to do production. However, he also knows that if he goes one inch beyond “encouraging” then the examiner is likely to not do what he wants at all. I was a bit surprised for him to tell me all about that, but, looking around, it probably is true. It’s also true about things like reopening, bad OA’s etc. etc. We’re not that well paid. Our job sux, even though it is fun to spar with some smarty smart pants attorneys every now and again. People stay here and work the way we do (pretty high production, esp compared to the beginning of the production system, maybe not 100% awesome quality, but pretty good) because the atmosphere is tolerant. Very tolerant. Maybe too tolerant. Either way, if it gets less so, and maybe they start giving people sht about every little nit you pick, the hemoraging of people will get so bad that our current attrition would look like peanuts.

    The public policy argument is simple. The public does not need more information that is worthless, so taking steps to ensure that it is not worthless is not a bad thing. That’s it. But let’s go a bit further. What steps should be taken? Well, we could get someone to vouch that the information is not worthless and trust them. Who better to ask than the applicant? What better way to have them vouch for it being valuable to at least one person (them) than to have them pay for the privilege of obtaining a right to exclude others from using it? But wait, “worthless” is subjective right? My invention isn’t completely worthless, it is worth maybe 1 cents. So, we need to set a level of worthlessness. 50k doesn’t seem that bad from that perspective. Patents are a pretty big deal some places.

    Also, there is no quid pro quo for something worthless in exchange for something decently valued. The public gets nothing, while the applicant gets the chance to overbroadly claim their invention. In fact, the public gets less than nothing since that app will be published and go into a database that could be full of things that actually seem worthwhile to other applicants and glut the whole thing up with worthlessness.

    Besides PDS, the way I see it, you’re already arguing my point. You see the current filing fees as more or less reasonable, but there is no reason why we couldn’t lower them further. 10$ shall we say? That would surely spark filings. If you’re truly behind the “disclosure is always a good thing” train of thought, then why not advocate making filing free? But I haven’t seen you do this. Do you really think that it is appropriate? No, I doubt you do.

  16. pds “Unfortunately, all inventors don’t have MM or 6K on call to provide advice as to what idea would have been disclosed in the next couple of years anyway. Then again, if they did, the number of filings would drop 98%.”

    On the contrary: they would increase by exactly the number of discrete advisements provide. That’s how the game is played: you anticipate what’s going to be hot and then you file a bunch of handwavey prophetic garbage, plus maybe a couple flowcharts. Oh, and it’s also recommended to make up some new “fancy” terms so a proper search requires that the searcher do additional work to figure out what the heck the claims actually mean. But don’t go too far because you want the “competitors” (i.e., future defendants) to know what’s coming down the pike.

    Similar things happen in biotech, too, but the law in that industry is much more strict and the examiners are far more educated so the odds of succeeding with some hail mary patent crap are much slimmer and require more resources. Nevertheless, at the first hint of a new “important” disease, you’ll see the foools rush in with their bogus treatment and diagnostic methods. Some paper was published yesterday linking Vitamin R2 to a reduction in breast cancer? Then rest assured that Carobex, Inc. will file their claims today to a method of reducing breast cancer by administering a therapeutic dose of carob. Why does Carobex, Inc. do this? Because Carobx, Inc. is stoopit but their CEO knows some even stoopiter venture capitalist who knows this guy named Maddox etc. etc.

    The modern day patent merry-go-round runs largely on greed, not “progress” and it certainly does not exist for the benefit of the average American citizen, unless you’re one of those braindead trickledowners.

  17. “The problem is pds, anyone can disclose. Here, let me tell you about this bicycle that I just made that opens cans. It’s a two in one bicycle/can opener. How awesome is that? Just peddle and you spend no electricity to open your can. It’s all enabled. It is useful! BUT WHO THE F GIVES A RAT”S BEHIND? There is no market, and the idea is ridiculous.”

    So, tell me, how is raising the filing fee going to discourage someone from filing that application over something that you deem “more worthy”? Raising filing fees simply discrimates against inventors will little funding and/or ideas from which it may take a long time to realize a profit.

    “Bottom line: There is such a thing as too much encouragement to disclose. The world is awash in information already. Ours is the first generation to experience ‘information glut’. Perhaps you’ve heard of it?”

    Every generation, probably since the Renaissance, thought they were experiencing “information glut” — however, they all perservered.

    Regardless, you have no policy arguments to support less disclosure beyond the fact that the USPTO is having a big spotlight shined on it, which is exposing all of its glaring deficiencies, to which both you and USPTO management appear uncomfortably and/or unwilling to admit, and the proposal to increase fees is simply an attempt to divert the spotlight elsewhere.

    “That disclosure did not need stimulating.”

    So easy to say in hindsight. Unfortunately, all inventors don’t have MM or 6K on call to provide advice as to what idea would have been disclosed in the next couple of years anyway. Then again, if they did, the number of filings would drop 98%.

    Regardless, the current patent system not only encourages disclosure, but quick disclosure — which is also beneficial to society.

  18. “Bottom line: There is such a thing as too much encouragement to disclose. The world is awash in information already. Ours is the first generation to experience “information glut”. Perhaps you’ve heard of it? ”

    If only the Commisioner made this statement. Then we could put it right next to:

    Everything that can be invented has been invented. — Charles H. Duell, Commissioner, U.S. Office of Patents, 1899.

    Or better yet:
    “Proposed solutions will not be limited by existing laws, rules, processes or procedures.”

    Never mind the fact that this “Noise” tries to be above the Law.

  19. If these surveys were only looking at government fees, they are fatally flawed. The amount of the legal fees for preparing a patent application play a much greater role in an applicant’s decision about whether to file.

    While the PTO filing fees have gone up moderately over the last ten years, the legal fees have actually decreased (average preparation fees are less now than they were 15 years ago). That is why there was a “boom”.

    Any study that doesn’t account for the change in legal fees is meaningless.

  20. “You are also silent as to the other concept breadcrumbs pointed out – the desire to lower filings, as in somehow less of a good thing is a way to solve “the problem”.”

    Eating less chocolate is a way to solve “the problem” of being fat from eating too much chocolate. But but but, chocolate is a good thing isn’t it? Moderation. Look it up.

  21. “Also, your proposal IGNORES the purpose of the US patent system, which is to encourage disclosure. ”

    The problem is pds, anyone can disclose. Here, let me tell you about this bicycle that I just made that opens cans. It’s a two in one bicycle/can opener. How awesome is that? Just peddle and you spend no electricity to open your can. It’s all enabled. It is useful! BUT WHO THE F GIVES A RAT”S BEHIND? There is no market, and the idea is ridiculous. My having been encouraged to disclose my invention did nothing more than add to a too big stack of references in the subclass bicycles:what’sits:Misc. Now whoever looks there for something actually useful will see my awesome idea and waste an extra second of their life. There needs to be some objectivity to patents that are allowed beyond hypothetical usefulness. The only possible reason someone would want to see my idea disclosed is for laughs, or an examiner wanting to reject the next guy with my idea.

    Bottom line: There is such a thing as too much encouragement to disclose. The world is awash in information already. Ours is the first generation to experience “information glut”. Perhaps you’ve heard of it?

    And, let’s take for instance the idea in a recent patent on this blog, automatically generating a mini icon from the contents of a file (possibly a graphical file). You have that one guy that disclosed first, yet you have likely countless others (I found 5 in about 10 minutes) that think they’ve invented it by themselves (even at MIT) within the next few years. That disclosure did not need stimulating. And such is the case all too often. We would see the idea in a product very shortly anyways. Why? Because ideas like that are obvious, regardless of TSM or common sense or anything. You have a file. You want to represent it in a GUI, you have to pick some way of representing it, wouldn’t the ideal be to have a mini-window of the file right there? In fact, wouldn’t it be ideal to actually have all the programs and files on the computer running at one time with 500 perfectly synchronized supercomputers backing them all up and merely have all the programs/files in small windows so you could pick from them? Btw, I’m publishing that idea right now and it’s not that bad of an idea. Perhaps when we have the CPU muscle really cheap then that’s what we’ll do.

    Btw, that idea, just like the patented one probably actually leads to people not finding the file faster in many tests. I have the link somewhere to a study about that, but it is also my own experience that in dealing with anything but picture files and sometimes movies that I haven’t watched often the whole thumbnailed view is very often slower than finding the file by name.

  22. “…”very inexpensive” fees.”

    Apparently they have never had to sit with a client and explain the economics of filing. In most instances the client reaction is one of “shock and awe”.

    Somewhere along the way it seems that sight has been lost that the system is supposed to be one of “quid pro quo”. How sad that back in the early 80’s the system was changed to one of “quid” and “quo” fell by the wayside.

  23. PDS:
    Sadly to say more often than not at a position not long ago I discovered that there were time bars that were missed by the original attorney. It was in the file. I then thought would it be worth it to the client to spend money on a patent application that would be still born as a patent? My thoughts are that any office action which comes before me has been screwed-up by the previous attorneys that drafted the case. I have found this to be ture 30% of the time and nearly 90% of those cases come from large law firms that are not IP boutiques.

    In addition, the previous attempts to advance the case that have failed are often the result of a deficiency in advocacy skills. In my several years of legal practice I have come to noticed that most attorneys are poor advocates. They are great analyzers of facts, but poor at advancing an argument. As a result there has been times when I found a great argument in previous responses that was just poorly argued.

  24. And what of the McKesson case Mr. Mooney? Are you stating that I should not worry about lying to the USPTO, because there is no chance of going to prison?

  25. “He said he would not waste time reviewing the prosecution file. He would focus on only the office action and references cited. I then queried that it would be wise not to repeat some of the failed arguments in the past. He said that was not his concern. I believe that it is unethical not to complete familiarize oneself with the entire prosecution history of an applicaiton before attempting to respond to the oustanding office action. To me this is retail prosecution and is blatantly unethical.”

    Assuming that after 2 RCEs, the client is bringing the application to me because they are unhappy with the former prosecutor’s work, then why would I care what they’ve done in the past? I would concern myself with a decision on appeal, but not anything else. I would want to know what the client believes is patentable and I would look at the claims to see if this is covered by the claims. I would also look at the references being cited.

    Honestly, I don’t care what the other attorney argued — that is water under the bridge. If I make the same arguments that the prior attorney attempted to make, but later abandoned, I will maintain those arguments if I believe in them.

    As I wrote many times in the past, I think too many attorneys cave, even if they have good arguments. They would rather amend than argue.

    Heck — if I thought this client had potential for providing me future business and I thought the claims were good, as written, I would do the appeal for $1,500. I don’t like selling mysef short, but to get a little client good will, I would.

  26. “How about a client who insists that a perfectly reasonable final OA rejecting absurdly broad claims be appealed solely for “political reasons” relating to the client’s relationship with a collaborator, in spite of the fact that any credible arguments made to secure these claims could adversely affect the value of a significant portion of the rest of the client’s portfolio.”

    No wonder you are in a pissy mood all of the time. With crappy clients like that, I would be too.

  27. Anon wrote:”I am not sure if it pays to be honest.

    Where did you go to law school?

    I learned all I needed to know in law school when the head idi0t was allowed to walk free by the sub-idi0ts because he successfully convinced a majority of them that getting a hummer from a woman wasn’t “having sexual relations” with a woman.

    After hearing that, I realized that lies only existed in my head, and that the solution to worrying about lying was understanding, as that liar of a head-idi0t I described above and the head-idi0t liar who followed him have taught us, that it’s not a lie if you can get more people to say “it’s not a lie” than to say “it is a lie.”

  28. anon “I note that it is two years of Federal Prison if one is found to have committed fraud upon a federal agency. I am a wee bit partial to my freedom.”

    If you’ve been reading this blog regularly, you might still have a job because you would have learned that there is quite literally no chance that anyone will ever charge you with committing fraud upon the PTO.

  29. As a side note for those so-called economists. Patents are not and never have been the trouble with the economy. I would suggest that the biggest problem with the economy . . . and always have been . . . the bankers. They caused the great depression of the 1930s and this great depression. If anything we should limit the number of bankers that can exist.

  30. Dear Mr. Mooney:
    You sound like the last partner I worked for . . . needless to say our relationship devolved to the point where I stated advancing the argument that he demanded would result in my having to lie to the USPTO. I handed the file back to him and promptly received a severance. The joke is that this individual is yet another managing partner for yet another law firm and I am looking for work.

    I am not sure if it pays to be honest. I note that it is two years of Federal Prison if one is found to have committed fraud upon a federal agency. I am a wee bit partial to my freedom.

  31. anon “Any thoughts?”

    My thoughts are that is the tip o’ the iceberg, friend. How about a client who insists that a perfectly reasonable final OA rejecting absurdly broad claims be appealed solely for “political reasons” relating to the client’s relationship with a collaborator, in spite of the fact that any credible arguments made to secure these claims could adversely affect the value of a significant portion of the rest of the client’s portfolio.

    The answer is that in nearly every instance by the time any of these shenanigans are figured out (assumed it ever is), everyone will have moved on to different pastures (not necessarily greener ones).

  32. Retail patent prosecution. It is the practice of trying to represent clients, particularly large corporations in a manner to maximize the profit of the law firm. As a result, corners are cut and employees are never provided enough time to complete a project in order to obtain the represented pay. Often this is disguised as the associate not having enough efficiency to complete the project in time. I acutally interviewed with a seasoned prosecutor and asked him how he would attempt to respond to an office action in a application that is on its second RCE for the $1,500.00 cap that he quoted. I said how would you review the prosecution file? He said he would not waste time reviewing the prosecution file. He would focus on only the office action and references cited. I then queried that it would be wise not to repeat some of the failed arguments in the past. He said that was not his concern. I believe that it is unethical not to complete familiarize oneself with the entire prosecution history of an applicaiton before attempting to respond to the oustanding office action. To me this is retail prosecution and is blatantly unethical. Any thoughts?

  33. “I say have deferred examination with a larger examination fee that ensures that we spend examining resources on applications that the applicant has some clue about the viability of their idea and are confident that the large examination fee is worth it.”

    Examination resources shouldn’t be the tail that wags the dog.

    Besides, patent issue/maintenance fees already serve as proxies for higher examination fees. For a large entity, the total for issue/maintenance fees is over $9K — considerably more than the approximately $1K filing fee.

    Also, your proposal IGNORES the purpose of the US patent system, which is to encourage disclosure. Instead, your proposal is simply to weed out all inventions, unless the applicant is extremely well-heeled and/or there is a recognized market for the product within a few years after filing.

    Short-sightedness at its best (or worst).

    Regardless, this is a proposal that will NEVER get off the ground. Although they are the bane of a certain poster’s existence, the solo/small-entity inventor are media darlings — who love to write about quirky inventions or the small-time inventor making it big. These are classic examples of the “only in America” story that the public just eats up.

    Any bill that includes language that disenfranchises small inventors by substantially raising filing fees will have ZERO chance of passing.

  34. Elasticity may be low within the normal range of patent office fees, but if the filing fees were raised to $50K I feel confident I’d have to find another line of work . . .

  35. A fatal flaw in economic studies that seems to be rampant in econonomic studies of patents is ignoring numerous other variables [factors} influencing the alleged study conclusion. Here, ignoring anything other than mere EPO [government] application fees. Other factors being ignored here include large increases in R&D investments needing patent protection during the same time period of EPO fee increases, the fact that these government fees for obtaining patents are relatively insignificant in comparison to the legal fees, etc.
    We will soon have a much more realistic elasticity of demand test – the number of patent applications that will be filed in the U.S. in the depression of 2009.

  36. So the big guys are tired of dealing with patents and want to reduce the filing of the same. Here’s an idea, why don’t we let retailers decide the price at which they will sell manufactured goods? I mean if you really want to get into economics, it makes no sense to allow a manufacturer dictate the price of a good sold by a retailer.

  37. “You are also silent as to the other concept breadcrumbs pointed out – the desire to lower filings, as in somehow less of a good thing is a way to solve “the problem”.”

    If people are unwilling to take the risk of investing by paying smaller filing fees initially or paying larger deferred examination fees, then that’s fine by me. Small guys who take risks deserve reward, not just small guys in general.

  38. “Remember that Applicants have alternatives.”

    Yes, and those alternatives have differential pricing, particularly when it comes to PCT searching (US vs Korea vs EU).

    Notwithstanding price, Who does the best job? In what field?

  39. SF,

    “…unless you happen to be in Detroit.”

    or you happen to be in banking, or defense, or ….

    except that the little people in all these areas still get the shaft.

    And now your idea would give those same little people the shaft in IP as breadcrumbs has pointed out.

    While deferred examination with a deferred fee would help, it isn’t until after examination is complete that you can even begin to think about licensing or other ways to make money from the property that is a patent.

    You are also silent as to the other concept breadcrumbs pointed out – the desire to lower filings, as in somehow less of a good thing is a way to solve “the problem”.

  40. “You continue to ignore the posts concerning the ability to actually know with any confidence the commercial viability at filing time.”

    That’s why there are winners and losers in business. Some people take risks and win. Some people take risks and lose. It’s not the job of government to accommodate/insure bad risk takers … unless you happen to be in Detroit.

  41. “You continue to ignore the posts concerning the ability to actually know with any confidence the commercial viability at filing time.”

    No. I was talking about deferred examination with a deferred fee — it wouldn’t be due at filing, only at the later date when they know whether they have something.

  42. Erez Gur,

    As you have rephrased it, your proposal sounds very tempting…

    SF,

    “I say have deferred examination with a larger examination fee that ensures that we spend examining resources on applications that the applicant has some clue about the viability of their idea and are confident that the large examination fee is worth it.”

    You continue to ignore the posts concerning the ability to actually know with any confidence the commercial viability at filing time. Along with considering the danger I presented above (a game only the rich can play), your proposal simply doesn’t have enough positives to outweigh the negatives. Once again, your concern with “examining resources” driving towards lessoning filings (or selective filings) employs a perverse logic against which the written, lawful function of the Office stands to represent.

  43. David French writes:

    I’ll bet the EPO was happy to receive this news: patent applicants are willing to pay more to get patents.

    May I raise my favorite topic: deferred examination.

    We actually want people to file patent applications and disclose the new technology that they have conceived. The burden is that we are examining everything that’s been filed.

    In many cases, the new technology does not turn-out to be commercially valuable. But we only find that out after a number of years.

    If we wish to reduce the burden of examination, let applicants (or third parties) request examination when they’re ready. For the balance of filings, let examination be deferred.

    If we wish to deter examination, then raise the examination fee, but shift the deadline for this event to a later date along the finite lifetime of potential patent protection.

    Deferred examination is a variant on partial examination. And we have partial examination today. When an applicant swears-back of a reference within the one-year grace period, this does not resolve the issue as to whether the resulting patent is valid. And it is understood that the validity of a patent, particularly based on newly discovered prior art, is always subject to review before the courts.

    The “boom” in patent filings is due to the generally increased realization that having a patent can greatly increase profits and can spare a company the misery of having to endure competition from imitators. This realization has spread-out into the global marketplace. Virtually half of all US patent filings come from foreign residents.

    Patents are fraught with uncertainty and to that extent qualify as a “lottery”. The cost of obtaining a patent would have to be substantially elevated to deter companies from participating in such a lottery. Too bad that the EPO now has a learned study that verifies this reality.

  44. “Yes dissuading filing based on economics is a bad thing.”

    At today’s prices, if you can’t recoup your prosecution costs, your invention isn’t worth much.

    I say have deferred examination with a larger examination fee that ensures that we spend examining resources on applications that the applicant has some clue about the viability of their idea and are confident that the large examination fee is worth it.

  45. I realize the amount of work involved, etc. etc., but it would be interesting to see the relative elasticity of various patent sectors. Pharma v. EE, etc.

  46. Breadcrumbs:

    I am personally against subcontracting Search and Examination but am proposing a better alternative to the $50k price tag.

    Applicants want a high-quality patent as quickly as possible, but it must be affordable.

    Imagine that you had ten S/E subcontractors you, as an Applicant, could choose from including foreign patent offices like Korea and Australia, as well as private initiatives established by the likes of e6k.

    Prices for S/E of fishing rods would be low, commensurate with the expected future profits, and the real expense for examining few claims and short specifications, while prices for S/E of chemical synthesis or pharma would be high.

    Applicants would not go to “Monty Hall” subcontractors because their patents would be worthless.

    At the same time, subcontractors who played games like not finding the best prior art or the RCE merry-go-round would be sued out of business. You would avoid a situation like in re Wheeler where an Inventor had to pay in excess of $20k for a search that a junior examiner could have done in 10 seconds.

  47. A few years back I saw a study that indicated the cost to a company for obtaining a patent including the filing fees, outside attorney fees for preparation and prosecution, in-house counsel and inventor and related other time, etc. was $35,000 – $75,000 depending on the technology.

    In any case, $50,000 filing fees might discourage the “[People who] will obtain a patent simply for the glory of hanging a beribboned document on the wall.” (Newman, J., concurring opinion, Figueroa v. U.S., 05-5144, Fed. Cir. 2006)

  48. pmilatty, nice observation but won’t atty fees rise to that level anyway? If Punter has to pay the PTO 50k, will he not reason that the services of a competent attorney to get full value from the 50k must necessarily cost at least as much. And anyway, does it matter what Punter thinks, because atty will anyway be inclined (as ever) to take the PTO Scale of Fees as a model for his own his Tariff of fees. So, it’s 50k to the PTO, please Punter, and another 50k+ to the profession. Now that’s not a lottery any more but, rather, playing for very high stakes, in a very swanky casino; much more swanky, I might add, than anywhere else in the world.

  49. Tim Wilson suggests that filing fees be increased to $50,000 per application. Couldn’t the same thing be accomplished by increasing the attorney’s fees to $50,000 per application?

  50. SF.

    That is a personal opinion. I believe that it would be bad.

    In a purely capitalist economy, organizations become larger because of the economy of scale. Large organizations necessarily pay a few managers higher and higher salaries and the workers lower and lower salaries, even if it means transferring activities to the third-world.

    R+D is suppressed because without patents it is not profitable and talented people would rather be high-paid managers than low-paid scientists/engineers.

    In patent-modified capitalism you give the little guy a chance to gain access to capital and establish small companies which, in my belief, is the only way to make new jobs and to generate tax revenues.

  51. This study seems flawed because it focuses on changes in the EPO, USPTO etc. filing fees to study patent demand elasticity, without equally taking into account changes in the larger component of the cost of obtaining the patent – the attorney fees!

  52. Erez Gur,

    I am troubled by your statement regarding market forces deciding reasonable cost of search and examination. You have a constrained system (search and examination are NOT optional), and thus the market is NOT free to decide an optimal cost (regardless of whether or not the Office outsources that function). Applicants do NOT have options to search and examination for US patenting. It seems that you are offering an option to have a US patent or not, and this would be tantamount to saying – “If you don’t like the rules I make up, take a hike”

    SF,

    Yes dissuading filing based on economics is a bad thing. Small inventors and small business are the true backbone of the US economy and culture. The logical extension of prohibitively expensive prosecution costs is that only the entrenched and wealthy businesses can play the game and thus an elitist, more malignant monopoly system is generated. You have played right into the hands of those that want to weaken or kill the patent system because of its ability to level the playing field.

    The current methodology of progessively larger annuity costs work well in the model of encouraging progress and applications. Either the invention works (in the business sense) over time and thus is worth the progressively larger annuity cost, or it does not and the invention becomes part of the public domain, free to everyone.

    The perverse logic of less applications is better permeates the Office philosophy, but that’s a different, and long, discussion – filing is a GOOD thing, filing provides the quid pro quo of disclosure, filing should be encouraged – not being able to handle an increased amount of filing should not have as its solution the goal of reducing filings.

  53. “So is it a bad thing if someone chooses not to file because they can’t recoup the expense of prosecution?”

    The purpose of the US patent system is to encourage public disclosure of ideas — so if someone chooses not to file because they cannot recoup the expense of prosecution, then yes, it is a bad thing.

  54. “So is it a bad thing if someone chooses not to file because they can’t recoup the expense of prosecution?”

    We’ve gone over this dozens of times on this board and still there a few people who just don’t get it.

    With few exceptions, determining the worth of a patent during the initial stages is a futile process. There are just too many unknowns to accurately guage the value of the patent in the future. As such, any intelligent third-party investor will not want to fund patent preparation/prosecution without taking a very large stake in the company. However, when that happens, the incentives for the inventors to “grow” the business substantially decrease.

    Despite some on this board calling patents a “lottery ticket,” most inventors want to practice their invention and develop a viable business based upon their patented technology. For those that think that they will license their technology to somebody else, I advise them that they should wait around hoping that some company will pay them — they need to go out and develop a market.

    Creating a demand for a technology is just as important as creating the technology. In many instances, the general concept can be conceived of in a day and implemented within a month to a year. However, creating a demand can take years — which is why it is difficult to predict the value of the patent since you don’t know if the demand can be created.

  55. “Small inventors will be wiped out because they either can’t afford it or won’t be able to recoup the expense even if they do get a patent.”

    So is it a bad thing if someone chooses not to file because they can’t recoup the expense of prosecution?

  56. Mark,

    Remember that Applicants have alternatives.

    Applicants will file provisionals as priority documents because of 102(e) and price. At the end of the priority year, if a utility costs $50k and a PCT costs $1450, Applicants will file a PCT.

    At priority+30 the Applicant will have to decide whether or not to enter US National Phase.

    Large companies (who don’t need the patents anyways) will probably pay, whatever the quality of Examination.

    Small inventors will be wiped out because they either can’t afford it or won’t be able to recoup the expense even if they do get a patent.

    Small companies will be dependent on how quickly they can get investment. Indeed, if you promise professional quality examination, they will try to build a business around a single core technology patented early on and keep developments secret. This will retard advancement and make investment and business development more risky but still possible.

    On the other hand, if you want to make a dramatic capitalism-based change, you could subcontract search and examination with the USPTO acting as no more than a mediator.

    The market will then decide what a reasonable cost is and examination quality will improve.

  57. “Higher fees would … [help] reduce the upward trend in propensity to patent.”

    Duh.

    I should go get a job as a professor, getting paid to state the obvious.

  58. Tangentially, I have been thinking lately that if someone were paying attention, a near perfect elasticity curve could have been constructed for gasoline over the last several months…

  59. Hey guess what else is really, really inelastic: taxes. Just because people will continue to pay taxes if we raise them doesn’t mean doing so is beneficial for society or the economy. Raising costs on patents will only stifle applicants’ spending in other areas (like wages and charitible activity). Hey government, go extract wealth from another source – preferrably a non-innovative one.

  60. “Only an ignoramous would want to reduce patent filings . . or alternatively someone who wanted to stem innovation.”

    Only an ignoramus would want to oppose the war … or alternatively someone who wanted to stop the progress of freedom.

    /low rent college republican off

  61. This isn’t that surprising. Once somebody spends years of time and millions of dollars inventing new technology, they’re seldom going to forego a few thousand dollars in filing fees to (try and) protect the work. A more interesting study would be of the elasticity of demand for licensed technology — a study that only IBM, Microsoft, and perhaps a handful of other companies could do.

  62. The paper seems to be about the elasticity of filings with respect to filing/examination fees. Given that those fees are much smaller than attorney fees, I’d expect that filings may well be much more elastic with respect to the total cost of filing. Am I missing something?

  63. Only an ignoramous would want to reduce patent filings . . or alternatively someone who wanted to stem innovation.

    Look in 1988 Daddy Bush layed-off tens of thousands of defense workers. Up until that time the top 5% of intellegentsia of the U.S. was monopolized by the Federal Government, following World War II, basically building bigger bombs for a better America. Sorry all you PhD types that are teaching in academia, but if you weren’t on the government payroll at one time or another . . . well you weren’t good enough at your discipline or you didn’t want to work for the government.

    After these top 5% were laid off innovation spawned in an unprecedented fashion in the 1990s. I saw innovation that really awed me. My favorite is disclosed in a patent to Endriz. He had this cool invention about casting E-M that was unperceivable by the un-aided eye. However, upon donning the appropriate goggles night could look like day. I mean you could walk into to an enemy campsite neutralize the enemy and they couldn’t barely see you. You would see them as though it were daytime. Check out the patent.

    Innovation has slowed under Baby Bush. The reason is quite simple. Baby Bush revved-up the defense industry again and all those great minds once again work for the Feds on projects that do not ordinarily lend themselves to patenting, at least not publically patenting. We ain’t got that many smart people pumping out patents any more.

    The difference between now and pre-1990s, however, is that all if not most of the private industrial laboratories have been closed. That leaves only academic institutions (usually government funded). As a result, the government can completely control research unless there is an incentive disseminate information. Patents are a good incentive. They are cheap to access by the inquiring mind. Look at the information in a patent. To get the same information from IEEE articles one would pay several hundred dollars in Copyright fees. I mean do we really want to stem the tide of low cost dissemination of information. Remember that the iinternet is well on its way to being censored.

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