Making the patent scope consistent with the invention: Evidence from Japan

• DOI: http://doi.org/10.1111/jems.12266
• Published date: 01 September 2018
• Author: Yusuke Naito,Yoshimi Okada,Sadao Nagaoka
• Date: 01 September 2018

Received: 26 January 2017 Revised: 10 February 2018 Accepted: 12 February 2018

DOI: 10.1111/jems.12266

ORIGINAL ARTICLE

Making the patent scope consistent with the invention: Evidence

from Japan

Yos hi mi O ka da 1Yus uke N aito1Sadao Nagaoka2,3

1Institute of InnovationResearch, Hitotsub-

ashi University,Kunitachi, Tokyo, Japan

2Research Instituteof Economy, Trade and

Industry, Chiyoda-ku, Tokyo,Japan

3TokyoKeizai University, Kokubunji, Tokyo,

Japan

Correspondence

YoshimiOkada, Institute of Innovation

Research,Hitotsubashi University, 2-1 Naka,

Kunitachi,Tokyo 186-8601, Japan.

Email:okada@iir.hit-u.ac.jp

Fundinginformation

ResearchInstitute of Economy,Trade, and

Industry;Study on Industrial Innovation

Capabilityand Innovation Infrastructure;

JapanSociety for the Promotion of Science,

Grant/AwardNumbers: 26885031, 26285055

Abstract

It is a crucial function of patent examination to make the patent scope consistent with

the contribution of the invention to the state of the art. We assess this function using

newly developed data on the scope of Japanese patent applications and grants. We

find that the scope was narrowed in two thirds of the grants, both the incidence and

the extent of narrowing increased when the applicant chose broad initial scope and

decreased when the quality of the applicant's disclosure of prior art was high, and that

important applications experienced narrowing more frequently, as one expects from

rational examination.

KEYWORDS

claim length, first claim, narrowing of patent scope, patent examination, patent scope, quality of prior art

disclosure

JEL CLASSIFICATION:

O34, O31, O38, K29

1INTRODUCTION

Delineating the scope of patents consistently with the contribution of the disclosed inventions to the state of the art is one

of the most crucial requirements for a patent system to promote innovation. Granting patents with overbroad scope hinders

competitors’ commercialization of knowledge already in the public domain, whereas granting patents with too narrow scope

weakens the incentive for innovative inventions.

A patent holder specifies the scope of his/her exclusive rights in “claims” of a patent. It is important to note that an applicant

has an incentive to obtain a patent that has the broadest patent scope as long as it satisfies novelty and inventive step over the

prior art known to him/her because broader patent scope increases the exclusionary power of the patent. An important task of

the Patent Office, therefore, is to search the closest prior art and have the applicant to narrow down the overbroad claims so that

they do not cover the prior art and are consistent with the true contribution of the invention to the state of the art. That is, the role

of patent examination is not only to assess the patentability of the invention but also to have the applicant specify sufficiently

and distinctly in the claim the difference between their invention and prior art and to narrow down the patent scope properly

so that it is commensurate with the real contribution of the invention to the state of the art (Christie, Dent, & Liddicoat, 2016;

Lemley & Sampat, 2008).

This study analyzes this crucial function of patent examination empirically. This role has been at the heart of concerns over

low-quality patents (Federal Trade Commission [FTC] 2003; Government Accountability Office [GAO], 2013; Jaffe & Lerner,

2004; National Academies, 2004). Probabilistic patents with uncertainty in their patent validity can result in a situation in which a

“weak” patent can obtain strong market power(Far rell & Shapiro2008; Lemley & Shapiro, 2005). A large number of potentially

invalid patents increase clearance costs, making inadvertent infringement more likely and litigation more frequent (Bessen &

Meurer, 2008).

J Econ Manage Strat. 2018;27:607–625. © 2018 WileyPeriodicals, Inc. 607wileyonlinelibrary.com/journal/jems

608 JOURNAL OF ECONOMICS & MANAGEMENTSTRATEGY

Recently, governments in major countries have launched policies to increase patent quality to promote innovation, and it has

become one of the top priority tasks for them to ensure high quality of patents, that is, the issued patents are not overly broad;

in 2013, the Economic and Scientific Advisory Board of the European Patent Office (EPO) issued a report that highlighted the

importance of patent quality in boosting innovation; in 2014, the Cabinet of the Japanese Government decided to aim to achieve

the highest quality patent examination in the world through several measures; in 2015, the U.S. Patent and Trademark Office

(USPTO) launched “Enhanced Patent Quality Initiative.”

Despite the importance of the function of making the scope of patents consistent with the inventions, it has not been fully

addressed in the academic literature to date and most economic analyses of the patent system have not considered the process

of narrowing patent scope, assuming a patent examiner's task to be simply to conclude to grant or not (see Schuett, 2013, for an

example). Christie et al. (2016) is one of a few studies on narrowing patent scope through examination process, yet the sample

is small and they did not analyze what influenced the incidence and the extent of narrowing. To the best of our knowledge,there

has been no full scale econometric analysis of patent examination for making the scope consistent with the invention.

It is important to note that an applicant planning to make an investment for commercializing his/her inventionhas an incentive

to search prior art and avoid excessively broad scope if it improves the likelihood of a grant decision and make the patent stronger

against potential challenges, because excessively broad scope would increase the possibility of rejections by examiners,and even

if a patent is granted, such patent would be potentiallyinvalid or unstable and could not protect such investment. Evenin t his case,

the scope can be excessivelybroad because the applicant does not know the competing applications not yet published. Moreover,

an applicant may haveno such incentive with respect to patents that he/she intends to use only for a blocking purpose (no commer-

cialization by the applicant). In this case, the applicant may well strategicallychoose broad patent scope relative to the inventions.

This study investigates to what extent the Patent Office contributes to making the scope of the patents consistent with the real

contribution of the inventions, based on a large-scale patent examination data on product patents in fourmajor technology areas.

The study also sheds light on whether the examiners invest more efforts in examining those patent applications, the validity and

the breadth of the patent scope of which are commercially more significant, as recommended by Lemley and Shapiro (2005).

From management perspective, the study has an important implication on the question of whether applicants can expect to

improve foreseeability of the outcome of patent examination (less rejection and less narrowing) by their patent claim drafting

that is consistent to better prior art search.

Our study uses a newly developedmeasure of patent scope: the inverse of the claim description length of the first claim, as the

primary measure of the breadth of the scope of a patent right.1We investigate incidence and the extent of narrowing, controlling

for the breadth of the initial patent scope and the quality of the applicant's disclosure of prior art together with other variables

relating to the importance of the invention. We also control for the applicant's strategy with respect to prior art search and the

choice of patent scope design by firm fixed effects. We measure the quality of the applicant's disclosure by the share of cocited

patent literature, which was cited by the applicant as well as by the examiner, out of all the patent literature citations made by

the examiner. In our econometric analysis, we addressed the endogeneity of examiner citations, on which our measure of the

quality of the applicant's prior art disclosure depends, by instrumental variables (IVs) method using past average of variable(s).

In summary, we found the following. Patent scope was narrowed as the outcomes of the examinations in around two thirds

of all the granted patents. A patent application with narrower initial claim or with better disclosure of prior art is more likely

to be granted with the initial claim intact, or is more likely to be granted with smaller extent of narrowing if the claim is

amended. Furthermore, the scope of an important patent is more likely to be narrowed. The results are consistent to our model

of patent examination process, in which an examiner spends more time in narrowing excess scope for those applications that

could otherwise result in a large economic cost under time constraint.

This article is organized as follows: Section 2 presents a survey of related empirical research; Section 3 describes our new

data set, focusing on our new measure of patent scope of the Japanese patent applications and grants, the inverse of the first claim

length, as well as its basic statistics; Section 4 provides our analysis of the data together with a model of patent examination

process, estimation models, and our estimation strategy based on IV method; and, Section 5 presents estimation results and

discussions. Section 6 concludes the study with a discussion of further study with the new data on patent scope as well as policy

implications.

2BRIEF SURVEY OF RELATED EMPIRICAL RESEARCH ON PATENT

SCOPE AND EXAMINATION

Our study on patent scope uses the length of the first claim as its measure. The basic idea is as follows: The description of an

independent claim2in a patent becomes longer as the number of elements limiting the scope of the exclusive right increases,