Patent Trial and Appeal Board's Consistency-Enhancing Function

• Author: Michael D. Frakes & Melissa F. Wasserman
• Position: Professor of Law and Economics, Duke University School of Law; Research Associate, National Bureau of Economic Research/Charles Tilford McCormick Professor of Law, The University of Texas at Austin School of Law
• Pages: 2417-2446

2417

Patent Trial and Appeal Board’s

Consistency-Enhancing Function

Michael D. Frakes* & Melissa F. Wasserman**

ABSTRACT: Agency heads, who have the primary responsibility for setting

an agency’s policy preferences, have a variety of tools by which they attempt to

minimize the discretion of their staff officials in an effort to ensure agency

policy preferences are consistently applied. One such mechanism is subjecting

agency official’s determinations to higher-level agency review. While scholars

have long surmised that judges seek to minimize reversal of their decisions by

a higher-level court, how agency officials’ decisions are influenced by higher-

level agency reconsideration has mostly eluded analysis.

In this Essay, we begin to fill this gap by examining the extent to which

reversal by the Patent Office’s internal adjudicatory board, the Patent Trial

and Appeal Board (“PTAB”), affects the behavior of patent examiners.

Utilizing a novel database comprising of over 9,000 unique patent examiners

and their decisions in over 1.3 million patent applications over a ten-year

period, we examine this question. Given the growing concern in heterogeneity

in patent examiner decision-making, understanding how PTAB reversal

affects examiner behavior is important to ensuring that similar patent

applications receive similar decisions at the Patent Office.

I. INTRODUCTION ........................................................................... 2418

II. BACKGROUND ............................................................................. 2421

A.HARMS ASSOCIATED WITH HETEROGENEITY IN PATENT

OFFICE OUTCOMES ................................................................ 2421

B.PATENT TRIAL AND APPEAL BOARD’S CONSISTENCY-

ENHANCING FUNCTION .......................................................... 2423

III.THEORY ....................................................................................... 2427

*

Professor of Law and Economics, Duke University School of Law; Research Associate,

National Bureau of Economic Research.

** Charles Tilford McCormick Professor of Law, The University of Texas at Austin School

of Law. We thank Rochelle Dreyfuss, Steve Yelderman, and participants at the 18th Annual

Intellectual Property Scholars Conference and Iowa Law Review’s Administering Patent Law

Symposium for useful comments.

2418 IOWA LAW REVIEW [Vol. 104:2417

A.PATENT EXAMINER HETEROGENEITY: DO PTAB APPEALS

FOCUS ON OUTLIERS? ............................................................ 2427

B.DOES PTAB REVERSAL HAVE A LONG-TERM EFFECT ON

PATENT EXAMINER DECISION-MAKING? ................................. 2431

IV.RESULTS ...................................................................................... 2432

A.DATA .................................................................................... 2432

B.PTAB TARGETING ANALYSIS ................................................. 2433

C.EXAMINER-RESPONSE ANALYSIS ............................................. 2437

V.NORMATIVE CONSIDERATIONS AND CONCLUSION ...................... 2444

I. INTRODUCTION

In recent years, the U.S. Patent and Trademark Office (“Patent Office”

or “Agency”) has come under increasing scrutiny over inconsistent

patentability determinations. In fiscal year 2017 alone, more than 8,000

patent examiners made more than 600,000 patentability decisions.1 There is

mounting empirical evidence that these 8,000 patent examiners have sharply

divergent grant rates, implicating concerns that the decision to grant a patent

is driven not only by the merits of the invention but also by the examiner to

which the application is randomly assigned.2 The concern regarding inter-

examiner disparities is so pressing that it led at least one scholar to quip,

“there may be as many patent offices as patent examiners.”3

The harms associated with inter-examiner disparities in decision-making

are undeniable. To begin, the fact of wildly divergent grant rates among

examiners is highly suggestive that the Patent Office is regularly getting the

decision to grant or deny a patent wrong. Much is at stake with the application

of legal patentability standards. The patent system encourages valuable

innovations by granting patents on inventions that are novel and that

represent more than a trivial advancement over the current scientific

understanding. However, should patents be issued covering technologies tha t

fail to meet proper patentability thresholds, there may be an insufficient level

of spurred innovation to justify the key costs of extending patent protection:

1. U.S. PATENT & TRADEMARK OFFICE, PERFORMANCE & ACCOUNTABILITY REPORT: FY 17, at

10, 168 tbl.1 (2017) [hereinafter USPTO PAR 2017], https://www.uspto.gov/sites/default/files/

documents/USPTOFY17PAR.pdf.

2. Sean Tu, Luck/Unluck of the Draw: An Empirical Stu dy of Examiner Allowance Rates, STAN.

TECH. L. REV., Oct. 2011, at 1, 6–7; Michael D. Frakes & Melissa F. Wasserman, Knowledge Spillovers

and Learning in the Workplace: Evidence from the U.S. Patent Office 15 fig.1 (Duke Law Sch. Pub. Law

& Legal Theory Series, Working Paper No. 2018-11), https://papers.ssrn.com/sol3/papers.

cfm?abstract_id=3099029.

3. Iain M. Cockburn et al., Are All Patent Examiners Equal? The Impact of Characteristics on

Patent Statistics and Litigation Outcomes, in P

ATENTS IN THE KNOWLEDGE BASED ECONOMY 28

(Wesley M. Cohen & Stephen A. Merrill eds., 2003).