Separating patent wheat from chaff: Would the US benefit from adopting patent post-grant review?

This article assesses the impact in the US of adopting a patent post-grant review (PGR) procedure similar to one provided in the America Invents Act (AIA) of 2011. We employ novel methods for matching US patents to their European counterparts to find that opposition rates are about three times higher among European Patent Office (EPO) equivalents of US litigated patents as against control-group (unlitigated) patents. Contingent on reaching a final judgment in EPO post-grant opposition, we find that about 70% of these equivalents have challenged claims that are either completely revoked or amended. Using our empirical findings to inform a series of welfare estimates, we calculate benefit-to-cost ratios that the US may expect from implementing PGR in the range of 4:1-10:1. We also discover that these large social benefits result primarily from eliminating unwarranted market power in the current stock of granted patents, and much less so from litigation cost savings per se. Our results provide evidence that the US may benefit substantially from adopting the AIA post-grant review, but only provided that costs are controlled and that administration and appeals are not allowed to become too costly. (C) 2014 Elsevier B.V. All rights reserved.