Why most patents are invalid – Extent , reasons , and potential remedies of patent invalidity

The legal stability of granted patents is uncertain, a fact that entails inefficiencies for the patentee as for third parties. It is an important question for intellectual property policy and management how severe this problem is. Few patents are litigated, and those that are are not a random selection. We thus ask: if a randomly picked patent underwent revocation proceedings, what would be the odds of it being invalidated? We address this question for the case of Germany, where revocation proceedings are separate from infringement suits. Based on court decisions, expert interviews, and a survey among patent lawyers, we find that patents entering revocation proceedings are about as legally robust as the average patent. However, less than half of all revocation proceedings conclude with a decision, and those that do involve more robust patents. Thus, the share of court decisions that declare the patent in suit partially or fully invalid—in Germany, 75% for 2000 to 2012 and 78% for 2010 to 2012—is a conservative estimate of the share of all patents that would be partially or fully invalidated if challenged in court. An econometric analysis of 301 court decisions between 2010 and 2012 supports this finding, predicting for a sample of randomly drawn patents a share of (partial or full) invalidation of 83%. We show that our arguments carry over to other legislations. While we concur with earlier studies that a more detailed examination would not solve the problem, we do not consider “rational ignorance at the patent office” a satisfactory explanation since also patents that are never litigated create inefficiencies. To address the problem that many patents are latently invalid we suggest a significant increase of the required inventive step in the examination process combined with a lower inventive-step standard in litigation.