Much Ado About Patents

Oui, oui, pain au chocolat!
Maggie by Shawn Harquail

Is patent applicant behaviour rational?  What do validation rates in EPO patents tell us?  These and more questions were subject to economic scrutiny at this morning's CREATe and Queen Mary hosted workshop. Fuelled by pain-au-chocolate, your Katonomist enjoyed chilling with economic enthusiasts to discuss new developments in patent research and methodology.

Behaviour
First up was a team of researchers at Newcastle University using behavioural economics to analyse the decision making process of patent applicants.  Dr. Sven Fischer suggests that applicants may suffer from both an optimism bias and an overconfidence bias.  That is, patent applicants think they're less likely to suffer an negative outcome than they are, and overestimate their abilities. In a laboratory setting, Sven and colleagues are exploring this by creating a decision-making experiment.

Given the challenges of good data in IP, the use of behavioural economics is an exciting development. An experimental setting allows researchers to create a proxy to understand the dynamics in play.  In this case, data is collected on participants who are given a time-consuming task with a potential prize, and can chose when to quit. During the experiment, participants are given some but incomplete feedback on their performance. The process mimics a patent application.  Innovators engage in the costly (time and money) patent application, they don't know if they'll be successful, they then get some feedback (discussions with examiners) and may or may not receive the prize of a patent.

"I'm so going to win"
"No, I'm so going to win"

The researchers' preliminary results suggest the potential prize was enough of an incentive to encourage some participants to make 'bad decisions' -- they kept playing the game even though their choices were irrational.  These findings confirm patent applicants suffer from the cognitive biases of optimism and overconfidence.  Even if the patent application is poor quality, and applicants are given information indicating this, the applicant may proceed with the application when they shouldn't, particularly if they're optimistic. The researchers are also looking at levers that might impact behaviour, and how this could be applied in real life, which might help policy makers and lawyers better advise applicants.

Validations
Next up was work by a team at Queen Mary (including Antanina Garansvili and Dr. Georg von Graevenitz), who are looking at validation patterns in Europe. Leading into the Unitary Patent, there are some interesting questions on the interaction between national patents and EPO bundled patents.  Are these patents complements, substitutes or neither? (Do patentees get both national and EPO patents, one or the other, or some other combination?) We have very little understanding as to how these work together on a systematic basis. (We know similarly little about the relationship between national and community trade marks and designs.)

Georg credited IPKat posts (and here) by Blogmeister Emeritus Jeremy and guest Peter Arrowsmith, and readers' comments, for shaping the research questions.  The posts addressed UK firms' relatively low patent rates and queried whether this was evidence of clever patenting by UK firms or a poor level of patenting overall.  This research, which is providing in-depth statistical analysis of validation rates and national patents, looks at this further. So far, the researchers find that UK firms that patent at the EPO tend to validate fairly widely. Additionally, larger R&D intensive firms, relatively, seek a higher proportion of national protection,

Cats go up, cats go down

As IPKat readers will know, there are a lot of factors that determine patent strategies and whether to go a national or EPO route.  One such strategy is to seek national patent in a few large economies to address the largest markets.  This has an additional benefit that, by controlling the largest markets, the patent holder benefits from such an advantage from the economies of scale (costs decrease the bigger you are) that it provides de facto protection in smaller markets where the innovation is not patented.  In this case, a national patent could provide the advantages of a EPO patent but at a cheaper price.

The researcher's initial findings show that validation rates across the major EU economies (percentage of EPO patents validated in these countries) rose after 2002. It's a fairly marked increase and isn't accompanied by a corresponding decrease in patenting in national offices.  The researchers haven't been able to pinpoint the cause, but are keen to hear from readers if they've any ideas.

Overall, the research suggests that EPO and national patents are complements, and not substitutes.

Next steps
Both papers are using novel data to glean insights into patenting. The Katonomist hopes that this trend continues.  The research is on-going, so now would be your chance if you'd like to comment and help shape this work.