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Patent Oppositions

Alessandro Sterlacchini a.sterlacchini@univpm.it

Università Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali

Legal risks over the patent’s lifecycle

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C. Sternitzke (2009) Reducing uncertainty in the patent application procedure. World Patent Information

Patent litigation and oppositions

• Patent litigations are heard in front of a court mainly for fighting infringements and, to a limited extent, challenging a patent’s validity

• Patent oppositions can be filed to the European Patent Office (EPO) by any third party against its decision to grant a patent, on the grounds that the prerequisites of patentability (novelty, inventiveness, and utility) as well as the full disclosure of the invention were not fulfilled

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Backgrounds I

• Explosion of patent applications and grants since the early 1990s. Parallel increase of patent litigation and oppositions up to 2000

• Main explanation: the largest firms have increasingly resorted to strategic patenting, i.e. for reasons other than that of protecting their inventions

• Workload and backlog in patent offices• Increase of “low quality” granted patents susceptible

of being invalidated in subsequent costly litigation• Since 2000 the percentages of oppositions at the

EPO have decreased • Growing quality of the EPO through more accurate

examinations and better paid examiners: higher administrative costs which, however, can be more than compensated by less litigation costs

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* Oppositions in year t on the average patents granted in year t and t-1. Source: EPO Annual Reports

Backgrounds II

• In Europe oppositions are used much more frequently than litigation (about 5% Vs. 1%)

• Cost of oppositions in Europe: from €10,000 to €25,000 (or €6,000 to €50,000 including patent lawyers’ fees)

• Cost of litigation: from €50,000 and €500,000 (depending on the complexity of the case)

• Different national jurisdictions: more legal expenses and uncertainty

• Unitary Patent (January 2013) and Unitary Patent Court (not entered into force yet) with exclusive – and centralised – jurisdiction for litigation concerned with EPO patents

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Patent litigation and litigation costs: social waste?

• The Patent, Used as a Sword (New York Times, October 7, 2012)

• In the smart phone industry alone, as much as $20 billion was spent on patent litigation and patent purchases in the last two years (an amount equal to eight Mars rover missions). Last year, for the first time, spending by Apple and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products.

• Since 2006, Apple itself has been sued 135 times, mostly by patent trolls interested in its deep pockets

• In June 23, 2012 Judge Richard Posner tossed out patent arguments made by both Apple and Motorola Mobility, and dismissed a lawsuit between the two companies

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R. Posner (2012) Why there are too many patents in America, The Atlantic, June.

“Patens are granted by the Patent and Trademark Office and are presumed to be valid. But their validity can be challenged in court, normally by way of defense by a company sued by a patentee for paten infringement”.

“Defensive patenting means getting a patent not because you need it to prevent [imitation] but because you want to make sure that you’re not accused of infringing when you bring your own product to market. The cost of patenting and the cost of resolving disputes that may arise when competitors have patents are a social waste”.

Empirical evidence

• Determinants of patent litigation (US) and oppositions (Europe, where the only centralised procedure for patent challenges is an EPO opposition)

• Type of industry or technology area (no clear evidence)

• Company characteristics: firm size and, especially, the extent of patent portfolios reduce the probability of litigation/opposition

• Patent characteristics: the most valuable patents are more likely to be litigated/opposed– Quality indicators: forward and backward citations,

patent family size (countries in which protection is sought for the same invention), claims (specific property rights to be protected, patent scope)

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Analysis of the major players in the European market of white goods

• Refrigerators and freezers, cooking appliances, washing machines and dishwashers

• Top ten players in Europe: 961 patents granted by the EPO in 2000-2005; 94 oppositions (high opposition rate)

• Companies more exposed to patent challenges and more inclined to oppose competitors’ patents

• Who is opposing the patents of whom (direct observation of rivalry)

• Does patent quality matter?• Joint analysis of company rivalry (strategic motive) and

patent quality as determinants of patent oppositions• Outcomes of the opposition proceedings (validation,

revocation, amendments) • Determinants of opposition outcomes 10

Leading companies in the European market of white goods

Sales(million euro)

2005

Ranking sales

EPOpatentsgranted

2000-2005

Ranking patents

BSH 5500 1 364 1

Electrolux 5150 2 174 2

Indesit 2880 3 38 8

Whirlpool 2400 4 113 3

Arcelik n.a. 5 23 10

Miele n.a. 6 62 4

Fagor-Brandt 1420 7 49 7

Candy 850 8 55 5

LG n.a. 9 29 9

Samsung n.a. 10 54 6

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Patents granted, oppositions received and filed

Patentsgranted

Total oppositions received

Oppositions received by listed competitors Oppositions filed against

listed competitors

Number NumberRatio on patents granted

NumberRatio on patents granted

NumberRatio on patents granted

BSH 364 38 0.104 27 0.074 30 0.082

Electrolux 174 22 0.126 19 0.109 14 0.081

Whirlpool 113 6 0.053 6 0.053 3 0.027

Miele 62 7 0.113 5 0.081 28 0.452

Candy 55 3 0.055 3 0.055 1 0.018

Samsung 54 3 0.056 3 0.056 0 0.000

Fagor-Brandt 49 3 0.061 0 0.000 1 0.020

Indesit 38 9 0.237 8 0.211 3 0.079

LG 29 2 0.069 2 0.069 0 0.000

Arçelik 23 1 0.043 1 0.044 1 0.044

Total 961 94 0.098 74 0.077 81* 0.084

*=Due to the presence of multiple opponents (two in twelve opposition cases and three in one case), the number of total oppositions filed is greater than that of oppositions received

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 Opponent

Patentee A B C D E F G H I J Total Others

Arçelik A 0 0 0 0 0 0 0 0 0 1 1 0

LG B 0 0 0 0 0 0 0 2 0 0 2 0

Indesit C 1 0 0 0 0 1 0 1 1 4 8 1

Fagor-Brandt D 0 0 0 0 0 0 0 0 0 0 0 3

Samsung E 0 0 0 0 0 0 0 1 0 2 3 0

Candy F 0 0 0 0 0 0 0 0 0 3 3 0

Whirlpool G 0 0 1 0 0 0 0 1 1 3 6 0

Miele H 0 0 0 0 0 0 0 0 1 5 6 2

Electrolux I 0 0 0 0 0 0 2 6 0 12 20 5

BSH J 0 0 2 1 0 0 1 17 11 0 32 14

Total 1 0 3 1 0 1 3 28 14 30 81 25

Matrix of reciprocal oppositions

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Logit regressions for the occurrence of a patent opposition from industry rivals

***= significant at 0.01; **=significant at 0.05; *= significant at 0.10.

Coefficient Stand. Error

Coefficient Stand. Error

Constant -3.272 1.001*** -2.212 1.193*

Log Backward citations -0.225 0.304 -0.223 0.304

Log Forward citations 0.379 0.188** 0.332 0.188*

Log Patent family size -0.058 0.267 -0.043 0.277

Log Claims 0.291 0.226 0.241 0.228

Log Patent portfolio 0.083 0.137 -0.251 0.204

Top four companies (dummy)

0.932 0.434**

Chi-squared likelihood ratio test (p-value)

6.444 (0.265) 11.463 (0.075)

Opposition outcomes

• In the opposition proceedings, three EPO examiners (including the one in charge of the first examination) are asked to re-assess the decision to grant a patent

• Opposition rejected (the patent is valid)• Patent amended (changes or reduction of

claims) • Patent revoked (no longer valid)• Opposition closed (residual outcome)

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Opposition outcomes: a comparison

Revoked Amended Opposition Rejected

Opposition Closed

All EPO patents 2000-2006 (legal status on January 2010) Scellato et al. (2011) 38.03 29.68 21.44 10.85

White goods 31.87 39.56 24.18 4.40

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Findings by company (oppositions among competitors only)

 Oppositions received

Share revoked

Share amended

Share revoked & amended

Oppositions filed

Share revoked

Share amended

Share revoked & amended

BSH 27 33.33 29.63 62.96 30 20.00 46.67 66.67

Electrolux 19 47.37 31.58 78.95 14 35.71 28.57 64.29

Whirlpool 6 16.67 33.33 50.00 3 66.67 33.33 100.00

Miele 5 0.00 60.00 60.00 28 28.57 46.43 75.00

Candy 3 0.00 33.33 33.33 1 100.00 0.00 100.00

Samsung 3 33.33 33.33 66.67 0 n.a. n.a. n.a.

Fagor-Brandt 0 n.a. n.a. n.a. 1 0.00 0.00 0.00

Indesit 8 37.50 50.00 87.50 3 33.33 66.67 100.00

LG 2 0.00 100.00 100.00 0 n.a. n.a. n.a.

Arcelik 1 0.00 100.00 100.00 1 100.00 0.00 100.00

Total 74 31.08 37.84 68.92 81 29.63 39.51 71.6017

Multinomial Logit regression

18***= significant at 0.01; **=significant at 0.05; *= significant at 0.10.

Coefficient Stand. ErrorOpposition rejected /closedConstant -2.700 2.190Log Backward citations -1.217 0.459***Log Forward citations 0.642 0.356*Log Patent family size -0.124 0.416Log Claims -0.057 0.471Log Patent portfolio 0.159 0.418Top four companies (dummy) 0.063 0.919Patent amendedConstant -4.084 2.024**Log Backward citations -0.055 0.490Log Forward citations 0.143 0.290 Log Patent family size -0.069 0.386Log Claims 0.925 0.326***Log Patent portfolio -0.367 0.322Top four companies (dummy) 0.631 0.565Patent revokedConstant -4.230 2.024**Log Backward citations 0.567 0.509Log Forward citations 0.239 0.268 Log Patent family size -0.032 0.630Log Claims -0.361 0.312Log Patent portfolio -0.409 0.350Top four companies (dummy) 2.815 1.141**Chi-squared likelihood ratio test (p-value)

32.124 (0.021)

Concluding remarks • The opposition probability is marginally affected by

the patents’ quality while it is much higher for the patents granted to the leading companies

• This would suggest that patent oppositions are used as strategic tools (to create uncertainty and/or delay the exploitation of inventions)

• However, by considering opposition outcomes, it emerges that the above interpretation is misleading

• More backward citations reduce the probability of maintaining a patent valid

• The patents with a high number of claims are more likely to be amended

• The probability of revocation rises for the patents granted to the top industry players 19

• These findings confirm that the opposition procedure adopted by the EPO is particularly effective in correcting the errors made in the first examination process, improving the quality of granted patents and, then, reducing the chances of further litigation

• Absent an effective post-grant review, the only way to fix the errors of patent offices would be that of challenging the patents' validity before national courts

• However, the cost of a patent lawsuit is much higher than that required to pursue an opposition case before the EPO

• As a consequence, this kind of administrative patent review, by reducing the scope for further and more expensive litigation, is improving social welfare

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Concluding remarks

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