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

Dr. Joachim Henkel , Technische Universität München

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 79% 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 305 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 around 83%. We show that our arguments carry over to other legislations. To address the problem that many patents are latently invalid we suggest a significant increase of the inventive step required for grant combined with an unchanged inventive-step standard in litigation.

About the speaker
Dr. Joachim Henkel is a professor of technology and innovation management at Technische Universität München. His research focuses on profiting from innovation, modularity, open source software, user innovation, and patent infringements, and has been published among others in Harvard Business Review, Rand Journal of Economics, Research Policy, and Strategic Management Journal. He serves on the editorial review boards of Academy of Management Journal, Industrial and Corporate Change, and Research Policy. Joachim Henkel was a visiting scholar at University College London, MIT Sloan School of Management, and twice at Harvard Business School. He received a degree in physics from the University of Bonn, a Ph.D. in economics from the University of Mannheim, and was an assistant professor (Habilitand) at Ludwig-Maximilians-University Munich. After his Ph.D., he worked for two years with the consulting firm Bain & Company.

Venue: A0.23 (TS53)

Date: 17 June 2015

Time: 12:00  CEST