© 1999 Robert P. Merges.

Wilson Sonsini Goodrich & Rosati Professor of Law, Boalt Hall School of Law, University of California, Berkeley.

1. LEWIS CARROLL, THE ANNOTATED ALICE 250-51(Martin Gardner, ed. 1960). This passage comes by way of political scientist Don Herzog. See Don Herzog, As Many as Six Impossible Things Before Breakfast, 75 CALIF. L. REV. 609 (1987) (critiquing "Critical Legal Studies"), quoting from LEWIS CARROLL, THROUGH THE LOOKING GLASS (1871).

2. See generally Priceline.com, Priceline.com (visited Apr. 19, 1999) <http://www.priceline.com/>.

3. Walker Digital Corp., Information (visited Apr. 24, 1999) <http://www.walkerdigital.com/html/information.html>.

4. See State Street Bank & Trust Co., Inc. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed Cir. 1998) (overruling cases holding or suggesting that claims to "methods of doing business" were not patentable). In many ways, State Street Bank did not initiate a new practice; it lent judicial authority to existing PTO policy:

With regard to "methods of doing business" in particular, it is worth mentioning that there are a large number of patents in this category that have been granted by the U.S. Patent and Trademark Office (PTO) prior to the Federal Circuit's State Street decision. In effect, State Street will serve to help confirm their validity.

Scott M. Alter, Federal Circuit Broadens Scope For Software Patents, 15 COMPUTER LAW. 24, 27 (1998).

5. Consider one line of business that Priceline.com is apparently interested in: airline ticket options, i.e., the purchase and sale of the right to buy tickets at a later time for a specified price. See U.S. Patent No. 5,797,127, issued Aug. 18, 1998 (entitled "Method, Apparatus, And Program For Pricing, Selling, And Exercising Options To Purchase Airline Tickets"). This patent has the two attributes of a business concept patent: (1) it describes an essentially commercial (as opposed to technological) activity, typically some way to make or save money; and (2) the hardware and software elements are described and claimed at such a high level of generality that they are for all practical purposes nominal. These features are readily apparent from the abstract and claim 1:

An apparatus, method, and program for determining a price of an option to purchase an airline ticket, and for facilitating the sale and exercise of those options. By purchasing an option, a customer can lock in a specified airfare without tying up his money and without risking the loss of the ticket price if his travel plans change. Pricing of the options may be based on departure location criteria, destination location criteria, and travel criteria.

[Claim 1:]

A data processing apparatus for determining a price of an option to purchase an airline ticket, comprising:

a central controller including a CPU and a memory operatively connected to said CPU;

at least one terminal, adapted for communicating with said central controller, for transmitting to said central controller option pricing information including departure location criteria, destination location criteria, and travel criteria;

said memory in said central controller containing a program, adapted to be executed by said CPU, for calculating a price of an option to purchase within a future period, for a particular ticket price, an airline ticket satisfying the departure location criteria, destination location criteria, and travel criteria;

wherein said central controller receives said criteria from said terminal and calculates the option price based upon the criteria.

The emphasis on the commercial function of the program ("calculating a price of an option to purchase ... an airline ticket"), together with the complete generality of the hardware and software elements ("central controller," "at least one terminal," "CPU," "memory," and "a program" are all completely general), leads to the conclusion that this is a patent on the business idea of using computers, in particular the Internet, to price and purchase options on airline tickets. For other examples of patents such as this, see U.S. Patent No. 5,732,400, issued Mar. 24, 1998 (entitled "System And Method For a Risk-Based Purchase Of Goods"); U.S. Patent No. 5,787,402, issued July 28, 1998 (entitled "System and Method for Performing Automated Financial Transactions Involving Foreign Currencies").

6. It will become clear as I go along what I mean by a "bad" patent. Succinctly put, it means a patent that should have been weeded out after a reasonable investment of effort, but was not.

7. See, e.g., Gottschalk v. Benson, 409 U.S. 63 (1972). See generally R OBERT P. MERGES, PATENT LAW AND POLICY: CASES AND MATERIALS ch. 2 (2d ed. 1997).

8. This history, which culminated in the acceptance of process patents in Cochrane v. Deener, 94 U.S. 780, 788 (1877), is well recounted in D ONALD CHISUM, CHISUM ON PATENTS 1.03 (1978 & Supp. 1999). See generally Edward C. Walterscheid, The Early Evolution of the United States Patent Law: Antecedents (Part 3 Continued), 77 J. PAT. & TRADEMARK OFF. SOC'Y 847 (1995).

9. See Cochran, 94 U.S. at 780.

10. See, e.g., Hotel Security Checking Co. v. Lorraine Co., 160 F. 467, 469 (2d Cir. 1908).

11. They certainly tried, nonetheless: See, e.g., In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994) (en banc) (emphasizing hardware components of claimed "rasterizer" invention). But see Pamela Samuelson, Benson Revisited: The Case Against Patent Protection for Algorithms and Other Computer Program-Related Inventions, 39 E MORY L.J. 1025 (1990) (making strong case against software patents).

12. See M ERGES, supra note , at 156 ("Regardless of specific strategies, the point is the same: firms can capture the value of innovations many ways. The question for policymakers is whether patents should be permitted, in light of the other "appropriability mechanisms" available. Again, the relatively frequent innovations in the financial services industry prior to the era of patentability suggest that firms had adequate means to appropriate the value of their new financial innovations.").

13. Walker Digital, Information (visited Apr. 24, 1999) <http://www.walkerdigital.com/html/information.html>.

14. See Teresa Riordan, It May Be "Big, Really Big," But An On-Line Airline Ticket Discounter is Also Being Challenged, N.Y. T IMES, Jan. 18, 1999, at C1. A patent interference is a proceeding to determine priority among two or more rival inventors. See 35 U.S.C. 135 (1998).

15. See D AVID NOBLE, AMERICA BY DESIGN: SCIENCE, TECHNOLOGY AND THE RISE OF CORPORATE CAPITALISM 10 (1977); JOHN BROOKS, TELEPHONE: THE FIRST HUNDRED YEARS 77 (1975).

16. See generally KENNETH BURCHFIEL, BIOTECHNOLOGY AND THE FEDERAL CIRCUIT (1995 & Supp. 1997).

17. U.S. C ONST., art. I, 8, cl. 8 ("The Congress shall have Power ... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries...").

18 See, e.g., D AVID A. HOUNSHELL, FROM THE AMERICAN SYSTEM TO MASS PRODUCTION, 1800-1932, at 5 (1984) (describing the McCormick reaper and the Singer sewing machine, classic examples of nineteenth century technology).

19. See Robert P. Merges & Glenn H. Reynolds, The Proper Scope of the Patent and Copyright Power (Nov., 1998) (working paper on file with author). It has recently been argued that the report of one early case in this area may well have been distorted. See Jacob Corre, The Argument, Decision, And Reports of Darcy v. Allen, 45 E MORY L.J. 1261, 1266 (1996) ("[T]he opinion in Darcy v. Allen should not be viewed as a late-Tudor instance of the kind of explicit and concerted constitutional attack on the Crown that contributed so significantly to the Civil War forty years later.").

20. See M ERGES, supra note , at 6.

21. See id.

22. See Statute of Monopolies, 1623, 21 Jam., ch. 3, 6 (Eng.) (stating that no patents that raise the "prices of commodities at home, or hurt of trade, or generally inconvenient ... [will be allowed]").

23. The surest sign that software is widely accepted as appropriate patentable subject matter is that we are beginning to see software-related patent infringement cases that do not even mention section 101 as an issue. See, e.g., Enpat, Inc. v. Microsoft, Inc., 26 F. Supp. 2d 806 (E.D. Va. 1998).

24. Indeed, there is a fair argument that a business concept is patentable whether or not it is implemented on a computer:

[In State Street Bank] the Federal Circuit indicated that whether an invention is directed to patentable subject matter under 101 does not depend on whether a "physical" transformation takes place or whether the claim is directed to a process or a machine. From this, it might then follow that a claimed process for, e.g., performing the function similar to Signature's invention, is patentable even absent its use with a computer. As long as the variables represent some set monetary values, it arguably should not matter who or what does the "transforming." After all, regardless of the transforming mechanism (e.g., machine or human), the invention can be said to have "practical utility," and produce a "useful, concrete and tangible result." As can be appreciated, arguments can also be made as to why State Street might not be so broadly interpreted.

Alter, supra note , at 28 (citations omitted).

25. See generally Robert P. Merges, The Economic Impact of Intellectual Property Rights: An Overview and Guide, 19 J. C ULTURAL ECON. 103 (1995).

26. For an argument that the phrase "for limited times," in the historical context of the Intellectual Property Clause, does set limits on Congress' ability to extend individual patents and copyrights through so-called "private bills," see Merges and Reynolds, supra note .

27. See supra note .

28. See D OUGLASS C. NORTH, INSTITUTIONS, INSTITUTIONAL CHANGE AND ECONOMIC PERFORMANCE 52 (1990).

29. See, e.g., Brenda Sandburg, Patent Applications Flow Freely, L EGAL TIMES, Feb. 22, 1999, at 12; Kenneth W. Dam, Some Economic Considerations In The Intellectual Property Protection Of Software, 24 J. LEGAL STUD. 321, 369-71 (1995) (discussing many of the problems with patent quality that had been identified with respect to software patents, and voicing optimism that problems can be addressed).

30. See Andrew M. Riddles & Brenda Pomerance, Software Patentee Must Conduct Own Search: Prior-Art Searches Made By The Patent Office Often Are Not Thorough Enough To Be Trusted, N AT'L L.J., Jan. 26, 1998, at C19. (accusing PTO of being little better than a "registration process" for some kinds of software patents).

31. See Greg Aharonian, 17,500 software patents to issue in 1998, I NTERNET PATENT NEWS SERVICE (Oct. 18, 1998), available at <http://lpf.ai.mit.edu/Patents/ipns/ipns-19981018.txt>.

32. See, e.g., Quantel, Ltd. v. Adobe Systems, Inc., 1997 U.S. Dist. LEXIS 16779 at *14-23 (D. Del. Sept. 22, 1997) (jury verdict invalidating software patents; special verdict form shows numerous "prior public use" references). Cf. M ERGES, supra note , at 416; George Gates, Trade Secret Software: Is It Prior Art?, 6 COMPUTER LAW. 11 (1989).

33. See O FFICE OF TECHNOLOGY ASSESSMENT, U.S. CONG., FINDING A BALANCE: COMPUTER SOFTWARE, INTELLECTUAL PROPERTY AND THE CHALLENGE OF TECHNOLOGICAL CHANGE 24 (1992) (noting need to "fill[] in" the prior art to improve software patent quality).

34. The Attorney-Advisor to Commissioner Christine A. Varney of the Federal Trade Commission has this to say on the topic:

Given continuing data and expertise problems, any expansion of the scope of statutory subject matter will inevitably result in the issuance of more patents that do not meet the statutory requirements of novelty and nonobviousness, but instead have the potential to block further software development. Given the non-public nature of the patent application process, the absence of effective post-award review and the substantial transaction costs associated with defending patent infringement litigation, many improvidently granted patents are likely to go unchallenged.

J. Beckwith Burr, Competition Policy And Intellectual Property In The Information Age, 41 VILL. L. REV. 193, 204 (1996).

35. See, e.g., Robert P. Merges & Richard R. Nelson, On the Complex Economics of Patent Scope, 90 C OLUM. L. REV. 839, 905-06 (criticizing an early monoclonal antibody diagnostic kit patent).

36. See fig.1 infra p. *.

37. See infra, Part V.A.

38. See fig.1 infra p. *.

39. Cf. Merges, supra note .

40. See, e.g., Yoram Barzel, Optimal Timing of Innovations, 50 R EV. ECON. & STATISTICS 348 (1968).

41. Implicit in this statement is that the technology at issue in the patent would be disclosed and/or commercialized even if no patent were granted. Put another way, the social cost is avoidable but the benefit is still realized. This is a bedrock assumption of our patent system. Our rules of novelty and nonobviousness assume that if technology is available "off the shelf" then someone will implement it without the need for any special property right. See M ERGES, supra note , at 259-63 ("Novelty and the Economics of 'Search'").

42. The term "rent-seeker" refers to those who seek a supra-competitive return. The usual sense is negative; thus, one who seeks such a return from an illegitimate, non-welfare-enhancing source is a rent-seeker. An example is a person who makes campaign expenditures on candidates who promise to back legislative action that profits one or few at the expense of the many.

43. See Lanham Act 33(b), 15 U.S.C. 1115(b) (1998).

44. In an interesting treatment of related issues published as this article went to press, Ian Ayres and Paul Klemperer work the other side of this issue. See Ian Ayres & Paul Klemperer, Limiting Patentees' Market Power Without Reducing Innovation Incentives: The Perverse Benefits Of Uncertainty And Non-Injunctive Remedies, 97 M ICH. L. REV. 985 (1999). They study the relative benefits of uncertainty and delay in the enforcement of patents. Their overall point is that uncertainty and delay in enforcing patents can at times permit limited entry that erodes the patentee's ability to price at the monopoly level. Their basic insight is that even a small amount of uncertainty regarding patent enforceability can have significant positive effects on social welfare, with much more limited negative consequences for the patentee's incentives. (This flows from the fact that, near the monopoly price under conventional assumptions, price increases benefit the patentee only a small amount while producing very significant dead weight losses to consumers.) The authors consider a variety of doctrines that might be enlisted to increase ex ante uncertainty, including patent standards. This leads them to argue in favor of "underinclusive" patent standards, i.e., those that might permit more invalid patents to survive longer, and of relatively lax patent review (at the margin) by the PTO. See id. at 1025-26 ("On the margin, [their argument] militates against statutory or regulatory rules that are known ex ante and instead militates in favor of common law standards that often produce relatively delayed and uncertain adjudication-particularly if the common law is underinclusive."). While their general argument is intriguing, it is submitted that uncertain PTO review is a poor way to implement it. The third-party costs-in the form of researching prior art, obtaining patent opinion letters, and revising research plans to avoid masses of uncertain but potentially valid patents-are simply too high. Best to apply their insights in other areas they explore, such as the doctrine of equivalents and the standard for granting preliminary injunctions.

45. For an excellent account of the problems with the patent registration system, and a thorough discussion of the genesis of the 1836 Act, see Edward C. Walterscheid, The Winged Gudgeon-An Early Patent Controversy, 79 J. P AT & TRADEMARK OFF. SOC'Y 533 (1997).

46. See id. at 535-36.

47. See S TUART BRUCHEY, ENTERPRISE: THE DYNAMIC ECONOMY OF A FREE PEOPLE 230 (1990) (describing Eli Whitney's frustration at long, expensive and "fruitless" litigation over the cotton gin patent).

48. See Walterscheid, supra note , at 548.

49. See id. at 549 (quoting a federal judge, who declared "[The] very great and alarming facility with which patents are procured [under the registration system] is producing evils of great magnitude. It encourages the flagitious peculations of imposters, and the arrogant pretensions of vain and fraudulent projectors ... the community suffers under the many diversified extortions").

50. See id.

51. See, e.g., H AL R. VARIAN, INTERMEDIATE MICROECONOMICS: A MODERN APPROACH 545-65 (3d ed. 1993).

52. One commentator wrote:

[T]he major defect of the Patent Act of 1793, which remained the law of the land until 1836, [was] ... that anyone could obtain a patent for anything, merely by paying the requisite fee and meeting the ministerial requirements imposed. It mattered not that the supposed invention had already been patented or had long been known and used. The threat of litigation was sufficient for the owners of apparently invalid patents to obtain substantial royalties from literally hundreds and thousands of farmers, small businessmen, and artisans for whom it truly was cheaper to pay than to be involved in expensive and perhaps ruinous litigation.

See Walterscheid, supra note , at 533.

53. The PTO only issues patents, it does not identify, locate, or sue infringers. At the same time, a private party cannot bring an enforcement action until his or her patent is granted, and even then this private action may be "stayed" while the patent is undergoing reexamination.

54. See Hideo Kodama & Jeffrey D. Tekanic, Reducing the Costs of Obtaining and Maintaining Japenese Patents, 81 J. P AT. & TRADEMARK OFF. SOC'Y 117, 127 (1999) (describing 7 year deadline to request examination). See also 35 U.S.C. 111(b) (describing provisional patent applications). Provisional patent applications are not examined by the PTO and can be replaced at any time up to one year from filing with a normal patent application. See id. This effectively allows a one-year "option" period for inventors to delay examination of a patent application.

55. The Public Interest and Private Patent Bills: Senate Hearings on Patent Extensions (Private Patent Bills), 102d Cong. 102-824 (1991) (statement of Prof. Robert Merges). An alternative would be to provide a "second tier" of patent protection to less significant inventions, as is done in foreign "utility model" protection schemes. See generally Mark D. Janis, Second Tier Patent Protection, 40 H ARV. INT'L L.J. 151 (1999)

56. Currently, the budget is largely a function of the fees the office collects, minus some money that Congress skims off for the general fisc. See 1995 U.S. P AT. & TRADEMARK OFF. ANN. REP. 47.

57. See ROBERT COOTER AND THOMAS ULEN, LAW AND ECONOMICS 326-71 (1988).

58. See 37 C.F.R. 1.56 (1999). See also Harry F. Manbeck, Jr., The Evolution and Issue of New Rule 56, 20 A M. INTELL. PROP. L. ASS'N Q.J. 136 (1992).

59. See, e.g., Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172 (1965); Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282 (9th Cir. 1984), cert. denied, 469 U.S. 1190 (1985).

60. The classic reference here is G UIDO CALABRESI, THE COSTS OF ACCIDENTS: A LEGAL AND ECONOMIC ANALYSIS (1970).

61. See infra Part V.C.

62. See M ERGES, supra note , at 9-10.

63. See id.; Walterscheid, supra note , at 534.

64. See 1997 U.S. P AT. & TRADEMARK OFF. ANN. REP. 85 tbl.2; id. at 87 tbl.6.

65. See id. at 73.

66. See, e.g., id. at 35.

67. See 1993 U.S. PAT. & TRADEMARK OFF. ANN. REP. 51.

68. See generally 1997 U.S. P AT. & TRADEMARK OFF. ANN. REP.; 1996 U.S. PAT. & TRADEMARK OFF. ANN. REP.; 1995 U.S. PAT. & TRADEMARK OFF. ANN. REP.

69. See 1997 U.S. PAT. & TRADEMARK OFF. ANN. REP. 85 tbl.2.

70. See 1997 U.S. P AT. & TRADEMARK OFF. ANN. REP. 41(showing the PTO's revenues for fiscal years 1996 and 1997); id. at 85 tbl.2 (showing the number of patent applications filed during 1996 and 1997); 1995 U.S. PAT. & TRADEMARK OFF. ANN. REP. 52 (showing the PTO's total resources for fiscal years 1994 and 1995); id. at 87 tbl.1 (showing the number of patent applications filed with the PTO during fiscal years 1994 and 1995); 1993 U.S. PAT. & TRADEMARK OFF. ANN. REP. 49 tbl.2 (showing the total funding PTO funding availability, per fiscal year, from 1983-1993); id. at 54 tbl.6 (showing the number of patent applications filed with the PTO each fiscal year, from1983-1993). Because it is not always possible to ascertain the patent budget, alone, from the PTO's annual reports, I have substituted total funding availability. This is possible because we are merely observing the ratio of funding to patent applications. Note that

71he numbers do not change greatly when we substitute patent funding, alone, which is given in the 1997 U.S. P ATENT & TRADEMARK OFFICE ANNUAL REPORT: the amount available per patent changes little, from $3100 to $2800. See id. at 73 (showing fee collections by category).

. See Harold Demsetz, Toward a Theory of Property Rights, 57 A M. ECON. REV. 347, 347-59 (1967).

72. Cf. Robert Ellickson, Property in Land, 102 Y ALE L.J. 1315, 1329-30 (1993) (describing origin of deed registries).

73. This is very similar to Posner's discussion of optimal filing fees in civil litigation. See R ICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 578-82 (4th ed. 1992).

74. See J ACK HIRSHLEIFER AND JOHN G. RILEY, THE ANALYTICS OF INFORMATION AND UNCERTAINTY 180 ff. (1992). To rigorously pursue the statement in the text, one would need to specify some additional variables, most importantly the PTO's a priori probability assessments of the validity of the patent (based on its internal search results information, e.g., that a search of certain stringency leads to an identical finding, and thus lack of patentable novelty, in 20% of all cases). In search theory, new information-the product of the search-operates to modify earlier probability assessments. For an application of this Bayesian approach to patent validity, see Robert P. Merges, Uncertainty and the Standard of Patentability, 7 HIGH TECH. L.J. 1 (1993).

75. That is, the cost benefit analysis that the PTO conducts is strictly a function of its own internal costs of examination and search. In that case, the PTO's cost benefit analysis will not reflect the true social welfare calculus, but instead only a "local" cost benefit analysis.

76. For an overview of these proposals, see Allan M. Soobert, Breaking New Grounds in Administrative Revocation of U.S. Patents: Proposition for Opposition-and Beyond, 14 S ANTA CLARA COMPUTER & HIGH TECH. L.J. 63, 128-44 (1998). We pick up the argument for oppositions, and the related argument in favor at least of reforming the U.S. reexamination system, later in Part V.C.

77. The entry level job descriptions for patent examiners list salaries ranging from $20,588 to roughly $60,000. See U.S. Pat. & Trademark Off., Patent Examiner Recruitment (Apr. 12, 1999) <http://www.uspto.gov/web/offices/ac/ahrpa/ohr/jobs/exam.htm>. After 10 or 15 years, an examiner who has reached "Primary Examiner" status may earn $72,000 to $80,000. Telephone Interview with Jeff Kushan, Esq., Powell, Goldstein, Frazer & Murphy, Washington, D.C., and former Attorney-advisor with the Office of Legislation and International Affairs at the U.S. Patent and Trademark Office (Apr. 20, 1999); Cf. Jim Landers, Perot-Backed Coalition Opposes Bill to Privatize U.S. Patent Office, D ALLAS MORNING NEWS, Sept. 8, 1998, at 1D ("[Then Commissioner of Patents Bruce] Lehman said privatizing the patent office would let him hire hundreds more patent examiners and pay them competitive salaries.").

78. See Agnes Shanley, You and Your Job: Shifting Career Gears Can Open New Doors, C HEMICAL ENGINEERING 141, 141 (Dec., 1998) (reporting that average salary for entry-level chemical engineers was $49,150 in 1998, versus an average of between $95,700 and $120,000 for management level engineers).

79. Telephone Interview with anonymous patent examiner (Feb. 1, 1999).

80. See Brenda Sandburg, Patent Applications Flow Freely, L EGAL TIMES, Feb. 22, 1999, at 12.

81. See generally Bengt Holmstrom & Paul Milgrom, Multitask Principal-Agent Analysis: Incentive Contracts, Asset Ownership and Job Design, 7 J.L. E CON. & ORG. 24 (1991). Holmstrom and Milgrom describe the importance of monitorability and employee incentives in jobs where employees (agents) are expected to perform multiple tasks. They present a model showing that separating tasks according to their monitorability characteristics allows the principal to give stronger incentives for tasks that are easy to measure, without fearing that the agent will substitute efforts away from harder-to-measure tasks. There are gains, in other words, from job designs that group hard-to-monitor tasks into individual jobs.

82. See, e.g., E DWARD P. LAZEAR, PERSONNEL ECONOMICS (1995).

83. See Trond Petersen, Reward Systems and the Distribution of Wages, 7 J. L AW, ECON. & ORG. 130 (1991); Holmstrom & Milgrom, supra note , at 24 (interpreting empirical studies).

84. Consider these anonymous comments, posted to a patent examiners' bulletin board:

You know what? I'm sick of finding ridiculous patents every time I look in my [files]. Part of the blame goes to the patent corps. We just don't fight hard enough against the bull---- being shoveled by upper management. And of course, that is where the rest of the blame goes. It's a system that's burning up, and management just keeps adding fuel to the fire.

And why should you care? Hey, management pays you for good patents or bad, right? In fact, they pay you more for doing less. Why should you fight with management. Why reject?

Greg Aharonian, A few patent examiners complain about patent quality, INTERNET PATENT NEWS SERVICE (Jan. 28, 1999), available at <http://lpf.ai.mit.edu/Patents/ipns/ipns-19990128.txt>.

85. This would obviously necessitate a change in the current practice of giving a reexamination request to the same group or examiner that originally examined the application, but this is a good idea anyway given the normal human instinct not to admit a mistake.

86. Reexamination proceedings are provided for by 35 U.S.C. 301-07 (1998). Anyone, including the patentee, may ask the PTO to examine the patent in light of certain types of new prior art that was not considered during prosecution. If this raises a substantial new question regarding patentability, then the PTO grants a reexamination and determines whether or not the patent claims are still valid. See M ERGES, supra note , at 1123-25.

87. See 35 U.S.C. 302 (1998); 37 CFR 1.20(c) (1998) (setting forth current fee). The Commissioner of Patents can also request a reexamination,. See M ERGES, supra note , at 1124.

88. See 35 U.S.C. 301-02 (1998). See generally M ERGES, supra note , at 1124.

89. 35 U.S.C. 303(a) (1998).

90. See H.R. R EP. NO. 96-1307, at 3-4 (1980), reprinted in 1980 U.S.C.A.A.N. 6460, 6462-63.

91. See 1997 U.S. P AT. & TRADEMARK OFF. ANN. REP. 93 tbl.13; 1995 U.S. PAT. & TRADEMARK OFF. ANN. REP. 90 tbl.7; 1993 U.S. PAT. & TRADEMARK OFF. ANN. REP. 56 tbl.11.

92. See Wayne O. Stacy, Note, Reexamination Reality: How Courts Should Approach a Motion to Stay Litigation Pending the Outcome of Reexamination, 66 G EO. WASH. L. REV. 172 (1997).

93. Oppositions, unlike reexaminations, are adversarial proceedings that allow for the introduction of physical evidence as well as the testimony of inventors and experts. In addition, oppositions occur early in a patent's life-they must be filed within nine months of issuance. This system finalizes patent validity earlier than the U.S. system, thereby benefiting patentees, potential infringers, and licensees. See M ERGES, supra note , at 1131-34.

94. Soobert, supra note , at 66 (footnotes omitted).

95. The Japanese patent system also includes oppositions, but other differences between the U.S. and Japan, together with the general agreement over the efficiency of the European system, make Europe a better basis of comparison.

96. See 1997 U.S. P AT. & TRADEMARK OFF. ANN. REP. 93 tbl.13; 1993 U.S. PAT. & TRADEMARK OFF. ANN. REP. 56 tbl.11.

97. See 1997 E UR. PAT. OFF. ANN. REP.15; 1996 EUR. PAT. OFF. ANN. REP.39; 1995 EUR. PAT. OFF. ANN. REP.44.

98. Cf. 1995 EUR. PAT. OFF., ANN. REP. 44 (Showing that, in approximately 65.7% of the cases, the patent was either maintained in amended form, or the opposition was rejected.)

99. The 2500 oppositions filed in Europe in 1995 were far in excess of the 376 U.S. reexamination requests. See 1995 E UR. PAT. OFF., ANN. REP. 15; 1997 U.S. PAT. & TRADEMARK OFF. ANN. REP. 93 TBL.13. In addition, there were far more opposition requests as a percentage of all patents issued the year before, or indeed of all outstanding patents in the system. By way of comparison, the European Patent Office granted 39,650 patents in 1997, versus 123,000 in the U.S. See 1997 EUR. PAT. OFF., ANN. REP. 15; 1997 U.S. PAT. & TRADEMARK OFF. ANN. REP. 84.Therefore, in Europe, 6.8% of issued patents were opposed, whereas, in the United States, only 0.3% of patents were reexamined.

100. For a recent summary of current reform proposals-and a radical extension of them-see generally Soobert, supra note . Soobert's idea of creating a negative incentive to pursue oppositions, by in essence fining infringers who do not use oppositions, is interesting as a general idea but may not be workable in practice. It may result in over-monitoring of patents, in industries where firms might decide that taking the risks of later infringement lawsuits is worthwhile compared to spending current dollars on extensive monitoring of issued patents. A more positive incentive, such as the award of attorney fees to accused infringers who move to stay an infringement trial and later win an opposition, might be worth exploring.

101. Congress contemplated this practice in the 21st Century System Improvement Act:

While no statutory provision is added by this Act to address interviews conducted before the examiner during reexamination, it is intended that the Office, through rulemaking, will provide third-party requesters the right to participate in any examiner interview initiated by the patent owner or by the examiner, and that such interviews will be conducted under controlled conditions before the examiner and an additional, more senior, Office representative.

H.R. 400, 105th Cong. 503 (1997).

102. See, e.g., S.507, 105th Cong. 506 (1997).

103. See Stacy, supra note .

104. See supra note .