Coase-Sandor Working Paper Series in Law and Economics

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The United States Patent and Trademark Office has, by this point, acquired a well-deserved reputation for ineptitude and inefficiency. Patent examiners do a remarkably poor job of screening out invalid applications, and yet the patent examination process remains surprisingly expensive. Proposals for reforming the patent office—of which there are many—have thus focused on improving the quality of patent review while decreasing the attendant costs. In so doing, scholars have entirely overlooked the valuable function performed by the high costs associated with obtaining a patent. These process costs force applicants to disclose private information regarding the value of their intellectual property and serve as a costly screen against a particularly insidious class of low-value patents: those that are useful only as a means of extracting nuisance settlements from commercial firms. The patent system's continuing viability therefore rests in significant part upon the barrier imposed by administrative cost. And though the patent office is the most prominent forum in which this type of passive screening operates, it is far from the only one. Administrative procedures function as costly screens in areas as diverse as landlord-tenant and employment law, environmental permitting, and immigration law. In each case, the private costs of the navigating the process may pose a more effective barrier to entry than the process itself.



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