S9 Ep31: How well does patent screening work?

Someone once held a patent on the swing. A piece of wood. Two ropes. The US Patent Office granted it. How often does that actually happen, and what does it cost when the system gets it wrong? Or, how often is a valid patent claim rejected?

Until now, no one knew. Tim Phillips talks to Mark Schankerman of LSE and CEPR, who with co-authors William Matcham spent eight years building the tools to find out. Using natural language processing across a dataset of around one million patent applications, twenty million claims, and fifty-five million examiner decisions, they measure how similar each incoming claim is to the hundred million claims that preceded it, going back to 1976. They find that 81% of initial patent claims fall below the patentability threshold; examiners must negotiate that figure down round by round. And they do a pretty good job. But around a third of all abandoned applications contain at least one valid claim the system failed to protect. You don’t see patents that aren’t awarded, so those errors have, until now, been invisible.

The research behind this episode:

Matcham, William, and Mark Schankerman. Forthcoming. "Screening Property Rights for Innovation." Econometrica. Available as CEPR Discussion Paper DP18334 (gated). Current version dated January 2026.

To cite this episode:

Phillips, Tim, and Mark Schankerman. 2026. “How “well does patent screening work? VoxTalks Economics (podcast).

Assign this as extra listening. The citation above is formatted and ready for a reading list or VLE.

About the guest

Mark Schankerman is Professor of Economics at the London School of Economics, where his research spans innovation, intellectual property, and the economics of technology. His work has examined how patent rights shape R&D incentives, the market for technology, and the behaviour of innovative firms, with particular attention to the institutions that govern how property rights are allocated and enforced.

Research cited in this episode

Prior art. In patent law, prior art is any publicly available knowledge that predates a patent application. Examiners are required to search prior art and reject claims insufficiently distinct from it. The concept defines the outer boundary of what can be granted protection; the closer a claim is to prior art, the weaker the case for granting it.

Type I and Type II errors in patent screening. A Type I error occurs when an examiner grants a claim that should have been rejected, typically because it is too similar to prior art. This allows the holder to charge royalties and, in the US context especially, to bring litigation. A Type II error occurs when a valid claim is refused or abandoned, depriving the applicant of protection they deserve and reducing future incentives to innovate. Schankerman argues that Type II error is systematically under-discussed in public debate: you can point to a patent that should not have been granted; you cannot point to the invention that was never protected.

Structural model. The paper uses a dynamic structural model, meaning it models the actual institutional rules, incentives, and decision sequences that govern patent prosecution at the USPTO. Structural models allow researchers to run counterfactual experiments, asking what would happen if specific rules or incentives were changed, without running those experiments for real. This is the methodological basis for the paper's policy analysis.

Patent distance measure. The paper's key methodological innovation is a quantitative measure of how similar a patent claim is to existing claims, constructed using natural language processing. The algorithm is trained on existing patent documents and compares the textual content of each incoming claim against all prior claims, covering roughly a hundred million filings going back to 1976. This produces a scalar distance figure that can be compared against an estimated patentability threshold.

Deadweight loss. The standard economic term for the welfare cost created when prices are raised above competitive levels. In the patent context, a wrongly granted claim allows its holder to charge higher licensing fees than the market would otherwise bear, generating a cost for users without a corresponding social benefit.

Request for Continued Examination (RCE). A procedural mechanism in the US patent system that allows applicants to re-open a finally rejected application in exchange for a fee. Unlike the European Patent Office or China's patent system, the USPTO places no hard limit on how many times an applicant can return. Schankerman's counterfactual analysis finds that restricting rounds to one substantially reduces screening costs and discourages strategic padding of claims.

Unified Patent Court (UPC). A specialised European court that began operating in June 2023. Its remit covers the enforcement of patent rights across participating EU member states; it does not conduct patentability examinations. Schankerman argues that by reducing the cost of enforcement, the UPC raises the stakes of the upstream screening process: a wrongly granted patent becomes cheaper and easier to assert.

Amazon one-click patent. Amazon received a US patent on the one-click online purchasing process. Schankerman uses the case to illustrate the core economic argument: the relevant question is not whether an invention is valuable, but whether patent protection was necessary to induce its development. If the invention would have occurred regardless, the grant creates costs without providing the intended innovation incentive.

Intrinsic motivation. The tendency for individuals to pursue a task for its own sake rather than for external rewards. Schankerman's model estimates that USPTO examiners exhibit substantial intrinsic motivation and that this is the primary driver of screening quality. In counterfactual simulations, removing intrinsic motivation causes outcomes to deteriorate markedly; removing the credit-based extrinsic incentive system has a much smaller effect.

Padding. Schankerman's term for the strategic behaviour in which patent applicants include claims that are broader than what is strictly novel, hoping some will survive examiner scrutiny and expand the scope of their eventual property right. The paper measures the extent of padding directly from the distance data and confirms it is widespread.

More VoxTalks Economics episodes

Patent pools for generic drugs, Mark Schankerman talks about how diffusion of new drugs is painfully slow in low-income countries. Do patent pools accelerate the process, and how we could still do a better job of licensing life-saving medicines?

Related reading on VoxEU

Patent screening, innovation, and welfare, Florian Schuett and Mark Schankerman, 6 Nov 2020. Critics of the patent system claim that patent rights are becoming an impediment to innovation, and an instrument to extract rents through patent litigation. This column develops a framework to quantitatively assess the effectiveness of the current US patent system and the welfare impact of reforms.