Ouyand, Su e Xu (2022)

Journal of Digital Economy 1 (2022) 166–179
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Journal of Digital Economy

journal homepage: www.keaipublishing.com/en/journals/journal-of-digital-economy
Patent system in the digital era - Opportunities and new challenges

Xin Ouyang (欧阳鑫)a, Zhen Sun (孙震)a, Xinzhen Xu (徐欣祯)a, *
a
Institute of Economics, School of Social Sciences, Tsinghua University, China
A R T I C L E I N F O A B S T R A C T
Keywords: The patent system is instrumental in contributing to firms' innovation and nations’ economic
Patent system growth. However, the system has been plagued by a series of persistent problems that prevent it
Digital technologies from playing its full role. For example, the fundamental issue of who should be awarded the patent
Innovation
has not yet been resolved; the massive backlog of patent applications in patent offices worldwide
has become a major headache for policymakers and innovating firms. In the paper, we propose
and discuss a framework that digital technologies could offer promising solutions to these long-
standing issues, thereby significantly improving the efficiency of the patent system. Meanwhile,
we also present and discuss a few challenges faced by the patent system due to the cumulative
nature and interconnectedness of digital technologies. Therefore, the digital era opens up new
possibilities for the patent system but also brings about new challenges. This paper hopes to shed
light on the discussion on the reform of the patent system in the digital era and point out a few
possibly fruitful research directions in this area.
“If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to
recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present
knowledge, to recommend abolishing it.”
—— Fritz Machlup (1958).
1. Introduction
Science and technology innovation has always been a core driver of economic growth and social progress, and how to promote
innovation is an important theme in national strategy and institutional design. In recent times, while we increasingly emphasize the
importance of innovation, we have also become increasingly aware of the many shortcomings in the current innovation system,
particularly the patent system. Fritz Machlup's comments, made more than half a century ago, are still vividly relevant today. With the
advent of the digital age, the continuing breakthroughs in information technologies such as artificial intelligence (AI), blockchain, and
big data have brought many new opportunities for patent system improvement. In the meanwhile, digital technologies and related
innovation have many different characteristics from those in the past, posing further challenges to innovation systems. How to effec-
tively harness these new technologies to solve or mitigate the old system's problems, and avoid its associated difficulties, has become a
prominent issue for scholars and policy makers in the digital era .
The patent system has been used to promote innovation for several centuries, making it one of the most vital institutional designs in
* Corresponding author. Institute of Economics, School of Social Sciences, Tsinghua University, Haidian District, Beijing, 100084, China.
E-mail addresses: oyx21@mails.tsinghua.edu.cn (X. Ouyang), zhensun@tsinghua.edu.cn (Z. Sun), xxz20@mails.tsinghua.edu.cn (X. Xu).
https://doi.org/10.1016/j.jdec.2022.12.003
Received 10 November 2022; Received in revised form 30 December 2022; Accepted 30 December 2022
2773-0670/© 2023 The Authors. Published by Elsevier B.V. on behalf of KeAi Communications Co., Ltd. This is an open access article under the CC
BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
X. Ouyang et al. Journal of Digital Economy 1 (2022) 166–179
modern economics. Numerous scholars and practitioners have continued to explore the relationship between patents and innovation
and to make targeted improvements to the design of the patent system (Mazzoleni and Nelson, 1998; Gallini, 2002; Langinier and
Moschini, 2002; Scotchmer, 2004; Rockett, 2010; Hall and Harhoff, 2012). However, there are still more holes that need to be fixed in
today's patent system than a layperson could possibly imagine. Scholars regularly discuss the possibility of revision of the patent system
(Bessen and Meurer, 2008; Jaffe and Lerner, 2011), while some scholars have gone so far as to suggest the abolition of the system
altogether (Boldrin and Levine, 2008). In this paper, we present some critical issues of the patent system and point to digital technologies
for possible solutions. In the meantime, we highlight a few new challenges faced by the patent system in the digital era and advocate
more research in this direction.
Firstly, the fundamental issue of who should be awarded a patent – to the first inventor or to whoever files the patent application first
– remains unresolved; and digital technologies could offer a solution that has long been sought. The patent system can be broadly
divided into first-to-invent and first-to-file systems. The first-to-invent system is based on the time of completion, i.e., the patent is
granted to whoever completes the invention first, while the first-to-file system is based on the time of filing, i.e., the patent is granted to
whoever files the application first. The first-to-invent system is most in line with the basic “targeting” principle in economic design - the
invention should be awarded to its first inventor - thus should be the first-best choice of patent systems. In practice, however, the first-to-
file system has been adopted in most countries with a patent system. The first-to-invent system suffers from various shortcomings,
including a disincentive to disclose innovations and a significant burden of proof on inventors (Frost, 1967; Gholz, 2000; Mossinghoff,
2002; Sichelman, 2009). The few countries that initially adhered to the first-to-invent system, most notably the United States, shifted
gradually to the first-to-file system due to the difficulty and burdens posed by determining who is the true first-inventor. Besides the
possibly misaligned incentive, the first-to-file system also has other limitations. It could lead to inventors being forced to “rush to patent”
(Macedo, 1990; Jackman, 1996), even when the prospect of the embedded technology is far from mature. The advent of the digital age
offers a possible solution to this fundamental problem. Through digital technology, we may find an efficient means of recording all the
relevant dates of the invention unambiguously, thereby identifying who the first inventor is. The use of digital technology could, once
and for all, put to rest the enduring debate between the first-to-invent and first-to-file systems.
In addition, there are equally problematic issues in the patent examination process, which could benefit substantially from digital
technologies. The examination of patents prior to grant is plagued by, for example, distortions in the direction of innovation (Budish
et al., 2015; Subramanian, 2004), delegated representation (Frakes and Wasserman, 2017, 2019; Tabakovic and Wollmann, 2018;
Charles et al., 2021), examiner's preferences (Cockburn et al., 2003; Lichtman, 2004; Lemley and Sampat, 2012),and so on. Of these,
perhaps the most widely discussed challenge for the patent examination system is that patent offices around the world are being
overloaded by an influx of patent applications. Patent office overload has further led to problems such as a backlog of patent appli-
cations, extended patent grant deadlines, and a decline in patent examination quality. Digital technologies, with their fast evolution and
wide applications across different technology fields, have by all means contributed to the recent patent surge. Nonetheless, the
development of blockchain and AI technologies offer promising solutions to improve both the efficiency and quality of patent
examination.
Lastly, we discuss new challenges faced by patent enforcement in the digital era. Innovations in information technology, software,
and other digital economy-related technologies have shown more prominent features of cumulative innovation and are becoming more
interconnected both between the upstream and downstream industries and across different industries (Cohen et al., 2000; Hall and
Ziedonis, 2001; Alc acer et al., 2009). To this end, the research and development of digital technologies often require a unified tech-
nological standard. However, promoting such a standard must clear the patent licensing barriers along the way, leading to all the
debates about the standard essential patents (SEPs). In this context, patent thickets or patent trolls in the digital era could significantly
increase the difficulty and cost of standard setting, potentially negatively impacting technological innovation and industrial develop-
ment. For example, a patent dispute between two entities could quickly spread along the industrial chain and eventually negatively
impact the whole industry. In recent years, we have witnessed an explosion of digital-technology-related patent disputes and litigation
(Allison et al., 2010; Mulligan and Lee, 2012). Therefore, improving the patent system to adapt to the characteristics of technological
innovation in the digital era has become a new challenge for the patent system.
Indeed, the patent system has reformed and evolved over these decades far more than it has in the last few centuries. In particular,
the new features of the digital economy have essentially revolutionized the situation facing the patent system. On the one hand, the
technological and economic features of the digital age have exacerbated many of the old problems faced by the patent system and
brought about some new challenges; on the other hand, the technological means of the digital age have offered new possibilities for the
patent system to address these problems and challenges. Therefore, this paper will present the challenges facing the patent system in the
digital age, and propose and discuss possible solutions to the problems, with the hope of shedding light on the literature on innovation
systems and contributing to the design and policy discussion of the patent system.
The rest of the paper is organized as follows: Part 2 briefly reviews the history of the patent system, and the challenges and op-
portunities for the patent system in the digital era. Part 3 and 4 introduce two fundamental problems of the patent system and discusses
the possible remedies offered by digital technologies. Part 5 discusses some new challenges faced by the patent system's in dealing with
digital technologies. Part 6 concludes.
2. A Brief review of the patent system
2.1. The origins of the national and international patent system
The patent system has a long history. As early as 1421AD, the Florentine government granted a patent to Filippo Brunelleschi for his
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design of a marble transport ship (Prager, 1946). In 1474, Venice issued the Venetian Patent Statute, an act that is considered to be the
origin of the patent protection system. Together with the Statute of Monopolies enacted by the English Parliament in 1624, it vied for the
title of “the first patent law in the modern sense.” In the following 15th and 17th centuries, the British Crown granted patent monopolies
in many fields, and Britain became the pioneer and beneficiary of the modern patent system. The development of the English patent
system, especially the issuance of the Statute of Monopolies, may have been an important reason for its rapid technological development
and eventual leading of the First Industrial Revolution (MacLeod, 2002; Mokyr, 2009). In the following centuries, other patent laws were
enacted in Western countries such as England (1718), the United States (1790), France (1791), Russia (1814), and Germany (1877), and
were likewise introduced to non-continental European countries such as India (1859) and Japan (1885) (Pottage, 2010).
As exchanges between countries became more frequent, innovation protection was no longer a matter for a single country, and the
patent system also needed to be globalized. In 1883, the Paris Convention for the Protection of Industrial Property established an
alliance of contracting parties to protect patents and, importantly, introduced the priority date provision. The provision is that any
national or resident of an allied country who files a patent application in his own country may, within a certain period of time, count the
date of the patent application filed in his own country as the effective date of filing in another country. This practice ensures that in-
ventions from any country are given priority worldwide, and to a certain extent, guarantees the same legal status for all inventors in
allied countries. In 1886, the Berne Union was formed and signed the “Berne Convention for the Protection of Literary and Artistic
Works,” extending the scope of patent protection to the literary and artistic fields. In 1967, the World Intellectual Property Organization
was founded based on the Paris Union and the Berne Union. In 1978, the World Intellectual Property Organization introduced The
Patent Cooperation Treaty (PCT), which now has 156 contracting parties. The core of the PCT is to establish a way to file multinational
patent applications, through which applicants can file international applications and then submit national/regional patent applications
to designated PCT contracting states/regions. PCT applications have largely standardized patent filings and searches across countries,
significantly reducing the cost of the patent process (Erstling and Boutillon, 2005).
In 1994, the signing of the TRIPS agreement established a global patent protection system to some extent, promoting the basic
universalization of the patent system and making the patent granting process broadly similar across countries (Hall and Harhoff, 2012).
At its core, TRIPS is about achieving harmonization in the international protection of IPRs (Yu, 2017). Of course, the protection and
enforcement of IP rights remain within administrative boundaries. In the patent system, such administrative boundaries are often
defined by a state or a country, hence the one-country-one-state rule (Hall, 2007). Notable exceptions include multinational systems
such as the European Patent Office and the African Regional Intellectual Property Organization, where a patent needs only be granted by
one authority to have the same legal status as if it has been granted by the patent offices of all member states.
2.2. The purposes and means of the patent system
Although the patent system has evolved over the centuries, its core purpose and means remain unchanged. The dominant view of
patents, both in practice and in economics, is that they are a necessary evil. A monopoly is accepted in order to stimulate innovation and
the disclosure of innovation, which essentially involves a trade-off between individual interests and the public good (Kitch, 1977). As
many innovations and inventions are characterized by the non-competitive and non-exclusive nature of public goods, if inventors were
not given the status of monopolists, too little innovation would be developed or made public from a societal point of view. In the absence
of a patent system, innovations with high economic returns remain trade secrets. By granting inventors property rights over their in-
novations, patents exclude others from taking uncompensated possession of their innovations for a limited period of time, encouraging
them to disclose the innovations and thus facilitating the knowledge flows and spillovers.
Therefore, the core purpose of the patent system is to promote innovation and encourage disclosure, and the core means is property
rights protection. Economists’ research on patents and the patent system then focuses on the relationship between patents and inno-
vation and the design of the patent system (Mazzoleni and Nelson, 1998; Gallini, 2002; Langinier and Moschini, 2002; Scotchmer, 2004;
Regibeau and Rockett, 2010; Hall and Harhoff, 2012). In addition, many scholars have studied patents from purely a legal perspective.
Legal scholars and jurists have, to a certain extent, given legal legitimacy to the existence of the patent system. For example, they believe
that the essence of the “grand bargain” of patents is “disclosure for protection” and give this bargain a corresponding legal legitimacy
(corresponding to the principle of “equity” in the principles of civil law).
2.3. Challenges and opportunities for the patent system in the digital era
As the digital era approaches, the number of patent applications has increased dramatically. Some of the existing problems of the
patent system have become more prominent, and many new problems have emerged. However, at the same time, the advancement of
digital technology has also provided new ideas to solve many problems of the patent system. For example, distributed ledger tech-
nologies (DLTs) such as blockchain ensure the completeness and traceability of information through cryptographic algorithms, time-
stamps and other technologies, which can provide a complete record of each invention that is uploaded onto the chain. This provides a
solution for adopting the first-to-invent or first-to-file system. In addition, the decentralization, openness and transparency of the DLTs
allow multiple parties lacking trust to interact, providing the possibility for external experts to participate in patent examination, which
can relieve the pressure of examination in patent offices and improve the quality of examination. AI can replace humans in routine
transactional work, freeing patent office employees from repetitive and tedious tasks. At the same time, AI is also applied in the fields of
patent translation, search and classification, and may also replace humans in the future in conducting the examination of patents in
specific fields. The generally highly correlated nature of digital technologies makes the patent thicket and patent trolls even more
harmful, and we expect these problems to be more evident in the digital age.
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Table 1
Problems of the patent system in the digital era.
DLTs AI Characteristics of digital technology
Patent for Whom opportunity

Patent Examination opportunity opportunity challenge
Patent Enforcement challenge
Table 1 provides a rough illustration of the correspondence between the problems of the patent system and the opportunities and
challenges brought by the digital era.
In the next section, this paper will discuss in some depth the problems and opportunities of the patent system in the digital economy,
combining research from innovation economics and other disciplines, in the hope of providing a conceptual overview of some of the
critical issues and challenges the patent system may encounter in the digital era.
3. The patent for whom?
A general underlying principle of the patent system is the double patenting rejection (Schlicher, 2003) or the principle of unity
(Kotabe, 1992). In line with universal thinking, this principle requires that only one patent can be granted for the same invention. In
practice, however, the practical implementation of this principle remains controversial. To whom shall we grant the patent if different
persons file two or more patent applications for the same invention? Should the patent be granted to the person who completes the
invention first or to whoever files for the application at the earliest?
These differences lead to two distinguished patent systems: the first-to-invent system and the first-to-file system. The first-to-invent
system is based on the timing of the invention, i.e., the patent is granted to whoever completes the invention first; the first-to-file system
is based on the timing of the application, i.e., the patent is granted to whoever applies first.
In most cases, the first-to-invent system seems more aligned with innovation incentives and general ideas of system design.1 In
practice, however, only a few countries, such as the United States2 and the Philippines, currently adhere to the first-to-invent system.
The first-to-invent system is considered not only to be more in line with natural logic, but also to provide a better incentive for invention
than the first-to-file system. Why, then, do most countries currently adopt the first-to-file system?
Several significant problems with the first-to-invent system hinder its adoption (Frost, 1967; Gholz, 2000; Mossinghoff, 2002). First,
the first-to-invent system may not be as good a promoter of innovation as expected. As stated earlier, a central objective of designing a
patent system is to encourage innovation and disclosure. In a first-to-invent system, inventors may keep their inventions under the
curtain without applying for a patent, until a competitor begins to use technologies or file patents that may infringe on the original
inventor's inventions. Such practices would lead to a far worse scenario than the “submarine patent” has created in the past. Worse still,
it would be detrimental to the disclosure and dissemination of innovations, one of the core purposes of the patent system.
Moreover, the central difficulty with the first-to-invent system is determining who is the first to complete an invention. to the
procedures to identify the first inventor not only have high institutional costs, but also increase the cost of filing for patent applicants and
extended the time needed for a patent grant. Relatedly, the first-to-invent system places a significant burden of proof on the inventor.
Inventors must retain a large amount of evidence in the research process to prove that they are the first to invent, thus expending a great
deal of unnecessary effort.
For all these reasons, most countries have adopted the first-to-file system, and the United States has also reformed its first-to-invent
system, moving in essence from a first-to-invent to a first-to-file system. However, this does not mean there are no problems with the
first-to-file system (Macedo, 1990; Jackman, 1996). Firstly, the central problem with the first-to-file system is the need to “rush-to--
patent” under time pressure, even if the invention is far from mature. Secondly, inventors have the incentive to hinder the research of
their peers, leading to the creation of unhealthy competition. Furthermore, patent applications are not always granted and take a long
time to be granted, and others can still apply for patents before the first application is granted. Ultimately, due to the difference in grant
periods and the possibility that the first application may be withdrawn, a later application may still be granted, leading to issues such as
conflicting applications .
The United States has strived to combine the advantages of the first-to-file and first-to-invent systems to create a new system called
the “first-inventor-to-file.” Under this system, the determination of patent novelty is uniformly based on the effective filing date of the
patent, marking a shift from a first-to-invent system to a first-to-file system. Furthermore, this system establishes a grace period for
inventor novelty. The law states, “A disclosure made one year or less before the effective filing date of a claimed invention shall not be prior art to
the claimed invention under subsection.” Under this clause, even if some inventor applies for a patent later, the inventor can exclude
someone else's application from the scope of the prior art as long as the inventor discloses it before others do within the grace period (one
1
At the time of the French Revolution, the idea that patents belonged to the first inventor was already included as a “natural human right” (Martin,
2008). It is a natural right that an invention belongs to the original inventor, and to fail to recognize it as the property of the original inventor would
be to ignore human rights.
2
In fact, even before the AIA came into force in 2013, the US did not have a pure first-to-invent system (Adelman et al., 2009); after AIA came into
force in 2013, the US adopted an inventor first-to-file system, which is generally considered by academia and practitioners to have switched to a
first-to-file system.
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Table 2
Brief comparison of several patent system.
Type Priority date Main Disadvantages
1 First-to-file Filing date Over-competition & Immature innovation

2 First-to-invent Invention date Late disclosure, Delay strategy & Complex procedure
3 Modified first-to-file system1 Invention date or Critical date (One year prior to filing date) Complex procedure
4 First-inventor-to-file (first-to- Filing date or Disclosure date Complex procedure but better than Type 2 and Type 3
disclose)
1
Before the AIA came into force in 2013, the determination of the ownership of a US patent was actually divided into two parts: firstly, the
determination of novelty under a pure first-to-invent system, as defined in subsections (a), (e) and (g) of section 102 of the pre-amendment patent law;
and secondly, the determination of whether a patent was a statutory bar under a critical date, as defined in subsections (b), (c) and (d) of section 102 of
the pre-amendment patent law. This system is therefore not a pure first-to-invent system and is referred to by Adelman and Dunner (1990) as the
Modified first-to-file system.
year after the patent is disclosed). This system is designed to inherit the advantages of the first-to-invent system, ensuring that the
applicants have sufficient time to prepare a patent application so that they are not forced to apply for immature patents under the first-
to-file system. The grace period rule in the new US patent law makes the inventor-first-to-file system essentially a “first-to-disclose”
system, thus overcoming some of the problems of a pure first-to-file system (Matal, 2011; Merges, 2012). However, the
first-inventor-to-file system retains many of the provisions of the first-to-invent system, and these provisions have prevented some of the
objectives of the reform from being substantially achieved. While the core objective of using the effective filing date of a patent as the
priority date is to simplify the legal procedure, the retention of the grace period runs counter to this objective by essentially using the
date of disclosure as the point in time for the patent. For example, if, during the grace period for a patent application, another inde-
pendently completed inventor discloses the invention, then the AIA would need to determine, through a retrospective process, whether
the applicant had disclosed the invention before the inventor, and whether this disclosure would also need to satisfy the grace period
requirement. While this process is less complicated than the old first-to-invent system, it is still not as efficient as a complete first-to-file
system. Table 2 provides a rough illustration of the priority dates and major drawbacks of the different patent systems.
It is worth adding that the debate over the patent system comes not only from the merits of the system itself but also from the
intricate conflict of interests. Under different patent systems, there are very different beneficiaries and competitive strategies. For
example, pharmaceutical and biotechnology companies represented by Bristol-Myers Squibb Company, Johnson & Johnson, and Amgen
have expressed strong opposition to the shift to a first-to-file system in the US (Haley and Haley, 2012; Zhang, 2012). Under the
first-to-invent system, pharmaceutical companies can temporarily refrain from filing patent applications at the stage of new drug
creation. This can shorten the time between the filing date and the date of the market launch of the drug, thereby extending the effective
protection period3 of the patent. Under the first-to-file system, pharmaceutical companies are forced to file patent applications as early
as possible, especially in some more competitive research areas. Thus, after the change from a first-to-invent system to a first-to-file
system, the timing of patent applications by pharmaceutical companies has changed, and they need to file patent applications
earlier, which means that the expiration of the patent protection period is earlier. While there is still a rigorous and lengthy process of
trials and approvals to bring a drug to market, the first-to-file system means a shorter patent life and lost benefits. Against this back-
ground, legislators in California, where there are many high-tech companies in pharmaceutical technology and biotechnology, are
generally opposed to the patent law reform bill.
It is clear that none of the existing systems, be it the first-to-file, first-to-invent, or some combinations of the two like the first-
inventor-to-file system, has provided a satisfactory and economically efficient solution to the problem of to whom the patent should
be granted. With the advent of the digital age, we may see the dawn of a solution to the debate between the first-to-invent and first-to-file
systems. The development of digital technology could provide an efficient means of determining the date of invention and identifying
the first inventor for the first-to-invent system, opening up new opportunities for the reform of the patent system.
DLTs such as blockchain, for example, provide new solutions to the question of whether to adopt a first-to-invent system or a first-to-
file system. Blockchain allows parties who do not know each other to jointly edit and preserve information without central management
(Cong and He, 2019). All information is open and transparent, and the integrity and immutability of the uploaded information are
ensured by cryptographic algorithms, timestamps, and other technologies, which provide technical support for the traceability and
disclosure of an invention. When an inventor proposes a new invention, he can upload it to the blockchain system and get a unique
timestamp. The inventor can add information to this invention at any time, and subsequent technological progress related to this in-
vention can be recorded in time. The blockchain will completely record all information changes made by the inventor. Therefore, the
core problem of the first-to-invent system, “who is the first to complete the invention,” will become quite clear on the blockchain
platform. As the information on the blockchain is open and transparent, the problem of inventors hiding their patents for a long time for
3
The patent term of a drug is counted from the date of filing a patent application. However, it is only after a drug is marketed that pharmaceutical
companies can gradually recover the cost of developing innovative drugs and begin to make a profit. Since the signing of the Uruguay Round
Agreements Act on December 8, 1994, the United States has changed the protection period of patents from 17 years from the date of grant to 20 years
from the earliest filing date. However, due to the long experimentation and approval process from the beginning of research and development to
market launch, generally, only 11–12 years are left for a drug patent. Therefore, how to maximize the patent protection period of a drug is a key
concern of every pharmaceutical company that enjoys patent rights.
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a possible “submarine attack” will no longer exist. At the same time, the problem of over-competition of immature patents caused by the
first-to-file system will also be alleviated because inventors can promptly add information on subsequent relevant technological progress
on the blockchain. A patent system established on the blockchain could fully record the history of an invention, enable the timely
disclosure of relevant technologies, and thus provide a fundamental solution to the debates of the first-to-invent and first-to-file systems.
In essence, the differences between the first-to-invent and the first-to-file systems are no longer relevant with the help of these
distributed lodging technologies.
4. Patent examination
4.1. Patent surge, patent office overload, and quality decline
Since the end of the last century, the number of patent applications and grants has been growing at an alarming rate. By 2020, the
number of patent applications worldwide had reached a staggering 3.28 million, more than four times the number of patent applications
filed in 1980.4 Prior to the boom in the digital economy, scholars pointed out that the main reasons for the surge in the number of patents
were the increase in R&D expenditures, the increase in invention rates, the decrease in examination standards, the expansion of the
scope of patent laws, and the change in national and corporate patent strategies (Hall and Ziedonis, 2001; Hall, 2005; Hu and Jefferson,
2009; Mulligan and Lee, 2012; Li, 2012). In the digital economy, lower search costs, lower replication costs, new forms of financing, and
the faster iteration of digital technologies have become the most central reasons for the growth in patenting (Baily and Lawrence, 2001;
Carlsson, 2004; Hsu et al., 2014; Fink et al., 2016; Chen et al., 2019). The patent applications in the digital fields of electrical, electronics,
computing, and scientific instruments has become the main contributor to patent growth.
The proliferation of patent applications overloads the patent office and has several negative impacts. Patent offices worldwide adopt a
centralized patent examination model, employing a certain number of patent examiners with specific technical knowledge to examine
patents manually under certain procedures. However, the multiplication of the number of patents has not been accompanied by an equal
increase in the number of patent examiners, nor has the efficiency of manual examination increased significantly. It has inevitably led to a
backlog of patent applications and more extended patent grant periods (in some countries, such as China, this is not the case, see Hu and
Jefferson, 2009). Thus, in the face of the vast number of patent applications, the patent office has tried to speed up the process of
completing the examination of patents. Since most patents are of little value and only a tiny fraction of patents go through the court
(Lemley, 2000; Lanjouw and Schankerman, 2004; Bessen and Meurer, 2005; Lemley and Shapiro, 2005), it is rational for patent offices to
use a relatively relaxed standard in examining the patent and maintenance fees will screen out those “trash patents” ex-post. This practice is
known as “rational ignorance at the patent office” (Frakes and Wasserman, 2019). However, Schankerman and Schuett (2022) show that
patent screening of patents through the courts is a luxury even when the courts are perfect. This so-called “rational ignorance” has led to a
decline in the quality of patent examination. Consequently, low-quality or even invalid patents are granted on a regular basis. These
invalid patents are particularly problematic: they are likely developed to imitate or impede other companies’ innovation or create un-
certainties and ambiguities to gain an advantage through litigation against them. The quality of these patents may be weak, but they can
incur a high cost to other patent owners due to the high cost of litigation and the subsequent deterrent effect on innovation (Lerner, 1995;
Allison et al., 2010). Therefore, these patents, which should not have been granted, result in a deadweight loss of social welfare.
Specifically, we use the work of patent examiners to illustrate the extent of the load on the patent office. Based on the US Count
System, a patent examiner needs to examine enough patents in the rated time to earn the required number of points. When an examiner
at the GS-14 level is given 72 h to examine patent of moderate technical difficulty, he needs to earn at least 11.8 points to meet the goal.5
For each completed examination of a patent without an RCE, the patent examiner ends up with only 2 points. In other words, a patent
examiner needs to complete the examination of almost all 6 patents within 72 h. Further, as the examiner's seniority increases, the work
requirements are further enhanced. Even with the intense work of patent examiners, the backlog of patents in patent offices worldwide
has reached an exaggerated level. According to Berger et al. (2012), the worldwide stock of pending applications is already well over 2
million, and the number is growing rapidly. In the face of the huge number of patent applications, the US patent examiner has become
one of the most stressed positions in the federal government.
In general, the patent surge has overloaded patent offices, which has led to several problems, such as backlogs of patent applications,
more extended grant periods, and a decline in patent quality. However, we should recognize that the patent surge is not necessarily a bad
thing in itself. At a macro level, the growth in the number of patents has been accompanied by a boom in science and technology in
developed countries such as the United States, Japan, and Europe, as well as the economic take-off of latecomer countries such as South
Korea, China, and India. The various problems caused by the surge in the number of patents are often due to the defects of the patent
system itself. Therefore, we should respond to the challenge of the proliferation of patents by reforming the current patent system, rather
than curb the growth of patents.
In the following sub-section, we will present the possibilities of using digital technologies such as blockchain technology and AI
technology to solve the various problems encountered in the patent examination process.
4
WIPO statistics Database, 2021, https://www.wipo.int/ipstats/en/, date of last visit: 2022.11.08.
5
The examiner's point target depends on the examiner's seniority and the technical complexity of the field, which ranges from 13.8 to 31.6, 16.6
being taken here.
171
4.2. Decentralized examination and AI assistance
4.2.1. Decentralized examination

In response to the problems mentioned above in a centralized patent system, some scholars have proposed decentralized patent
examination as a possible solution. Helman (2019) points out that a decentralized system will be better than a centralized system when
decisions depend on fact-gathering, special situations, or special knowledge, especially when the knowledge is dynamic and frequently
changing, for the reason that such knowledge is originally decentralized in the society. Starting from this, Helman (2019) constructs a
partially decentralized patent system, where some functions of the patent system are decentralized. In this system, decentralization
focuses on the application and examination stages of a patent. Specifically, in the application phase, inventors provide patent appli-
cations to a shared patent database that can be built on a blockchain-like platform enabling participants to share information auton-
omously. During and after the examination process, information is provided by the PTO, patent owners, and outside experts. However,
some power should still be concentrated in the hands of the PTO, where the PTO should exclusively retain the authority to advise the
President on IP issues, issue patent examination guidelines, and conduct post-examination proceedings. In addition, De Rassenfosse and
Higham (2021) propose the solution of outsourcing the examination, where the patent office can outsource part of the patent exami-
nation to a third party with more resources and specific technical expertise, and this practice has already been applied in Japan and some
Central American countries.
A decentralized patent system has several advantages that could alleviate, to some extent, the problems of the patent system dis-
cussed earlier. First, on this shared patent database platform, the examination process would be openly participatory. The participation
of industry experts instead of only patent office examiners would speed up the examination of patents and identify patent-worthy in-
ventions more precisely and quickly, thus providing a solution to the explosion in the number of patents and the decline in the quality of
granted patents (Noveck, 2006; Nam, 2012; Helman, 2019; De Rassenfosse and Higham, 2021). Second, an open patent examination
process that allows for social scrutiny can facilitate examiners to improve the accuracy of their work and reduce the need for
post-examination procedures and litigation. Third, it is more difficult to motivate employees in the government sector than in the private
sector. A decentralized system allows for more effective competitive payment schemes based on performance and proficiency, which can
better motivate patent examiners to be more productive than the PTO (Helman, 2019).
At the same time, a decentralized patent system faces new problems. First, a platform that can easily expand and quickly share in-
formation in real time is a vital infrastructure to realize a decentralized patent system. The current offline physical institutions, such as
patent offices, are expensive to expand and face time and space barriers. These features make information distribution costly and ineffi-
cient, which makes it difficult for them to meet the demand of a decentralized system. Second, even if the aforementioned sharing platform
is established, it is difficult for the parties on the platform to trust each other. A typical problem is that external experts are private ex-
aminers whose motives for examining may differ from those of the patent office, which is a public institution. For example, secret collusion
between private examiners and patent applicants is a major problem with this model. Third, even if the trust issues of participants are
addressed, coordination within a decentralized patent system could also be a concern. All parties can participate in the examination of
patents. Without unified management by the patent office, information modifications and additions from different participants may make
the patent system more prone to mistakes, irrelevant information, and inconsistent record structures (Helman, 2019).
Digital technologies can provide technical support for the construction of a decentralized patent system, and to a certain extent,
alleviate the new problems faced by the decentralized patent system. Among them, DLTs, such as blockchain, is one of the important
technologies to realize a decentralized patent examination system. DLTs rely on three leading technologies. Cryptographic Keys establish
a secure digital identity for each participant and guarantee the security, completeness, and immutability of peer-to-peer information
transmission in a distributed system. Distributed Peer-to-Peer Networks enable decentralized parties to share information without the need
for a central server, allow the network to scale, avoid single-point failures, and prevent a single or a small group of participants from
taking over the network. Both technologies guarantee the efficient and secure storage of information in the system. Lastly, Consensus
Mechanisms enable nodes in a distributed system to reach a consensus on an issue by majority voting, allowing all participants to share
the same truth without a trusted third party (EI Ioini and Pahl, 2018; Cong and He, 2019). Based on these three techniques, DLTs can
provide transparency, traceability, and security guarantees for interactions between users with a certain degree of distrust, and allow
parties who do not know each other to work together in a decentralized manner to maintain and edit a database system without the need
for a trusted third party (Walport, 2016; El Ioini and Pahl, 2018; Cong and He, 2019).
At this point, we can analyze the critical role that DLTs can play in constructing a decentralized patent system by matching the
advantages of DLTs with the needs of a decentralized patent system. First of all, DLTs can realize real-time information transmission and
have the characteristics of traceability, immutability, and transparency, which can reduce information asymmetry among various
subjects. In the patent application and examination process, patent applicants know more about their patent applications’ factual in-
formation than examiners. Patent applicants can adopt different application strategies to achieve shorter filing times or lower filing
costs, and may mask the actual invention by drafting a complicated application with too many claims (Archontopoulos et al., 2007).
Since it is difficult for the patent office (patent examiner) to prove that the applicant has not disclosed all relevant information, the
applicant has the incentive to hide the information (Langinier and Marcoul, 2016). Due to this information asymmetry, patent examiners
must decide on the effort to spend searching for invalid patent information to make trade-offs between the number of patents examined
and the examination quality (Langinier and Marcoul, 2019). Otherwise, they are incentivized not to search for prior art (Atal and Bar,
2010). In contrast, the traceability, tamper-proof, and open and transparent features of DLTs such as blockchain can mitigate the
intentional hiding of information by applicants with an information advantage.
Second, DLTs provide a highly transparent and trusting environment for patent application and examination. This feature enables
some interactions involving parties that do not necessarily trust each other, such as patent application, disclosure, the participation of
172
Fig. 1. Key correlations of DLTs technologies, features, and decentralized patents system pain points.
external experts in patent examination, and third-party assistance services for patent owners in asset management after the patent
application succeeds. As far as patent disclosure is concerned, currently, only public disclosure by the patent office can establish the
priority of an invention, and inventors cannot disclose their patents themselves and have them recognized and protected by the public.
The main reason for this is the lack of a credible environment or organization among the decentralized public, and the patent office plays
the role of a credible organization. DLTs are tamper-proof and can create an immutable timestamp and record all changes in the system
to support subsequent verification by the patent office. Thus, distributed ledger systems provide a trusted environment for patent
disclosure, increasing the likelihood that inventors, rather than the patent office, disclose patents and establish the priority of in-
ventions. The system would allow inventors to have their inventions disclosed and protected in a timely manner without having to wait
for a patent to be granted (Ali, 2020). It would change the way patents are registered and enhance the protection of ungranted patents.
To address the issue of secret collusion between private external examiners and patent applicants mentioned above, if this approval
occurs on a distributed ledger system, the distributed ledger system will record all operations of either party in the system. Moreover, the
review process is public, and in particular, companies that are adversaries to the applicant will act as gatekeepers in the process,
monitoring the fairness of the review (De Rassenfosse and Higham, 2021).
Third, DLTs such as blockchain, which can track operations occurring in the system, can detect errors in the operating system
promptly and empower the patent office to correct them, alleviating the confusion caused by the lack of centralized and coordinated
management of distributed systems (Helman, 2019). Finally, we can summarize the correspondence among the technologies, features of
DLTs, and the pain points faced by decentralized proprietary systems in Fig. 1.
4.2.2. AI assistance
Little literature has focused on the fact that patent examiners performing patent examination work themselves may be a misallo-
cation of human capital. According to WIPO,6 there were 11,421 patent examiners in China in 2017, while the United States and Europe
employed 12,759 and 6696 patent examiners, respectively, in 2018. Unlike many basic examination tasks, patent examination has
extremely high educational and professional skill requirements for patent examiners. In the US, patent examiners need at least a
bachelor's degree (many with graduate degrees) and up to five years of experience as auxiliary examiners before becoming Primary
Examiners. As technical experts in the relevant fields, these patent examiners do not engage in scientific creation but merely conduct
patent examinations. This huge waste of human resources can be regarded as a high institutional cost of the patent system.
In addition, as patent offices pay competitive salaries to retain talent, the cost of patent examination and maintenance fees have been
on a generally rising trend, which has a direct and significant impact on patent filings (Graham et al., 2009). Empirical studies have
shown a negative correlation between patent costs per capita and the number of patent applications (van Pottelsberghe de la Potterie
and François, 2009). Excessive patent fees may be a central reason for the low per capita patent holdings in some countries, not to
mention that patent fees, as a sort of tax on innovation, also create distortions in the amount and direction of innovation.
With the advancement of digital technology, the replacement and assistance of AI to human workers have become a hot topic of
discussion (Hang and Chen, 2022). Encyclopedia Britannica defines AI as the ability of a computer or a robot controlled by a computer to
mimic human intelligence to accomplish a task.7 The signature feature of AI is problem-solving based on the information collected, and a
common approach to problem-solving is means-end analysis (MEA), which is the gradual reduction of the difference between the
6
WIPO Global Brand Database, https://branddb.wipo.int/branddb/en/, date of last visit: 2022.11.08.
7
https://www.britannica.com/technology/artificial-intelligence, date of last visit: 2022.11.08.
173
current state and the final goal (Ali, 2020).

Most studies have shown that technologies such as AI can replace the workforce performing routine tasks (Acemoglu and Autor,
2011; Levy, 2018; Ernst et al., 2019; Sun and Hou, 2019; Bai and Zhang, 2021). Some advanced AI technologies can already replace or
assist humans in decision-making. For example, personalized advertising recommendations based on users' internet browsing data
(Boerman et al., 2017); intelligent tour guide services based on information such as location, weather, social media sentiment, and user
preferences (Meehan et al., 2013); in addition, AI has also been applied in the field of healthcare and medical decision making. For
example, Hudlicka (2013) developed a virtual coach to train users in positive meditation through natural language dialogue. The virtual
coach can adjust facial expressions and dialogue content according to users' learning needs and motivations. In the medical field,
misjudgment by doctors is one of the major causes of patient deaths. In contrast, AI is less susceptible to subjective bias and can assist
doctors in decision-making. For example, IBM Watson Health can combine data from a patient's medical history with data from a large
number of patients with similar disease manifestations to assist in making correct diagnostic decisions and provide other possible
treatment options (Dilsizian and Siegel, 2014).
Good AI algorithms have powerful predictive capabilities and can make non-discriminatory judgments that are also expected to help
judges make more accurate decisions (Ludwig and Mullainathan, 2021). The Stanford Computational Policy Lab (SCPL) has partnered
with the North Carolina-based Research Triangle Institute to develop a risk assessment tool based on machine learning technology to
help judges in making bail decisions. Professor Sharad Goel, Executive Director of SCPL, mentioned that much of the current pretrial
detention is unfair and unnecessary, and their research found that judges' decisions on bail are often arbitrary and vary widely from
judge to judge. The machine learning-based risk assessment tool attempts to construct different assessment criteria adapted to different
regions. It relies on algorithms to address judges' unconscious subjective bias, which will help judges make fair decisions and release
low-risk incarcerated persons. Moreover, the tool can provide possible alternatives to incarceration for judges. For example, if a drug
treatment program might reduce a defendant's risk level, then a judge could choose to impose similar behavioral health assistance on the
defendant instead of choosing to incarcerate the defendant.8
AI technology has been applied in patent examination and management. According to Zhou et al. (2018), in 2016, the JPO estab-
lished the “Research Project Group for Improving the Effectiveness of Patent Administration Using Artificial Intelligence Technology”
with the aim of applying AI technology in patent examination and management. Firstly, 20 operations were selected for the possible
introduction of AI technology. Among them, the routine transaction operations of patent administration, such as automatic response to
phone calls/emails and electronic filing of paper applications, can be easily replaced by AI, freeing human beings from tedious work.
Operations involving prior art search and invention classification are more challenging to achieve by AI than by human beings.
However, there is no precedent of research and development for the business involving making invention examination decisions, which
is mainly due to the lack of basic research on the existing AI technology to compare the similarities and differences of technologies, and
the AI is also unable to automatically provide reasons for refusal of authorization for the time being. In addition to Japan, some
countries, such as the United States, Australia, and Canada, are also promoting AI technology for patent classification and search work.9
In May 2018, WIPO, in collaboration with AI experts from the University of Geneva, used neural network technology to launch an
automated patent classification tool for the International Patent Classification (IPC) system, called IPCCAT-neural, which is retrained
annually with updated patent information and will help patent examiners more easily access and search prior art.10 This shows that
AI-assisted patent search and classification work will improve the efficiency and quality of patent examination and, to some extent,
alleviate the problems of the proliferation of patents and decline in quality.
Although the current application of AI in the patent system is mainly focused on standardized clerical work, and it is still difficult for
AI to replace or assist in patent examination, AI still has great potential to replace manual patent examination in certain fields. According
to WIPO's survey, computer vision, including image recognition, is the most popular application of AI, and the number of patents related
to it accounts for almost half of AI-related patents and is growing rapidly.11 With the development of visual image technology and deep
learning, AI will be able to complete the examination of appearance patents and trademark examination with graphics and icon ex-
amination as the core content (Zhou et al., 2018). As another example, WIPO has developed an AI-powered neural machine translation
tool called WIPO Translate for patent offices, inventors, attorneys, and others worldwide to understand inventions based on other
languages. Based on WIPO's PATENTSCOPE database, this translation tool provides access to more than 77 million patent documents
from various countries, with accurate translations between some 18 languages.12
There are many advantages of AI assisting or replacing human beings in patent examination work, and with the advancement of AI
technology, AI-assisted patent examination will no longer be far away. First, many time-consuming and labor-intensive tasks can be
replaced by AI (Ali, 2020), which saves labor costs and improves the speed and accuracy of examination. For example, examining
whether a patent application satisfies novelty will no longer need to be done by an examiner. Since novelty testing relies heavily on
searching and matching with existing patents in databases, machines can outperform humans in this function. AI assistance can even
move the novelty check forward to the applicant's application stage, allowing the applicant to self-check and adjust the application.
8
https://engineering.stanford.edu/magazine/article/can-ai-help-judges-make-bail-system-fairer-and-safer, date of last visit: 2022.11.08.
9
https://www.uspto.gov/subscription-center/2021/uspto-developing-new-artificial-intelligence-capabilities-examiner-search, date of last visit:
2022.11.08. https://www.uspto.gov/blog/director/entry/artificial-intelligence-tools-at-the, date of last visit: 2022.11.08. https://www.wipo.int/
about-ip/en/artificial_intelligence/search.jsp, date of last visit: 2022.11.08.
10
https://www.wipo.int/wipo_magazine/en/2018/05/article_0001.html, date of last visit: 2022.11.08.
11
https://www.wipo.int/tech_trends/en/artificial_intelligence/story.html, date of last visit: 2022.11.08.
12
https://www.wipo.int/wipo-translate/en/, date of last visit: 2022.11.08.
174
Patent application software, such as LexisNexis PatentOptimizer, can have novelty checks built in, which can be performed when
drafting patent specifications or uploading copies of patent specifications to the software (Ali, 2020). AI-assisted novelty checks can
make the patent examination process more efficient and improve the accuracy of patent examination. Second, the development of
technologies such as natural language processing and deep learning can assist in understanding the textual content of patent applications
and improve the quality and efficiency of patent examination (Zhou et al., 2018; Lin and Wang, 2020). Third, the development of
technologies such as computer vision can assist in patent examination, especially for appearance patents. By obtaining useful infor-
mation from images, videos, and other inputs by computers, and matching and checking similar appearances based on that information,
it can reduce the risk of omissions and misjudgments in manual examination while freeing examiners from a lot of tedious comparison
work (Lin and Wang, 2020). Fourth, just as AI can reduce the subjective bias of judges as mentioned earlier, AI can also alleviate the
subjective bias of examiners and the inconsistency of review standards.
5. Patent enforcement
5.1. Patent thicket & patent trolls
In the digital age, innovation strategies of companies and third parties, such as patent thickets and patent trolls, pose a significant
threat to the patent system. Firstly, we introduce the patent thicket, in which a company applies for multiple patents to protect one of its
high-value products from multiple perspectives, thus forming a patent protection network. If a competitor wants to enter this market to
compete, it must break through the layers of patent protection, as if through a dense patent thicket. This corporate strategy has been
criticized as a violation of antitrust laws (Hall et al., 2021), but it is not currently prohibited at the legal level. In essence, the patent
thicket phenomenon is a kind of “anticommons,” which can be understood as the mirror image of the tragedy of the commons (Heller
and Eisenberg, 1998). Individuals often overuse the resources of the commons because of their non-exclusive nature. The opposite is true
for patents as anticommons, where the existence of the patent system requires permission from the patentee before any patent can be
used, thus preventing the resources from being fully used.
The characteristics of digital technology greatly exacerbate the tremendous destructive power of the patent thicket (Samuelson,
1999; Cohen et al., 2000; Hall and Ziedonis, 2001; Radin, 2001; Garud et al., 2002; Alcacer et al., 2009; Barnett, 2014; Rong, 2022; Shi
et al., 2022). First, the digital age often requires uniform technical standards. When the patent thicket is widespread, it is extremely
difficult to clear the corresponding patent licensing barriers, which greatly increases the difficulty and cost of standard implementation.
Second, the industry chain in the digital era is long, with a refined division of labor and a high degree of correlation between upstream
and downstream enterprises. Litigation problems at any one key node can spread along a highly correlated chain and have a dramatic
impact on the entire industry. Third, digital technologies are characterized by cumulative innovation and interdependence, and patent
thicket strategies have also been instrumental in hindering companies’ R&D. Shapiro (2000), who developed the concept of patent
thicket, illustrates this graphically:
“Today, most basic and applied researchers are effectively standing on top of a huge pyramid, not just on one set of shoulders. Of
course, a pyramid can rise to far greater heights than could any one person, especially if the foundation is strong and broad. But
what happens if, in order to scale the pyramid and place a new block on the top, a researcher must gain the permission of each
person who previously placed a block in the pyramid, perhaps paying a royalty or tax to gain such permission? Would this system
of intellectual property rights slow down the construction of the pyramid or limit its height?”
There is also a class of companies known as patent trolls or non-practicing entities (NPEs), which have a huge negative impact based
on a similar logic to the patent thicket strategy (McDonough, 2006; Risch, 2012; Schwartz and Kesan, 2013). While the purpose of the
patent thicket is to monopolize, these companies use patent litigation to extort huge settlements or compensation payments. They do not
conduct research or produce actual products but occupy a key position in the patent chain by acquiring companies and patents. The use
of digital technologies or the development of standards are threatened by litigation attacks from patent trolls. As a result, they have as
bad an impact on innovation in digital technology and the development of the digital economy as the patent thicket.
5.2. Some influential cases
We provide a few compelling examples to illustrate the widespread impact of patent thicket or patent trolls in the digital age.
The first famous example is Pitney Bowes’ 1995 lawsuit against Hewlett-Packard involving US Patent No. 4,214,157 and US Patent
No. 4,310,757.16 These technologies smooth the edges of laser printer prints using spots of different sizes to eliminate the step effect of
printing. These technologies may seem to focus only on the technical aspects of printing and should not have a disproportionate impact.
However, due to HP's extensive collaboration, many manufacturers have products that resulted in infringement of Pitney Bowes. In this
case, after settling with Hewlett-Packard for $400 million in 2001, Pitney Bowes went on to sue Apple, Panasonic Electronics, Samsung,
and eight other electronics companies based on the same patent, resulting in widespread and significant impact.
The second famous example is the patent lawsuit between Intergraph and Intel. At first, Intergraph accused Intel of infringing two of
its patents involving technologies related to parallel computing. Since these technologies were eventually applied to Intel's chips, a
crucial part of the entire semiconductor industry chain, Intergraph's lawsuit eventually affected many companies. For example, several
16
https://law.justia.com/cases/federal/district-courts/FSupp2/141/288/2472702/, date of last visit: 2023.01.06.
175
X. Ouyang et al.
Table 3
Problems of the patent system, challenges and opportunities in the digital era.
Problems of the Patent System Challenges in the Digital Era Opportunities in the Digital Era
The Patent For First-to- The inventors have the incentive to keep Through DLTs, we may find an efficient means of
Whom? invent their inventions for a long time without recording all the relevant dates of the invention
system applying for a patent in a hurry unambiguously, thereby identifying who the first
How to determine who is the first to inventor is.
complete an invention
It places a significant burden of proof on
inventors
First-to- The need to “rush-to-patent” under time
file pressure
system Inventors have the incentive to hinder the
research of their peers
A later application may still be granted
Patent The patent office uses a centralized patent examination In the digital economy, lower search costs, lower DLTs enable the construction of decentralized patent
Examination model, with inefficient examination by patent examiners, replication costs, new financial methods, and the systems that are open and transparent and allow for
which leads to backlogs of patent applications, more faster iteration of digital technology itself have led to the participation of outside experts in the examination
extended grant periods, and a decline in patent quality a significant increase in the number of patent process, improving the efficiency of patent
applications, resulting in patent office overload examination
It may be a waste of human resources for patent AI can assist or replace manual work in patent
examiners to specialize in patent examination work classification, search and examination
Patent Patent Layers of patent protection hinder the full Digital technologies often require uniform technical
Enforcement Thicket
176
utilization of resources standards, and technologies are highly

interconnected, which exacerbates the tremendous
destructive power of the patent thicket
Patent Patent trolls take key positions in the patent The use of digital technologies or the development of
Trolls chain by acquiring companies and patents, standards are threatened by litigation attacks from
and then extort huge amounts of patent trolls.
compensation through patent litigation
Journal of Digital Economy 1 (2022) 166–179

computer manufacturers purchased chip products from Intel that involved infringement of Intergraph's patents, thereby inevitably
involving infringement of Intergraph's patents. As a result, after receiving $525 million in damages from Intel through these two
lawsuits, Intergraph filed further lawsuits against a wide range of computer manufacturers, including HP.
The third example comes from China and involves the famous “Sweep” patent. With the invention patent ZL201210113851.8,13
Code Center has sued companies such as Jinli, Alipay, and Xiaodian Technology. As can be expected, based on the extensive application
of this patent in China, Code Center may even be able to sue all digital companies in China and the world. Because of this, Apple, Alipay,
and Shanghai Rongtai Health Technology Corporation got together to sue for this patent's invalidation, but the trial ended against these
plaintiffs.
Through these specific examples, we better understand the high degree of correlation between digital technologies in the digital age
and the tremendous destructive power of patent thickets and patent trolls in the digital age.
6. Conclusion
This paper first reviews the origin and development of the modern patent system and points out that its core purpose is to promote
innovation and encourage disclosure, and its core means lies in providing property rights. Next, we focus on the problems and op-
portunities of the patent system in the digital economy. Table 3 summarizes the main findings of this paper.
First, the choice between the first-to-invent and first-to-file has been a fundamental issue in the design of a patent system. Most
countries have adopted the first-to-file system due to difficulties in determining the first inventor, and the first-to-file system has
problems such as over-competition brought by immature patents. Digital technologies such as blockchain can record the history of an
invention completely, and the storage of invention information on the chain will ensure the information is accurate, open, complete,
traceable, and non-tamperable, which overcomes the defects of both the first-to-invent system and the first-to-file system.
Second, the explosion in the number of patents has put excessive pressure on the patent offices. In the digital era, DLTs such as
blockchain can assist in building a decentralized patent system, allowing external experts to participate in patent examination. AI
technology has already assisted in patent classification and search; in the future, it is promising to assist or replace manual work in
patent examination. These digital technologies could provide a solution to problems in patent examination due to the explosion in the
number of patents and the consequent decline in the quality of granted patents.
Third, rapidly evolving and widely applied digital technologies pose many challenges to patent enforcement. In the digital era,
technologies have become more cumulative and interconnected, which has led to the formation of patent thickets and patent trolls. They
create barriers for patent transaction and enforcement, as any technology commercialization needs to get approval from a “great wall” of
patent owners. These features also mean there is likely uncertainty and ambiguity in patented technologies, which induce patent trolls
and lead to more disputes and litigation. We call for attention to be paid to these challenges posed by digital technologies.
The EU, China and Japan have been exploring the use of AI to assist examiners in patent classification, translation, prior art search
and other areas. We believe this is a fruitful path. We advocate further use of digital technologies in the patent system, especially the
DLTs and AI-assisted decision-making, to alleviate the issues of the system as discussed in this paper. We expect these technologies will
transform or even revolutionize the patent system, thereby fulfilling its role of promoting innovation in the increasingly complex and
dynamic technological landscape.
In summary, the digital era brought about new opportunities for developing a more efficient and cost-effective patent system, which
could have profound and far-reaching implications for technological innovation and economic development. We welcome and look
forward to such changes. Meanwhile, digital technologies also pose new challenges to the patent system, many of which have just begun
to surface. Overall, we spot research gaps and opportunities from economic, managerial, and legal perspectives and call for more
research in this interdisciplinary field.
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Journal of Digital Economy 1 (2022) 166–179

Contents lists available at ScienceDirect

Journal of Digital Economy

Patent system in the digital era - Opportunities and new challenges

2. A Brief review of the patent system

2.1. The origins of the national and international patent system

2.2. The purposes and means of the patent system

Patent for Whom opportunity

3. The patent for whom?

1 First-to-ﬁle Filing date Over-competition & Immature innovation

4.1. Patent surge, patent ofﬁce overload, and quality decline

4.2. Decentralized examination and AI assistance

4.2.1. Decentralized examination

current state and the ﬁnal goal (Ali, 2020).

5.1. Patent thicket & patent trolls

5.2. Some inﬂuential cases

utilization of resources standards, and technologies are highly

Journal of Digital Economy 1 (2022) 166–179

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