By Donald Zuhn —

Last month, the Patent
Public Advisory Committee (PPAC) issued its report on the U.S. Patent and
Trademark Office's proposal for setting and adjusting patent fees, which the
Office laid out in a notice of proposed rulemaking published in the Federal
Register on September 6 (see "More on USPTO's Proposed New Fees").  In issuing the notice of proposed rulemaking,
the Office was exercising the fee setting authority conferred upon it by § 10
of the Leahy-Smith America Invents Act.

Pursuant
to § 10 of the AIA, the Director is allowed to set or adjust any fee
established, authorized, or charged under Title 35 ("to recover the
aggregate estimated costs to the Office for processing, activities, services,
and materials relating to patents").  AIA § 10 specifies that the
Director submit proposed fee changes to the PPAC not less than 45 days before
publishing the proposed fees in the Federal Register (which the Office did last
February; see "USPTO
Proposes Fees Changes"), after which the PPAC shall have 30 days to
deliberate, consider, and comment on the proposal as well as hold a public
hearing on the proposal (the Office held two public hearings on fees in
February).  Pursuant to § 10, the Director shall then consider and analyze
PPAC's comments, advice, or recommendations before setting or adjusting the fee
(as the Office did in the notice of proposed rulemaking).  AIA § 10 also
requires that the Director provide the public with a 45-day period in which to
comment on any fee change (the deadling for submitting comments to the notice
of proposed rulemaking is November 5, 2012), and specifies that fee changes
shall not become effective until 45 days after the final rule regarding such
change is published in the Federal Register (in order to give Congress an
opportunity to enact a law disapproving of the fee change).

The
29-page PPAC report compares the fees proposed by the Office in February with those set
forth in the notice of proposed rulemaking, commends the Office for responding
to stakeholders with respect to some revisions, and suggests further changes in
instances where PPAC believes the Office's fees proposals are still too
high.  The PPAC report begins by noting
that "[c]ompared to the first proposal of February 2012, the [notice of
proposed rulemaking] proposes reduced fees in almost all areas," and the report therefore "commends the USPTO for seriously considering the public
and PPAC comments and responding with reductions in the proposed fees."  Ultimately, "[w]hile the proposed fees
still raise some concerns, the PPAC applauds the efforts and endorses the fees
in general with some reservations noted in [the] report."

Before
addressing those reservations, the report opines on a handful of fees-related
topics.  For example, in a section
entitled "Behavioral Incentives," the report notes that "[w]ithin
the ambit of overall aggregate revenue recovery, the AIA allows the USPTO to
set individual fees at levels to encourage or discourage behaviors by
applicants," and indicates that:

As a policy matter, the PPAC advised that
while some use of fees to encourage or discourage behavior may be appropriate,
significant use of this ability to set fees at very high levels to discourage
actions is not recommended because it is not clear that the USPTO will always
take into consideration the factors driving applicants to certain behaviors,
which may be at cross-purposes with particular desires of the USPTO.  For example, court decisions push applicants
to take certain actions, such as submitting larger numbers of claims of varying
scope or filing follow-on applications as continuations or divisionals to cover
all possible subject matter to which they may be entitled.

However,
the report suggests that "[w]hile the Office notes in various points their
concerns about applicant behavior, they have not focused enough concern (in so
far as both public comment and PPAC considered reflection find) on behaviors by
the Office overall."

With
respect to the Office's pendency goals (i.e.,
reducing first action pendency to ten (10) months by 2015 and the total
pendency to twenty (20) months by 2016), which motivated some of the Office's
fees setting determinations, the report notes that:

[I]n discussing pendency timeframes, it is worth noting that the Leahy-Smith
America Invents Act (AIA) retained a particular feature of US patent law
relating to prior art.  Importantly, a
patent publication in the United States or a foreign country is still
considered to be prior art as of its effective filing date for both novelty and
obviousness purposes.  Generally, patent applications
are published by about 18 months after the effective filing date (of the
application or an earlier-filed priority application, such as a Provisional
application).  Under the stated goal of
first Office Action on the merits by 10 months, and allowance by 20 months,
there may be prior art that is unknown to both the Applicant and the
USPTO.  The [PPAC Finance] Sub-Committee
believes that there may be applications that receive first Office Actions on
the merits for which the full panoply of prior art is, at the time of
examination, unavailable.  In such cases,
if there is a publication of prior art that occurs after the filing date of an
application under examination, it is likely that a first Office Action on the
merits may be incomplete.

The
report therefore warns that "[t]hese situations may increase the
uncertainty of the patenting process, and may undermine the expected revenues
to the USPTO."

The
bulk of the report discusses suggestions offered by the PPAC Finance
Sub-Committee (consisting of PPAC voting members Esther Kepplinger, Wayne
Sobon, Damon Matteo, and Ben Borson) in response to the Office's February 2012
fees proposal, and then reviews the fees proposal in the notice of proposed rulemaking
(NPRM), offering critiques with respect to certain fees presented in the
notice.  With regard to filing, search, and examination fees, the
report notes that the current fees are $1,250, the February proposal was
$1,840, and the NPRM proposal is $1,600. 
The report states that:

While
the filing, search and examination fees as proposed by the NPRM represent an
increase of 28% compared to the current equivalent fees, because the issue fee
and publication fee are proposed to be a lower amount in total to paid by
successful patent applicants, the total fees in the NPRM for filing, search,
examination, publication and issue are lower than those currently in place.

The report, however, "still questions the
increase proposed for the third stage maintenance fee," noting that
"[g]iven the percentage of patentees who currently pay for this stage, the
concern is that revenues will decrease more than projected when fewer patentees
elect 3rd stage maintenance."

The report is perhaps most critical of the Office's
proposed fees for Requests for Continued Examination (RCEs).  The report notes that "the NPRM proposes
reducing the fee for an RCE from the February 2012 Proposal of $1,700 to $1,200
. . . and retaining the proposed fee of $1,700 for second and subsequent RCEs
(an 83% increase and greater than the proposed $1600 fee for filing, searching
and examining a completely new application)."  The report explains that:

[A]pplicants
rely on RCEs to continue the prosecution and eventually (and justly) receive a
patent on their invention.  RCEs are
mostly filed by applicants genuinely attempting to move prosecution forward and
get a patent and not generally, it is believed, simply to delay the prosecution
(applicants have the ability to file further continuation applications to
proceed with other claim sets or to keep a particular patent family in
prosecution in any case).  RCEs are a
source of frustration for both the Office and the applicants, with both parties
contributing to the problem.  However,
from both casual conversation and also in public statements, the USPTO seems to
place the blame for the rapid growth in RCE applications solely and squarely on
applicants.  The change several years ago
to move RCEs to the special new case docket (rather than an examiner’s amended
docket) causes (as one would expect) significant delays in acting on RCEs.  That the Office has proposed significant
increases in the RCE fees adds salt to an existing wound:  applicants must pay more for what most perceive
as a reduction in service.  Thus, the
proposed increase in fees for RCEs was not well received by the public.

Noting
that "[t]he USPTO acknowledges that the cost of completing an RCE is less
than that required for an original utility application," the report contends
that "the increased costs to applicant being proposed to treat an RCE (and
particularly a second and subsequent RCE) compared to the fees proposed for a
utility or continuation application seems illogical."  Instead, the report suggests that:

[A] small increase in the fee for an RCE might be appropriate but it
should align more closely to the associated required work, and certainly be
less than the fees for new or continuation applications.  The higher fee for second and subsequent RCEs
should be eliminated because these become easier and cheaper to examine and any
number of continuations may be filed at the same cost per continuation.  Rather than punishing applicants for pursuing
their inventions by filing an RCE, it is suggested that the USPTO continue to
find ways to reduce applicants' need for the RCEs in the first place.

With
respect to excess claims fees, the report notes that while the NPRM proposed to
slightly reduce independent and total claims fees (such that these fees would
increase by 68% and 33%, respectively, over the current fees), the report
states that "[t]his increase seems excessive, especially in light of the
fact that applicants cannot take advantage of multiple dependent claims in the
manner available in other patent offices." 
Instead, the report suggests that the excess claims fees be further
reduced.

The
report also finds appeal fees to be "quite high," despite the
Office's decision to reduce the fee for filing a notice of appeal to $1,000
(from an initial proposal of $1,500) and the fee for forwarding an appeal brief
to the Patent Trial and Appeal Board (PTAB) to $2,000 (from an initial proposal
of $2,500).  The report explains that:

There is a concern that the fees are being
proposed, at least in part, to discourage filing an appeal or filing an
RCE.  However, applicants must choose one
of those lines of action for resolution of cases.  In some instances there has been excellent
examination and the issue is a difference of opinion.  However, in many instances, the applicant is
driven to appeal or filing of an RCE due to significant problems with the
examination.

The
report suggests that the initial notice of appeal fee be lowered "back to
around its current post-surcharge amount of $620 (for example $750), and if the
case is not reopened or allowed by the examiner, then charging the increased
amount for forwarding the brief to the Board and thereby funding the formal
appeal."

With
respect to the new fee for correcting inventorship (which was reduced from an
initial proposal of $1,700 to $1,000 in the NPRM), the report observes that
"inventorship depends upon the claims examined and, eventually, those
issued; during the examination process claims change due to restriction
requirements and/or amendments," and concludes that "[a] fee for
changing the inventorship stemming from a restriction requirement or amendments
to the claims does not seem appropriate." 
The report states that the fee "still seems rather high," and
suggests that "[t]his rule should be tightened to only pertain to
correction of inventorship which adds an inventor after the first office action."

As
for the fee for supplemental examination, the report notes that "[t]he
USPTO in its NPRM, has sharply reduced the fees for [filing the] Request (from
$7,000 to $4,400) and for reexamination (from $20,000 to $13,600), and has
increased the number of allowed references from 10 to 12," but indicates
that "all of these fees still seem very high, given that the Office
estimates that the total unit cost of an original examination of a patent is
only $3,569 (FY 2011)."  The report
suggests that "these fees be brought down in line with original
examination."

With
respect to fees for ex parte reexamination
(EPR), the report notes that "[t]he Office drastically increased the fees
for all EPRs from the present post-surcharge fee of $2,520 to $17,750 in the
initial fee proposal and which the Office has now reduced in the NPRM by 15% to
$15,000."  The report opines that:

The proposed increase is troubling from a
number of respects.  First, given that
prior to AIA USPTO fees were set by Congress, upon informed request by the
USPTO (subject to yearly cost-of-living adjustments), why was this significant
discrepancy between fee and cost not seen earlier?  Second, why are these reexaminations (which
can only be based on patents and publications, involve no testimony and no
interaction with third parties other than the patentee) costing so much?  . . .  Third,
just as in other areas of petition and then institution, the Office should
break this fee into two pieces: petition and then examination.

In
contrast, the PPAC report "generally approves the current fee structure
for [inter partes review], as
striking the right balance between cost recovery and incentive for use."  That fee structure calls for an inter partes review (IPR) Request fee of
$9,000 (with $200 for each challenged claim greater than 20) and an IPR
Institution fee of $14,000 (plus $400 for each claim subject to the instituted
case greater than 15).  The report also
expressed approval for the post grant review fee structure, which includes a $12,000
Request fee (with $250 per additional challenged claim above 20) and an Institution
fee of $18,000 (with $550 per excess claim above 15).