USPTO Posts Comments on Proposed Fees Changes

By Donald Zuhn --

The U.S. Patent and Trademark Office recently posted public comments it received regarding the table of patent fee changes the Office proposed in early February.  The comments, submitted by the American Bar Association (ABA) Section of Intellectual Property Law, American Intellectual Property Law Association (AIPLA), Association of American Universities (AAU), Japan Intellectual Property Association (JIPA), Minnesota Intellectual Property Law Association (MIPLA), and eighteen individuals, are available on the USPTO's Patent Public Advisory Committee (PPAC) public comments for fee setting webpage.  In addition, testimony provided by the Intellectual Property Owners Association (IPO) and New York Intellectual Property Law Association (NYIPLA) at the PPAC's first meeting on the proposed fees can be found on the PPAC's main webpage.

The collection and publication of comments is the latest step in the Office's exercise of its new fee setting authority pursuant to § 10 of the Leahy-Smith America Invents Act.  Pursuant to AIA § 10, the Office submitted a table of patent fee changes to the PPAC on February 7, in advance of two public hearings that were held on February 15 and February 23 (see "USPTO Proposes Fees Changes").  In a notice published in the Federal Register in January, the Office set a February 29 deadline for the public to submit written comments regarding the proposed fees changes sent to the PPAC (see "PPAC to Hold Public Hearings on Proposed Fee Schedule").  Under AIA § 10, the Director can now publish the proposed fees in the Federal Register on March 23 (or sometime thereafter), and must afford the public with a 45-day period in which to comment on any proposed fee change so published.

Focusing on the comments and testimony provided by the IP organizations, the AIPLA's letter addresses a number of overall considerations as well as specific fee categories.  With respect to the Office's goal to create a 3-month reserve fund, the AIPLA states that "it is paramount that every precaution should be taken to ensure that the fees paid by users are not vulnerable to a Congress looking for ways to reduce the budget deficit."

The AIPLA expresses appreciation for the Office's proposal to lower some of the fees in the core filing process, but notes that "at least anecdotally, a significant portion of issued patents currently have to go through the RCE process to educate the Examiner and reach agreement," and that "[t]he proposed significant increases to RCE fees undercut these postulated savings."  The group "believes there is a real opportunity to create an optional staging at the point of filing," suggesting that:

The proposal would be to maintain a separate filing fee from the search and examination fees.  At the time of filing, only the filing fee would be due.  Then, when the application is about to be taken up for examination (the time to be determined by the Office), the applicant will be informed and have the opportunity to pay the search and examination fees or abandon the application.

As for RCEs, the AIPLA's letter states that the group:

[N]ow perceives that RCEs are a common and frequently necessary practice in examination generally (at least in some art units) for both applicant and examiner.  However, we are troubled that the USPTO appears to perceive RCEs as more of an applicant-generated problem that does not need to be addressed or accounted for by the Office, or more particularly by incented Examiner behavior, which among other things may have been exacerbated by efforts to reduce allowances or the unintended consequence of the recent performance agreement.

The group suggests that "[a]ll things being equal, the increased revenue (and examiner credits) stemming from RCE filings (which are at least partly under the control of the Office) would tend to incentivize that behavior," and argues that "[i]ncentives need to be balanced for all constituents."  As one possible means for resolving the RCE issue, the AIPLA proposes the creation of a new "single review RCE" procedure at a fee lower than that being used currently for a full RCE (to make, for example, a last review of late cited art or a last updated search).

With respect to appeals fees, the AIPLA writes that it is concerned about the new proposed fee structure for the appeals process, stating that:

In at least some instances, the appeals process may reflect a break-down in the examination process which is not the fault of the Applicant.  This may be reflected in the number of cases in which a notice of appeal is filed but which are returned to prosecution after a pre-appeal conference.  It is also reflected in the number of cases that are resolved after the Applicant's brief is filed, or before the cases are submitted to the Board.  By combining the notice of appeal fee with the fee for the Appeal brief (which presumably was intended to cover the Examiner's efforts on the Response), the Applicant is bearing a larger share of the burden even if a pre-appeal conference ultimately indicates the Examiner had not made a proper rejection.

The AIPLA also finds the fees for new procedures, such as supplemental examination, to be problematic.  The group indicates that:

The USPTO is estimating costs for Supplemental Examination plus an ensuing Ex Parte Reexamination to be $5,180 + $16,116, but at the same time the USPTO estimates the fully burdened costs for Utility Examination (post search) at a little under $2,000.  Even if you double the estimated Utility Examination estimate to $4,000 to account for the 4 Office actions anticipated by the USPTO, this difference can only be described as striking and raises concerns about the underlying assumptions.  Equally challenging is the requirement to file two Supplemental Examination requests at a total cost of $42,600 when the number of references cited exceeds 10 while a third party can submit 11 references during prosecution for less than $400.

The AIPLA notes that it "does not support raising the fees for Supplemental Examination as a disincentive to requesting it," adding that it "contemplates a broad variety of reasons why reasonable patentees might want to exercise the process without any intent to cleanse misconduct."

The Office's proposed fees for post-grant and inter partes review also raise issues for the AIPLA.  In particular, the group believes that "[t]he fees currently proposed are very high, and at first glance appear to many members to be significantly out of line."  However, the AIPLA contends that "these post-grant processes are cornerstones of quality improvement envisioned by Congress in the AIA, and their valuable purpose should not be thwarted by fees which are excessive and discouraging."  Moreover, the AIPLA suggests that one "unintended consequence of the high PGR [post-grant review] fees is that they might actually encourage abusive behavior rather than deter it."  The group explains that:

Although third parties would have to pay the high filing fee to initiate the PGR, thereafter they would be able to run their side of the PGR as cheaply as possible.  By contrast, the patent owner most certainly will not cut corners if important patents are involved, and its costs will mount.  Should those costs reach on the order of $500,000, win or lose, a rational patent holder might be encouraged, for example, to pay a settlement of $250,000 as a "nuisance value," regardless of the merits of the case.

The AIPLA closes its letter by "urg[ing] the Office to advance the implementation schedule of the micro-entity fees on a preliminary basis to assist these applicants," noting that "the 15% surcharge provided by the AIA found its way into the Office fees as close to instantly as one could contemplate, but the cost reduction specifically provided for the benefit of classes impacted by the increased fees is on a very slow and deliberate path."

Like the AIPLA, the ABA Section of IP Law, in its letter, argues that "the Office should not set fees for access to newly mandated proceedings and procedures in the Office that would have the effect of inappropriately discouraging their use" (italics in original).  The group states that "[s]etting fees at a prohibitively high level would unacceptably impinge on the rights of patent applicants and the public to fully utilize the remedial and other provisions in the new laws."  As one example, the Section points to the claims fees imposed for both post-grant and inter partes review, which it contends "will render those proceedings effectively inaccessible in many instances," adding that "[e]mblematic of this issue is the situation where a patent owner has deliberately sought and been issued a vast network of interrelated patent claims, all directed to a single invention, solely for the purpose of complicating efforts of a competitor to invalidate the patent in a later enforcement proceeding."

Examining the fees proposal for these new proceedings, the Section explains that:

[T]he fee for filing a Post-Grant Review petition against a patent containing 20 or fewer claims will be $35,800.  This sizable basic filing fee will be challenging enough for many would-be petitioners.  It sits, however, at the low end of the proposed fee scale.  [For a] patent containing 200 claims, filing a petition for Post-Grant Review would cost: $125,300 for the first 70 claims, then an additional $465,400 for the remaining 130 claims, for a grand total of $590,700.

The same fee-related concerns apply to Inter Partes Review.  The fee for filing an Inter Partes Review petition against a patent containing 20 or fewer claims is proposed to be $27,200.  For a patent containing 200 claims, the fee would be an astounding $448,800 ($95,200 for the first 70 claims plus $353,600 for the remaining 130 claims).

The Section contends that "fees of this magnitude will all but foreclose use of the proceedings for claim-heavy patents," and argues that:

Since Congress clearly could not have intended for patent applicants to have an incentive to flood applications with large numbers of claims, knowing that in many instances this will prevent a subsequent Post-Grant Review or Inter Partes Review challenge, the Section requests that the Office reconsider a fee structure for these proceedings that is not claim-number dependent.  For instance, the Office might consider a fee surcharge linked to the number of rejections proposed in a request, as opposed to the number of claims targeted by the request.

The group also finds fault with the proposed fees for supplemental examination, noting that:

[T]he fees for filing a Supplemental Examination for 10 items of information would be $27,000, assuming all items submitted are 20 pages or less in length.  If each of the 10 items is 100 pages, the filing fees would be $31,600.  Should the patentee have more than 10 items for consideration, then multiple Supplemental Examinations would have to be filed with the appropriate fees.  For consideration of 50 items of 100 pages each, for example, the filing fees alone would be $158,000.

The Section argues that "fees of this magnitude may make the proceeding too costly for a majority of the potential users which, in turn, will frustrate congressional intent in creating such a proceeding."

In testimony provided by the IPO, the group "strongly urge[d] further analysis of whether fee increases as large as those proposed on February 7 are necessary in order to achieve the [Office's pendency and quality] goals."  Like the AIPLA, the IPO also expressed "concern[] that a substantial operating reserve would be a tempting target for congressional appropriators, who are under pressure to find funds for other government programs," adding that the group "believe[s] congressional confiscation of an operating reserve is a real danger."  The IPO also suggested that the Office take additional steps to reduce the number of RCE filings.

In contrast with the AIPLA, the IPO closed its letter by indicating that:

While innovative small businesses and universities certainly are a critical part of the innovation-based economy, so are large businesses.  We note that AIA section 10 gives the PTO Director authority to impose limits on who may qualify as a micro entity if reasonably necessary to avoid an undue impact on other patent applicants or owners.  Also, when subsidies are necessary for small and micro entities, we believe it would be better public policy for Congress to appropriate money for those subsidies from general government funds.

In its letter, the JIPA noted that of all the proposed fees, it was most "concerned about the RCE, Post-Grant and Inter-Partes Review fees."  The group noted that like other participants at the public hearing on February 15, it "also believes that the RCE fee is too expensive."  The JIPA also expressed concern about the "expensive fees" for post-grant and inter partes review, explaining that "[t]here seems to be a possibility that many users cannot use new introduced reviews because of the expensive fees."  The group also suggested that "the substantial part of the petition fee for Post-Grant Review and Inter-Partes Review should be returned to the petitioner when Board decides not to institute the proceeding."  In addition, the JIPA suggested that "dependent claims should be excluded for the purpose of calculating the petition fee for Post Grant Review and Inter-Partes Review," noting that absent such exclusion, "it will not be possible for users to file a post grant review appropriately against patents with many claims."

For additional information regarding this topic, please see:

• "A Glimpse under the Hood: How the USPTO Proposes to Adjust Patent Fees," March 14, 2012
• "USPTO Proposes Fees Changes," March 1, 2012
• "USPTO News Briefs," February 20, 2012
• "PPAC to Hold Public Hearings on Proposed Fee Schedule," February 1, 2012

Comments

[Skeptical]

I heard Dave Kappos say yesterday at the Sughrue Symposium in Ohio that at least the first RCE fee was to be lowered. He also outlined a "CUPID" program which would allow late IDS submissions to not be dragged through the RCE process.

Nonetheless, I remain somewhat skeptical about the funding paradigms and the assumptions being made under the hood.

[Skeptical]

As far as funding a reserve, why not ask Congress to simply return all previous funds "lifted" from the USPTO that applicants have already paid into the system?

[EG]

"I remain somewhat skeptical about the funding paradigms and the assumptions being made under the hood."

Agreed. Call me Skeptical II about these proposed patent fee changes.

[Les]

The fee system is very unfair. Why should applicants that happen to draw bad examiners have to pay more in the form of appeal fees? Appeals should be free. Maybe that would provide an incentive to PTO management to improve examination and to perhaps move away the from knee jerk second action final policy