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AIA Proposed Rules: Fees at the Patent Trial and Appeal Board


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: February 28, 2012 @ 8:59 pm
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As most of you are undoubtedly aware, the United States Patent and Trademark Office has been cranking out proposed rule packages one right after another.  The speed at which these rules packages are coming out is impressive, but also makes it virtually impossible to keep pace while you continue to try and represent clients.  The USPTO is obviously putting in a lot of time and effort, and by and large it seems that they are doing a good job.  But as you start to review proposed rules package after proposed rules package you start to get the sense that the America Invents Act (AIA) is going to change even more than anyone expected.

One of the rules packages that is sure to capture the attention of patent attorneys and litigators alike is the recently released Rules of Practice for Trials Before the Trial and Appeal Board and Judicial Review of Patent Trial and Appeal Board Decisions (hereinafter “Board rules”).  What a mouthful! This particular rules package is some 35 pages in the Federal Register 3 column format.  If you copy and past into Word with Arial 12 point font this rules package is 86 pages, just to give you some idea of the magnitude.

The proposed Board rules provide a consolidated set of rules relating to Board trial practice for inter partes review, post-grant review, the transitional program for covered business method patents and derivation proceedings. The proposed rules also provide a consolidated set of rules to implement the provisions of the Leahy-Smith America Invents Act related to seeking judicial review of Board decisions.  If you are interested in submitting comments you have only until April 9, 2012 to submit.  The USPTO prefers e-mail comments to patent_trial_rules@uspto.gov, but comments may also be submitted regular mail addressed to: Mail Stop Patent Board, Director of the United States Patent and Trademark Office, P.O. Box 1450, Alexandria, VA 22313– 1450, marked to the attention of ‘‘Lead Judge Michael Tierney, Patent Trial Proposed Rules.’’

How can I summarize 86 pages in one blog post?  Given the magnitude of the proposed Board rules and my desire for this to be a summary and not a novella, it is only realistically possible to pick and choose.  With that in mind today I will focus on the fees, which are sure to be a hot button issue.  The fees for these procedures are quite high and will almost certainly take you by surprise initially, particularly if you try and compare these fees with the current cost for reexamination proceedings.

At the PLI Patent Law Institute there was great discussion about this and I gained some interesting insights.  Current reexamination fees don’t come anywhere close to providing cost recovery for the USPTO.  The decision was made years ago that the Office wouldn’t charge cost recovery; call it a public policy measure to encourage the challenging of bad patents.  But now fees must be set to recover costs and that makes for a brave new world.  I wonder, however, what the continuing justification for maintenance fees will be in a cost recovery world at the USPTO.  Maintenance fees would then seem like windfall revenues, but that is another story for another day.

Fee Setting Authority

Sections 10(d) and (e) of the Leahy Smith America Invents Act set forth a process that must be followed when the Office is using its newly acquired authority to set or adjust patent fees. This process does not feasibly permit the fees for inter partes review, post-grant review, the transitional program for covered business method patents and derivation proceedings to be in place by September 16, 2012 (the effective date required by the Leahy-Smith America Invents Act). In fact, the Patent Office believes that the fees that will be set using its Section 10 authority will not be finalized and effective until sometime in March 2013.  Thus, it is necessary for the Office to set fees for these new procedures  pursuant to its authority under 35 U.S.C. 41(d)(2).

§ 41(d)(2) provides that fees for all processing, services, or materials relating to patents not specified in 35 U.S.C. 41 are to be set at amounts to recover the estimated average cost to the Office of such processing, services, or materials.  It is anticipated, however, that the fees proposed in here will be revisited in as Section 10 fee setting authority unfolds.

Fees in General

The filing of a petition for review by the Board will require payment by the petitioner of the appropriate petition fee to recover the aggregate cost for providing the review. The appropriate petition fee will be determined by the number of claims for which review is sought, as well as the type of review requested.

The proposed fees for filing a petition for inter partes review are: $27,200 for requesting review of 20 or fewer claims, $34,000 to request review of 21 to 30 claims, $40,800 to request review of 31 to 40 claims, $54,400 to request review of 41 to 50 claims, $68,000 to request review of 51 to 60 claims, and an additional $27,200 to request review of additional groups of 10 claims.

The fees for filing a petition for post-grant or covered business method patent review would be: $35,800 to request review of 20 or fewer claims, $44,750 to request review of 21 to 30 claims, $53,700 to request review of 31 to 40 claims, $71,600 to request review of 41 to 50 claims, $89,500 to request review of 51 to 60 claims, and an additional $35,800 to request review of additional groups of 10 claims.

These proposed fees will undoubtedly be commented on, and the early criticism, which seems quite valid, asks how the addition of a single additional claim to be reviewed can add such large amounts to the cost.  For example, if you file a petition for post-grant review and want 30 claims reviewed the fee will be $53,700.  If you want 31 claims reviewed the fee will be $71,600, so that extra claim reviewed will cost you $17,900.  Of course paying that $17,900 entitles you to bring challenges to 9 other claims, which would be free once you paid for the 31st claim.  Essentially, with rigid segmentation of fees it is difficult, if not impossible, to see a cost of recover implementation at work.  It would be far more in keeping with the statutory authority to have additional claim fees akin to what happens during prosecution when you go beyond three independent claims or 20 total claims.

Counting Claims

The uninitiated might be tempted to believe that figuring out how many claims are being reviewed would be rather easy.  Of course, anyone with a registration number knows otherwise.  So as you might expect there are specific rules that relate to counting claims for fee purposes.

To understand the scope of a dependent claim, the claims from which the dependent claim depends must be construed along with the dependent claim itself. Accordingly, for fee calculation purposes, each claim challenged will be counted as well as any claim from which a claim depends, unless the parent claim is also separately challenged.  Several examples are provided to illustrate:

Example 1: Claims 1–30 are challenged where each of claims 2–30 are dependent claims and depend only upon claim 1. There are 30 claims challenged for purposes of fee calculation.

Example 2: Claims 20–40 are challenged where each of claims 20–40 are dependent claims and depend only upon claim 1. As claims 20–40 depend from claim 1, claim 1 counts toward the total number of claims challenged. Thus, there are 21 claims challenged for fee calculation purposes.

Example 3: Claims 1, 11–20, and 31–40 are challenged. Each of claims 1 and 31–40 are independent claims. Each of claims 11–20 are dependent claims and depend upon claim 9, which in turn depends upon claim 8, which in turn depends upon claim 1. As claims 11–20 depend upon parent claims 8 and 9, claims 8 and 9 would count as challenged claims towards the total number of claims challenged. As claim 1 is separately challenged, it would not count twice towards the total number of claims challenged. Thus, there are 23 claims challenged for fee calculation purposes.

Example 4: Claims 1, 11–20, and 31–40 are challenged. Each of claims 1 and 31–40 are independent claims. Claim 11 depends upon claim 1 and claims 12–20 depend upon claim 11. As each of the challenged claims is based on a separately challenged independent claim, we need not include any further claims for fee calculations purposes. Thus, there are 21 challenged claims.

Counting claims in this fashion could create an theoretical unfairness, although likely not a practical unfairness.  Perhaps you don’t challenge a broader claim because you know for certain that the claim is invalid and couldn’t be asserted practically.  The claim that is being asserted against you, or threatened to be asserted, is a dependent claim that chains back through multiple claims that don’t worry you for one reason or another.  All of those claims through which the claim you want to challenge weaves would be considered challenged and add to the fee.  But would anyone who is bringing a review ever not challenge all claims, particularly broader claims?  In practice probably not… however…

With these claim counting rules a savvy patent draftsman could (and should) modify conventional drafting techniques to make sure that there are more claims in an issued patent than typical, and that the commercially useful claims are dependent claims that weave back through and touch as many previous claims as possible.  Such a strategy would make any challenge cost prohibitive, or at least cost prohibitive for most would-be petitioners, thereby providing post grant insurance against any of the various reviews that will be available.

IT Fee

Within the aforementioned fees there is a fee built in to address the information technology cost to establish the process and maintain the filing and storage system through 2017.   This IT fee has a base component of $1,705 for requests to review 20 or fewer claims. The IT component fees would be $2,122 for requesting review of 21–30 claims, $2,557 for requesting review of 31–40 claims, $3,409 for requesting review of 41–50 claims, $4,267 for requesting review of 51–60 claims, and an additional $1,705 for requesting review of additional groups of 10 claims.

Judge Fees

After the IT fee, the remainder of the aforementioned fees go toward cost recover for judges to determine whether to institute a review and conduct the review, together with a proportionate share of indirect costs, e.g., rent, utilities, additional support, and administrative costs. Based on the direct and indirect costs, the fully burdened cost per hour for judges to decide a petition and conduct a review is estimated to be $258.32, which seems reasonable given prevailing private sector attorney hourly rates.

Time Estimates for Completing Work

If cost recovery is the statutory mandate then the USPTO had to give some consideration to how long various reviews would take, and they did. For example, for a petition for inter partes review with 20 or fewer challenged claims the Office anticipates that 98.7 hours of judge time would be required. For 21 to 30 challenged claims, an additional 24.7 hours is anticipated for a total of 123.4 hours of judge time. For 31 to 40 challenged claims, an additional 49.3 hours is anticipated for a total of hours of 148 judge time. For 41 to 50 challenged claims, an additional 98.7 hours is anticipated for a total of 197.4 hours of judge time. For 51 to 60 an additional 148 hours is anticipated for a total of 246.7 hours of judge time. According to the Office the increases in adjustment reflect the added complexity that typically occurs as more claims are in dispute.

For a petition for post-grant or covered business method patent review with 20 or fewer challenged claims, it is anticipated that 132 hours of judge time will be required. For 21 to 30 challenged claims, an additional 33 hours is anticipated for a total of 165 hours of judge time. For 31 to 40 challenged claims, an additional 66 hours is anticipated for a total of 198 hours of judge time. For 41 to 50 challenged claims, an additional 132 hours is anticipated for a total of 264 hours of judge time. For 51 to 60 challenged claims, an additional 198 hours is anticipated for a total of 330 hours of judge time. Again, the increase is explained as an adjustment that reflects the added complexity that typically occurs as more claims are in dispute.

Once again, however, the question can and should be raised relative to additional anticipated time.  For example, how is it possible that the 21st claim in a post grant review will take 33 additional hours but the 22nd through 30th claim will take no additional time?  As stated earlier, I suspect this issue will be driven home hard in the comments and we may ultimately wind up seeing a sliding scale cost for challenged claims.  That is really the only way to truly have fees set at an amount that reflects cost recovery.

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Posted in: America Invents Act, Gene Quinn, IP News, IPWatchdog.com Articles, Patent Trial and Appeal Board, Patents, USPTO

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

10 comments
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  1. One thing I noticed about the fees is that it costs more to request post-grant review than it does to request inter partes review (which cannot be requested until 9 months after grant). This creates a financial incentive for a challenger to wait until 9 months after grant in order to save about $8000. This seems backwards to me, and I would think the PTO would want to encourage challengers to file early in order to resolve any validity issues as soon as possible.

    I also don’t understand how the increases in maintenance fees are justified by recovering costs. I find it hard to believe that there are many, if any, costs on the PTO’s end for maintaining the patent.

    I also don’t like the incentive that is set up with filing an appeal: because examiners fill a quota for the number of appeals that are filed, it is very conceivable that an examiner would issue a final rejection and force the applicant to file a notice of appeal for $1500. Then, the examiner could simply retract the final rejection and allow the claims, which counts toward his quote for dispositions. The Executive Summary made a comment about developing better examiner incentives, but I will believe it when I see it.

  2. Gene,

    One thoguht that runs through the article puzzles me:

    Are you sure that cost recovery is mandated?

    I did not understand that to be the case with the directions from the AIA.

  3. Anon-

    I don’t know for certain that cost recovery is mandated by the AIA, I will have to check. I think it is.

    Here, however, the USPTO is not using the new AIA fee setting authority. The process they have to follow to set fees under the new AIA power (Section 10 power) will take until at least March 2013. With these new procedures going into effect on September 16, 2012, there needed to be fees in place in advance of when the AIA fee making rules go into effect. Under the Section 41 fee setting that the PTO has cost recover is definitely mandated.

    -Gene

  4. I seem to recall from the Executive summary that management had been asked to give an estimate of the cost/benefit analysis of their proposed new fee schedule, and the formal detailed proposal has more charts and graphs than I think have ever seen before all in one place.

    If I had been handed a piece legislation like the AIA, I would probably be quite reluctant to get anywhere near the language that the Congress had passed. Pretty impressive given the Very short timelines the USPTO has been given to complete their tasks.

    How to try to fix the underlying confusing language is anyone’s guess, because the courts don’t seem to be very well qualified to deal with it from what I have able to discern.

    Stan~

  5. I do not understand how the PTO could, in contrast, propose a mere $400 fee for starting a derivation proceeding? That could not possibly be related to realistic PTO cost projections, This is a Board-run contested inter partes proceeding, thus inherently not unlike present interference derivation [originality contest] litigation. Yet this $400 fee is wildly inconsistent with the above-noted vastly higher fees being set even for ex parte reexaminations much less all other inter partes contested matters.
    Further evidencing that this proposed mere $400 fee for this new proceeding is completely out of line with PTO cost-recovery [and, I fear, may even encourage frivolous derivation allegations], the PTO correctly admits in its own comments for the proposed “derivation proceeding” rules, at 77 FR 28 p. 7033, that:
    “The skills necessary to prepare a petition seeking a derivation proceeding and to participate in a trial before the Patent Trial and Appeal Board would be similar to those needed to prepare a request for inter partes reexamination..”

  6. Maintenance fees serve a public policy goal of encouraging the expiration of patents on noncommercially viable inventions. The high fees for filing a petition for inter partes review seems to be consistent with that public policy objective. No one is going to file unless the invention is commercially viable and there is a lot of money at stake.

  7. [...] the posted information, the public hearings and feedback from PPAC, and posts and comments on the major outlets, I wanted to highlight a few interesting bits of data that stood out to me.-Similar graphs or raw [...]

  8. Well, since I was recently “awarded” a patent w/over 200 claims, I’ve got no problem with the “expensive” “patent-challenging” fees properly reflecting what the overworked PTO actually spends on such challenges.

    Look; if you didn’t think the invention was important enough to at least file a 1.99 on; or otherwise supply any supposed invalidating prior art you have to the examiner during prosecution; that’s your problem.

    In this day and age, there’s no excuse for companies–either individually or with others operating in the same and/or similar fields/industries–to set up their own ongoing prior art database/s . . . and review of pending apps.

  9. Gene,

    Per my question at comment 2, there is a new post at the PatentDocs blog:
    ( http://www.patentdocs.org/2012/03/uspto-proposes-fees-changes.html#comments )

    If I read this correctly, these fee changes that you write about in this article are NOT tied to a direct cost recovery, as they are directly related to the AIA. Therefore, since cost recovery may be supplemented in rationale by the Office new ability to set fees to influence behavior, a large portion of your underlying theory is undercut.

    However, there still is a requirement to somehow tie any proposed fee into an aggregate zero-sum balance, even if the fees are altered to purposefully affect appllicant behavior. This means that the Office cannot merely raise fees across the board as this would violate the “in the aggregate” zero-summation.

    I thinkthe level of scrutiny needs to be very high on any assumptions, implied or asserted, made by the Office in their fee setting and concurrent “in the aggregate” zero-summation requirement.

  10. Gene,

    I note that PatentDocs has posted an updated article, and true to form, the emphasis on “in the aggreagate” has been made.

    See the article at http://www.patentdocs.org/2012/03/a-glimpse-under-the-hood-how-the-uspto-proposes-to-adjust-patent-fees-.html#comments