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
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 firstname.lastname@example.org, 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.
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.
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.
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, Board of Patent Appeals & Interferences, Gene Quinn, IP News, IPWatchdog.com Articles, Patent Fools™, USPTO
About the Author
Gene Quinn is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had many millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, USA Today, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.