Rush to Avoid Increased Fees Will Hurt the USPTO

By Gene Quinn
September 16, 2011

Earlier today President Obama signed the America Invents Act at Thomas Jefferson High School in Alexandria, Virginia. Patent reform is now a reality, and over the next 18 months there will be massive changes to U.S. patent law. The Patent Office has already been working on regulatory reforms to the Appeals process and to the Reexamination process, so with the changes in this legislation along with the rulemaking necessary to implement the law there will be little that remains the same by March 16, 2013, when all aspects of the legislation have gone into effect. Virtually nothing that you know about patent law and/or patent process today will be relevant come March 16, 2013.

There are certain aspects of the patent reform legislation that will go into effect immediately, or nearly immediately. One example of a near immediate change is the treatment of fees paid to the United States Patent and Trademark Office. Effective 10 days after the legislation is signed fees will go up at the USPTO, thanks to a 15 percent surcharge.

The legislation explains:

There shall be a surcharge of 15 percent, rounded by standard arithmetic rules, on all fees charged or authorized by subsections (a), (b), and (d)(1) of section 41, and section 132(b), of title 35, United States Code. Any surcharge imposed under this subsection is, and shall be construed to be, separate from and in addition to any other surcharge imposed under this Act or any other provision of law.

As you might imagine, many are rushing to pay whatever fees they can prior to the implementation of this 15 percent surcharge. This, however, will hurt the Patent Office, perhaps significantly. You see, we are approaching the end of FY 2011 and the USPTO has long since collected the amount of money Congress appropriated for them for FY 2011. That means that any sums over and above what the Office was appropriated will be collected and turned over to the General Treasury to be used by the government for purposes other than the business of the Patent and Trademark Office.

Those rushing to pay fees before September 26, 2011, will save 15%, but the Patent Office will not have access to that money. The budgetary calendar resets on October 1, 2011, which marks the start of Fiscal Year 2012. While the America Invents Act does not put an end to fee diversion key Congressmen in the House of Representatives pledged that they would allow the USPTO to keep 100% of the user fees collected. Thus, presumably, fees paid starting October 1, 2011, would go to the USPTO to use for the purpose intended by the payor; namely the examination of applications and ongoing business operations of the agency.

The language of the America Invents Act is quite peculiar and largely misleading relating to the issue of fees. A quick read suggests that there is an end to fee diversion because the USPTO will be allowed to use 100% of fees collected. The Act says:

There is established in the Treasury a Patent and Trademark Fee Reserve Fund. If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund. To the extent and in the amounts provided in appropriations Acts, amounts in the Fund shall be made available until expended only for obligation and expenditure by the Office in accordance with paragraph (3).

However, 35 U.S.C. 42(c) will still include language saying: “To the extent and in the amounts provided in advance in appropriations Acts…” This isn’t completely clear by reading the Act itself, but if you follow what is being removed and what is being kept, Congress is still retaining the right to appropriate funds to the USPTO. Thus, the USPTO will get to keep 100% of their funds provided that is what is authorized in advance in appropriations Acts. What this means is that the status quo is unchanged. Despite the slight of hand in the Act the Patent and Trademark Office will only get 100% of user fees collected provided that is what Congress appropriates.

In all likelihood Congress will not go back on its promise, that was contained in a letter and not at all binding on anyone, to fully fund the USPTO during FY 2012. Beyond 2012 who knows what will happen with respect to USPTO funding. We could well be back in a place where fee diversion is alive and well. One has to think that is the broader Congressional plan given that the House and Senate specifically voted down attempts to once and for all put a concrete and unmistakable end to fee diversion.

In any event, the USPTO request for FY 2012 is for $2.7 billion, and the scuttlebutt on Capitol Hill suggests the USPTO will indeed get $2.7 billion. That will significantly assist the Office in making long needed IT upgrades, hiring new patent examiners and authorizing overtime. So look for a lot of positive things to happen relative to the backlog and overall efficiency of the USPTO during FY 2012. Of course, the fight for a permanent end to fee diversion needs to continue!

Over the next few days as you might be tempted to pay fees to save 15% perhaps you should ask your clients whether they want to put their money where there mouth is. We have all advocated for the USPTO to keep 100% of their fees, which is the only common sense outcome. But saving 15% means the USPTO won’t get that money and instead it will go to completely unrelated activities of the federal government. Is saving 15% worth the harm to the USPTO? Not saving money is, of course, counter-intuitive, but is it against your interest?  Certainly it would be nice to have that 15% for something else, but if a bubble does occur that will hit the USPTO with increased work without the ability to keep the fees.  So they get the work but don’t get the money, which won’t do anything to help the situation at the USPTO.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of Read more.

Discuss this

There are currently 20 Comments comments.

  1. Alan Cote September 16, 2011 3:23 pm

    Nothing like some sensationalism:

    Perhaps all attorneys/agents should have to re-take the Patent Bar exams then.

  2. Alan Cote September 16, 2011 3:25 pm

    (the bit from the article that I was referring to got chopped from my post, here it is)

    Virtually nothing that you know about patent law and/or patent process today will be relevant come March 16, 2013

  3. Gene Quinn September 16, 2011 3:35 pm


    Given that you claim I am engaging in sensationalism would you please educate us on why you believe what I said was sensational? You can start by explaining why changing 35 U.S.C. 102 isn’t such a big deal. You can continue by explaining how the introduction of post-grant review isn’t that much of a change. Please also continue with explaining why prior user rights is minor issue, how the litigation reforms are inconsequential. Of course, since this isn’t such a big deal you will be able to explain how derivation practice will unfold procedurally at the patent office, as well as what the specific meaning of terms and concepts never defined in patent law will be. Also, does the “disclosure” mentioned in 102(b)(1) capture sales and public use?

    Appeals practice is being reformed, Reexam practice is being reformed, Interference practice is being abolished, Derivation Practice will need to be created. All of the 102 case law moving forward will no longer apply. The America Invents Act conflates obviousness and novelty vis-a-vis double patenting (i.e., now your own work cannot be used against you for novelty).

    If you don’t wholeheartedly agree with my statement that virtually nothing will be the same come March 16, 2013 then you haven’t been paying attention. Pretend that everything isn’t changing if you like, that is up to you.


  4. EG September 16, 2011 3:51 pm


    September 16, a date that will live in Patent Infamy, the day the AIA (Abomination Inane Act) became law.

  5. Alan Cote September 16, 2011 8:45 pm

    Well yeah, the changes are massive and far-reaching. But the fundamentals of drafting a patent application haven’t changed. Which isn’t actually the point …
    Rather, the site shows you’re very easy to wind-up (see the language of your reply), and your line was a good catalyst for lighting your short fuse. All in good fun of course. I enjoy IPW, and some of your writing. The sort of dire copy you used is classic journalism, so chapeau monsieur Quinn.

  6. Phillies Sweep September 18, 2011 1:36 am

    “Virtually nothing that you know about patent law and/or patent process today will be relevant come March 16, 2013”

    Gene, for a lawyer you sure could learn a thing or two about parsing your words carefully. Contrary to what you say, 102 as we know it WILL continue to apply after that date for applications filed before then, for applications which are continuations of applications filed before then, and most importantly for patents already granted at that time or granted subsequently on the aforementioned classes of applications. So I for one am not planning to forget everything I know about 102 in its current guise come March 16, 2013. The situation is more like the change to 20-years-from-filing that went into effect in June 1995 (which you should know about even though it happened before you got your license) or the passage of the AIPA in 1999 (when you were in your patent attorney diapers): practitioners will need to know more than one set of laws.

    Your bombast aside, your observation that waiting until October 1 to pay is more likely to help the PTO than paying now (which certainly won’t help the PTO, for the reasons you mention) is a good one, but I’m more cynical than you are: any surplus in collections is still going to be raided by Congress, notwithstanding the language of the statute. And I have an ethical duty to my clients to represent them as well as possible, which includes paying fees now if I know they’re due and will go up September 26.

    One group of people who will have a choice about paying by September 25 or waiting until October 1, without breaching a duty toward any clients, are newly-minted practitioners. So maybe you should direct your comments to your PLI-course acolytes who can defer paying their registration fee until October 1.

  7. Paul F. Morgan September 18, 2011 9:52 am

    Gene, thanks for your long campaign to show how relatively few inventors, companies, patent applications or patents will be affected by all the changes in the new patent laws, even in the long run. Other than 102[when it goes into effect] most of the many changes are for specialized situations, and the most lengthy provisions [relating to several different reexaminations, all miss-named] will only be potentially used for or affect some of the patents being litigated or threatening litigation in the future.
    [A “technical corrections bill” after a year or may be also desirable for a few of the more confusingly written sections.]
    Of course that does not mean that professional patent practitioners can ignore the statutory changes. The PTO should be seriously re-considering a reasonable, low cost, MCLE program of some kind. The PTO had started to plan one but then apparently dropped that ball a few years ago. It ought to include credits for attending local CLE programs on the new legislation that are acceptable for state bar MCLE credits.

  8. Anon September 18, 2011 11:20 am

    Paul F. Morgan,

    Is black now white?

    Gene’s point is that relatively few (if any) inventors, companies, patent applications or patents will NOT be affected by all the changes in the new patent laws. When he says the system will be virtually and completely changed by a certain date, the implication that cannot be missed is that everyone will be affected. Yet somehow you garner the meaning that very few will be affected. The mismatch is stark.

    But as a point to the topic of this thread, the timing of payments, keep in mind that as of Oct 1, 2011 a new fiscal year will be in place. I know that we have heard that the Office will be fully funded for Fiscal 2012, but do those promises contemplate the debt-reduction implications that may occur if the group of ten cannot agree on the painful cuts that are to be made?

  9. Gene Quinn September 18, 2011 11:48 am

    Phillies Sweep-

    You need to get a grip. Obviously what I said is correct. Why you can’t see that is a mystery. Clearly two sets of 102 rules will change everything. Clearly after the law changes go into effect there will be completely new rules of practice for new applications. The fact you want to pretend things will be the same won’t change reality. I am correct, you ate incorrect to chide me. Chiding me for a clearly correct statement SMS is of inappropriate arrogance. Wise up!

  10. Gene Quinn September 18, 2011 11:59 am

    Phillies Sweep-

    One more thing to add.

    Please explain why you willfully and blatantly mischaracterize what I wrote? Obviously you have an agenda. What is your agenda?

    I dud not say is that everything will change, which is objectively true. You would know that if you read the law.

    Finally, I don’t appreciate arrogance from those who wish to remain anonymous. So lose the arrogant tone, identify yourself or go elsewhere with your erroneous and self important views.

  11. Blind Dogma September 18, 2011 4:32 pm

    Finally, I don’t appreciate arrogance from those who wish to remain anonymous.

    Except of course, my arrogance.

    But I get a pass since I provide drinks to the thirsty crowds…


  12. Scott September 18, 2011 9:29 pm

    What blog post would be complete without a few weisenheimers chiming in…

  13. Neil Farbstein September 19, 2011 4:59 am

    As far as the inter partes challenges- How do outside parties become aware of the patent application being challenged? Is there a change to publication rules?

  14. Anon September 19, 2011 10:35 am

    Hal Wegner has an intersting email out this morning on this topic:

    Ironically, as patent fees increase by 15 % this Friday as part of the America Invents Act, the Patent Office will end up losing substantial revenue in the coming months: On October 1, 2011, government agencies will be operating under a Continuing Resolution which should freeze funding levels that will not permit the Patent Office to take advantage of the new government revenues gained by the fee increase.

    Even worse, the Patent Office must fund its new statutorily mandated programs which will entail greater resources for the new Patent Trial and Appeal Board (PTAB) and other aspects of the new America Invents Act. This necessarily means cutbacks for the regular examining corps.

    A Statutory “Anomaly” to Save the Patent Office Budget: The key chance for the Patent Office to use its increased funding would be for the Congress to enact a statutory “anomaly” as part of the continuing resolution. This is a long shot.

    Food for thought.

  15. PB September 19, 2011 11:11 am

    Why is it that all of the blogs and news are making such a big deal about the surcharge?

    The text of the bill (section 11) says:

    (i) Appropriation Account Transition Fees-
    (1) SURCHARGE-
    (A) IN GENERAL- There shall be a surcharge of 15 percent, rounded by standard arithmetic rules, on all fees charged or authorized by subsections (a), (b), and (d)(1) of section 41, and section 132(b), of title 35, United States Code. Any surcharge imposed under this subsection is, and shall be construed to be, separate from and in addition to any other surcharge imposed under this Act or any other provision of law.

    (2) EFFECTIVE DATE AND TERMINATION OF SURCHARGE- The surcharge provided for in paragraph (1)–
    (A) shall take effect on the date that is 10 days after the date of the enactment of this Act; and
    (B) shall terminate, with respect to a fee to which paragraph (1)(A) applies, on the effective date of the setting or adjustment of that fee pursuant to the exercise of the authority under section 10 for the first time with respect to that fee.

    So, the surcharge should end when the PTO sets the fees differently than how the legislation has done it, correct? Well, if I’m not mistaken, they just did:

    According to the federal register, there is a 2.3% fee increase for the 2012 fiscal year, not the hyped up 15% increase.

  16. Gene Quinn September 19, 2011 3:55 pm


    You are incorrect. Starting September 26, 2011, you will have to pay the fee PLUS the 15% surcharge.


  17. PB September 19, 2011 4:11 pm

    I apologize and am not trying to be difficult. I am merely trying to understand. Why does the surcharge not end as stated in the legislation? Am I misunderstanding something? How or when would the surcharge end, or is it to be considered a permanent fixture? If so, how does this fit with the language that “the surcharge… shall terminate, with respect to a fee to which paragraph (1)(A) applies, on the effective date of the setting or adjustment of that fee pursuant to the exercise of the authority under section 10 for the first time with respect to that fee”?

  18. Anon September 19, 2011 5:20 pm


    What does section 10 tell us? How is that different than the annual budget setting process that the surcharge does not effect?

  19. Neil Farbstein September 19, 2011 5:36 pm

    Can they get authorization to lower the fees for all small entities after the 15% increase? I thought the PTO sets its own fees.

  20. Anon September 20, 2011 7:16 pm

    At an event in Ohio today, Bob Stoll announced to a packed room of patent attorneys that NONE of the expedited fees paid into the system to beat the 15% surcharge would be seen by the Patent Office.


    He also offered that even the post-October 1 influx to the Office is not certain, that the Office would be petitioning the powers that be for the “anomaly” standing and thus lending credence to the Hal Wegner position.

    The innovators of America were just hit with a 15% innovation sur-tax.