USPTO Proposes Significantly Higher Patent Fees

On September 6, 2012, the United States Patent and Trademark Office published proposed rules in the Federal Register setting or adjusting fees for patent related services.  In proposing patent fees the USPTO is for the first time seeking to exercise the fee setting authority established under Section 10 of the America Invents Act (AIA).  According to the Federal Register Notice, the proposed fees are appropriate to cover patent operations at the Office, as well as create a “sustainable funding model” that will work toward further reduction in the patent application backlog.  The fees are also set with an eye toward a necessary “upgrade [of] the Office’s patent business information technology (IT) capability and infrastructure.”

Now begins a two month public comment period.  In order to ensure consideration, those wishing to submit written comments must do so no later than November 5, 2012. Comments should be sent by electronic mail message over the Internet addressed to: [email protected].  Further, these proposed fees will be fair game for discussion at the AIA Roadshows scheduled throughout the United States during the month of September.

The recurring theme will be decreased fees for those who qualify for micro-entity status, but increased fees for everyone else.  Decreased fees for micro-entity status are appreciated, but they will not even apply to all independent inventors, but only a subset of independent inventors who are at the lowest end of the income scale and who have had very few patents or patent applications.  Thus, even the professional garage inventor will be a small entity and will pay more — in some cases substantially more — than they pay now.  Not to mention the small businesses that are the engine of the U.S. economy.  These fees will be a real and substantial impediment to the patent process for those individuals and businesses that we need to be encouraging and incentivizing the most.

I predict that patent fees will become a political issue in the Presidential Election cycle.  I can already hear the ads by Republicans and the talking points.  The Obama Administration is raising fees significantly on innovators, entrepreneurs and small businesses that drive the economy and produce jobs in America.  The Obama Administration will be portrayed as out of touch and anti-business.  These fees will be presented as a further evidence that the President’s policies are a drag on the economy and on job creation.  It will just be too tempting for the Republicans because who is actually anti-innovation or against entrepreneurs and small businesses? It fits the narrative perfectly.

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Notwithstanding the battle that is likely to ensure on fees, the USPTO has provided far more information about these new fees than most people are going to be interested in considering.  There are explanations, power point presentations and excel spreadsheets for those who want to thoroughly emerse themselves in the nitty-gritty details and nuances.  The documents provided include:

• Fee Setting At a Glance
• Regulatory Impact Analysis
• Table of Patent Fee Changes
• Costing Methodologies
• Elasticity Estimates
• Initial Regulatory Flexibility Act Tables
• Aggregate Revenue Table for Proposed Patent Fees in NPRM [PDF | Excel]
• Aggregate Revenue Table for Current Fees [PDF | Excel]
• Aggregate Revenue Table Across the Board [PDF | Excel]
•  Aggregate Revenue Table for Fees Set at Cost Recovery [PDF | Excel]
• Aggregate Revenue Table for Preliminary Proposed Patent Fees from February 2012  [PDF | Excel]
• Instructions for Aggregate Revenue Tables

The USPTO proposal would set or adjust some 352 patent fees.  By the numbers the setting/adjustment is as follows, broken down by size of entity:

• 94 patent fees apply to large entities (i.e., ‘‘large entity’’ an entity other than small or micro entities)
• 94 patent fees apply to small entities
• 93 patent fees apply to micro entities
• 71 patent fees are not entity-specific

Of the 94 large entity fees, 66 are being adjusted, 19 are set at existing fee amounts, and 9 are newly proposed in this rule. Of the 94 small entity fees, 80 are being adjusted, 5 are set at existing fee amounts, and 9 are newly proposed in this rule. There are 93 new micro entity fees being set at a reduction of 75 percent from the large entity fee amounts. Of the 71 fees that are not entity-specific, 6 are either being adjusted or set as new fees in this rule and 65 are set at existing fee amounts.

The USPTO also points out in the proposed fees that despite the presence of some fee increases, “applicants who meet the new micro entity definition will pay less than the amount paid for small entity fees under the current fee schedule for 88 percent of the fees eligible for a discount under section 10(b).”

These fees will certainly not make everyone happy.  For example, the total cost (i.e., Filing + Search + Examination fees) of filing a patent application will increase as follows:

• Large entity cost $1,600 — increase of $350
• Small entity cost $800 — increase of $175
• Micro entity cost $400 — decrease of $225

Will this cause a decrease in the number of applications filed?  The Patent Office says yes, saying: “The Office recognizes that some applicants may choose to reduce the number of applications filed in response to this proposed increase in fees. However, the Office anticipates that this impact will be relatively short-term; lasting for the first two and a half years of the fee increase.”  Frankly, at this time in place I don’t know that doing anything that reduces the number of filings makes sense.  We want more innovation and investment, not less.

Additionally, the fee for filing a Request for Continued Examination has gone up.  The proposal would set the fee as follows:

• Large entity = $1,200 — increase of $270
• Small entity = $600 — increase of $135
• Micro entity = $300 — decrease of $165

This will be worrisome because despite the Office’s best efforts it is still necessary to file RCEs in many cases for a variety of reasons.  There are just some Art Units at the USPTO that will not issue a patent unless they are ordered to do so by the Board, which is almost incomprehensible given that the role of the USPTO is to issue patents.  In these cases there are many RCEs filed in an attempt to obtain a patent before the extraordinary expense (and time commitment) of an appeal are undertaken.  Still further, there are examiners who game the system in order to obtain additional credit for working on a case prior to issuing the case.  Higher fees here will be particularly problematic for those who operate in technologies that see one or the other of these types of gaming of the system.

Still further, the cost of filing even a Notice of Appeal will rise, which is also going to rub many the wrong way given that the real rate of an examiner being overturned on appeal when you factor in reversals post Notice of Appeal is approximately 75%.  See 75% – The Real Rate of Patent Applicant Success on Appeal.  Forcing those who have been jerked around by the “no patent for you” patent examiners for many years to have to pay more to seek recourse for the rights that should have freely flowed will be a hard pill to swallow.  Notwithstanding, here is a look at some of the increases relative to appeals:

Notice of Appeal

• Large entity = $1,000 — increase of $380
• Small entity = $500 — increase of $190
• Micro entity = $350 — decrease of $60

Total Appeal Fees

• Large entity = $3,000 — increase of $1,760
• Small entity = $1,500 — increase of $880
• Micro entity = $750 — increase of $130

But no where will the proposed fees take more criticism than in the area of reexamination.  In what can only be characterized as a peculiar and disingenuous presentation of the facts, the USPTO offers a comparison of the cost of ex parte reexamination not based on the cost as it exists today, but rather in comparison with the previously announced proposed fees.  Thus, the Federal Register Notice actually shows a table where the cost of an ex parte reexamination is decreased!  It is decreased in comparison with the exorbitant fees initially proposed, but dramatically increased over the cost today.  The figures below show the increase based on the cost of an ex parte reexamination as it currently exists:

• Large entity = $15,000 — increase of $12,480
• Small entity = $7,500 — increase of $4,980
• Micro entity = $3,500 — increase of $980

The fees for inter partes review and post-grant review, although less than initially proposed, are still extremely high, which makes one wonder how often those procedures will be employed.  For example, for inter partes review there will be a fee upon submitting a request for such review and a post institution fee.  The USPTO proposes an inter partes review petition fee of $9,000 for up to 20 claims and a per claim fee of $200 for each claim requested for review in excess of 20. Furthermore, the USPTO also proposes to set the inter partes review post-institution fee of $14,000, for a review of up to 15 claims. and a per claim fee of $400 for review of each claim in excess of 15 during the post-institution trial.  The following example is given:

[U]nder this proposal, if a party requests inter partes review of 52 claims, the petitioner would pay $44,200 ($9,000 plus 32 [52 minus 20] times $200 equals $15,400; plus $14,000 plus 37 [52 minus 15] times $400 equals $28,800; for a total of $44,200).

This seems to be a needlessly cumbersome formula if you ask me.

Similarly, for post-grant review, the USPTO proposes a post grant review petition at $12,000 for up to 20 claims and a per claim fee of $250 for each claim in excess of 20.

The USPTO also proposes a post grant review post-institution fee at $18,000, for post-institution review of up to 15 claims and a per claim fee of $550 for review of each claim in excess of 15 during the post-institution trial. The same 52 claim review example is presented, but for post-grant the cost would be $58,350.

Maintenance fees also will be going up, making it more expensive to keep a patent once you have obtained one.  The costs will be:

Large entity maintenance fee payments

• 1st payment = $1,600 — increase of $470
• 2d payment = $3,600 — increase of $$750
• 3rd payment = $7,400 — increase of $2,670

Small entity maintenance fee payments

• 1st payment = $800 — increase of $235
• 2d payment = $1,800 — increase of $375
• 3rd payment = $3,700 — increase of $1,335

Micro entity maintenance fee payments

• 1st payment = $400 — decrease of $165
• 2d payment = $900 — decrease of $525
• 3rd payment = $1,850 — decrease of $515

So many other fees are all going up as well.  Extension of time fees will increase between 7% to 33%.  Application size fees go up 29%.  Excess claim fees increase between 33% to 73%.  Of course, in each situation the fees drop for micro-entities and the increases will be paid by small entities and large entities.

Frankly, I think these proposed fees are quite onerous and rather objectionable.  The most objectionable is perhaps the increase in the maintenance fees.  We are told that the fees have to be  appropriate to recover the cost of the work provided (i.e., on a cost recovery basis).  What is the justification for ANY maintenance fees let alone increased maintenance fees?  The work has already been done by the USPTO and maintenance fees are nothing more than a tax that must be paid in order to keep a patent current.  The USPTO does nothing more, so why do we have those fees at all?

Let the debate begin.