On October 3rd 2016, Michelle Lee’s USPTO released a proposed $710 million patent fee increase for public comments. (Notice of Proposed Rulemaking, Docket No. PTO-P-2015-0056, Setting and Adjusting Patent Fees During Fiscal Year 2017, 81 Fed. Reg. 68150 (Oct. 3, 2016)). US Inventor filed a response.
In an August 8th 2016 speech to the Detroit Economic Club, then candidate Donald Trump declared, “Upon taking office, I will issue a temporary moratorium on new agency regulations.” The USPTO’s proposed fee increase was published for comments on October 3, 2016, before it was known who would be the next president. But the fee increase is considered a new agency regulation, so it would be subject to the moratorium if Trump were elected. On November 8th, Trump won the election. I don’t think anyone, including the USPTO, thought that Trump would not keep his campaign promise of a moratorium, so it was not surprising that President Trump immediately ordered a moratorium as soon as he was sworn it on January 20th.
The USPTO’s proposed fee increase was open for public comment for 60 days, so on December 2nd 2016 comments were closed. A fee increase had to wait another 45 days before it could become effective, so the earliest date the fee increase could be take effect was January 18th, two days before inauguration. This is an important date because the fee increase would get caught up in Trump’s moratorium if it were not put into effect before January 20th. It appears the fee increase may be caught up in the Trump regulation moratorium. The USPTO has not announced whether they will abandon the fee increase or pursue it. Still, there is much surrounding this attempted fee increase that is curiously suspicious.
Executive Order 12866 governs new regulations. Under this executive order, a regulation is considered a “significant regulatory action” if that regulation has “an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities”. The USPTO fee increase has an economic effect of $710 million over five years, which is above the threshold. Therefore, it must be marked a “significant regulatory action” when reported to the Office of the Federal Register. Reporting proposed regulations as significant flags the regulation on the Federal Register, which enables the public, including the Trump Transition team, to easily search and find significant regulations.
Although the USPTO admitted its fee increase is considered “significant”, the proposed rule published for public comment was not reported as significant in the Office of the Federal Register’s online database. A person searching for “significant” proposed rules in the Federal Register database would have missed the USPTO’s fee increase when it was published on October 3rd 2016 and throughout the Trump transition period and inauguration on January 18th 2017. Failing to report a rule as significant in the searchable database makes finding significant pending regulations very difficult. One must read the contents of each regulation to determine which are significant. Even after Trump won the election and the transition team was actively looking at pending regulations, and in full knowledge that Trump would almost certainly put in place a moratorium on new regulations, any member of the public (or the Trump transition team) performing a search for significant rules in the Federal Register database would not have found the USPTO’s fee increase.
Did Michelle Lee’s USPTO actually attempt to push through a significant regulatory action ahead of inauguration while attempting to avoid scrutiny by the Trump transition team by not identifying the fee increase as significant in the Federal Register database? I guess it cannot be said for sure, but the question deserves an answer. (Note: Only after US Inventor brought this issue to the attention of the Trump White House on February 10, 2017 was the USPTO’s fee increase marked as significant in the Federal Register database.)
Transparency was not the only concern US Inventor had regarding the USPTO’s fee increase regulations. In support of the fee increase, the USPTO conducted an elasticity analysis to predict applicant behavior as a result of the proposed increased fees. However, the USPTO did not consider small businesses and independent inventors who are less able to pay the USPTO’s increased fees in the elasticity analysis. Small business and independent inventors are not even mentioned once in the elasticity analysis. Effectively, the USPTO’s analysis treats all applicants like large multi-national corporations. If the USPTO had included small business and independent inventors, they would have found that these small applicants are far more sensitive to price increases than large corporations.
What is most frustrating is that USPTO prides itself in its Patent Pro Bono Program, which is geared toward independent inventors and small companies who cannot afford to patent inventions. Obviously, the USPTO knows that small entities already have trouble paying under the current fee structure. In the face of this knowledge, Michelle Lee’s USPTO excluded this most sensitive group from their elasticity analysis.
While Michelle Lee’s USPTO is attempting to increase examination fees, the USPTO is diverting fees paid for examination to fund the rapidly growing Patent Trial and Appeals Board (PTAB). The PTAB was created by Congress to address the problem of so-called “bad patents” promoted by the anti-patent lobby and Michelle Lee. Their argument was that the USPTO issues far too many “bad patents” and those patents are used to shakedown unsuspecting multinational corporations. Thus, the PTAB was created to invalidate these so-called, but undefined, “bad patents”.
But Michelle Lee’s PTAB went much further than invalidating just “bad patents”. The PTAB invalidates at least one claim in over 95% of the patents that it reviews. Invalidating just one claim can neuter the enforceability of the patent completely, making it worthless. This is particularly true because once one claim is invalidated requesters can use that invalidated claim as support for a reexamination request that would place the burden on the applicant to defend a patent that was supposed to be presumed valid. Worse, a reexamination proceeding can easily take three to four years to complete without appeals.
It defies reason that 95% of issued patents are “bad patents” and should be invalidated or neutered, and it is insulting that the Patent Office refuses to presume patents they issue are presumed valid despite the statute saying that examined and issued patents are, in fact, legally presumed valid. These patents have already been examined in a rigorous, lengthy and expensive examination process by the same USPTO that is now invalidating the patent. They give with one hand and take with the other; the Patent Office has become more arms dealer than honest broker. Furthermore, and quite importantly, these patent are selected by experts who risk millions of dollars evaluating the patent, the case for infringement and paying for litigation. It is beyond obvious that these patents cannot all be “bad patents”.
Disturbingly, especially in light of the USPTO proposed fee increase, if a petition for a PTAB trial is not instituted, 75% of the petition fee paid to institute a PTAB procedure is returned to the petitioner. If the PTAB needs funding, it makes more sense to keep this money in the PTAB than it does to take examination fees and divert them to the PTAB and then increase examination fees. Even more disturbing is the fact that the Administrative Patent Judges who agree to institute the challenges are the ones who decide the challenges, which means they control their own docket and production quota. It is no wonder it is more likely to have multiple challenges on the same patent initiated than a single omnibus challenge that would only give the self interested PTAB judges a single quota credit. The gaming of the system for the disadvantage of the patent owner is disgusting.
Moreover, returning fees biases the decision to institute a PTAB challenge, especially when big corporations “gang tackle” a patent with multiple petitions. Each petition has a fee of around $20,000, so when multiple petitions are filed, the cumulative fees may be hundreds of thousands of dollars. Denying a petition means returning 75% of that money. In an environment where the USPTO claims to be cash strapped, as is evident by the USPTO’s proposed fee increase, it may not be a good career decision for PTAB judges to deny institution.
This USPTO fee increase appears to have been timed to get a regulation in place before President Trump could stop it and appears to have been omitted as significant from the Federal Register database to avoid scrutiny. Such political games should be beneath America’s Innovation Agency.
But why is the USPTO in such a fee crisis? Because they have strayed from their mission, which is to issue patents. Far too many Art Units have allowance rates under 5%, and some as low as 1% (and those are in Art Units dominated by Fortune 500 companies). For an agency that derives the majority of its fees from patent owners paying maintenance fees it is downright idiotic for the Office to allow examiners to bury applicants and refuse patents at every turn. Worse, the solution isn’t to ease up and allow patents, instead it is to double and triple down on instituting more post grant challenges and raising fees. Issue patents for a few years in those “no patent for you Art Units” and the fee problems would be solved.
There are a lot of big things in the USPTO that need to be fixed before raising fees on independent inventors and small businesses.