USPTO Breaks President Trump’s “One-In Two-Out” Executive Order

President Donald J. Trump

President Donald J. Trump

It would appear as if Obama holdover Michelle K. Lee continues to run the USPTO. More than six weeks after President Trump’s Inauguration Lee is delivering remarks at PPAC and PTAB Bar Association on March 2, 2017, appearing as a speaker at industry events (e.g. AUTM), signing notices published in the Federal Register, and signing newly issued U.S. Patents. This could be a very expensive problem for inventors as these patents end up in litigation and defense lawyers inevitably challenge the validity of any patent issued and signed by Lee because there is no clear authority for anyone to sign patents until an official announcement has been made on Lee’s statuts.

The lack of transparency surrounding Lee’s status is but one serious problem at the USPTO; there are others. Take for example the story of how the USPTO under Michelle Lee is pushing a fee increase. We first alerted the Patent Public Advisory Committee (PPAC) in an open letter outlining the problematic nature of the USPTO fee increase just ahead of the first quarterly meeting on March 2, 2017. A major issue is that fees for examination, where the USPTO creates patents, are being internally diverted to the PTAB, where the USPTO destroys patents. Yet, the USPTO wants to increase examination fees anyway, presumably so those fees can still be diverted to fund the financially failing PTAB. The PPAC accepted the letter and will soon publish it on their site.

The contents of our letter were not discussed at the most recent PPAC quarterly meeting, but it was acknowledged for receipt and it appears some PPAC members wanted to discuss it. However, during that meeting serious questions came to light about whether Lee’s USPTO is undermining President Trump ‘One-In Two-Out’ Executive Order.

President Trump’s ‘One-In Two-Out’ Order (formally Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs) mandates that whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed. Moreover, under the ‘One-In Two-Out’ Order, the costs of any new regulations must be offset by the elimination of existing costs of at least two prior regulations. The ‘One-In Two-Out’ Order broadly defines the term “regulation” or “rule” to mean “an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency.”

The White House Office of Management & Budget (OMB) issued guidance on implementing the ‘One-In Two-Out’ Order. The OMB Guidance explains, under the heading “Coverage:”

Q: Which new regulations are covered?

A: The EO’s requirements for Fiscal Year 2017 apply only to those significant regulatory actions, as defined in Section 3(f) of Executive Order 12866, an agency issues between noon on January 20 and September 30, 2017. This includes significant final regulations for which agencies issued a Notice of Proposed Rulemaking before noon on January 20, 2017.

At the quarterly PPAC meeting, USPTO Deputy CFO Frank Murphy (listed on the agenda as Acting CFO) stated that USPTO is moving forward with its proposed $710 million fee increase, despite the Trump’s ‘One-In Two-Out’ Order. See Livestream of PPAC at 1:22:30 for discussion. PPAC Member Bernie Knight (former General Counsel of USPTO) then asked Mr. Murphy whether the $710 million fee increase is subject to Trump’s ‘One-In Two-Out’ Order. Mr. Murphy responded that he does not believe the $710 million fee increase is subject to Trump’s ‘One-In Two-Out’ Order because, in his view, it is not a “new” regulation but rather is an “amendment” to an old regulation.

Mr. Murphy also responded that, even if the $710 fee increase were subject to Trump’s ‘One-In Two-Out’ Order, the USPTO would look to eliminate two regulations in other agencies within the Commerce Department, not the USPTO’s own regulations. But how can the USPTO eliminate regulations in other agencies? Can you imagine the likely fight that will occur between the USPTO and those other Commerce Department agencies (NIST, Census, ITA, NOAA, BEA, BIS, NTIA), as the USPTO seeks to gore the ox of these other agencies, without offering any of the USPTO’s own regulations for repeal? And how could such an interpretation be at all consistent with the terms of the ‘One-In Two-Out’ Order, let alone the spirit of the Order?

USPTO’s interpretation is wrong: OMB Guidance does not distinguish between “new” regulations and “amended” regulations. A proposed regulation that would go into effect in FY2017 is “new” and is covered by the ‘One-In Two-Out’ Order so long as it is a significant regulatory action and was published in a “Notice of Proposed Rulemaking before noon on January 20, 2017.”

Here, the USPTO’s proposed fee increase was published in a Notice of Proposed Rulemaking on October 3, 2016 (i.e., before noon on January 30, 2017) and itself admits that it is “significant for purposes of Executive Order 12866” (i.e., having an annual effect on the economy of $100 million or more). See 81 FR at 68179. Therefore, under the OMB’s definition, the USPTO fee increase is both a “new regulation” and a significant regulation to which the Trump ‘One-In Two-Out’ Order applies.

We think the public would be shocked to learn that the USPTO, or any agency, can increase fees by $710 million through rulemaking and claim that this is not a rule subject to the Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs.

Stakeholders and concerned citizens alike need to start asking whether President Obama’s Director of the USPTO, holdover Michelle Lee, is seeking to undermine President Trump from within.

The Author

Paul Morinville

Paul Morinville is Founder and former President of US Inventor, Inc., which is an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups. US Inventor has been walking the halls of Congress knocking on doors and sitting down with hundreds of offices to explain the damage suffered by inventors due to patent reforms. Paul is President of SemiComm HK, a Hong Kong company licensing patents in China, and an independent inventor with dozens of U.S. patents and pending patents in enterprise middleware.

Paul Morinville

Randy Landreneau is the President of US Inventor, an organization working to restore the American Patent System. The future of American innovation depends on the ability of the independent inventor to defend his or her patent rights, no matter how disruptive the invention. Randy is also an inventor and President of Complete Product Development, a company that provides CAD design, prototyping, 3D printing, silicone molding and educational services to inventors and companies.

Paul Morinville

Adrian Pelkus is an inventor with 30+ years experience developing over 300 different electronic products and high technology processes that have helped startup several technology companies. Mr. Pelkus is named inventor on fourteen issued U.S. Patents including the "Baby Think it Over" infant simulator, a “Thin Film Flexible Solar Cell”, the FDA cleared "Jaw Elevation Device" and O2MislyTM Wound Treatment System. In 2005 Mr. Pelkus reorganized the San Diego Inventors Forum now a 501(c)(3) to help startup entrepreneurs. Mr. Pelkus serves on the Board of Directors of both United Inventors Association of America (UIA) and US Inventor, organizations dedicated to assisting and educating inventors.

Paul Morinville

Scott Moskowitz is founder and managing director of Blue Spike LLC. The idea for Blue Spike came about while still an undergraduate & later experience at Sony Corporation in Japan, the first undergraduate honored to work in an active business strategy group within Sony Corporation. Mr. Moskowitz invented a large number of approaches to protect media content such as music, video, software & images. Several inventions are "pioneer patents" & created new industries & lucrative, high-paying jobs. Mr. Moskowitz also invented "ASLR" to increase software & device security. Work in signal analysis included robust summaries of signals - "signal abstracts" - for content recognition & monitoring as well as "packet watermarks" for identifying & securing streams of data, or packet flow, deep packet inspection, differential quality of service ("diffQoS"), intrusion detection, prevention of denial of service attacks, differential quality of experience ("diffQoE") & "trusted transactions" for enabling, at least, "dynamic authentication".

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Discuss this

There are currently 7 Comments comments.

  1. Night Writer March 8, 2017 11:10 am

    Seems like one of the dynamics at work here is the anti-patent movement so that a fee increase is just seen as good and another way to crush patents.

  2. CW5 March 8, 2017 12:29 pm

    The article states that at least some of the increased fees will be used to fund the PTAB – which of course is devoted to crushing patents.

    Am I the only one who finds it strange that the USPTO is increasing the fees for initial examination (where it issues patents that should never see the light of day) so it can fund post-grant proceedings (which are devoted to killing the patents it never should have been issued in the first place)?

    This looks more like a ponzi scheme every day. Heads the USPTO wins, tails the people lose.

  3. David March 8, 2017 12:42 pm

    It’s unfortunate that the dollar numbers aren’t available for public inspection.

    With all this money and adjudicatory power, we are beginning to see signs of an “above the law” federal agency gone rogue.

  4. Simon Elliott March 8, 2017 3:08 pm

    This doesn’t surprise me. The “one in two out” rule is a soundbite, not good policy.

  5. Now Is The To Act March 8, 2017 3:29 pm

    I agree with the conclusion of the article. Taxation without representation, and worse, providing funding to fuel the further demise of fairly obtained and paid for patents rights.

    Is the final recourse for protest a letter to PPAC?

    What Court, Presedential or Congressional filing or court injunction may be immediately undertaken to challenge Mr. Murphy’s position and block the increase?

    If there exists such a mechanism, a person or group (such UIA) should act immediately to file a legal challenge.

  6. Mike Piehler March 10, 2017 8:59 am

    How is it not “consistent with the spirit of the executive order” to increase fees for patents (good for big business by squeezing out small inventors) by taking money from NOAA? This administration is always excited for a reason to strip resources from NOAA.

  7. Michael Salla March 19, 2017 7:04 pm

    A reliable source has revealed that President Trump issued a Memorandum to declassify over a thousand secret patents out of the current pool of nearly 5700. Does anyone have an idea of how to confirm such a claim other than waiting for the end of 2017 when the list of recently declassified patents is published?