On Thursday, September 6th, the U.S. Patent and Trademark Office’s Patent Public Advisory Committee (PPAC) convened a meeting as part of its rulemaking process for adjusting patent fees under the authority granted to the USPTO under the America Invents Act (AIA). At the meeting, USPTO officials outlined their current proposed rules to raise fees for certain utility patent applications, late payment charges for maintenance fees and AIA trial fees which will increase as a result of recent rulings by the U.S. Supreme Court.
In his remarks, USPTO Director Andrei Iancu noted that the agency first exercised its fee setting authority under the AIA back in 2013. He credited those fee adjustments with helping to reduce both the patent application backlog and pedency times while also introducing fee reductions for small and micro entities. Although the second fee revision under the AIA went into effect this January, Iancu said that the agency was continuing to look at fee revisions which would help the USPTO make significant investments into upgrading the agency’s IT systems. He added that the current round of proposed fee revisions are anticipated to go into effect in 2021.
There are a couple of reasons supporting the agency’s decision to project an increase in certain fees according to Tony Scardino, Acting Deputy Director of the USPTO. One of those reasons is inflation which increases the costs of many resources year after year. The Supreme Court’s decision this April in SAS Institute v. Iancu is another reason behind the proposed fee increases as the decision requires administrative patent judges (APJs) sitting on PTAB trials to decide the patentability of all claims challenged by petitioners. Scardino also spoke to the importance of maintaining an operating reserve at the USPTO, which he said serves the role of a line of credit for the USPTO which the agency cannot obtain in the same way that private, non-governmental entities can. Scardino said that fiscal year 2017 ended below the minimal operating reserve level and that projections for 2018, 2019 and 2020 were also showing expectations that the agency’s reserve finances would be below that minimal level.
“As recently as earlier this year, the government experienced two short-term shutdowns, and the USPTO was able to stay open during using our reserves. When any kind of cash flow risk presents itself, approximately 90 percent of USPTO spending is on things that we don’t want to cut or we can easily cut in the short term such as rent, paying our employees, or paying for contracts that support mission-critical initiatives. So when short-term spending cuts are needed, they almost always come from the areas where we have the most flexibility which are IT hardware replacement and software development.”
The USPTO’s proposed targeted fee adjustments were presented at the PPAC meeting by Brendan Hourigan, Director of the USPTO’s Office of Planning and Budget. The greatest fee increases from a percentage standpoint were those increases for late payments associated with maintenance fees. The USPTO’s proposal included a 525 percent increase for late maintenance fees at the 3.5 year, 7.5 year and the 11.5 year renewal periods, raising late payment fees from $160 up to $1,000 for large entities. Hourigan said that this increase would bring USPTO late payment fees into line with those charged by other offices and would encourage the on-time payment of maintenance fees, adding that more than 90 percent of patent renewals already end up getting paid prior to the due date. Maintenance fees for original and re-issue patents would also rise by $400 at the 3.5 year mark, by $160 at the 7.5 year mark and then by $400 at the 11.5 year mark; these increases represented a 25 percent rise in maintenance fees at the 3.5 year mark but only a 4 percent increase at the 7.5 and 11.5 year marks. The proposal would also increase issue fees for utility and re-issue patents by 20 percent, from $1,000 to $1,200 for either.
The USPTO is also looking to encourage patent applicants to file their applications in the DOCX format by introducing a new surcharge for utility non-provisional applications that are filed in formats other than DOCX. This would introduce a new $400 fee for such applications. According to Hourigan, the decision to encourage DOCX-format filings is intended to simplify the sharing of application data as DOCX files are XML-based. Other formats, such as PDFs, must be converted to XML using optical character recognition (OCR), a technology which is a source of potential errors.
In terms of sheer dollars, the greatest fee increases proposed by the USPTO are various increases associated with Patent Trial and Appeal Board (PTAB) proceedings. Across the board, AIA trial fees would increase by about 25 percent under the USPTO’s proposals. If approved, petitions challenging up to 20 claims in an inter partes review (IPR) proceeding would increase from $15,500 up to $19,500 with each claim in excess of 20 claims costing an additional $375, a $75 increase over the current excess claim fees. IPR post-institution fees would increase from $15,000 up to $18,750 with an additional $750 charge for each claim in excess of 20 claims. Petition fees for post-grant review (PGR) and covered business method (CBM) review proceedings would jump from $16,000 up to $20,000 with an additional $475 charge for each challenged claim in excess of 20 claims. Post-institution fees for CBM and PGR would increase from $22,000 up to $27,500 with an additional $1,050 fee for each challenged claim in excess of 20 claims.
The USPTO’s fee setting proposal also includes a new charge for admitting counsel to the PTAB on a pro hac vice basis. A one-time $250 charge would allow counsel to represent a party in proceedings at the PTAB for the duration of those proceedings, including the “several years” which it may take for a proceeding to go from petition to termination in situations where the case may be appealed to and then remanded by the Federal Circuit. This fee is intended to shift the cost of PTAB services from overall trial fees to the petitioning party while enabling litigators who may not be registered to practice before the PTAB but have extensive knowledge of the subject matter to appear in a trial.
Following the USPTO’s presentation at the PPAC meeting was a series of scheduled testimony made by various public witnesses representing stakeholders in the U.S. patent system. Requests for further information to justify certain fee increases was a common thread crossing the statements of these witnesses. Lisa Jorgenson, executive director of the American Intellectual Property Law Association (AIPLA), asked the agency to better justify the increased surcharge for late maintenance fee payments as well as the increases to IPR and PGR trials. Jorgenson noted that much of the additional work required by SAS Institute would take place after the institution decision and thus it might make more sense to divide the fee increase such that the pre-institution fees bear less of the increase than those charged post-institution. Roland McAndrews of the Intellectual Property Owners Association (IPO) also sought additional justification for the 525 percent increase to the late payment surcharge for maintenance fees, noting that the desire to encourage on-time payments alone didn’t support that increase.
Issues with the increase to maintenance fees were raised by Roger Burleigh, associate general counsel for IP with Ericsson. Burleigh said that a large research and development corporation such as Ericsson, which holds around 45,000 global patent assets, has to set a very large budget for obtaining and maintaining patent grants making the agency’s fee structure very important. Although the largest percentage of the increase for maintenance fees are applied at the first renewal period, Burleigh noted that many firms don’t know whether a patent has commercial value until the second or third renewal periods, forcing more costs on an entity before the value of the patent is understood. Burleigh supported maintenance and issue fee increases of about 7 percent to keep pace with inflation.
Josh Malone, inventor of Bunch O Balloons, noted that the day’s hearing on fee increases was “based on an unrealistic and aspirational value proposition,” namely that the fees paid for obtaining a patent would actually result in the grant of a patent which was backed by the full faith of the U.S. government. Malone said that while many inventors likely think that they can get a patent for the issue fees of $1,200, the actual cost of a patent is around $350,000, the median cost for defending a patent at the PTAB. For inventors like Malone who have faced more than one challenge at the PTAB, that total is even higher. “I know this is uncomfortable and discouraging… No one wants to be in the crowd when the child says that the emperor has no clothes,” Malone said. “But this is no empire. This is America. You know deep down what I am saying is true. And you don’t have to accept it.” Malone then urged the leadership of the USPTO to join him on Capitol Hill to request Rep. Darrell Issa (R-CA) to hold a hearing in the next month or two to discuss the integrity of the U.S. patent grant.