‘A Study in Scarlet’—Powers of Attorney and USPTO Rulemaking, Part II: The USPTO Fails to Take the Paperwork Reduction Act Seriously

In Part I, I introduced the USPTO’s unpublished guidance document for signatures on powers of attorney, and the incompatibility of that guidance with state law, regulation, and the USPTO’s published guidance. Multiple laws should have caught the problems and led to a corrected document. Today, we’ll look at the USPTO’s pattern of ignoring those laws in multiple rounds of review under the Paperwork Reduction Act.

Background: Guidance, the Administrative Procedure Act, the President’s Bulletin on Agency Good Guidance Practices, and Regulations of the Department of Commerce

We’re all familiar with all the procedural checks and balances that operate when Congress and the President make laws. Similar procedures apply when agencies make rules. These procedures arise under the Administrative Procedure Act, the Paperwork Reduction Act, the Regulatory Flexibility Act, Executive Order 12866, a directive from the Executive Office of the President, and regulations from the Department of Commerce. (The full scheme of these laws is laid out in two of my articles, here and here). To summarize the law that applies to the USPTO’s hidden guidance document:

(a) agencies cannot have secret rules—if rules aren’t published, they cannot be enforced, 5 U.S.C. § 552(a)(1) and (2).

(b) where there’s an ambiguity in a statute or regulation (not an open term or a silence to gap fill, a “genuine ambiguity”), an agency can interpret that ambiguity by a guidance document that has not gone through notice-and-comment, but

(c) subregulatory guidance documents may not be imbued with force of law, and the agency cannot rely on them as the last word, but instead must “consider[ ] [alternative] positions advanced by affected private parties.”

In its response to Part I, the USPTO attempted to mitigate its nonfeasance by explaining “The 2016 document is just a training resource to explain prior examples… consistent with MPEP…” In one sentence, the USPTO demonstrates all four of my points.

• First, the statute (552(a)(2)(C)) requires agencies to “make available for public inspection in an electronic format … instructions to staff that affect a member of the public.” The USPTO’s response explains exactly why holding the 2016 “Internal use ONLY” guidance document secret is unlawful.
• Second, the USPTO’s response demonstrates the USPTO’s resistance to even informing itself of what the law is, let alone following it.
• Third, the USPTO’s guidance is not “consistent” with regulation or other guidance: any lawyer knows that “managing member” of an LLC has “actual” and “apparent” authority. The USPTO’s guidance is inconsistent with the operative state law, inconsistent with regulation, and inconsistent with the MPEP.
• Fourth, mere “consistency” isn’t enough for the agency’s guidance to be lawful. Guidance that gap-fills on an issue adverse to any member of the public, or otherwise goes beyond interpreting “genuine ambiguity,” is unlawful. Almost every president since George W. Bush has issued an executive order or other directive reminding agencies of the limits on subregulatory guidance. Why hasn’t the USPTO conformed itself to the law?

Background: the Paperwork Reduction Act

The Paperwork Reduction Act (44 U.S.C. § 3501 et seq.) is the law that quashed the 5/25 claims, 3 continuations, Markush, IDS, and Appeal rules in 2008-09 (also here).

The Paperwork Reduction Act works a bit like the securities laws. Like the securities laws, the whole scheme relies on honest bookkeeping by the regulated party, and honest disclosure in submissions to a regulatory agency. The Act requires agencies to consider cost-benefit balancing of all rules that require paperwork, and to truthfully estimate the burden an agency imposes on the public. The idea is that fair disclosure will provide incentives to an agency to reduce its regulatory costs. The regulator is the Office of Information and Regulatory Affairs (OIRA) in the Executive Office of the President.

The Paperwork Reduction Act requires agencies to obtain a clearance to collect paperwork whenever the agency changes its rules, and every three years thereafter. For purposes of the “Internal use ONLY” power of attorney rule the Act requires as follows:

• The agency must publish a notice in the Federal Register giving the public 60 days to send comments to the agency. This Federal Register Notice must request public comment on whether the agency’s estimate of burden is accurate, and request suggestions for improvements to the agency’s processes to minimize burden.
• The agency must gather its burden estimates, rationales, and responses to public comments, with “objective support” for its burden estimates, and do whatever investigation is reasonable under the circumstances to support certification of a number of statements, and submit them to the Office of Information and Regulatory Affairs (OIRA) in the Executive Office of the President.
• The agency must run a second Notice asking the public to provide comments to OIRA during a 30-day comment period, to comment on the agency’s submission, accuracy of its burden estimates, and whether the agency could adjust its procedures to reduce burden.

Almost always, agencies follow the rules, so OIRA approves agency submissions within hours after the close of the 30-day comment period and approves for three years. If there are public comment letters, the agency and OIRA work them out via ex parte consultations—the public has no real-time insight into those communications; a record is only made public after proceedings conclude.

The process concludes when OIRA issues a “control number” (or issues a notice that a control number is refused). That control number is the clearance from OIRA to the agency to collect paperwork. You’ve all seen the language and wondered what it means: “Approved for use through 03/31/2021. OMB Control Number 0651-0035” on a form is not an approval for anyone to use the form; it’s clearance for the agency to collect it. If a form, or a rule that asks the public for paperwork, doesn’t have a current control number, the agency can enforce Congress’ statutory requirements, but can’t enforce the agency’s regulations, requirements, or preferences (see also here).

January to May 2021: the USPTO’s Triennial Renewal of Paperwork Clearance for Powers of Attorney

In January 2021, the USPTO ran a notice for triennial re-review of powers of attorney. The USPTO’s proposal was facially absurd: the USPTO estimated burden for powers of attorney at three minutes of paralegal time:

• Zero attorney time.
• Zero client time.
• Zero time to determine which entity within a corporate enterprise owns the application, and zero time to find the proper signatory.
• Zero time to choose which of several customer numbers might be appropriate for the appointment.
• Zero time to choose from among the USPTO’s six power of attorney forms.
• Zero time to prepare the document.
• Zero time to prepare ancillary documents, such as a § 3.73 statement.
• Zero time to figure out the USPTO’s misinformative bounce notices.
• Zero time to call the Application Assistance Center and wait on hold (half an hour is typical), and dial in again if the “assistance” is incorrect.
• Zero time to refile the same document when the bounce was due to USPTO error.
• Zero time to prepare and refile a replacement when the error is the applicant’s but arose because the USPTO’s rules are unclear.

In March 2021, as explained in Part I, a group of about a dozen of us worked up a comment letter that explained three essential points:

• We provided 15 pages of recommendations for how USPTO randomness could be reduced, thereby reducing that $40 million in incremental burden.
• The USPTO’s estimate of three minutes for the status quo was not remotely plausible: when one accounts for all the rework time occasioned by USPTO error and unpredictability, the USPTO’s disregard of law, and the information gathering, procedural cat-herding, and resubmission, a better estimate is an hour of attorney time, 18 minutes of client time, and 24 minutes of paralegal/assistant time. Most of that time is diagnosis and rework when the USPTO bounces a power for unpredictable reasons.
• Our letter gave two sets of estimates: one (fairly high) that reflects the burden of the USPTO’s irrational status quo, and a second one (much lower) that could apply if the USPTO implemented all our recommendations.

Twelve of us worked on this letter; 91 signed it.

At this point in the process, our letter is a no-harm-no-foul set of public comments that points out innocent errors and unintended consequences that exist in every agency proposal, despite the best of intentions. Agencies make errors in their estimates of burden, and that’s OK. The whole point of public comment is to correct those estimates, so the agency knows where to focus its improvement efforts, and correct its good-faith-but-erroneous beliefs. All an agency has to do is two perfectly rational things:

• accept the public’s recommendations for improving processes to reduce costs or explain that implementing the recommendations will increase the agency’s costs by more than the cost reductions for the public.
• accept the estimates offered by the public or develop objectively-supported estimates of its own (with disclosed rationale and data sources).

Remarkably, the USPTO did neither. Instead, in April 2021, the USPTO doubled down in a second Federal register notice and submission to OIRA. The USPTO barely acknowledged the recommendations for reduction of paperwork burden (which are, after all, the central point of the Paperwork Reduction Act), and gave no serious answer. The USPTO made statements to OIRA, for OIRA’s ex parte consideration, whose objective incorrectness is outside the range of normal human error.

• The USPTO insisted that its estimate of three minutes per power of attorney was correct. Where the law requires the agency to provide “objective support” for its estimates, the USPTO provided nothing more than insistence on its own infallibility. The USPTO offered no substantial disagreement with the public comment letter’s estimates; the USPTO simply expressed its disagreement, with no identifiable rationale.
• The USPTO did not dispute that its own failure to implement basic principles of the Paperwork Reduction Act and its own haphazardness create $40 million per year in excess burden but offered not a word to explain how the USPTO would act to reduce that excess burden. The USPTO simply ignored the cost-benefit considerations at the center of the Paperwork Reduction Act.

On May 1, 2021, we filed a responsive letter at OIRA, explaining the omissions and unsupported statements in the USPTO’s submission.

Our explanation of USPTO malfeasance left OIRA with few options. OIRA did something very rare: on May 17, 2021, OIRA gave the USPTO a failing grade. OIRA gave the USPTO a six month “do over,” with the proviso that it must consider the already-extant public comments:

Approval granted for 6 months, USPTO should resubmit for the full 3-year renewal request. Public comments that were submitted will be carried over and continued to be considered during the renewal review.

September and November 2021: The USPTO’s Triennial Renewal of Paperwork Clearance for Powers of Attorney—With None of the “Do Over” Errors Corrected

In September 2021, the USPTO restarted the approval process with a third Federal Register notice. Between May and September, the USPTO did precisely nothing to reduce burden for powers of attorney. In its third Federal Register notice, the USPTO had proposed to implement exactly zero of the recommendations provided in the public comment letters. In the third Federal Register notice, the USPTO gives exactly zero consideration to the “public comment letters” that OIRA had directed it to “continue to consider.” But—the USPTO adopted our lower estimates of burden that would apply had the USPTO implemented our recommendations, while having done exactly zero to implement them. In other words, this Federal Register notice contained representations to be made to an ex parte tribunal that no reasonable person would accept as informed or candid.

So, we filed a third public comment letter pointing out the USPTO’s failure to follow the directives given by OIRA, and pointing out a number of false statements, and corrections the USPTO could adopt before submitting false statements to OIRA. As one example, we suggested that the USPTO should correct its assertion that time spent on powers of attorney is entirely paralegal time, with client and attorney time both zero.

The USPTO paid no attention. (This is fairly typical—in some cases, the USPTO files its submission at OIRA before the public comment period expires, and thereby ignores the last day’s public comment letters. If you suspect that the USPTO actively evades fair response to public comments, your suspicion has objective support.) Instead, the USPTO filed its fourth paper at OIRA with no further consideration of the public comment letters, and with a number of certifications that lack any objective basis, statements of fact that no reasonable person could have believed to be true. After getting caught the first time in the spring of 2021, the USPTO repeated these truthfulness-impaired statements a second time in the fall, in a submission to an ex parte tribunal, with the sign-off of lawyers.

And so we filed a fourth comment letter on December 29, 2021. We pointed out the following errors in the USPTO’s filing:

• The USPTO’s failed to “consider public comments,” after a direct order from the Executive Office of the President.
• The USPTO made an affirmative representation to an ex parte tribunal that the time for an attorney or agent to oversee a power of attorney is zero.
• The USPTO made an affirmative representation to an ex parte tribunal that the time for a client to sign a power of attorney is zero.
• The USPTO cherry-picked incompatible facts—the USPTO claimed the benefit of our lower estimate that could apply if the USPTO had adopted our recommendations for reduction of burden, but claimed those estimates for its unreformed and unlawful status quo
• The law requires an agency to make certain certifications: that agency conducts business “written using plain, coherent, and unambiguous terminology,” is “consistent and compatible, to the maximum extent practicable, with the existing reporting and recordkeeping practices,” and “reduces to the extent practicable … the burden” on persons who interact with the agency. The USPTO checked the boxes for these certifications—but if the USPTO investigated to ensure truthfulness in its certifications to an ex parte tribunal, the results of that investigation are not visible.

This time OIRA does not appear to be on board with the USPTO. As previously mentioned, most agency requests are granted within hours of the close of the 30-day comment period. In contrast, as of July 15, 2022, the USPTO’s request for approval remains pending with no action by OIRA after seven months.

For Director Vidal: Procedural Law Matters

This two-part article uses powers of attorney as a simple example to demonstrate a pervasive problem. Powers of attorney are just about the simplest and least controversial paperwork there is. And yet, even for this simplest and least-consequential paperwork, the USPTO is fighting the law and common experience. Why? If this is how the USPTO handles an inconsequential rule, what should the public believe is happening with rules that have real consequence?

For more substantial rules, the USPTO regularly claims exemptions, “artfully” paraphrases public comments in order to avoid plain and direct answers, and attempts to promulgate rules by guidance when regulation is required. A former OIRA official, who had reviewed hundreds of these submissions made by every other agency in the government, observed:

The USPTO is a longstanding, serial violator of established regulatory principles. This is the product of a bureaucratic culture that treats presidential direction as interference, is adamantly opposed to basing regulatory decision-making on informed analysis, and has serious difficulty adhering to the rule of law.

Rulemaking law prevents unintended consequences and unintended costs.  The public’s past suggestions are still there just waiting for adoption.

The USPTO provided written comment on Part I of this article, but declined to comment on Part II.