Groups Ask PTO Panel to Revisit Assumptions Behind New Fee Proposal

Access practice tools, as well as industry leading news, customizable alerts, dockets, and primary content, including a comprehensive collection of case law, dockets, and regulations. Leverage...

By Tony Dutra  

U.S. intellectual property bar associations put in writing Feb. 29 the concerns they expressed at a Feb. 15 hearing that the Patent and Trademark Office's proposed patent fee hikes are too steep.

The groups generally criticized the agency's underlying cost model, estimates of the elasticity of demand in the face of higher rates, and the complexity of proposed new procedures to implement provisions of the America Invents Act.

As of Feb. 29, the Patent Public Advisory Committee, which has oversight responsibility and conducted the two hearings on the PTO's proposal, received comments from 14 individuals and 5 associations. Only the Association of American Universities provided uncritical support of the proposal.

The agency expects to modify the fees before their official publication as a notice of proposed rulemaking in the Federal Register in June. The new rates are intended to go into effect in February 2013.

AIA Gives PTO Authority to Revise Fees

Until the patent reform bill passed last September, Congress alone was responsible for adjusting patent application and maintenance fees. Section 10 of the America Invents Act (Pub. L. 112-29), however, gave the PTO the authority to adjust fees “to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents.”

The process whereby the new fees will take effect involves buy-in from the PPAC, which called the hearings (20 PTD, 2/1/12). The agency delivered its proposal to PPAC and released it to the public only eight days before the hearing (26 Patent, Trademark & Copyright Law Daily, 2/9/12), leaving little time for in-depth review.

However, four witnesses were heard in the Virginia hearing and two in California:

• Herb Wamsley, executive director of the Intellectual Property Owners Association;

• Q. Todd Dickinson, executive director of the American Intellectual Property Law Association;

• Robert A. Armitage, chair of the American Bar Association's Section of Intellectual Property Law and general counsel at Eli Lilly & Co., Indianapolis;

• Peter G. Thurlow of Jones Day, New York, and co-chair of the patent law and practice committee of the New York Intellectual Property Law Association .

• Ron D. Katznelson, president of Bi-Level Technologies, Encinitas, Calif., on behalf of the Institute of Electrical and Electronics Engineers; and

• Ernie Beffel of Haynes Beffel & Wolfeld, Half Moon Bay, Calif.

One Supporting Review; Many Criticisms

The AAU led five other education-related organizations in comments praising the PTO.

“The increased fee collections proposed for FY 2013 and FY 2014 will provide the revenue necessary to improve USPTO operations in ways that will benefit the entire patent community,” the AAU said. “Moreover, the approach taken … of generally targeting fees to match service cost recovery but also raising or lowering selected fees in support of public policy goals is a thoughtful procedure for generating the increased revenue necessary to achieve the proposal's specified goals.”

The IPO, AIPLA, and the ABA/IPL followed up with written comments reflecting the same concerns expressed in their hearing testimony. They were joined in their criticisms by the Japan Intellectual Property Association.

• AIPLA's comments again contended that the PTO's apparent priority for reducing patent pendency was driving much of the agency's increase in aggregate costs—effectively, allowing for the hiring of more examiners—at the expense of other important goals.

The PTO's plan is to meet its pendency goals—10 months to first office action on average and 20 months total pendency—in 2015 and 2016, respectively.

“While [pendency] is certainly an important and laudatory goal, also long-sought by the user community, it must be balanced against the costs of entering and participating in the system,” AIPLA said. “It should not interfere with the primary goal of the patent reform effort: quality improvement, both in perception and in fact.”

• The ABA/IPL echoed the concern about quality, but appeared to agree with the agency's plan to increase the examiner corps to address that concern. Though the organization—expressing its own views and not those of the ABA House of Delegates or Board of Governors—hoped for the decrease in pendency that the PTO sought, it allowed that the goal could be pushed “over the next several years.”

• The IPO's comments expressed support for the timing of the PTO's pendency goals, but still contended that the fees appeared too high.

The IPO instead proposed a number of actions that the agency should take to minimize its cost structure. In particular, the IPO questioned the PTO's plan for an “operating reserve” of three months of expenses for operations, projected to grow rapidly from its current level of about $150 million and reach $700 million in a steady state.

“The creation of an operating reserve of this magnitude within this time frame would add significantly to the fee burden that patent applicants and owners would have to bear,” the IPO said.

RCE, Post-Grant Fees Called Out Specifically

The three associations were joined by the JIPA in criticizing the agency's proposed specific fees in two areas most emphatically:

• Requests for continued examination. The proposed rate structure included significant increases in some fees, such as an 83 percent leap in the fee for a request for continued examination. The agency maintained its subsidized fee—i.e., lower than actual cost—for a patent application. However, it set the RCE fee to match its estimated cost.

The IPO urged the agency to take other actions to reduce the need for RCEs rather than set a price that would discourage their use.

AIPLA was more specific in laying the blame for the need for RCEs on the PTO. “[W]e are troubled that the USPTO appears to perceive RCEs as more of an applicant-generated problem that does not need to be addressed or accounted for by the Office, or more particularly by incented Examiner behavior, which among other things may have been exacerbated by efforts to reduce allowances or the unintended consequence of the recent performance agreement,” AIPLA said, referring to recent changes in examiner performance evaluation.

• Post-grant review procedures. The proposed fees for the new post-grant review (PGR) and inter partes review (IPR) procedures created under Section 6 of the AIA were of particular concern.

The PTO's proposed pricing would match estimated costs, but the resulting proposed fees would be enormous compared to existing PTO fees. The PGR and business method challenges—essentially a PGR procedure—would begin at $35,800 for a patent with less than 20 claims and increase to $125,300 for one with 61-70 claims, with $35,800 more for every 10 claims after that. An IPR request on equivalent patent claim counts would cost $27,200, $95,200, and $27,200, respectively.

“The Section submits that fees of this magnitude will all but foreclose use of the proceedings for claim-heavy patents,” the ABA/IPL said. “The fee structure should not create a system that discriminates against third party challenges to patents with the largest number of claims.”

The associations generally argued that Congress asked for the new procedures as an inexpensive alternative to litigation, and that the PTO's proposal did not provide the appropriate incentive. “This could not have been the congressional intent of these provisions—discouraging challenges to patents with the most complex and problematic claim structures that may be among the patents most difficult to effectively challenge in a patent infringement lawsuit,” according to the ABA/IPL's comments.

For More Information

Comments to PPAC are listed at


Request Intellectual Property on Bloomberg Law