PTO's AIA-Based Proposal for New Patent Fee Structure More Attractive Than First Request

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The Patent and Trademark Office's newest proposal for patent fees, likely to be effective in February or March, addresses a number of concerns raised by stakeholders but still leaves open the question of whether new post-grant administrative trial proceedings will be attractive to patent challengers.

The Leahy-Smith America Invents Act, Pub. L. 112-29, gave the PTO the authority to reset patent application and maintenance fees. The agency issued an initial proposal Feb. 7 (26 PTD, 2/9/12), but significant constituencies among the patent community expressed disappointment (84 PTD, 5/2/12) (43 PTD, 3/6/12).

The new proposed fees, to be published in a Sept. 6 notice of proposed rulemaking, are generally lower compared to the original proposal, and the office created additional opportunities to split fees between the cost of initiating a procedure and ultimately going through with it.

“The proposed fees reflect the robust public input we have already received at multiple public events and through written comments,” PTO Director David J. Kappos said in a Sept. 4 press release.

Costs for AIA-authorized challenges to issued patents remain high in circumstances when the PTO agrees to institute the challenge, though, and it is still unclear whether prospective users of the administrative trial options will favor PTO proceedings over district court litigation.

Stakeholders have 60 days after Federal Register posting--which would fall on a Sunday, Nov. 25--to comment on the proposed fees. The PTO would then revise the fees as needed and the new fees would go into effect “at least 45 days” after that.

The office previously said that it was targeting implementation of the new fee structure sometime in February 2013.

Two 'Overriding Principles' Drive Structure.

Section 10 of the America Invents Act authorized the PTO to adjust fees “to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents.”

It also allowed the PTO to assess a 15 percent temporary fee surcharge, and the agency accordingly raised fees on 123 line items Sept. 26, 2011 (185 PTD, 9/23/11). The surcharge was intended to provide adequate funding to the office while it was in the process of creating the new fee structure.

After the PTO first published a new fee structure proposal Feb. 7 (26 PTD, 2/9/12), stakeholders reacted negatively, but mostly because the PTO suggested surprisingly high prices on post-issuance opposition procedures, also authorized under the AIA (86 PTD, 5/4/12)(43 PTD, 3/6/12).

With the newly proposed fee structure, the PTO continues to defend its aggregate cost-covering calculations in light of “two overriding principles”: a necessary increase in resources to address the backlog and pendency burdens on the agency in recent years, and a need for a “three-month patent operating reserve” so as to establish “a more sustainable funding model than in the past to avoid disruptions caused by fluctuations in the economy.”

The agency backed off slightly on the latter. While the original proposal sought to reach the three-month reserve level in 2015, the current proposal postpones the buildup until 2017.

As to performance goals, however, the NPRM indicates that the PTO will retain its aggressive campaign:

Performance Measure   March 2012   Targeted (Year)  
First action pendency 22.6 months 10 months (2015)
Total pendency 34.1 months 20 months (2016)
Application backlog 644,775 350,000 (2015)

To reach those goals, the PTO claims it must “hire additional patent examiners, improve the patent business IT capability and infrastructure, and implement other programs to optimize the timeliness of patent examination.” Those costs add to the aggregate and, according to the NPRM, the agency must therefore “collect more aggregate revenue than it estimates that it will collect at existing fee rates.”

Application Filing, Search, and Examination.

The NPRM first identifies the projected aggregate costs of the agency over the next five years. Patent operations in fiscal year 2013 are anticipated to cost $2.549 billion, rising to $2.945 billion in fiscal year 2017. But to reach the operating reserve balance in FY 2017, aggregate cost recovery would have to be $2.604 billion in FY 2013 and average 4 percent above operation costs per year.

Application and granted patent growth are then projected as well to provide a basis for aggregate revenue equal to aggregate cost, and the fees are set to reach that revenue in light of the calculated demand.

However, use of the word “aggregate” in AIA Section 10 further allows the agency to set an individual activity fee without necessarily tying it to the costs of performing that specific activity. The notice acknowledged this flexibility as a way “to set individual fees to further key policy considerations, while taking into account the cost of the associated service or activity.”

For example, the proposal would raise the total fees for patent application filing, search, and examination from $1,250 for a large entity to $1,600, a 28 percent increase, but the figure still represents about 42 percent of the PTO's cost of providing those services. The below-cost figure addresses the agency's policy consideration for “fostering innovation.”

Fees for applications exceeding 100 pages and those with excess or multiple dependent claims would increase compared to current rates as well, though less so than in the original proposal.

The agency proposed to decrease, from $4,800 to $4,000, the fee for prioritized examination--a final disposition of patent grant or rejection within 12 months--that went into effect right after the AIA was enacted, under the AIA's Section 11(h). The PTO had announced its intention to drop that fee previously, based on the its actual cost experience during the early months of implementation.

RCEs, Appeals.

The PTO originally proposed not to give the same below-cost treatment to RCEs, though, and instead proposed that the fee meet cost, rising from $930 to $1,700.

Stakeholders were generally displeased with that decision, arguing that the agency's actions often leave the patent applicant with no choice but to file an RCE. In the Sept. 6 proposal, the agency now would allow a first RCE for $1,200, while keeping the $1,700 fee for the second and subsequent RCEs.

“Those applications that cannot be completed with the first RCE do not facilitate an effective administration of the patent system with the prompt conclusion of patent prosecution,” the PTO said in the NPRM, pointing to another of its policy considerations in setting individual fees.

The PTO maintained its clear desire to decrease RCE filings by pricing the alternative, an appeal of an application rejection, competitively with the RCE fee. The combined notice of appeal and appeal brief cost would be lowered from its current level of $1,240 to $1,000.

“The USPTO proposes this fee relationship to ensure that all applicants have viable options to dispute a final rejection when they believe the examiner has erred,” the NPRM explained.

However, the appeal filer would incur an additional $2,000 fee if the examiner does not withdraw the rejection and the applicant wishes to appeal the examiner's answer to the appeal brief. Though that figure is lower than the Feb. 7 proposal, it still means that, in many if not most instances, the appeal filer would ultimately incur $3,000 in fees, up significantly from the current $1,240 charge. Nevertheless, the new fee would still be below the agency's estimated cost--as noted in the original proposal--of just under $5,000.

Publication, Issuance, Maintenance.

To recover aggregate costs despite the accommodations for the below-cost activities, the PTO's proposal would set certain fees--publication, issuance, and maintenance of patents--above the individual activity cost. The PTO characterizes the revenues from these activities as a “back-end” subsidy of “front-end” application examination fees.

Nevertheless, the publication and issuance fees represent a decrease from current costs. The publication fee was eliminated--the PTO said it “benefits the IP system more than individual applicants”--and the $960 issuance fee proposed represents almost a 50 percent reduction from the current fee. The PTO contended that this reduction more than offsets the increase in filing, search, and examination fees, resulting in a decrease in end-to-end patent procurement fees. That cost advantage would shift, however, for patent applicants who file two or more RCEs before patent issuance.

An earlier proposal to add a fee for filing an oath or declaration was scratched. A fee to correct inventorship was retained, but is now proposed to be $1,000 instead of the originally proposed $1,700.

The fee to execute or change a patent assignment was kept at $40 if submitted on paper, but eliminated altogether if performed electronically. The change will “benefit the overall IP system by reducing the financial barrier for recording patent ownership information and facilitating a more complete record of assigned applications and grants,” according to the NPRM.

Total fees for the three maintenance stages--at 3.5, 7.5, and 11.5 years--would be $11,600, an increase of 45 percent above the current total payment. The proposal justified the maintenance fees by contending that, at each stage, “patent owners have more information about the commercial value of the patented invention and can more readily decide whether the benefit of a patent outweighs the cost of the fee.”

Supplemental, Ex Parte Reexamination.

The PTO originally announced pricing for supplemental examination--an AIA-created form of reexamination initiated by the patent owner to limit exposure to inequitable conduct charges in future litigation--at $5,180 to process the supplemental examination only, and an additional $16,120 for the subsequent ex parte reexamination if a substantial new question of patentability is raised (17 PTD, 1/27/12).

Those surprisingly high figures were raised even further in the February proposal and that proposal, too, goes into effect Sept. 16 under separate final rule (157 PTD, 8/15/12).

However, the PTO backed off somewhat in the Sept. 6 NPRM, with respect to the fees that will take effect in February. The new proposal would set those fees at $4,400 and $13,600, respectively.

Ex parte reexamination as an independent request would cost $15,000 under the new proposal, down 15 percent from the original proposal but still almost six times what it cost in 2011.

New Post-Grant Challenge Procedures.

The proposed fees published in February for the new AIA procedures known as post-grant review and inter partes review, as well as the PGR-like “transitional” program program for challenging a “covered business method patent” or CBM were heavily criticized (26 PTD, 2/9/12); (84 PTD, 5/2/12).

The IPR and CBM proceedings become available Sept. 16, and in an Aug. 14 final rule on the administrative trials, the PTO largely maintained the fees from its original proposal to be effective as of that date(158 PTD, 8/16/12).

The Sept. 6 notice would modify those fees after the February or March implementation date of the new fee structure, however.

The PTO dropped the fees somewhat in the notice, and it further made PGR and IPR potentially more attractive by splitting each cost into two parts, one to cover the request--$12,000 and 9,000, respectively--and a follow-on cost only if the challenge is approved by the PTO--$18,000 for PGR and $14,000 for IPR. The challenger would have to make the entire payment upon the challenge request, but the second charge would be returned if the PTO does not institute the challenge.

The original proposal also included step-wise increased costs for the challenger for claims challenged above 20. The new proposal would require a $600 and $800 fee, respectively, per claim above 20, and again those fees would be split between the two time periods for incurring charges.

“These options for staging and splitting fees into multiple parts will benefit small and micro entities, who will be able to spread out their payments of fees and in some instances, potentially receive refunds of fees where only a portion of a particular service is ultimately provided,” according to the notice.

The PTO continued to claim that its estimated costs for providing these trial services would be higher than these fees. The agency dropped the fees only to reflect the policy goal of “facilitating greater access to the post grant review proceedings because certainty of patent rights benefits the overall IP system.”

Micro Entity Category.

The proposal would also implement pricing, at a 75 percent discount, for the new “micro entity” applicant category, defined in AIA Section 10(g). Small entities not qualifying as micro entities would continue to receive the 50 percent discount on most of the above fees.

The discount would not apply, however, to the post-grant trial procedures--inter partes review, post grant review, covered business method patent review, and derivation proceedings--enabled by the AIA.

Eight AIA Roadshows in September.

The PTO will conduct a one-day AIA “roadshow” in each of eight cities in September. The agenda covers multiple aspects of AIA implementation, including one 40-minute presentation on the fees. The roadshow schedule is:

• Sept. 10 in Minneapolis;

• Sept. 12 at PTO headquarters in Alexandria, Va.;

• Sept. 14 in Los Angeles;

• Sept. 17 in Denver;

• Sept. 20 in Detroit;

• Sept. 24 in Atlanta;

• Sept. 26 in Houston; and

• Sept. 28 in New York City


The first three roadshows will also be web cast.

By Tony Dutra  

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