PTO's First Fee-Setting Proposal Asks for Big Hikes in Current Rates, High Post-Grant Fees

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By Tony Dutra  

The Patent and Trademark Office published its first proposal for resetting patent application and maintenance fees, an authority given to the agency for the first time under the America Invents Act (Pub. L. 112-29).

For the most part, the agency matched pricing for any one service reasonably closely to the service's unit cost. However, significant increases in some cost-matching services—an 83 percent leap in the fee for a request for continued examination, for example—highlighted the differences between the agency's current fees, controlled by Congress, and the related service costs.

Other fees would be deliberately maintained much lower than unit cost. For example, patent search fees would increase only moderately, even though the PTO's search costs are up to 2.5 times the proposed fees.

Finally, some fees would increase significantly under the proposal even though the cost is low. For example, total maintenance fees would increase by almost 50 percent even though the cost to process each of the three maintenance payments was calculated to be $1.

The PTO and the Patent Public Advisory Committee will hold hearings on the proposal Feb. 15 and 23, and the agency expects to modify the fees before their official publication as a notice of proposed rulemaking in the Federal Register in June.

“The fee schedule we have published represents only an initial proposal and is far from final,” PTO Director David J. Kappos said in a press release. “We invite feedback and recommendations from the public and look forward to a meaningful dialogue over the coming months as we work to set these fees at the optimal levels.”

Under the proposed time line, the new fee structure would take effect in February 2013.

AIA Gives PTO Authority

Under Section 10 of the AIA, the PTO has the authority to adjust fees “to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents.”

In the Feb. 8 proposal, the agency identified the need to increase its aggregate costs.

The “two overriding principles” of the fee realignment were mentioned repeatedly: a necessary increase in resources to address the backlog and pendency burdens on the agency in recent years, and a need for an operating reserve so as to establish “a more sustainable funding model … to avoid disruptions in agency operations caused by fluctuations in the economy.”

To meet those two goals, the proposal estimated aggregate collections to increase by 10 percent in fiscal year 2013, and another 5 percent the following year. The additional revenue would, at least in part, fund the hiring of 1,500 new patent examiners in FY 2013.

With those increases, the PTO suggested, the agency would meet its pendency and backlog goals in FY 2015. “And with the currently unfunded backlog finally paid off, we anticipate being able to reduce fees in FY 2016 and beyond,” according to the office.

The proposal included an “alternative schedule” that would maintain the current fees but with an “upward trajectory” beyond 2015 in both the backlog and pendency.

140-Plus Pages Supporting Fee Realignment

Use of the word “aggregate” in AIA Section 10 would further allow the agency to set an individual activity fee without necessarily tying it to the costs of performing that activity.

The office recently published proposed rates for AIA-based procedures that will take effect in September that, in fact, exactly reflected the estimated costs (20 PTD, 2/1/12). But the justification for those rates did not fall under AIA Section 10.

The Feb. 8 proposal includes a number of examples where the agency varied considerably from its estimated costs. Most notably, according to a discussion of the agency's funding model, “The publication, issue, and maintenance fees from granted patents subsidize the cost of patent examination, including those that are not allowed.”

“The goal for fee structure realignment is to refine and tailor fees to specific activities at specific points in time, giving applicants the ability to make more informed decisions about the dollars they spend prosecuting patent applications as more information becomes available to them,” the agency said in one of five documents published on its AIA website:

  •  a letter to the PPAC summarizing the reasoning behind the realignment;
  •  a 34-page executive summary;
  •  85 pages with more detail on the background and rationale for the pricing structure;
  •  a 9-page table of patent fee changes covering over 240 separate fees; and
  •  9 pages in table form showing the agency's aggregate revenue calculations.

The proposal and rationale for specific fee changes were provided in the large, detailed document, on pages 56-66.

Application Filing, Search, and Examination

The proposal would keep the fees for patent application filing, search, and examination well below the PTO's cost of providing those services. However, the three-activity total would rise from $1,250 for a large entity to $1,840, a 47 percent increase.

Fees for applications exceeding 100 pages and those with excess or multiple dependent claims would increase as well.

However, 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 in September, per AIA Section 11(h). The detailed document based the fee drop on the PTO's experience during the first four months of implementation.

RCEs, Appeals

The PTO chose 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.

With a clear intent to decrease RCE filings, the agency noted that the figure was higher than the proposed fee for filing a notice of appeal and appeal brief, $1,500. “The USPTO proposed this fee relationship to ensure the applicant has a viable option [to filing an RCE] to dispute a final rejection when the applicant believes the examiner has ruled in error,” the detailed document explained.

However, the appeal filer would incur an additional $2,500 fee if the examiner does not withdraw the rejection and the applicant wishes to appeal the examiner's answer to the appeal brief.

In many if not most instances then, the appeal filer would ultimately incur $4,000 in fees, up significantly from the current $1,240 charge. Nevertheless, the new fee would still be below the agency's estimated cost of just under $5,000, again showing a big difference with the rate Congress has set.

Publication, Issuance, Maintenance

The proposal would modify fees related to publication, issuance, and maintenance of patents.

A new fee of $3,000 would apply for filing an oath/declaration up to the notice of allowance, with another $1,700 required to correct inventorship.

A combination publication and issue fee would be set at $960, less than half the current $2,040 fee.

Maintenance fees would increase from a total of $8,710 for the three payments to $12,800. The last payment, due at 11.5 years, would zoom to $7,600, reflecting the likelihood that those paying at that late date have recognized the “high commercial value” of the patent “compared to the returns on investment,” according to the proposal.

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). “[I]n all cases under the proposed fee structure, and despite any increases in fees, those who qualify as micro entities under the new definition established by AIA will pay less than they currently pay as small entities,” according to the PPAC letter.

The discount would apply to all of the fees discussed above. Small entities not qualifying as micro entities would continue to receive the 50 percent discount on all of the above fees.

Post-Grant Procedures

Just two weeks earlier, the PTO 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).

The new proposal would increase those fees to $7,000 and $20,000, respectively.

In the Jan. 25 announcement of the supplemental examination pricing, the agency proposed to raise to $17,750 the fee for ex parte reexamination as an independent request, up from its current rate of $2,520. The Feb. 8 proposal would add only $10 to that rate.

Fees for the new AIA procedures known as post-grant review and inter partes review, as well as the PGR-like “transitional” programprogram for challenging a “covered business method patent,” were included in the current proposal.

The pricing matched estimated costs, and the resulting proposed fees are enormous, compared to existing PTO fees. The PGR and business method challenges 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.

Given the previously announced supplemental examination fees, these proposed post-grant opposition fees are actually not surprising. Administrative patent judges will adjudicate these disputes, rather than the Central Reexamination Unit examiners who will handle supplemental examinations and ex parte reexaminations.

Low Utilization of PGR/IPR Procedures?

Congress intended that the new procedures would represent a cost-effective alternative to litigation in district courts.

However, Matthew A. Smith of Foley & Lardner, Washington, D.C., told Bloomberg BNA that the PTO's proposed fees are too high considering that goal. “For small and middle-sized business, the ones who can least afford patent litigation on an invalid patent, the fees will lead to lower utilization of the proceeding,” he said.

Smith noted that a patent challenger's costs would increase to the extent the patent owner can assert more and more claims. “For cases that involve thousands of assertable claims,” he said, “total USPTO fees might approach the cost of medium-sized patent litigation. Somewhat strangely, the scaling fee structure incentivizes the addition of claims during ex parte application prosecution, or through reissue/reexamination proceedings.”

“I imagine that the patent community will have strong reactions to these dramatic fee increases and the significant fees for the new contested case proceedings,” according to Smith's colleague, Courtenay C. Brinckerhoff.

However, in a posting on her PharmaPatents blog, she added, “Although the USPTO has given us a lot of information to sift through, it is important that we take the time to review its proposals and consider whether there are alternative approaches that might better balance the interests of the USPTO and stakeholders.”

For More Information

Proposal documents at

Federal Register notice about the hearings at

Brinckerhoff is a member of this journal's advisory board.


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