Emergency Explainer: What happens with patents in a government shutdown
How to prepare yourself for any effects of a possible shutdown
At the end of September, the United States government passed a continuing resolution to fund the federal government. However, that continuing resolution only had funding for 45 days. Speaker Kevin McCarthy was ousted by the his party in response days later, a first for a House Speaker in United States history, adding to uncertainty for the government. Even the government’s AAA credit rating is at risk. A shutdown is still very much a live possibility.
Most importantly for our readers, every single government function relating to patents is federal and therefore subject to a possible shutdown. Many of our customers and readers have reached out to us asking how they might be affected. So we have put together an emergency explainer instead of our normally scheduled content to help you plan ahead and understand how the possible government shutdown affects the world of intellectual property.
USPTO reports on its finances as part of the appropriations process every year. Its most recent budget report is from March 2023. Looking at Appendix I, USPTO has increased its operating reserves to three months for its patent functions and four months for its trademark functions.1 During that time, USPTO will function normally, prosecuting patents, accepting applications, and more. Most systems are available online and you can check their availability here.
Once USPTO runs through its reserves, it will likely follow through the Department of Commerce’s Plan for Orderly Shutdown Due to Lapse of Congressional Appropriations. The last plan was issued in 2021. In it, the Department of Commerce does not say that USPTO will continue to operate in full, even though USPTO is technically self-funding through its application fees, because USPTO is still subject to appropriations.2 The Department of Commerce says that it will only except from furlough patent examiners who protect “mission critical” intellectual property (without defining what that is), review foreign activity, review newly filed patent applications, conduct National Secrecy Act reviews, assess Hatch Waxman requests, fulfill License and Review functions, and basically anything that involves a timely aspect of preserving priority dates or losing property rights.
PTAB will continue, but will retain a “minimal” staff level only insofar as needed to preserve property rights, like reviewing evidentiary motions for discovery proceedings or managing contested cases that require orders signed by a judge. So expect IPRs to continue, but with great delays and with many types of motions not able to be reviewed in a timely fashion.3 Administrative staff, like the Office of General Counsel or Chief Financial Officer, will be heavily furloughed. And in a shutdown, trademarks will be more heavily affected than patents: anyone not affecting “mission critical” trademarks or foreign activity, or IT systems, will be furloughed.
The other matter is the courts. Patent law matters arising under patent law are handled under the federal courts, so they would be at risk under a shutdown. The Federal Circuit has stated that it is “open for business” and that it is “fully staffed to provide all judicial business functions until further notice” but has not provided more specific guidance. Its CM/ECF case management/e-filing system will remain functional and its filing deadlines will all remain in effect. That said, the judiciary as a whole has funding for two weeks, beyond which it is unclear what would occur. During the last long government shutdown, the Federal Circuit really did manage to function uninterrupted for 35 days, so it may be able to operate without delay during this time. District courts will have to prioritize after those two weeks are up, though they will still be able to function because they do derive at least some funding from filing fees and the like, though they would likely prioritize criminal cases over civil ones.
The Bottom Line
So, to summarize, here is the timeline:
USPTO has reserves to function normally for three months for patents and four for trademarks, after which it will function at a reduced capacity for functions like IPR and prosecution;
The Federal Circuit does not have a well-defined plan, but in the past has operated as normally and plans to do so for this shutdown as well;
District courts will be available as normal for two weeks, after which it is unclear but it is reasonable to expect that civil matters will be deprioritized.
For practical purposes, here is a reasonable response based on the plan provided by the government:
For the first three months of a shutdown, everything will proceed as normal;
Once the furlough starts, you should still do anything that could affect a property right. File in a timely fashion to preserve your priority dates, do everything that affects foreign filings (USPTO has been clear that everything that affects foreign rights will remain staffed), meet Hatch-Waxman deadlines, etc. Just remember this would be an unprecedented situation so expect chaos;
For the Federal Circuit, presume all filing deadlines apply until further notice;
For IPRs, PTAB will continue to function but at a reduced capacity, so keep your eyes open for relevant filings, just don’t expect anything to move with speed after three months and the furloughs begin and for many motions and decisions to be delayed, if not on hold until a shutdown ends.
Please pay close attention because once a furlough begins the situation would be unprecedented—remember that previous shutdowns have not lasted long enough to burn through any patent function’s operating reserves. The above is merely guidance based on the information provided by the relevant government institutions and historical patterns; in a prolonged government shutdown things may go haywire and it is up to you to use your best judgment in serving your company and your clients.
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Starting in 2025, USPTO expects its reserves to decrease significantly. This is because of the expected investments required of it under the Unleashing American Innovators Act of 2022, which requires USPTO to create several new offices, as well as creating higher fee discounts for small and micro entities. USPTO also expects to be highly impacted by inflation on civilian pay raises, for example examiners.
A provision of the American Invents Act of 2011 originally removed USPTO from the appropriations process entirely, but today the excess fees are sent to a transparent fund, primarily for the purposes of funding the operating reserve. However, despite Congressional promises, fee diversion does still occur during appropriations (though at a small scale). Subjecting USPTO to appropriations not only creates this bizarre furlough situation but also opens up further temptation for Congress to keep digging deeper into the cookie jar.
Unfortunately for those in the copyright world, the Copyright Office will largely shut down.