USPTO Significantly Increases Fees Across the Board
As budget woes add up, USPTO is turning to squeezing inventors to cover its needs and, possibly, achieve certain policy goals
Yesterday, USPTO quietly dropped a bombshell proposal that would change the fee structure for patents dramatically. They proposed over 20 new fees and nearly 40 large increases alongside a 5% increase across the board. Some of these proposed changes would be massive. Under the new proposal, a number of fees would go from costing a few hundred dollars to thousands. This would fundamentally change the cost of receiving protection for intellectual property. To add on to it, the fee increases are particularly steep for design patents and terminal disclaimers.
There are several interesting statistics in USPTO’s report. Continuation applications have tripled since 2010 and now represent 34% of all serialized filings. As a whole, serialized filings rose 44%. USPTO complains that it is difficult for examiners to balance docketing between noncontinuing innovations and continuing applications, thus fretting that USPTO will therefore reduce American competitiveness by delaying the introduction of newer technologies into the stream of commerce as opposed to rehashing old technologies. At least, that is USPTO’s rationale.
It is worth noting that USPTO does change its fees from time to time. As Voice of IP’s Eli Mazour points out, the last time this happened was 2020, and 2025’s proposal is a huge departure. Then, there was only 1 new fee and only 8 major fee increases. He also points out that in Tafas v. Dudas, 541 F. Supp. 2d 805 (E.D. Va. 2008), the court struck down USPTO rules restricting RCEs and continuations as unduly limiting the ability to file a patent in contravention of the Patent Act, which did not authorize such restrictions. Yet, as applications continue to climb and recruiting examiners gets more difficult, USPTO seems to be once again looking towards ways to fight its ever-climbing pendency rates. Courts do not like efforts to make end-runs around them; perhaps there will be a further lawsuit citing Tafas that will strike down these proposed increases.
On top of that, the Biden Administration is clearly interested in cracking down on certain patent practices, from suing over the Orange Book to trying to expand march-in rights. Pharma has received significant criticism over the years for its efforts to extend drug patent lifetimes with techniques like patent thickets and greenfielding. One piece of evidence this is aimed, at least in part, at pharma? Patent term extension application fees increased nearly 6x to $6700, which would suddenly make the fifth-most expensive single fee. As a reminder, PTE is not the same as PTA—PTE is exclusively used for medical products.
The highest rates are reserved, after all, for reexaminations, terminal disclaimers, and other such efforts that require examiner time for old matters, as well as Pharma-specific needs like PTE and large sequence listings. The effect is to try to limit the interaction practitioners have with examiners and to reduce the effort in filing continuations, especially for older patent families. What USPTO is not allowed to do by dictat, it seems, it is going to try to do by incentives with fee structures instead.
To some extent, there was also an inevitability to all this.
In our Emergency Explainer describing what happens with USPTO during a government shutdown, we mentioned that budget-wise, at least, the patent office lives in a strange place: it is self-funding, yet it is still subject to the appropriations process. This has always left it open to the risk that Congress could dip into its funding to put it into a deficit. This also leaves it open to the risk that Congress saddles it with obligations it cannot meet. An important part of avoiding this problem is the so-called operating reserve. USPTO has a more than 3-month operating reserve for patent functions.
The Unleashing American Innovators Act of 2022 put USPTO in a financial bind. Congress required USPTO to create several new offices in far-flung places that are not major patent centers. While this is intended to be an investment in spurring innovation in those places, for now that just means that USPTO has to add on new expenses. Furthermore, this Act required USPTO to create higher fee discounts for small and micro entities. Combined with inflation and civilian pay raises for examiners in a competitive market for those with technical skills, and USPTO expects its operating reserve to go down dramatically starting in 2025—the exact year these proposed increases would hit. In fact, without changes, the OR is forecasted to go negative in 2028.
USPTO needs to maintain its economic viability to support American innovation and economic competitiveness. Could the US Federal Government provide USPTO more funding to do its job? Could it remove USPTO from the appropriations process? Could it read the room and eliminate some of the unnecessary spending it has imposed on the patent office? Perhaps. But it likely won’t, which means that the fee increases will continue until morale improves.
Prior Art
Prior Art is a new section we’re trying with Nonobvious. Here, we are going to highlight topics that we’ve covered in previous issues that have come up in the news in the last week. This is different than Weekly Novelties, which is just a news roundup.
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The Anniversary of Patents
Last year’s holiday issue was “Why Patents?” and it covered the history of the patent system, arguing that it helps diffuse innovation through the economy by comparing the Venetian and American systems, which formed the basis of all modern patent systems.
March 19 was the 550th anniversary of the Venetian Patent Act, which was the first known patent protection statute in history. It replaced the more discretionary process then used in Italy. Let’s celebrate an important milestone!
Patent Trends
Last year, we covered practical tips for practitioners in drafting AI patents (which is different than using AI to draft patents). In that issue, we observed that AI patents were growing quickly and were more likely to be granted than typical software patents in a post-Alice world.
This week, Axios published an analysis of USPTO data. It found that the Bay Area was producing patents at a rate nearly 5x higher than the rest of the country, even post-Alice. AI is a major factor in this story, of course. And it is only going to go up from here.
Weekly Novelties
An interview with USPTO’s Kathi Vidal in Techcrunch; interestingly, she worked on fuzzy logic and machine learning systems before going to law school in the 1990s (Techcrunch)
Chattanooga was one of the fastest-growing cities for patent grown from 2012-22 (Times Free Press)
Arbutus won a key victory in a claim construction hearing, causing Moderna’s shares to fall 4% (Bloomberg Law)
Patent case numbers at the UK High Court surged 30% in 2023 after an all-time low in 2022 (JUVE Patent)
Bayer’s patent on the substance for Xarelto, it’s main blockbuster drug, expired yesterday; however, its dosage patent will extend its exclusivity into 2026 (Law360)
China announced key new rules for patents, which may result in significant changes to patent strategies in the country (WSGR)
Apple was sued, again, this time over Siri (World IP Review)