February 2010

USPTO Fees 2011: Justifying the Fee Increase

Patent,

It is clear that the USPTO needs funding to address its backlog of yet-to-be-examined patent applications and to revitalize its information technology infrastructure. An increase in funding is largely in the interest of the patent community. The primary downside is that most of the proposed increase will be paid by the patent community as well. Three forms of increased funding are currently on the table:

  1. Increase substantially all fees by 15%.
  2. Allow the USPTO to set its own fees.
  3. Allow the USPTO to retain and spend its collected fees even if they are over-budget

Fifteen Percent of What: Although a 15% increase in fees is significant. The current prosecution fees for a large entity total to $2,900. This includes Filing, Search, Examination, Publication, and Issue Fees. Many applicants pay additional fees for late responses, appeals, petitions and RCEs. The median fees paid for a large entity is probably closer to $4,000 and a 15% increase would be $600. For small-entities, the fees are reduced by 50%. Of course, the majority of the cost of patent prosecution is not found in USPTO fees, but rather in the cost of hiring patent attorneys & agents as well as the time spent by inventors and managers. For a large entity, the total cost of preparing an application and prosecuting the application through to issuance easily runs over $25,000. In that scenario, the $600 increase may be better seen as a 2.4% increase.

Trusting the USPTO: Some applicants may be worried that USPTO would rapidly increase fees if it were given the right to set its own fees. Perhaps the office would buy-into Tim Wilson’s $50,000 application fee proposal. I do not believe that fear is grounded in reality. Here, I point to three practical limits on the PTO’s power. First, as proposed, the fee increase would be limited to increases that allow the office to recoup its costs. Second, if the PTO raises a large excess amount in fees the extra revenue will almost certainly be taken by Congress. Knowing that, the PTO is unlikely to greatly increase fees. Finally, the current director David Kappos appears sympathetic to patent applicants and is unlikely to take actions that are truly adverse to that community as a whole.

Why not Cuts: The difficult case for the PTO is to explain why two-billion-dollars is not enough? (See tables below). I.e., should the needed money come from redirecting unhelpful spending rather than increasing revenue?

Redirection – An Office Full of Examiners: A particular thought that comes-to-mind is the potential that everyone on the patent-side who is qualified to be examining patent applications should be examining patent applications. This means that supervisors, technology center directors, quality-assurance specialists, legal advisors, international liaisons, patent attorneys, judges, petitions officers, and commissioners could all have examination dockets. Even if small, these folks are – for the most part – have a history of being productive examiners and would contribute to reducing the backlog. In addition, a refocus and reconnection on the core role of examination may also help the office both improve quality and its spirit.

The following two charts are taken from the USPTO FY2009 Annual Report:

Note: A note on my $25,000 prosecution budget above. That is my own anecdotal estimate. This includes (1) the time spent by in-house inventors and managers in writing-up the invention and selecting which inventions to patent along with patenting bonuses paid to the inventors; (2) attorney time in drafting and prosecuting the patent application; and (3) fees paid to the USPTO. Is this accurate?

USPTO FY2011 Budget: Part II

Patent
  • Note: This is a discussion of President Obama’s proposed budget for FY2011. It is unlikely that the proposal will be pass through Congress unchanged.
  • Read Part I: [Link]
  • USPTO Press Release: [LINK]

    Goals:

    • A significant reduction in patent pendency periods and the existing patent inventory backlog; improvement in patent quality; enhanced intellectual property (IP) protection and enforcement; global IP policy leadership; and investment in information technology (IT) infrastructure and tools to achieve a 21st Century system that permits end-to-end electronic processing in patents and trademark IT systems.
    • Achieve 3 percent annual efficiency gains in patents processing through the re-engineering of management and workflow processes.
    • Initiate a targeted hiring surge and hire 1,000 patent examiners annually during FY 2011 and FY 2012. This effort will target former patent examiners and IP professionals who will require minimal training and can be productive virtually from the start of their employment.
    • Further details on the USPTO’s five-year strategic plan will be released in the second quarter of 2010 as they become available.

      Fees:

    • The administration is proposing an interim fee increase on certain patent fees which is estimated to generate $224 million.
    • The administration continues to support granting the USPTO fee-setting authority as a significant part of a sustainable funding model that would allow the director to propose and set fees in a manner that better reflects the actual cost of USPTO services.
  • Just-an-Examiner: [LINK]
    • “[I]t will be interesting to see how the Office goes about finding 1,000 former examiners and IP professionals to hire. Like the Office’s targets for pendency and backlog reduction, it seems pretty ambitious. Still, there’s certainly nothing wrong with aiming high.”
  • Salary Rate for Examiners (Plus Overtime and Federal Government Benefits): Depending upon qualifications and prior experience, new patent examiners are typically hired at in the range of grades 7-11. [updated with 2010 salary information below]

Obama FY2011 Proposed Budget for the USPTO (Including at Least a 15% Increase in Fees)

Patent,
  • USPTO estimates $2.322 billion in revenue for FY2011. FY2009 USPTO revenue was $1.901 billion and FY2010 revenue is projected at $2.003 billion. 
  • The jump in expected revenue is largely based on a proposed 15% increase in user fees. According to the budget statements, the increase is “intended to be an interim measure.”  However, I would not expect fees to drop again any time soon.
  • Justifying this increase, the administration indicates that it has set a “high priority goal” of reducing “patent pendency for first action and for final actions from the end of 2009 levels of 25.8 and 34.6 months respectively by the end of 2011, as well as the patent backlog.”
  • USPTO would also be given full access to its fee collections up-to $100 million over-budget.
  • USPTO would also be given authority for FY2011 to increase fees beyond the 15% at its discretion.
  • A Wall Street Journal article cites Commerce Department officials as indicating that the increased funding will allow the PTO to “reinstate overtime and hire 1,000 new examiners.”  Director Kappos has also indicated that updates of the USPTO IT system is necessary. [Link]
  • The budget also estimates $36 million for the Court of Appeals for the Federal Circuit.
  • Read the Budget here.

 

Patently-O Bits and Bytes No. 317

Patent
  • Learning International IP: A relatively new patent-attorney asks the following question: “I find myself very unfamiliar with foreign patent practice. Could you recommend a book/other resource that discusses the intricacies of patent prosecution in foreign countries from the point-of-view of a US patent practitioner?” Suggestions?
  • Learning by Watching: Professor Beckerman-Rodau is spearheading an IP Podcast series available for free from Suffolk Law. [LINK]
  • Learning IP Theory: Three fairly new books recently arrived in the mail. All would be considered left leaning.

Patently-O Bits and Bytes No. 317

Patent
  • Learning International IP: A relatively new patent-attorney asks the following question: “I find myself very unfamiliar with foreign patent practice. Could you recommend a book/other resource that discusses the intricacies of patent prosecution in foreign countries from the point-of-view of a US patent practitioner?” Suggestions?
  • Learning by Watching: Professor Beckerman-Rodau is spearheading an IP Podcast series available for free from Suffolk Law. [LINK]
  • Learning IP Theory: Three fairly new books recently arrived in the mail. All would be considered left leaning.

Invalidity of the Extension of a Patent Term

Patent

Thousands of requests will be filed in the next couple of weeks asking the USPTO to recalculate the patent term adjustment (PTA) owed to recently issued US patents. [LINK] In a prior post, I suggested that the PTO’s approach of offering a second-window for recalculation could be seen as improperly extending the agency’s authority. [LINK] The PTO’s improper extension of authority to adjust PTA is unlikely to leave a patent invalid. However, it is possible that the extended term could be rendered invalid under 35 U.S.C. § 282.

Section 282 describes defense available to an accused patent infringer. The final portion of the statute creates a defense of “invalidity of the extension of a patent term” based on improper calculation under either Section 154(b) (PTA) or Section 156 (PTE) of the Patent Act.

[The following shall be a defense:] Invalidity of the extension of a patent term or any portion thereof . . . because of the material failure (1) by the applicant for the extension, or (2) by the Director, to comply with the requirements of such section.

The statute goes on to explain that failure to comply with the statutory requirements create a defense against actions involving infringement “during the period of the extension.”

Under this statute, the term extension can be left invalid based on the USPTO’s failure to follow the law outlined in 35 U.S.C. § 154(b). The 1999 statute has not been interpreted yet, but appears to require (i) material failure to comply with the requirements of Section 154(b) and (ii) that the accused infringement occur “during the period of the extension,” and that the result will be that the improperly calculated portion of the extension will be invalidated.

* * * * *

Extension of USPTO Authority?: Section 154(b) of the Patent Act details the steps for calculating a patent term adjustment and for challenging the USPTO’s determination. Section 154(b)(3)(B)(ii) requires that the PTO “provide the applicant one opportunity to request reconsideration.” (Emphasis added). A still dissatisfied patentee then has a right to file a civil action in the US District Court located in Washington DC within 180 days of the grant of the patent. Patent applicants with patents that issued in the past 6-months were all already given one opportunity to request reconsideration of the USPTO’s PTA decision. In its interim recalculation offer, the USPTO is providing applicants with a second opportunity to request reconsideration. The administrative law question is whether the USPTO has authority or offer the second opportunity. Regarding invalidation of the extension under Section 282, an accused infringer hoping to challenge the term extension would also need to prove that the PTO action is “material.”

* * * * *

The image above comes from James Scurlock’s Patent No. 7,397,731.

Filing a Patent on Behalf of a Non-Cooperating Inventor

Patent

PatentLawPic907Yale Preston v. Marathon Oil (D.Wyoming)

The trial date is approaching in the case of Preston v. Marathon Oil. Preston was a former employee of Marathon and the two are disputing ownership of patent rights.  Preston and Marathon each obtained a patent naming Preston as the inventor.  Marathon’s file-history is interesting because it includes a petition to accept an unsigned oath based on the inventor’s refusal to sign.

37 CFR 1.47(b) reads as follows:

Whenever all of the inventors refuse to execute an application for patent, or cannot be found or reached after diligent effort, a person to whom an inventor has assigned or agreed in writing to assign the invention, or who otherwise shows sufficient proprietary interest in the matter justifying such action, may make application for patent on behalf of and as agent for all the inventors. The oath or declaration in such an application must be accompanied by a petition including proof of the pertinent facts, a showing that such action is necessary to preserve the rights of the parties or to prevent irreparable damage, the fee set forth in § 1.17(g), and the last known address of all of the inventors. An inventor may subsequently join in the application by filing an oath or declaration complying with § 1.63.

The petition filed by Marathon includes: (1) a statement from Marathon’s attorneys that contacted Preston by Mail and by Telephone and that he indicated his refusal to sign; (2) a copy of the employment agreement that includes a promise to disclose and an assignment of IP rights. The petition was granted. [Petition.pdf (2643 KB)]

Two interesting tidbits: (1) Preston’s patent issued first, and the examiner of the Marathon Oil application issued a double-patenting rejection. Interestingly, it does not appear (from the file history) that Marathon ever filed a terminal disclaimer or otherwise discussed Preston’s patent. [The Preston patent was not disclosed by the Marathon, rather it was located by the Examiner in his search.]  (2) the employment agreement is important for the case. As he signed his agreement, Preston indicated that he held prior rights in a “CH4 Resonating Manifold” that would not belong to Marathon.  The agreement expressly states that Marathon agrees that those rights are “NOT the property of MARATHON.”  The question up for grabs is whether the invention at issue in this case is the same as the CH4 manifold disclosed in the agreement.