Setting and Adjusting Patent Fees During Fiscal Year 2020

DEPARTMENT OF COMMERCE

Patent and Trademark Office

37 CFR Parts 1, 11, 41, and 42

[Docket No. PTO-P-2018-0031]

RIN 0651-AD31

Setting and Adjusting Patent Fees During Fiscal Year 2020

AGENCY:

United States Patent and Trademark Office, Department of Commerce.

ACTION:

Final rule.

SUMMARY:

The United States Patent and Trademark Office (Office or USPTO) sets or adjusts patent fees as authorized by the Leahy-Smith America Invents Act (Act or AIA), as amended by the Study of Underrepresented Classes Chasing Engineering and Science Success Act of 2018 (SUCCESS Act). The USPTO is a business-like operation where the demand for patent products and services and the cost of operations are affected by external factors, such as the economy, legislation, court decisions, and increases in the costs of supplies and contract services, as well as internal factors, such as changes in patent examination processes and procedures. The fee adjustments are needed to provide the Office with a sufficient amount of aggregate revenue to recover the aggregate cost of patent operations in future years (based on assumptions and estimates found in the FY 2021 Congressional Justification (FY 2021 Budget)) and to allow the Office to continue progress toward achieving its strategic goals.

DATES:

This rule is effective on October 2, 2020, except for the amendment to § 1.16(u) in amendatory instruction 2i, which is effective on January 1, 2022. The changes to § 1.18(b)(1) shall apply to those international design applications under the Hague Agreement having a date of international registration on or after October 2, 2020.

FOR FURTHER INFORMATION CONTACT:

Brendan Hourigan, Director of the Office of Planning and Budget, by telephone at (571) 272-8966; or Dianne Buie, Director, Forecasting and Analysis Division, by telephone at (571) 272-6301.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose of This Action

The Office issues this Final Rule under section 10 of the AIA (section 10), Public Law 112-29, 125 Stat. 284, as amended by Public Law 115-273, 132 Stat. 4158 (the SUCCESS Act), which authorizes the director of the USPTO to set or adjust by rule any patent fee established, authorized, or charged under title 35 of the United States Code (U.S.C.) for any services performed, or materials furnished, by the Office. Section 10 prescribes that fees may be set or adjusted only to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents, including administrative costs of the Office with respect to such patent fees. Section 10 authority includes flexibility to set individual fees in a way that furthers key policy factors, while taking into account the cost of the respective services. Section 10 also establishes certain procedural requirements for setting or adjusting fee regulations, such as public hearings and input from the Patent Public Advisory Committee (PPAC) and congressional oversight. The revenue and workload assumptions in this Final Rule are based on the assumptions and estimates found in the FY 2021 Budget. However, projections of aggregate revenues and costs are based on point-in-time estimates, and are subject to change. Notably, since the FY 2021 Budget was published, fee collections have been lower than anticipated, due, in part, to fewer application filings resulting from the COVID-19 outbreak.

Although economic circumstances have changed substantially since the FY 2021 Budget was developed, the USPTO determined it remains the most appropriate starting point for developing this Final Rule. First, the USPTO's projections of aggregate revenues and costs are necessarily estimates that can change substantially from one point in time to the next due to numerous factors outside the USPTO's control, including cyclical economic changes or exogenous shocks, such as COVID-19, changes in the laws governing USPTO revenues or expenditures, and other events. Nevertheless, the USPTO has historically used its most recent budget assumptions when setting fees, because they are the most recent complete evaluation of the USPTO's budget expectations and requirements, and provide assumptions for stakeholders to use when formulating their comments. Those projections were developed in late calendar year 2019, prior to the COVID-19 outbreak, and assumed continuing stable economic growth, not the sharp economic downturn and rebound of 2020.

The FY 2021 Budget was developed based on the assumptions that real GDP would grow around 2.2 percent in FY 2020 and 1.9 percent in FY 2021. The USPTO appreciates that revenue estimates based on those assumptions may be higher than what will ultimately be collected.

The USPTO has considered the state of the U.S. economy, the operational needs of the agency, and the comments and advice received from the public during the 60-day comment period. The USPTO has made adjustments to the timing of the Final Rule based on all of these considerations, specifically delay publishing the Final Rule from April with a July effective date to August with an October effective date. This approach is consistent with the USPTO's many other efforts to provide various types of relief to stakeholders, including deadline extensions and fee postponements. Ultimately, the goal of the USPTO is to ensure not only that businesses and entrepreneurs can weather the economic downturn, but that they can hit the ground running as it passes.

B. Summary of Provisions Impacted by This Action

Consistent with federal fee setting standards, the Office conducted a biennial review of fees, costs, and revenues that began in 2017 and concluded that fee adjustments are necessary to provide the resources needed to improve patent operations, including implementing the USPTO 2018-2022 Strategic Plan (Strategic Plan). As a result, the 296 fees set or adjusted in this rule align directly with the Office's strategic goals and four key fee setting policy factors, discussed in detail in Part III: Rulemaking Goals and Strategies.

The assumptions and estimates found in the FY 2021 Budget show that the fee schedule in this rule will recover the aggregate estimated costs of patent operations, including achieving the Office's strategic goals as detailed in the Strategic Plan, available at:

www.uspto.gov/strategicplan.

The Strategic Plan defines the USPTO's mission, vision, and long-term goals and presents the actions the Office will take to realize those goals. This fee setting rule supports the patent-related strategic goal to optimize patent quality and timeliness, which includes optimizing patent application pendency and examination time frames, issuing highly reliable patents, fostering innovation through business effectiveness, and enhancing the operations of the Patent Trial and Appeal Board (PTAB or Board). To the extent that the aggregate revenue generated by this rule will be used to pay for all patent-related costs

of the USPTO, this rule also supports the USPTO's goal to provide domestic and global leadership to improve intellectual property (IP) policy protection and enforcement, as well as the mission support goal to deliver organizational excellence, which includes optimizing the speed, quality, and cost-effectiveness of IT delivery to achieve business value and ensuring financial sustainability to facilitate effective USPTO operations. Before issuing this Final Rule, the Office considered and analyzed all comments, advice, and recommendations received from the public during the 60-day comment period. The Office's response to comments received is available in Part VI: Discussion of Comments.

During a formal process closely tied to the annual budget process, the USPTO reviewed and analyzed the overall balance between the Office's estimated revenue and costs over the next five years (based on the assumptions and estimates found in the FY 2021 Budget) and also reviewed individual fee changes and new fee proposals to assess their alignment with the Office's strategic goals and fee structure philosophy, both of which aim to provide sufficient financial resources to facilitate the effective administration of patent operations. Specifically, the Office assessed how well each proposal aligned with four key fee setting policy factors: Promote innovation strategies, align fees with the full cost of products and services, set fees to facilitate the effective administration of the patent system, and offer processing options for applicants.

This Final Rule sets or adjusts 296 patent fees for large, small, and micro entities (any reference herein to “large entity” includes all entities other than those that have established entitlement to either a small or micro entity fee discount). The fee rates for small and micro entities are tiered, with small entities receiving a 50 percent discount on certain patent fees and micro entities receiving a 75 percent discount. Small entity fee eligibility is based on the size or certain non-profit status of the applicant's business and that of any other party holding rights to the invention. Micro entity fee eligibility is described in section 10(g) of the AIA. The Office is also introducing five new fees and discontinuing four fees.

Overall, the routine fees to obtain a patent (

i.e.,

filing, search, examination, and issue fees) will increase under this Final Rule, relative to the current fee schedule, in order to ensure financial sustainability and accommodate increases needed to improve the predictability and reliability of patent IP protection. Applicants who meet the definition for small or micro entity discounts will continue to pay a reduced fee for the fees eligible for a discount under section 10(b) of the AIA. Additional information describing the fee adjustments is included in Part V: Individual Fee Rationale in this rulemaking and in the “Table of Patent Fees: Current, Final Patent Fee Schedule, and Unit Cost” (hereinafter “Table of Patent Fees”) available at

https://www.uspto.gov/FeeSettingAndAdjusting.

As background, section 10 of the AIA changed the Office's fee setting model and authorized the USPTO to set or adjust patent fees within the regulatory process. Section 10 better equips the Office to respond to changing circumstances. In Fiscal Year (FY) 2013 and FY 2018, the USPTO used the AIA's fee setting authority to achieve key fee setting policy factors—to promote innovation strategies, align fees with the full cost of products and services, set fees to facilitate the effective administration of the patent system, and offer patent processing options for applicants—and to generate sufficient resources needed to meet the Office's strategic patent priorities. With the additional fees collected as a result of the January 2013 Setting and Adjusting Patent Fees Final Rule (hereinafter “the January 2013 Final Rule”) (78 FR 4212) and the January 2018 Setting and Adjusting Patent Fees in Fiscal Year 2017 Final Rule (hereinafter “the January 2018 Final Rule”) (82 FR 52780), the Office made considerable progress in reducing the patent application backlog and pendency.

Since the development of the USPTO fee schedule currently in effect, there have been changes to a number of the assumptions on which the cost and revenue projections supporting that rulemaking were based. Notably, since the January 2018 Final Rule was published, the USPTO's projected patent examination costs have increased, and (b) fee collections have been lower than anticipated due to a later than planned implementation of the January 2018 Final Rule. The higher fees set or adjusted in this rulemaking are needed as the Office continues its efforts towards accomplishing its mission and responding to the demands of both the domestic and international economies for robust and timely IP products and services. The USPTO must continually reinforce the predictability, reliability, and quality of those IP rights. Doing so fosters the utmost confidence in the legal durability of the USPTO's products and inspires greater innovation and further economic growth.

The Office's strategic goal to optimize patent quality and timeliness recognizes the importance of innovation as the foundation of American economic growth and national competitiveness. Through this goal, the Office diligently works to balance timely examination with improvements in patent quality, particularly the reliability of issued patents. One of these improvements was a comprehensive analysis of examination time, known as the examiner time analysis (ETA). The last comprehensive review of examination time was completed over 40 years ago. Since then, significant changes to the examination process have occurred, including the emergence of new, more complex technologies, an increase in available prior art that must be searched, the impact of new electronic tools on the examination process, the challenges of transitioning to a new patent classification system, and changes in the legal landscape. As the USPTO plans for the future, the Office considers how changes such as these impact the amount of time it takes to examine an application.

The USPTO is also working towards improving patent quality by providing increased clarity on patentable subject matter eligibility under 35 U.S.C. 101. The Office continues to strive to create consistency and increased clarity through this guidance. The Office is also focusing efforts on improving the initial search and availability of the best prior art to examiners. This aspect takes a variety of forms, and the Office is working on many possible approaches. Overall, presenting more comprehensive search results to the examiners initially will lead to more efficient examination, a decrease in the information gap between the examination phase and any potential later challenge or litigation phases during the life of a patent, and an increase in the reliability of the patent grant overall. Effecting the changes in the examination process needed to ensure the issuance of reliable patents, while also issuing those patents in a timely manner, means recognizing a potential increase in the core operating costs for future years.

Another major component of the overall patent process is the work carried out by the PTAB. On April 24, 2018, the U.S. Supreme Court issued its decision in

SAS Institute Inc.

v.

Iancu,

138 S. Ct. 1348 (2018). Changes related to the

SAS

decision, along with the implementation of other improvements, have increased the average cost to conduct each proceeding. These changes are discussed in detail in Part V: Individual Fee Rationale.

In addition, as a production-oriented entity, the USPTO relies on IT as a mission-critical enabler for every aspect of its operation. The quality, efficiency, and productivity of patent operations correlate to the performance of the USPTO's IT systems. To accomplish its performance-based strategies, the USPTO continuously engages in multi-year efforts to stabilize and upgrade its business systems and the IT infrastructure supporting those systems in order to keep pace with emerging business, legislative, and court needs and technology standards. Since the last patent fee setting effort, the USPTO has made significant progress on IT tools, including continued development and implementation of the Patent End-to-End (PE2E) IT capability. For example, the Office continues to work on releasing systems such as Patent Center which will modernize the transaction systems by combining EFS Web and Patent Application Information Retrieval (PAIR) in a single interface. The Office has also made progress on the continued development and deployment of the PTAB End-to-End (PTAB E2E) IT capabilities, which will expand the use of intelligent data to support appeal decisions and process

inter partes

review (IPR) proceedings, post-grant review (PGR) proceedings, covered business method review (CBM) proceedings, and derivation (DER) proceedings. Other IT efforts are underway to stabilize, modernize, or replace the USPTO's legacy systems and aging infrastructure. To this end, in FY 2019, the USPTO performed an assessment of its IT systems, infrastructure, and processes and began stabilizing and modernizing IT. One of the first improvements was to move the critical Patent Application Location Monitoring (PALM) system from an aging server to new servers that are at least 10 times more reliable, 100 times faster, and use less than half of the power consumed by the prior server.

The FY 2021 Budget does not anticipate that investments in IT modernization and stabilization costs will increase beyond levels previously foreseen. However, given the assumptions and estimates of revenue and spending found in the FY 2021 Budget, this fee increase is needed to support continuing IT investments at previously planned levels. Without an increase in the USPTO's aggregate revenue, resources available for IT investment will inevitably be curtailed.

Lastly, the USPTO has taken steps to establish and maintain operating reserves to facilitate execution of multi-year plans. Using fee setting authority and other tools, the USPTO continuously refines its multi-year planning and budgeting. The fee setting authority prescribed in the AIA, as amended by the SUCCESS Act, allows the Office to effectively engage the stakeholder community on fee adjustments; fully recover the aggregate costs of its planned operations, including the development and maintenance of sufficient operating reserves; invest in strategic agency initiatives; and respond to changing market needs and other external factors.

Research has shown that large fee-funded, business-like agencies without an operating reserve are at risk of cash flow stress. The USPTO's operating reserves enable the Office to mitigate this risk. For instance, in FY 2019, certain federal government departments and agencies, including the Department of Commerce, shut down as a result of a lapse in appropriations. The USPTO was able to remain open using funds available from the operating reserves. This allowed the USPTO to continue operations, thus preventing a significant degradation in service levels, such as patent pendency time frames. This example provides an ongoing, compelling case for the operating reserves' significant value. Both external factors and internal decisions impacting the spending and revenue projections mentioned above have affected the Office's ability to grow the operating reserve to the levels anticipated in the January 2018 Final Rule. The USPTO assesses risk annually and determines the minimum level of reserves necessary to shield core operations against known financial risks. The Office also establishes optimal operating reserve targets, which are reviewed at least biennially, based on an assessment of the likelihood and severity of an array of risks. Based on the cost and revenue assumptions found in the FY 2021 Budget, the USPTO's patent operating reserve is projected to remain above the minimum level and gradually build toward the optimal level, due to the impact of this Final Rule. Absent this fee increase, the USPTO's patent operating reserve will fall below the minimum level in FY 2021 and be exhausted by the end of FY 2022, which will leave the Office vulnerable to changes in the economy that reduce annual revenue, government-wide fiscal events, unexpected cost increases, and a number of other financial risks.

The USPTO also acutely recognizes that fees cannot simply increase for every improvement the Office deems desirable. The USPTO has a responsibility to stakeholders to pursue strategic opportunities for improvement in an efficient, cost-conscious manner. The Office's financial advisory board (FAB) focuses on financial risk management and determining what expenses are truly necessary. Each year the FAB reviews multiple scenarios to determine what level of fee collections are expected and what the hiring and spending levels should be in order to effectively carry out the Office's mission. The FAB also regularly reviews USPTO activities to identify opportunities for cost savings and resources that can be redirected to higher-priority efforts. As a result of the USPTO's careful financial management and prudent use of fee setting authority, Congress recognized the Office as a good steward of fee setting authority and extended that authority through the SUCCESS Act.

In order to continue building on the progress made over the past several years, and consistent with the USPTO's biennial fee review policy, the final patent fee schedule detailed herein continues to focus on the fundamental purpose of the USPTO, which is to foster innovation, competitiveness, and job growth by recognizing and securing IP rights through the delivery of high-quality and timely patent examination and review proceedings in order to produce reliable and predictable IP rights. This Final Rule seeks to provide the USPTO sufficient financial resources to facilitate the effective administration of the U.S. IP system. This Final Rule includes targeted fee adjustments, and an approximately 5 percent across-the-board adjustment to all patent fees that are not covered by the targeted adjustments or that are discontinued. This Final Rule is needed because critical costs to the Office continue to increase. Based on the assumptions and estimates found in the FY 2021 Budget, the fees set forth in this Final Rule will help replenish and grow the patent operating reserve and maintain the USPTO's finances, enabling the Office to deliver reliable and predictable service levels, even in times of financial fluctuations. A more robust patent operating reserve will also position the Office to identify and continue to undertake capital improvements, such as adapting to an ever-increasing technological future. The operating reserve will be managed carefully; if the projected operating reserve were to exceed the targeted optimal level by 10 percent for two consecutive years, it is USPTO policy to examine the contributing factors and determine whether it would be advisable to lower fee rates. The fees set or adjusted in this Final Rule intend to position the Office well to deliver on

known commitments and address unknown risks in the future.

C. Summary of Costs and Benefits of This Action

This Final Rule is economically significant and results in a need for a Regulatory Impact Analysis (RIA) under Executive Order 12866 (Regulatory Planning and Review) (Sept. 30, 1993). The Office prepared a RIA to analyze the costs and benefits of the Final Rule over a five-year period, FY 2020-FY 2024. The RIA includes an analysis of four alternatives and shows how well they aligned with the Office's rulemaking strategies and goals, which include strategic priorities (goals, objectives, and initiatives) from the Strategic Plan and the Office's fee setting policy factors. From this conceptual framework, the Office assessed the absolute and relative qualitative costs and benefits of each alternative. Consistent with the Office of Management and Budget (OMB) Circular A-4, “Regulatory Analysis,” this rule involves a transfer payment from one group to another. The Office recognizes that it is very difficult to precisely monetize and quantify social costs and benefits resulting from deadweight loss of a transfer rule such as this Final Rule. The costs and benefits that the Office identifies and analyzes in the RIA are strictly qualitative. Qualitative costs and benefits have effects that are difficult to express in either dollar or numerical values. Monetized costs and benefits, on the other hand, have effects that can be expressed in dollar values. The Office did not identify any monetized costs and benefits of this Final Rule but found that this Final Rule has significant qualitative benefits with no identified costs.

The qualitative costs and benefits that the RIA assesses are: (1) Fee schedule design—a measure of how well the fee schedule aligns with the key fee setting policy factors; and (2) securing aggregate revenue to recover aggregate cost—a measure of whether the alternative provides adequate revenue to support the core mission and strategic priorities based on assumptions and estimates found in the FY 2021 Budget and described in the Final Rule, Strategic Plan, and FY 2021 Budget. Based on the costs and benefits identified and analyzed in the RIA, the fee schedule detailed in this Final Rule offers the highest net benefits. As described throughout this document, the final patent fee schedule maintains the existing balance of below-cost entry fees (

e.g.,

filing, search, and examination) and above-cost maintenance fees as one approach to foster innovation. Further, as detailed in Part V: Individual Fee Rationale, the fee changes are targeted in support of one or more fee setting policy factors. Lastly, this Final Rule secures the aggregate revenue needed to achieve the strategic priorities encompassed in the rulemaking goals and strategies (

see

Part III: Rulemaking Goals and Strategies). The final patent fee schedule allows for optimizing patent quality and timeliness. This significantly increases the value of patents by advancing commercialization of new technologies sooner and reducing uncertainty regarding the scope of patent rights, which fosters innovation and has a positive effect on economic growth. The RIA explains the results in more detail at

https://www.uspto.gov/FeeSettingAndAdjusting.

II. Legal Framework

A. Leahy-Smith America Invents Act—Section 10

The Leahy-Smith America Invents Act was enacted into law on September 16, 2011.

See

Public Law 112-29, 125 Stat. 284. Section 10(a) of the Act authorizes the director of the Office to set or adjust by rule any patent fee established, authorized, or charged under title 35, U.S.C., for any services performed by, or materials furnished by, the Office. Fees under title 35 of the U.S.C. may be set or adjusted only to recover the aggregate estimated cost to the Office for processing, activities, services, and materials related to patents, including administrative costs to the Office with respect to such patent operations.

See

125 Stat. at 316. Provided that the fees in the aggregate achieve overall aggregate cost recovery, the director may set individual fees under section 10 at, below, or above their respective cost. Section 10(e) of the Act requires the director to publish the final fee rule in the

Federal Register

and the Official Gazette of the USPTO at least 45 days before the final fees become effective. Section 10(i) terminates the director's authority to set or adjust any fee under section 10(a) upon the expiration of the seven-year period that began on September 16, 2011.

B. The Study of Underrepresented Classes Chasing Engineering and Science Success Act of 2018

The Study of Underrepresented Classes Chasing Engineering and Science Success Act of 2018 (SUCCESS Act), was enacted into law on October 31, 2018.

See

Public Law 115-273, 132 Stat. 4158. Section 4 of the SUCCESS Act amended section 10(i)(2) of the AIA by striking “7-year” and inserting “15-year” in reference to the expiration of fee setting authority. Therefore, the updated section 10(i) of the AIA, as amended, terminates the director's authority to set or adjust any fee under section 10(a) upon the expiration of the 15-year period that began on September 16, 2011, and ends on September 16, 2026.

C. Small Entity Fee Reduction

Section 10(b) of the AIA requires the Office to reduce by 50 percent the fees for small entities that are set or adjusted under section 10(a) for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents.

D. Micro Entity Fee Reduction

Section 10(g) of the AIA amended 35 U.S.C. ch. 11 by adding section 123 concerning micro entities. The Act provides that the Office must reduce by 75 percent the fees for micro entities for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents. Micro entity fees were implemented through the January 2013 Final Rule, and the Office will maintain this 75 percent micro entity discount for the appropriate fees and will implement micro entity fees for additional services as appropriate.

E. Patent Public Advisory Committee Role

The Secretary of Commerce established the PPAC under the American Inventors Protection Act of 1999. 35 U.S.C. 5. The PPAC advises the Under Secretary of Commerce for Intellectual Property and Director of the USPTO on the management, policies, goals, performance, budget, and user fees of patent operations.

When adopting fees under section 10 of the Act, the director must provide the PPAC with the proposed fees at least 45 days prior to publishing the proposed fees in the

Federal Register

. The PPAC then has at least 30 days within which to deliberate, consider, and comment on the proposal, as well as hold public hearing(s) on the proposed fees. The PPAC must make available to the public a written report of the comments, advice, and recommendations of the committee regarding the proposed fees before the Office issues any final fees. The Office considers and analyzes any comments, advice, or recommendations received from the PPAC before finally setting or adjusting fees.

Consistent with this framework, on August 8, 2018, the director notified the PPAC of the Office's intent to set or adjust patent fees and submitted a

preliminary patent fee proposal with supporting materials. The preliminary patent fee proposal and associated materials are available at

https://www.uspto.gov/FeeSettingAndAdjusting.

The PPAC held a public hearing in Alexandria, Virginia, on September 6, 2018. Transcripts of the hearing are available for review at

https://www.uspto.gov/sites/default/files/documents/PPAC_Hearing_Transcript_20180906.pdf.

Members of the public were invited to the hearing and given the opportunity to submit written and/or oral testimony for the PPAC to consider. The PPAC considered such public comments from this hearing and made all comments available to the public via the Fee Setting and Adjusting section of the USPTO website,

https://www.uspto.gov/FeeSettingAndAdjusting.

The PPAC also provided a written report setting forth in detail the comments, advice, and recommendations of the committee regarding the preliminary proposed fees. The report regarding the preliminary proposed fees was released on October 29, 2018, and can be found online at

https://www.uspto.gov/sites/default/files/documents/PPAC_Fee_Setting_Report_Oct2018_1.pdf.

The Office considered and analyzed all comments, advice, and recommendations received from the PPAC before publishing the notice of proposed rulemaking (NPRM) Setting and Adjusting Patent Fees during Fiscal Year 2020. The NPRM and associated materials are available at

https://www.uspto.gov/FeeSettingAndAdjusting.

Likewise, before issuing this Final Rule, the Office considered and analyzed all comments, advice, and recommendations received from the public during the 60-day comment period. The Office's response to comments received is available in Part VI: Discussion of Comments.

III. Rulemaking Goals and Strategies

A. Fee Setting Strategy

The overall strategy of this Final Rule is to establish a fee schedule that generates sufficient multi-year revenue to recover the aggregate cost of maintaining USPTO patent-related operations and accomplishing the USPTO's patent-related strategic goals in accordance with the authority granted to the USPTO by AIA section 10, as amended by the SUCCESS Act. The overriding principles behind this strategy are to operate within a sustainable funding model to avoid disruptions caused by fluctuations in financial operations and to enable the USPTO to continue strategic improvements, such as optimizing patent application pendency; issuing highly reliable patents; fostering innovation through business effectiveness; enhancing operations of the PTAB; and optimizing the speed, quality, and cost effectiveness of information technology delivery to achieve business value.

In addition to the overriding principles outlined above, as discussed earlier in this document the Office assesses its alignment with the four key fee setting policy factors: (1) Promoting innovation strategies, (2) aligning fees with the full cost of products and services, (3) facilitating the effective administration of the U.S. patent system, and (4) offering patent processing options to applicants. Each factor promotes a particular aspect of the U.S. patent system. Promoting innovation strategies seeks to ensure barriers to entry into the U.S. patent system remain low, and innovation is incentivized by granting inventors certain short-term exclusive rights to stimulate additional inventive activity. Aligning fees with the full cost of products and services recognizes that as a fully fee-funded entity, the Office must account for all of its costs, even as it elects to set certain fees below, at, or above cost. This factor also recognizes that some applicants may use particular services in a much more costly manner than other applicants (

e.g.,

patent applications cost more to process when more claims are filed). Facilitating effective administration of the patent system seeks to encourage patent prosecution strategies that promote efficient patent prosecution, resulting in compact prosecution and a reduction in the time it takes to obtain a patent. Finally, the Office recognizes that patent prosecution is not a one-size-fits-all process; therefore, where feasible, the Office endeavors to fulfill its fourth policy factor of offering patent processing options to applicants.

B. Fee Setting Considerations

The balance of this sub-section presents the specific fee setting considerations the Office reviewed in developing the final patent fee schedule. Specific considerations are: (1) Historical costs of patent operations and investments to date in meeting the Office's strategic goals; (2) the balance between projected costs to meet the Office's operational needs and strategic goals and the projected future year fee collections; (3) fee schedule design; (4) sustainable funding; and (5) the comments, advice, and recommendations offered by the PPAC on the Office's initial fee setting proposal and the public comments received in response to the July 2019 NPRM. The Office carefully considered the comments, advice, and recommendations offered by the PPAC and public. Collectively, these considerations informed the Office's chosen rulemaking strategy.

(1) Historical Cost.

To ascertain how to best align fees with the full cost of products and services, the Office considers unit cost data provided by the USPTO's activity based information (ABI) program. Using historical cost data and forecasted application demands, the Office can align fees with the costs of specific patent products and services. The document entitled “Setting and Adjusting Patent Fees during Fiscal Year 2020—Activity Based Information and Patent Fee Unit Expense Methodology,” available at

https://www.uspto.gov/FeeSettingAndAdjusting,

provides details on the Office's costing methodology in addition to four years of historical cost data. Part IV of this Final Rule details the Office's methodology for establishing fees. Additionally, Part V describes the reasoning for setting some fees at cost, below cost, or above cost such that the Office recovers the aggregate cost of providing services through fees.

(2) Projected Costs and Revenue.

In developing this Final Rule, the USPTO considered estimates of future year workload demands, fee collections, and costs to maintain core USPTO operations and meet the Office's strategic goals, all of which can be found in the FY 2021 Budget. The FY 2021 Budget and the Strategic Plan highlight the priorities of: optimizing patent application pendency; issuing highly reliable patents; fostering innovation through business effectiveness; enhancing operations of the PTAB; optimizing the speed, quality, and cost effectiveness of IT delivery to achieve business value; and ensuring financial sustainability to facilitate effective USPTO operations. This also enables the USPTO to continue to leverage nationwide talent to build, retain, and effectively manage the highly educated and talented workforce it needs to properly serve its stakeholder community and the country.

(a) Updated Revenue Estimates.

As is discussed in more detail in Part IV: Fee Setting Methodology, when setting fees at appropriate levels to recover aggregate costs, the USPTO must estimate future year demand for its products and services through a careful analysis of economic conditions, potential changes in the legal and policy

environment, and operational efficiency and productivity. Many of these factors fall outside the USPTO's control. Since the time that the USPTO published the January 2018 Final Rule, new information has become available that has resulted in adjustments to several of the assumptions underlying the Office's revenue projections. The result of this change is a lowering of revenue expectations under the existing fee schedule. This reduction is due to a number of factors, including a reduction in the estimates for request for continued examination (RCE) submissions over several years and maintenance fee collections. These assumptions and estimates are found in the FY 2021 Budget.

Despite increases in serialized filings in FYs 2017 through 2019, the rate of RCE submissions during that same time period was much less than expected. In particular, 2018 and 2019 saw a 10 percent decrease in the number of RCEs filed compared to the number projected, and RCE projections for FY 2020 and beyond have been reduced accordingly (as found in the FY 2021 Budget). This reduction of RCEs enables USPTO examining staff to re-allocate more of their time to examine an increased number of serialized filings, thereby reducing our unexamined inventory. While the USPTO considers the reduction in RCE submissions to be a generally positive development, it has resulted in the FY 2020 and FY 2021 revenues being lower than expected when the January 2018 Final Rule was published.

In FYs 2017 through 2019 maintenance fee collections, particularly the most expensive third stage collections, were lower than projected. As a result, the refreshed forecast included in the FY 2021 Budget has been lowered.

Absent the increase in fees or an unsustainable reduction in operating costs, the USPTO will be forced to draw down its operating reserves and take on higher levels of financial risk.

(b) Quality, Backlog, and Pendency.

The strategic goal to “optimize patent quality and timeliness” recognizes the importance of innovation as the foundation of American economic growth and national competitiveness. Through this goal, the Office will continually improve patent quality, particularly the predictability and reliability of issued patents. The USPTO is also committed to improving pendency to better ensure the timely delivery of innovative goods and services to market and the related economic growth and creation of new or higher-paying jobs.

The Office will continue to diligently make progress toward pendency targets and quality expectations to issue predictable and reliable patents while also addressing the anticipated growth in application filings. The Office will work to optimize patent examination time frames within the framework of patent term adjustment (PTA) while continuing to monitor and report traditional pendency measures. This includes engaging customers to identify optimal pendency and examination time frames and making sure that the Office has the appropriate number of examiners to generate the level of production to meet those time frames. This Final Rule will produce revenues adequate to continue the USPTO's progress towards attaining its strategic goal to optimize patent quality and timeliness.

The Office recognizes the importance of issuing high-quality patents that provide reliable and predictable intellectual property protection. If the USPTO is to achieve its strategic objective of issuing highly reliable patents, patent examiners must be afforded sufficient time to conduct a thorough and complete examination of each application. In the time since fees were last adjusted, the USPTO has completed a comprehensive analysis of examination time, known as ETA, the result of which determined a need for updates to the allotment of examination time.

In the past, allotment of examination time for a particular application was determined by the most comprehensive claim and could not account for multi-disciplinary inventions. Sometimes, patent applications of similar technologies would receive disparate time for examination as a result. This, together with significant changes in patent prosecution that have occurred since examination time goals were established over 40 years ago—such as advancements in the technological complexities of applications, a growing volume of prior art, and a changing legal landscape—has brought about the need for updates to the allotment of examination time. The time examiners are given to examine applications is the critical link between pendency and quality. These updates reflect internal and external stakeholders' priorities and experiences as they relate to examination time, quality, and application complexity, and also enable optimal pendency and quality levels.

In addition to the changing legal landscape, increasing technical complexities of applications, and the growing volume of prior art to be searched during examination, updates to examination time will also take into account the full scope of technology recited in an application as well as the particular attributes of the application, such as the number of claims, the size of the specification, and the number of references cited in any filed information disclosure statement. Based on technology examined, examiners who currently receive the least amount of time for examination will generally see the largest increases in examination time, and conversely, examiners who currently receive the highest amount of time may see little, if any, increase in examination time. Further, all examiners will be provided additional examination time based on the specific attributes of the application. Together, these changes improve the calibration of the time needed to conduct a thorough examination, position the Office to better adjust time in the future as needed, and provide stakeholders increased confidence in the certainty of any resultant patent rights.

Separate from the ETA findings, analysis of the patent staffing model indicates an incremental decrease in examiners' average net output over time, resulting in higher core patent examination costs than in previous estimates. One possible explanation for this reduction in output may be that the percentage of examiners receiving production awards has dropped, and a larger number of examiners are forgoing promotions and staying at lower grades. Additionally, applicants' increased use of programs like the after final consideration pilot (AFCP) and interviews, along with increased training needs due to changes in the legal landscape and examination practices, has increased the amount of non-examination time used by examiners, also leading to productivity losses.

Another area where essential operating costs have increased is the PTAB. The PTAB, as it currently exists, was established by the AIA in September 2012. The PTAB manages pendency for three different activities: AIA trials, which, by statute, must be adjudicated within one year of filing; re-examination petitions, which, by statute, must be completed with “special dispatch”; and

ex parte

appeals. The PTAB is committed to resolving appeals and

inter partes

matters within statutory or USPTO time frames, while streamlining processes and procedures throughout the PTAB. This entails retaining and leveraging nationwide talent. As the Office institutes operational changes at the PTAB to comply with the

SAS

decision and implements other improvements, as

detailed in Part V: Individual Fee Rationale, the average workload associated with each trial is increasing.

(c) Business Effectiveness.

Given the estimates of costs and revenue found in the FY 2021 Budget and absent efforts to boost future revenue, funding for other USPTO and stakeholder priorities, like IT stabilization and modernization and other business improvement initiatives, will need to be reduced to well below planned levels in the coming years. To this end, revenue generated from the final patent fee schedule will enable the USPTO to focus on how the Patents organization operates to foster business effectiveness. In fulfilling this objective, the Office will listen to customers and employees and then take patent-specific actions that will position the Office to meet expectations.

The USPTO will provide the cutting-edge tools that employees and customers need to efficiently and effectively accomplish their tasks, particularly through the continued implementation of Patents End-to-End. For example, this could entail the use of artificial intelligence or machine-learning efforts. Another key initiative that will enhance the work capabilities of both employees and customers is to improve searchable (text) access to domestic and international patent applications, including access to non-patent literature and prior art, and Office actions.

(3) Fee Schedule Design.

The final fee schedule was designed to set individual fees to further key policy considerations while taking into account the cost of the particular service. To encourage innovators to take advantage of patent protection, the Office continues its longstanding practice of setting basic “front-end” fees (

e.g.,

filing, search, and examination) below the actual cost of carrying out these activities. Additionally, new fees are set, and existing fees are adjusted, in order to facilitate the effective administration of the patent system. Part IV of this Final Rule details the Office's methodology for establishing fees, and Part V describes the reasoning for setting and adjusting individual fees, including fee schedule design benefits. The RIA, available at

https://www.uspto.gov/FeeSettingAndAdjusting,

also discusses fee schedule design benefits.

(4) Sustainable Funding.

A major component of sustainable funding is the creation and maintenance of a viable patent operating reserve that allows for effective management of the U.S. patent system and responsiveness to changes in the economy, unanticipated production workload, and revenue changes. As a fee-funded agency, the USPTO uses its reserves to mitigate the variability in its spending and revenue streams that can create volatility in patent operations and threaten the Office's ability to support mission operations.

The USPTO aims to manage the operating reserve within a range of acceptable balances and evaluates its options when projected balances fall either below or above that range. Minimum planning targets are assessed annually and are intended to address immediate unplanned changes in the economic or operating environments as the Office builds its reserve to the optimal level. The optimal reserve target, which is reviewed at least biennially, is established based on an assessment of the likelihood and severity of an array of financial risks. A 2019 evaluation of the patent operating reserve relative to the financial risk environment, revalidated the optimal reserve level of three months' operating expenses as the appropriate long-range target given various risk factors, such as the high percentage of fixed costs in the Patent business and recent and potential changes in the legal, judicial, and policy environments. For the Patent business line's operating reserve, a minimum planning level of approximately $300 million—just over one month's operating expenses—has been established. The USPTO's annual budget delineates prospective spending levels (aggregate costs) to execute core mission activities and strategic initiatives. In the FY 2021 Budget, the USPTO estimated that its aggregate patent operating costs for FY 2021, including administrative costs, would be $3.3 billion, and aggregate estimated patent fee collections and other income would be $3.4 billion, with the difference being added to the operating reserve. The health of the operating reserve is a key consideration as the USPTO sets its fees. Aided by the increased fees detailed in this Final Rule, future year projections are anticipated to gradually build the operating reserve toward the optimal level of three months' operating requirements while maintaining the minimum operating reserve balance during the five-year period. The projections found in the FY 2021 Budget are based on point-in-time estimates and assumptions that are subject to change. For instance, the budget includes assumptions about filing levels, renewal rates, whether the president will authorize or Congress will mandate employee pay raises, the productivity of the workforce, and many other factors. A change in any of these factors could have a significant cumulative impact on reserve balances. For example, the legally mandated 2019 and 2020 pay raises added a cumulative cost of $445 million (from FY 2020 to FY 2024) to patent operations. As seen in Table 2, set forth in Part IV: Fee Setting Methodology, over a five-year planning horizon the operating reserve balance can change significantly, underscoring the Office's financial vulnerability to various risk factors and the importance of fee setting authority.

The USPTO will continue to assess the patent operating reserve balance against its target balance annually, and at least every two years, the Office will evaluate whether the optimal target balance continues to be sufficient to provide the stable funding the Office needs. Per the Office's operating reserve policy, if the operating reserve balance is projected to exceed the optimal level by 10 percent for two consecutive years, the Office will consider fee reductions. Under the new fee structure, as in the past, the Office will continue to regularly review its operating budgets and long-range plans to ensure the USPTO uses patent fees prudently.

(5) Comments, Advice, and Recommendations from the PPAC and the Public.

As detailed in the NPRM, in the report prepared in accordance with AIA fee setting authority, the PPAC conveyed support for the USPTO in seeking the revenues it needs to increase the reliability and certainty of patent rights, provide timely examination, improve and secure its IT infrastructure, and adequately fund its operating reserve. Specifically, the report stated, “As a general matter, we believe that increased revenue for the USPTO will be important to fulfill its Strategic Plan and implement the recommendations of the PPAC.” Patent Pub. Advisory Comm., Fee Setting Report (2018). The Office considered and analyzed the comments, advice, and recommendations received from the PPAC before publishing this Final Rule.

Likewise, the Office considered and analyzed the comments, advice, and recommendations received from the public during the 60-day comment period before publishing this Final Rule. The Office's response to comments received is available in Part VI: Discussion of Comments.

C. Summary of Rationale and Purpose of the Final Rule

The Office estimates that the patent fee schedule in this Final Rule will produce aggregate revenues to recover the aggregate costs of patent operations, including the implementation of its strategic and mission support goals,

objectives, and initiatives in FY 2020 and beyond. Using the Strategic Plan as a foundation, the Final Rule will provide sufficient aggregate revenue to recover the aggregate cost of patent operations, including optimizing patent application pendency; issuing highly reliable patents; fostering innovation through business effectiveness; enhancing the operations of the PTAB; optimizing the speed, quality, and cost-effectiveness of information technology delivery to achieve business value; and ensuring financial sustainability to facilitate effective operations.

IV. Fee Setting Methodology

The Office carried out three primary steps in developing the final patent fee schedule:

Step 1: Determine the prospective aggregate costs of patent operations over the five-year period, including the cost of implementing new initiatives to achieve strategic goals and objectives.

Step 2: Calculate the prospective revenue streams derived from the individual fee amounts (from Step 3) that will collectively recover the prospective aggregate costs over the five-year period.

Step 3: Set or adjust individual fee amounts to collectively (through executing Step 2) recover projected aggregate costs over the five-year period, while furthering key policy factors.

These three steps are iterative and interrelated. The following is a description of how the USPTO carries out these three steps.

Step 1: Determine Prospective Aggregate Costs

Calculating prospective aggregate costs is accomplished primarily through the annual USPTO budget formulation process. The budget is a five-year plan (that the Office prepares annually) for carrying out base programs and new initiatives to implement the USPTO's strategic goals and objectives.

The first activity performed to determine prospective aggregate costs is to project the level of demand for patent products and services. Demand for products and services depends on many factors that are subject to change, including domestic and global economic activity. The USPTO also takes into account overseas patenting activities, policies and legislation, and known process efficiencies. Because filing, search, and examination costs are the largest share of the total patent operating costs, a primary production workload driver is the number of patent application filings (

i.e.,

incoming work to the Office). The Office looks at indicators such as the expected growth in real gross domestic product (RGDP), the leading indicator of incoming patent applications, to estimate prospective workload. RGDP is reported by the Bureau of Economic Analysis (

www.bea.gov

) and is forecasted each February by the OMB (

www.omb.gov

) in the Economic and Budget Analyses section of the Analytical Perspectives and twice annually by the Congressional Budget Office (CBO) (

www.cbo.gov

) in the Budget and Economic Outlook. A description of the Office's methodology for using RGDP can be found in Appendix III: Multi-year Planning by Business Line, of the FY 2021 Budget. The expected change in the required production workload must then be compared to the current examination production capacity to determine any required staffing and operating cost (

e.g.,

salaries, workload processing contracts, and publication) adjustments. The Office uses a patent pendency model that estimates patent production output based on actual historical data and input assumptions, such as incoming patent applications and overtime hours. An overview of the model, including a description of inputs, outputs, key data relationships, and a simulation tool is available at

https://www.uspto.gov/patents/stats/patent_pend_model.jsp.

The second activity is to calculate the aggregate costs to execute the requirements. In developing its budget, the Office first looks at the cost of status quo operations (the base requirements). The base requirements are adjusted for OMB-directed pay increases and inflationary increases for the budget year and four out-years (detailed calculations and assumptions for this adjustment can be found in the FY 2021 Budget). The Office then estimates the prospective cost of expected changes in production workload and new initiatives over the same period of time (refer to “Program Changes by Sub-Program” sections of the FY 2021 Budget). The Office reduces cost estimates for completed initiatives and known cost savings expected over the same five-year horizon. Finally, the Office estimates its three-month target operating reserve level based on this aggregate cost calculation for the year to determine if operating reserve adjustments are necessary.

Based on the assumptions and estimates found in the FY 2021 Budget, during FY 2020, patent operations will cost $3.256 billion (

see

Appendix II of the FY 2021 Budget), including $2.221 billion for patent examining; $92 million for patent trial and appeals; $167 million for patent information resources; $28 million for activities related to IP protection, policy, and enforcement; and $754 million for general support costs necessary for patent operations (

e.g.,

the patent share of rent; utilities; legal, financial, human resources, and other administrative services; and Office-wide IT infrastructure and support costs). In addition, the Office will transfer $2 million to the Department of Commerce Inspector General for audit support. The Office also estimates collecting $34 million in other income associated with recoveries and reimbursable agreements (offsets to spending).

A detailed description of the operating requirements and related aggregate costs is located in the FY 2021 Budget

.

Table 1 below provides key underlying production workload projections and assumptions from the FY 2021 Budget used to calculate aggregate costs. Table 2 (

see

Step 2) presents the total budgetary requirements (prospective aggregate costs) for FY 2020 through FY 2024 and the estimated collections and operating reserve balances that will result from the adjustments contained in this Final Rule. As the FY 2021 Budget notes, these projections are based on point-in-time estimates and assumptions that are subject to change. There is considerable uncertainty in out-year budgetary requirements. A number of risks could materialize over the next several years (

e.g.,

those associated with the re-compete of major contracts, including property leases, changing assumptions about presidentially authorized or congressionally mandated employee pay raises, etc.) that could increase the USPTO's budgetary requirements in the short- to medium-term. These estimates are refreshed annually in the production of the USPTO's Budget.

Table 1—Patent Production Workload Projections—FY 2020-FY 2024

FY 2020

FY 2021

FY 2022

FY 2023

FY 2024

Utility, Plant, and Reissue (UPR):

Applications *

632,400

632,100

642,700

652,900

662,500

Application Growth Rate

1.9%

0.0%

1.7%

1.6%

1.5%

Production Units

604,300

589,500

607,700

626,400

642,600

Unexamined Patent Application Backlog

559,600

571,600

569,300

557,600

538,400

Examination Capacity **

8,451

8,780

9,094

9,395

9,684

Performance Measures (UPR):

Avg. First Action Pendency (Months)

15.5

15.5

15.4

15.0

14.5

Avg. Total Pendency (Months)

23.7

23.9

24.0

23.7

23.2

* In this table, the patent application filing data includes requests for continued examination (RCEs).

** In this table, Examination Capacity is the UPR Examiners On-Board at End-of-Year, as described in the FY 2021 Budget.

Step 2: Calculate Prospective Aggregate Revenue

As described above in Step 1, the USPTO's FY 2020 requirements in the FY 2021 Budget include the aggregate prospective costs of planned production, anticipated new initiatives, and a contribution to the patent operating reserve required for the Office to maintain patent operations and realize its strategic goals and objectives for the next five years. The aggregate prospective costs become the target aggregate revenue level that the new fee schedule must generate in a given year and over the five-year planning horizon. To calculate the aggregate revenue estimates, the Office first analyzes relevant factors and indicators to calculate or determine prospective fee workloads (

e.g.,

number of applications and requests for services and products), growth in those workloads, and resulting fee workload volumes (quantities) for the five-year planning horizon.

The Office considers economic activity when developing fee workloads and aggregate revenue forecasts for its products and services. Major economic indicators include the overall condition of the U.S. and global economies, spending on research and development activities, and investments that lead to the commercialization of new products and services. The most relevant economic indicator that the Office uses is the RGDP, which is the broadest measure of economic activity. At the time the FY 2021 Budget was developed, CBO anticipated RGDP to grow around 2.2 percent in FY 2020 and 1.9 percent in FY 2021.

These indicators correlate with patent application filings, which are key drivers of patent fees. Economic indicators also provide insight into market conditions and the management of IP portfolios, which influence application processing requests and post-issuance decisions to maintain patent protection. When developing fee workload forecasts, the Office considers other influential factors, including overseas activity, policies and legislation, court decisions, process efficiencies, and anticipated applicant behavior.

Anticipated applicant behavior in response to fee changes is measured using an economic principle known as elasticity, which, for the purpose of this Final Rule, measures how sensitive applicants and patentees are to changes in fee amounts. The higher the elasticity measure (in absolute value), the greater the applicant response to the relevant fee change. If elasticity is low enough (

i.e.,

demand is

inelastic,

or the elasticity measure is less than one in absolute value), a fee increase will lead to only a relatively small decrease in patent activities, and overall revenues will still increase. Conversely, if elasticity is high enough (

i.e.,

demand is

elastic,

or the elasticity measure is greater than one in absolute value), a fee increase will lead to a relatively large decrease in patenting activities such that overall revenues will decrease. When developing fee forecasts, the Office accounts for how applicant behavior will change at different fee amounts projected for the various patent services. The Office analyzed elasticity for nine broad patent fee categories: filing/search/examination fees, excess independent claims fees, excess total claims fees, application size (excess page) fees, issue fees, RCE fees, appeal fees, AIA trial fees, and maintenance fees, including distinctions by entity size where applicable. Additional details about the Office's elasticity estimates can be found in “Setting and Adjusting Patent Fees during Fiscal Year 2020—Description of Elasticity Estimates,” available at

https://www.uspto.gov/FeeSettingAndAdjusting.

Summary of Step 2

Patent fees are collected for patent-related services and products at different points in the patent application examination process and over the life of the pending patent application and granted patent. Approximately half of all patent fee collections are from maintenance fees, which subsidize the cost of filing, search, and examination activities. Changes in application filing levels immediately impact current year fee collections, because fewer patent application filings means the Office collects fewer fees to devote to production-related costs. The resulting reduction in production activities also creates an out-year revenue impact because less production output in one year results in fewer issue and maintenance fee payments in future years.

The USPTO's five-year estimated aggregate patent fee revenue, based on assumptions found in the FY 2021 Budget, (

see

Table 2) is based on the number of patent applications it expects to receive for a given fiscal year, work it expects to process in a given fiscal year (an indicator of future patent issue fee workload), expected examination and process requests for the fiscal year, and the expected number of post-issuance decisions to maintain patent protection over that same fiscal year. Within the iterative process for estimating aggregate revenue, the Office adjusts individual fee rates up or down based on cost and policy decisions (

see

Step 3: Set Specific Fee Amounts), estimates the effective dates of new fee rates, and then multiplies the resulting fee rates by appropriate workload volumes to calculate a revenue estimate for each fee. To calculate the aggregate revenue for the FY 2021 Budget, the Office assumed that all Final Rule fee rates would become effective on July 10, 2020, except for the new non-DOCX filing surcharge fee, which was assumed to become effective on January 1, 2021. The effective dates of all Final Rule fee rates have since been delayed from those original assumptions as USPTO further assessed the impact of the

pandemic on the economy and stakeholders. Using these figures, the USPTO summed the individual fee revenue estimates, and the result is a total aggregate revenue estimate for a given year (

see

Table 2). Additional details about the Office's aggregate revenue, including projected workloads by fee, can be found in “Aggregate Revenue Tables, Final Patent Rule Schedule” available at

https://www.uspto.gov/FeeSettingAndAdjusting.

Table 2 shows the available revenue and operating reserve balances by fiscal year, including the Final Rule fee rates in the projected fee collections. The estimates in the table can be found in the FY 2021 Budget and were developed in late calendar year 2019, prior to the COVID-19 outbreak. Under current circumstances, it is difficult to predict what the actual numbers will be.

Table 2—Patent Financial Outlook—FY 2020-FY 2024

Dollars in millions

FY 2020

FY 2021*

FY 2022

FY 2023

FY 2024

Projected Fee Collections

3,400

3,251

3,709

3,744

3,861

Other Income

34

34

34

34

34

Total Projected Fee Collections and Other Income

3,435

3,285

3,743

3,778

3,895

Budgetary Requirements

3,256

3,455

3,601

3,681

3,800

Funding to (+) and from (−) Operating Reserve

179

(170)

141

97

95

EOY Operating Reserve Balance

587

417

558

656

751

Over/(Under) $300M Minimum Level

287

117

258

356

451

Over/(Under) Optimal Level

(227)

(447)

(342)

(265)

(200)

* The assumed effective date for the Final Patent Fee Schedule shifts some projected collections from FY 2021 to FY 2020, due to the expectation that patentees who are eligible will submit maintenance fee payments prior to the effective date of the Final Rule.

Step 3: Set Specific Fee Amounts

Once the Office finalizes the annual requirements and aggregate prospective costs through the budget formulation process, the Office determines specific fee amounts that, together, will derive the aggregate revenue required to recover the estimated aggregate prospective costs during the five-year budget horizon. Calculating individual fees is an iterative process that encompasses many variables and policy factors. These are discussed in greater detail in Part V: Individual Fee Rationale.

One of the variables the USPTO considers to inform fee setting is the historical cost estimates associated with individual fees. The Office's ABI provides historical costs for an organization's activities and outputs by individual fees using the activity based costing (ABC) methodology. ABC is commonly used for fee setting throughout the federal government. Additional information about the methodology, including the cost components related to respective fees, can be found in the document entitled “Setting and Adjusting Patent Fees during Fiscal Year 2020—Activity Based Information and Patent Fee Unit Expense Methodology” available at

https://www.uspto.gov/FeeSettingAndAdjusting.

The USPTO provides data for FY 2016-FY 2019 because the Office finds that reviewing the trend of ABI historical cost information is the most useful way to inform fee setting. The underlying ABI data are available for public inspection at the USPTO upon request.

When the Office implements a new process or service, historical ABI data is typically not available. However, the Office will use the historical cost of a similar process or procedure as a starting point to estimate the full cost of a new activity or service.

V. Individual Fee Rationale

Based on assumptions and estimates found in the FY 2021 Budget, the Office projects that the aggregate revenue generated from the new patent fees will recover the prospective aggregate cost of its patent operations including contributions to the operating reserve, per the strategic initiative to ensure financial sustainability to facilitate effective USPTO operations. As detailed previously, the PPAC supports this approach, stating that, “The PPAC supports the USPTO in seeking the revenues it needs to increase the reliability and certainty of patent rights, provide timely examination, improve and secure its IT infrastructure and adequately fund its operating reserve” Patent Pub. Advisory Comm., Fee Setting Report [2] (2018).

It is important to recognize that each individual fee is not necessarily set equal to the estimated cost of performing the activities related to the fee. Instead, as described in Part III: Rulemaking Goals and Strategies, some of the individual fees are set at, above, or below their unit costs to balance several key fee setting policy factors: Promoting innovation strategies, aligning fees with the full cost of products and services, facilitating effective administration of the patent system, and offering patent processing options to applicants. For example, many of the initial filing fees are intentionally set below unit costs in order to promote innovation strategies by removing barriers to entry for innovators. To balance the aggregate revenue loss of fees set

below cost,

other fees must be set

above cost

in areas where it is less likely to reduce inventorship (

e.g.,

maintenance).

For some fees in this Final Rule, such as excess claims fees, the USPTO does not typically maintain individual historical cost data for the service provided. Instead, the Office considers the policy factors described in Part III to inform fee setting. For example, by setting fees at particular levels using the facilitating effective administration of the patent system policy factor, the USPTO aims to: (1) Foster an environment where examiners can provide and applicants can receive prompt, quality interim and final decisions; (2) encourage the prompt conclusion of prosecuting an application, resulting in pendency reduction and the faster dissemination of patented information; and (3) help recover costs for activities that strain the patent system.

The rationale for the fee changes are grouped into three major categories, discussed below: (A) Across-the-board adjustment to patent fees; (B) targeted fees; and (C) discontinued fees. The purpose of the categorization is to

identify large fee changes for the reader and provide an individual fee rationale for such changes. The categorization is based on changes in large entity fee amounts because percentage changes for small and micro entity fees that are in place today would be the same as the percentage change for the large entity, and the dollar change would be half or one quarter of the large entity change.

The Table of Patent Fees includes the current and Final Patent Fee Schedule fees for large, small, and micro entities as well as unit costs for the last four fiscal years. Part VII: Discussion of Specific Rules contains a complete listing of fees that are set or adjusted in the patent fee schedule in this Final Rule.

A. Across-the-Board Adjustment to Patent Fees

In order to both keep the USPTO on a stable financial track and allow for the advancement of policies and practices that enhance the country's innovation ecosystem, the Office is adjusting all patent fees not covered by the targeted adjustments as discussed in section B, or to be discontinued as discussed in section C, by approximately 5 percent. Given the time that has passed between the implementation date of the last fee adjustments and this Final Rule, a 5 percent increase is similar to fees increasing by 2 percent annually to help USPTO keep up with the cost of inflation and other cost increases, such as mandatory pay raises not planned for in previous budgets. Individual fees, above $50, are rounded to the nearest $10

1

by applying standard arithmetic rules. For fees that have small and micro entity fee reductions, the large entity fee is rounded up or down to the nearest 20 dollars by applying standard arithmetic rules. The resulting fee amounts are more convenient to patent users and permit the Office to set small and micro entity fees at whole dollar amounts when applying the applicable fee reduction. Therefore, some smaller fees will not be changing, since a 5 percent increase would round down to the current fee, while other fees would change by slightly more or less than 5 percent, depending on rounding. The fee adjustments in this category are listed in the Table of Patent Fees.

1

The description of the rounding rule in the NPRM incorrectly indicated that fees were rounded to the nearest $5, rather than to the nearest $10. This error has been corrected in this Final Rule. The fees proposed in the NPRM and implemented in this Final Rule were both rounded to the nearest $10 and are not affected by the error in the description.

The 5 percent across-the-board adjustment strikes an appropriate balance between projected aggregate revenue and aggregate costs based on the assumptions used to develop the point-in-time estimates that support this Final Rule. The underlying cost and revenue estimates in this Final Rule, which are supported by the FY 2021 Budget, show that fees are set at levels that secure aggregate cost recovery while ensuring a reasonable pace for operating reserve growth.

B. Targeted Fees

For those fees targeted for specific adjustments in this Final Rule, the individual fee rationale discussion is divided into two categories: (1) Adjustments to existing fees, and (2) new fees.

Adjustments to existing fees are further divided into subcategories according to the function of the fees, including: (a) Maintenance fee surcharge, (b) request for the expedited examination of a design application fee, (c) utility and reissue issue and maintenance fees, and (d) AIA trial fees. New fees are further divided into subcategories according to the function of the fees, including: (a) Non-DOCX filing surcharge fee, and (b)

pro hac vice.

As discussed further below and in USPTO's responses to public comments, the USPTO has considered public feedback on the proposed (c) annual active patent practitioner fee and has decided not to proceed with implementing this fee at this time. The USPTO does plan to pursue procedures to allow patent practitioners to voluntarily certify whether they have completed a minimum amount of continuing legal education (CLE). The USPTO further expects that registered practitioners who certify that they have completed such CLE will be recognized in the online practitioner directory. In the near future, the USPTO plans to issue proposed guidelines regarding such voluntary CLE certification, with a request for public comments.

As discussed above, for purposes of comparing amounts in the individual fee rationale discussion, the Office has included the current fees as the baseline to calculate the dollar and percentage changes for new fees.

(1) Adjustments to Existing Fees

The following fees are to be increased by an amount other than the 5 percent across-the-board increase for most patent-related fees. These targeted adjustments are made for a variety of strategic reasons. A discussion of the rationale for each fee follows.

(a) Maintenance Fee Surcharge

Table 3—Maintenance Fee Surcharge Fees—Fee Changes and Unit Cost

Fee description

Current fees

large

(small)

[micro]

entity

Final rule

fees

large

(small)

[micro]

entity

Dollar

change

large

(small)

[micro]

entity

Percentage

change

large

(small)

[micro]

entity

FY 2018

unit cost

FY 2019

unit cost

Surcharge—3.5 year—Late payment within 6 months

$160

($80)

[$40]

$500

($250)

[$125]

+$340

(+$170)

[+$85]

+213

(+213)

[+213]

n/a

n/a

Surcharge—7.5 year—Late payment within 6 months

$160

($80)

[$40]

$500

($250)

[$125]

+$340

(+$170)

[+$85]

+213

(+213)

[+213]

n/a

n/a

Surcharge—11.5 year—Late payment within 6 months

$160

($80)

[$40]

$500

($250)

[$125]

+$340

(+$170)

[+$85]

+213

(+213)

[+213]

n/a

n/a

The Office will set the surcharge for a late maintenance fee payment within six months following the due date at $500 for large entities. It is the responsibility of the patentee to ensure maintenance fees are paid timely to prevent expiration of a patent. If a maintenance fee is not paid within the first six months of the year in which it can be paid, a maintenance fee reminder notice is sent to the fee address or correspondence address on record. Failure to receive the notice does not shift the burden of monitoring the time for paying a maintenance fee from the patentee to the USPTO. At this point, a surcharge is required in addition to the maintenance fee in order to maintain a patent. If the maintenance fee and any applicable surcharge are not paid by the end of the 4th, 8th, or 12th years after the date of issue, the patent rights lapse, and a Notice of Patent Expiration is sent to the fee address or correspondence address on record. If a fee address has not been established, the notices are sent to the correspondence address. Over 95 percent of patent renewals are paid before the due date, but some patents are renewed during the six-month period following the due date.

While still below what other IP offices charge, increasing this surcharge brings the USPTO more in line with its global counterparts. The goal of increasing this surcharge is to encourage patent holders to renew by the due date. Encouraging on-time renewals will benefit the public by increasing the understanding of which patents remain in force and which patent rights have been allowed to lapse.

The USPTO provides tools to help patent owners monitor due dates, such as the Patent Maintenance Fees Storefront,

https://fees.uspto.gov/MaintenanceFees,

where anyone can see the payment windows for all patents. Additionally, customers with

USPTO.gov

accounts (

i.e.,

MyUSPTO) can create a “patent docket” and add patent or application numbers in order to keep track of due dates. Also, the weekly Official Gazette notices list the range of patents for which maintenance fees are now payable. In addition, with the availability of free calendar apps, individuals can easily set up their own reminders of when maintenance fee payments are eligible for renewal (3, 7, 11 years from issue) and when they are due (3.5, 7.5, 11.5 years from issue).

(b) Request for Expedited Examination of a Design Application Fee

Table 4—Request for Expedited Examination of a Design Application Fee—Fee Changes and Unit Cost

Fee description

Current fees

large

(small)

[micro]

entity

Final rule

fees

large

(small)

[micro]

entity

Dollar

change

large

(small)

[micro]

entity

Percentage

change

large

(small)

[micro]

entity

FY 2018

unit cost

FY 2019

unit cost

Request for expedited examination of a design application

$900

($450)

[$225]

$1,600

($800)

[$400]

+$700

(+$350)

[+$175]

+78

(+78)

[+78]

$125

$97

In the NPRM, the Office proposed increasing the fee to request expedited examination of a design application to $2,000. In this Final Rule, after carefully considering comments from the PPAC and the public, the Office is increasing the fee to request expedited examination of a design application to $1,600 for a large entity. This fee was introduced at a fee rate of $900 in November 2000. The Office is increasing the fee for the first time since its inception.

Expedited examination is available to all design applicants who first conduct a preliminary examination search and file a request for expedited treatment accompanied by a fee for the expedited treatment and handling (37 CFR 1.17(k)) in addition to the required filing, search, and examination fees. This cost-based expedited treatment fulfills a particular need by affording rapid design patent protection that may be especially important where marketplace conditions are such that new designs on articles are typically in vogue for limited periods of time. The Office notes that the unit cost presented for this service only accounts for the initial processing of the request and does not include additional resources expended. The applications are individually examined with priority, and the clerical processing is conducted and/or monitored by specially designated personnel to achieve expeditious processing through initial application processing and the design examining group. For a patentable design application, the expedited treatment is a streamlined filing-to-issuance procedure. This procedure further expedites design application processing by decreasing clerical processing time as well as the time spent routing the application between processing steps. Specially designated personnel are required to conduct and/or monitor the expedited clerical processing. Also, expedited design applications may be individually treated throughout the examination process where necessary for expedited treatment, whereas normally, the search phase of design application examination is conducted in groups.

For the first few years following the introduction of this program, requests for expedited examination of a design application were less than 1 percent of total design filings. In recent years, requests have increased to over 2 percent of total filings. As discussed in the NPRM, the increase in demand for this service forced the Office to choose to cap the program (

i.e.,

impose limits on the number of expedited examinations it will undertake in a given fiscal year), end the program, or increase the fee. Increasing this optional fee will allow the USPTO to better manage staffing to match the demand for this service, while still keeping the service available as an option for those who may benefit from this program. The USPTO believes that this new fee amount, as well as the associated small and micro entity discounts, will provide the Office the ability to continue offering this service to applicants.

(c) Utility and Reissue Patent Issue and Maintenance Fees

Table 5—Utility and Reissue Patent Issue and Maintenance Fees—Fee Changes and Unit Cost

Fee description

Current fees

large

(small)

[micro]

entity

Final rule

fees

large

(small)

[micro]

entity

Dollar

change

large

(small)

[micro]

entity

Percentage

change

large

(small)

[micro]

entity

FY 2018

unit cost

FY 2019

unit cost

Utility issue fee

$1,000

($500)

[$250]

$1,200

($600)

[$300]

+$200

(+$100)

[+$50]

+20

(+20)

[+20]

$325

$319

Reissue issue fee

$1,000

($500)

[$250]

$1,200

($600)

[$300]

+$200

(+$100)

[+$50]

+20

(+20)

[+20]

325

319

For maintaining an original or any reissue patent, due at 3.5 years

$1,600

($800)

[$400]

$2,000

($1,000)

[$500]

+$400

(+$200)

[+$100]

+25

(+25)

[+25]

n/a

n/a

For maintaining an original or any reissue patent, due at 7.5 years

$3,600

($1,800)

[$900]

$3,760

($1,880)

[$940]

+$160

(+$80)

[+$40]

+4

(+4)

[+4]

n/a

n/a

For maintaining an original or any reissue patent, due at 11.5 years

$7,400

($3,700)

[$1,850

$7,700

($3,850)

[$1,925]

+$300

(+$150)

[+$75]

+4

(+4)

[+4]

n/a

n/a

The Office is adjusting the issue fees by 20 percent and first stage maintenance fees by 25 percent. These adjustments will mark the first time maintenance fee rates have changed since 2013. The total package of fees in this Final Rule does not significantly impact the balance between front-end and back-end fees. The USPTO continues to set front-end fees below the cost to the Office to provide those services in order to encourage innovation. Front-end fees for a utility patent with one RCE and lifetime maintenance will continue to be about 18 percent of the total fees paid over the life of a patent (

see

Table 6). However, as certain technology lifecycles grow shorter, it is important that the USPTO not rely too heavily on fees paid late in the life of a patent. Therefore, the Office is slightly rebalancing the back-end fees to recover the initial search and examination costs earlier in the life of the patent.

Table 6—Front-End and Back-End Fee Balance

Fee group

Fee title

Current

Large

entity fee

Percent

of total

Group's

percent

of total

Final rule

Large

entity fee

Percent

of total

Group's

percent

of total

Front-End Fees

Filing

$300

2

18

$320

2

18

Search

660

4

700

4

Examination

760

4

800

4

1st RCE

1,300

8

1,360

8

Back-End Fees

Issue

1,000

6

16

1,200

7

18

1st Stage Maintenance

1,600

10

2,000

11

2nd Stage Maintenance

3,600

22

66

3,760

21

64

3rd Stage Maintenance

7,400

44

7,700

43

Total

16,620

100

100

17,840

100

100

The issue fee for utility and reissue patents is increasing from $1,000 to $1,200, and the first stage maintenance fee is increasing from $1,600 to $2,000. As a result, the combined fees paid for issue and first stage maintenance is increasing from 16 percent to 18 percent of the total fees paid for a utility patent with one RCE and lifetime maintenance.

However, second and third stage maintenance fees are only increasing by 4 percent—less than the across-the-board adjustment—with second stage increasing from $3,600 to $3,760 and third stage increasing from $7,400 to $7,700.

The Office determined elasticity estimates for the three maintenance payments for both large and small entities. For all point estimates and confidence intervals, maintenance fees were found to be inelastic, with the first stage being the least elastic of these fees. More detailed information on elasticity estimates can be found at

https://www.uspto.gov/FeeSettingAndAdjusting

in the document entitled “Setting and Adjusting Patent Fees during Fiscal Year 2020—Description of Elasticity Estimates.”

(d) AIA Trial Fees

Table 7—AIA Trial Fees—Fee Changes and Unit Cost

Fee description

Current fees

large

(small)

[micro]

entity

Final rule

fees

large

(small)

[micro]

entity

Dollar

change

large

(small)

[micro]

entity

Percentage

change

large

(small)

[micro]

entity

FY 2018

unit cost

FY 2019

unit cost

Inter partes review request fee—Up to 20 claims

$15,500

$19,000

+$3,500

+23

$15,016

$17,887

Inter partes review post-institution fee—Up to 15 claims *

15,000

n/a

n/a

n/a

25,490

27,376

Inter partes review post-institution fee—Up to 20 Claims *

n/a

22,500

n/a

n/a

n/a

n/a

Inter partes review request of each claim in excess of 20

300

375

+75

+25

n/a

n/a

Inter partes post-institution request of each claim in excess of 15 *

600

n/a

n/a

n/a

n/a

n/a

Inter partes post-institution request of each claim in excess of 20 *

n/a

750

n/a

n/a

n/a

n/a

Post-grant or covered business method review request fee—Up to 20 claims

16,000

20,000

+4,000

+25

21,465

26,296

Post-grant or covered business method review post-institution fee—Up to 15 claims *

22,000

n/a

n/a

n/a

29,842

40,791

Post-grant or covered business method review post-institution fee—Up to 20 claims *

n/a

27,500

n/a

n/a

n/a

n/a

Post-grant or covered business method review request of each claim in excess of 20

375

475

+100

+27

n/a

n/a

Post-grant or covered business method review post-institution request of each claim in excess of 15 *

825

n/a

n/a

n/a

n/a

n/a

Post-grant or covered business method review post-institution request of each claim in excess of 20 *

n/a

1,050

n/a

n/a

n/a

n/a

* The post-institutional threshold for paying claims fees will increase from 15 to 20.

On April 24, 2018, the U.S. Supreme Court issued its decision in

SAS Institute Inc.

v.

Iancu,

138 S. Ct. 1348 (2018). As required by the decision, the PTAB will institute a trial as to all claims or none. Previously, the PTAB instituted a trial on just some claims. This has increased the amount of time spent per case post-institution. The Office has also modified its pre-institution practice to take into account the impacts of the

SAS

decision. For example, prior to

SAS,

the PTAB did not generally address all arguments at institution. Post-

SAS,

for purposes of deciding whether to institute trial on a petition, the Office's policy is to provide details to the parties to the extent practicable, including responding to arguments in a patent owner's preliminary response that were not the basis for the decision whether or not to institute. This has increased the amount of time spent per case pre-institution. These changes related to the

SAS

decision have increased the average cost to conduct each proceeding.

Other implementations, such as providing automatic sur-replies and pre-hearing conferences, were made to help provide additional fairness and certainty to the parties and public while continuing the PTAB's practice of rendering high-quality decisions within the statutory time limits applicable to AIA trial proceedings; however, these changes, too, have increased the average cost of conducting each proceeding.

The post-institutional threshold for paying excess claim fees is increasing from 15 to 20 claims so as to match the PTAB's request threshold, reflecting the fact that, following the Supreme Court decision in

SAS,

the PTAB is required to institute all claims or none. The NPRM proposed fees based on the Office's best estimates at that time, taking into consideration the cost increases already experienced, plus future inflationary cost growth. Since then, the Office has collected and analyzed the additional cost data available through the end of FY 2019. In addition, the Office has taken into account uncertainties resulting from changes in the way in which AIA trials are conducted.

While the unit cost data (

see

Table 7) shows that post-institution costs have increased more than pre-institution costs, pre-institution costs have also increased. These costs have increased in response to the Supreme Court's

SAS

decision, as discussed above.

In addition, in response to feedback from stakeholders, the Office has modified its approach to concurrent petitions challenging the same patent or patents in the same family filed by the same petitioner. Specifically, the Board now considers whether to exercise its discretion to limit the number of these parallel petitions that may, if the threshold is met, be instituted. Similarly, the Board has undertaken a closer review of petitions to determine whether they raise issues that were considered by the examiner during

ex parte

prosecution or during other proceedings before the Office. To evaluate these requests the Board must make close comparisons between the challenges to determine whether it should exercise its discretion and institute a trial. Such comparisons require analyzing the prior art cited in the petitions and evaluating the reasons given by the petitioners for filing additional petitions. As this development in AIA trial practice is relatively recent (within the last 12 months), the Office does not yet have an accurate model to predict how many requests it will receive and how much additional effort will be necessary to evaluate them. To account for these uncertainties, it is necessary to set the pre-institution fees for

inter partes

reviews at $19,000. This 23 percent increase is less than the 25 percent increase proposed in the NPRM but above the FY 2019 unit cost. The pre-institution fee is set at more than the FY 2019 unit cost to take into account the uncertainties outlined above that arose

in that year and are expected to continue in FY 2020 and beyond.

The post-institution fee is set to $22,500 for

inter partes

review, which is above the increase proposed in the NPRM but considerably lower than the FY 2019 actual unit cost. As a result of the

SAS

and

Arthrex Inc.

v.

Smith & Nephew, Inc.,

941 F.3d 1320 (Fed. Cir. 2019) decisions, there has been an increase in the number of remands to the PTAB, which has increased the post-institution amount of work and costs. At this time, it remains unclear whether the post-institution costs will remain at the current level or decrease after the

SAS

and

Arthrex

remands have been fully addressed. Accordingly, the post-institution fee is set above the proposed NPRM fee, which is above the pre-

SAS

FY 2017 unit costs but below the post-

SAS

FY 2019 unit costs. The Office continues to evaluate the data as it becomes available to better understand the long-term impact of

SAS

on post-institution costs.

Post-grant review and covered business method review fees will be maintained at the rates proposed in the NPRM, at $20,000 for pre-institution and $27,500 for post-institution. These fee rates are above the respective

inter partes

review fees, due to the additional work involved with post-grant and covered business method reviews, but below the FY 2019 actual unit costs for post-grant reviews and covered business method reviews due to uncertainties about future costs. Specifically, post-grant reviews and covered business method reviews may raise additional issues beyond those raised in

inter partes

reviews, such as patent eligibility, written description, enablement, indefiniteness, and public use. Further, given the additional issues that may be raised, post-grant reviews and covered business method reviews provide 33 percent higher word limits for petitions, patent owner responses, and preliminary responses. While the actual unit costs for post-grant and covered business method reviews have typically been higher than the unit costs for

inter partes

reviews for these reasons, it is harder to determine the precise cost of post-grant and covered business method reviews. Due to a relatively small number of trials (approximately 60 post-grant reviews or covered business method reviews annually), the data on actual unit costs can vary from year to year. Therefore, it is unclear whether the post-

SAS

costs will remain at the current levels. The Office will continue to evaluate data as it becomes available to better understand the long-term impact of

SAS

on post-grant review and covered business method review costs.

This rulemaking will help the PTAB continue to maintain the appropriate level of judicial and administrative resources to continue to provide high-quality and timely decisions for AIA trials.

(2) New Fees

(a) Non-DOCX Filing Surcharge Fee

Table 8—Non-DOCX Filing Surcharge Fee—Fee Changes and Unit Cost

Fee description

Current fees

large

(small)

[micro]

entity

Final rule

fees

large

(small)

[micro]

entity

Dollar

change

large

(small)

[micro]

entity

Percentage

change

large

(small)

[micro]

entity

FY 2018

unit cost

FY 2019

unit cost

Surcharge—non-DOCX filing

New

$400

($200)

[$100]

+$400

(+$200)

[+$100]

n/a

(n/a)

[n/a]

n/a

n/a

The Office is implementing a new fee for utility non-provisional applications filed under 35 U.S.C. 111 and submitted in a format other than DOCX (structured text). This surcharge applies to filings that are submitted in an electronic document, such as a PDF, that is not saved in the DOCX format. It also applies to filings that are submitted non-electronically, in addition to the existing paper filing surcharge. The surcharge is being introduced for specifications, claims, and abstracts. The submission in DOCX format will facilitate improvements in the efficiency of patent operations. After careful consideration of public comments, the Office has decided to delay the implementation of the non-DOCX filing surcharge, and it will become effective on January 1, 2022. Over the next several months, the Office will continue with its outreach efforts, addressing customer concerns and providing ample time for applicants to transition to this new process.

Using EFS-Web, anyone with a web-enabled computer can file patent applications and documents without downloading special software or changing document preparation tools and processes. Registering as an EFS-Web eFiler allows enhanced filing, follow-on processing, saved submissions, and more. EFS-Web registered eFilers have been able to file specification, abstract, and claims in DOCX for utility non-provisional filings since August 2017.

Launched in 2015, the eCommerce Modernization (eMod) Project aims to improve the electronic application process for patent applicants by modernizing the USPTO's filing and viewing systems. Recent improvements include implementing structured text functionalities. Structured text allows applicants to more easily submit their documents as text-based documents rather than having to create PDF documents. This streamlines the application and publication processes. The Office tested the capabilities of structured text within EFS-Web and PAIR with the eMod Text Pilot Program, which ran from August 2016 until September 2017. The pilot was successful, and many improvements were made based on feedback from applicants, including independent inventors, law firms, and corporations. Structured text features are now available to all EFS-Web-registered and Private PAIR users and give applicants the ability to file structured text via EFS-Web and access structured text submissions, structured text Office actions, and Extensible Markup Language (XML) downloads via Private PAIR. Additional information can be found in the associated DOCX quick start guide available on the USPTO website,

https://www.uspto.gov/patents-application-process/checking-application-status/quick-start-guides.

For more information on filing in DOCX, please visit

https://www.uspto.gov/patent/docx.

To encourage the filing of more applications in structured text, the required fee surcharge applies to application filings that do not include the specification, claims, and abstract in DOCX format. This will accelerate the

adoption of DOCX to realize a variety of benefits. Both the USPTO and applicants will see increased efficiencies, over the lifetime of an application, from encouraging DOCX filings. Based on a USPTO survey, over 80 percent of applicants author their patent applications in DOCX in the normal course of business. Filing in structured text allows applicants to submit their specifications, claims, and abstracts in text-based format and eliminates the need to convert structured text into a PDF for filing. Applicants can access examiner Office actions in text-based format, which makes it easy to copy and paste when drafting responses. The availability of structured text also improves accessibility for sight-impaired customers who use screen reading technology.

DOCX filing provides opportunities to increase efficiency in the Office. It enables the development of software to provide automated initial reviews of applicant submissions to help reduce the effort required by the Office. The automated reviews can tell applicants up front if potential problems exist and allow them to make changes prior to or at the time of submission. This also improves validation based on content, such as claims validation for missing claim numbering or abstract validation for word count and paragraph count.

Increased DOCX filing will also lead to higher data quality by reducing system conversion errors. It provides a flexible format with no template constraints. It also improves data quality by supporting original formats for chemical formulas, mathematical equations, and tables. DOCX filing also improves document identification by automatic detection, allows for greater reuse of content, and provides improved searching for patent applications and submissions. The originally submitted structured text document is available in Private PAIR, allowing easy retrieval of original DOCX files.

Structured text usage also helps streamline the application process and provides benefits for the USPTO. The Office converts image-based filings (

e.g.,

PDF documents) into text-based format for internal processing. Text-based filings will allow the Office to skip this time-consuming and costly step. Optical character recognition (OCR) of image-based filings costs the Office approximately $3.15 per new submission. In addition to the initial submission, the use of image-based PDFs incurs many costs over the lifetime of an application. There are large costs associated with the USPTO's systems and personnel—from pre-examination, examination, and publication—due to the need to apply OCR to convert image-based PDFs into structured text that can be leveraged by downstream systems. The surcharge is applied not only to account for these inefficiencies, but also to address rising expenses. Encouraging text-based filings will decrease the Office's costs. If, in the future, the program were extended to additional application documents besides specifications, claims, and abstracts, the potential savings could reach as much as $9.0 million annually.

XML generated from DOCX files complies with the international World Intellectual Property Office (WIPO) Standard ST.96 from intake through display and use in examination tools. Receiving filings through structured text makes documents automatically available to examiners in almost real-time. DOCX filing also improves examination consistency by using automated tools to analyze text, increases the accuracy of examiner formalities reviews and tools (

i.e.,

claims tree generators and document comparison), and improves results in automated pre-search and future analytics (

i.e.,

section 112(b) and (f) evaluations) by using text supplied by applicants. DOCX submission contributes to the USPTO's plan to begin the automation of publication processes, which will lead to large cost reductions in the production of patent artifacts (grants and pre-grant publications), and contributes to the USPTO's plan to begin the automation of processes to assist in formalities reviews, classification, and routing, which leads to improved patent quality, reduced pendency, and greater consistency.

(b) Pro Hac Vice Fee

Table 9—Pro Hac Vice Fee—Fee Changes and Unit Cost

Fee description

Current fees

large

(small)

[micro]

entity

Final rule

fees

large

(small)

[micro]

entity

Dollar

change

large

(small)

[micro]

entity

Percentage

change

large

(small)

[micro]

entity

FY 2018

unit cost

FY 2019

unit cost

Fee for non-registered practitioners to appear before the Patent Trial and Appeal Board

New

$250

+$250

n/a

n/a

n/a

In this Final Rule, the Office is implementing a fee to appear

pro hac vice

in an AIA trial proceeding. The non-registered practitioner fee is for each proceeding that a non-registered practitioner requests admission to practice. If a non-registered practitioner requests admission to multiple AIA trial proceedings, multiple requests and fees will be required, one for each proceeding. Once a request is granted, the counsel is admitted for the entire duration of a proceeding, which may extend for several years, (

e.g.,

when an

inter partes

review proceeds to final written decision, and, after appeal to the Federal Circuit, is remanded back to the PTAB for further proceedings). By instituting the

pro hac vice

fee, the Office will be able to shift the cost of the service of processing these requests from the overall AIA trial fees to the requesting, non-USPTO registered counsel.

(c) Annual Active Patent Practitioner Fee

In the NPRM, the USPTO proposed a new fee called the annual active patent practitioner fee, and an associated fee structure, under 37 CFR 1.21 and 11.8, so that patent practitioners, who directly benefit from registration, would bear the costs associated with maintaining the integrity of their profession, including the costs of OED's register maintenance and disciplinary functions. The fee collections were proposed to shift the costs of the services OED provides patent practitioners in administering the disciplinary system and register maintenance from patent applicants and owners to the patent practitioners. The annual active patent practitioner fee was proposed to be $340, with a $100 annual fee discount for those who certified completion of a certain number of CLE. In addition, the Office proposed that registered practitioners who are endorsed on the register as voluntarily

inactive would be liable for a fee of $70 per year to cover OED's administrative costs in maintaining the register and updating their information. Finally, a new emeritus status was proposed for active patent practitioners who have been registered for ten or more years to elect emeritus status, subject to certain conditions.

However, during the public comment period, the USPTO received a number of comments expressing concerns over the proposed new fee. Having further considered the public feedback on this proposal, the USPTO has determined that it will not at this time implement the annual active patent practitioner fee, the proposed new voluntarily inactive fee, or the proposed emeritus status. The Office continues to recognize the value of CLE in maintaining and enhancing patent practitioners' legal skills. In addition, the Office recognizes that it is beneficial to provide information regarding a registered practitioner's CLE status to the public. Thus, while completion of CLE remains voluntary, the USPTO intends to recognize patent practitioners who certify completion of six hours of CLE in the preceding 24 months, including five hours of patent law and practice and one hour of ethics credit, in the online practitioner directory. In the near future, the USPTO intends to issue proposed CLE guidelines, with a request for public comment on them. It is anticipated that the proposed guidelines will address the types of CLE courses that may qualify for recognition and the form of recognition for patent practitioners who certify that they have completed the CLE.

Registration Statement

Although the USPTO is not implementing the annual active patent practitioner fee in this Final Rule, the Office intends to communicate with practitioners on a periodic basis for register maintenance. Thus, biennially, registered practitioners, as well as individuals granted limited recognition under 37 CFR 11.9(b), will be required to file a registration statement with the OED director. Notice will be provided to patent practitioners at least 120 days in advance of the due date for the filing of the registration statement, electronically, through the USPTO's online system. The registration statement takes the place of the practitioner survey, which is administered on paper. The USPTO anticipates that patent practitioners will first be required to submit a registration statement in the spring of 2022. Registered practitioners will not be required to pay any fee at the time the registration statement is filed.

Failure to file the registration statement by the due date may result in the registered practitioner being subject to a delinquency fee and possible administrative suspension, as was the case for a patent practitioner who failed to respond to the practitioner survey. Specifically, if a registered practitioner, or a person granted limited recognition pursuant to 37 CFR 11.9(b), fails to file the registration statement by the due date, the OED director will publish and send a notice to the registered practitioner advising them of the failure to file the registration statement, the consequence of being administratively suspended, and the requirements for reinstatement. The notice will request filing of the registration statement within 60 days after the date of such notice.

If a patent practitioner fails to comply with the notice within the time allowed, the OED director will then publish and send to the practitioner a Rule to Show Cause why his or her registration or recognition should not be administratively suspended. The OED director shall file a copy of the Rule to Show Cause with the USPTO director. The practitioner will be given 30 days from the date of the Rule to Show Cause to file a response with the USPTO director. The response should address any factual and legal bases why the practitioner should not be administratively suspended. Within 10 days of receiving a copy of the response, the OED director may file a reply with the USPTO director. The USPTO director will enter an order either dismissing the Rule to Show Cause or administratively suspending the practitioner. The aforementioned is the same procedure currently used when a registered practitioner fails to timely respond to the practitioner survey.

Reinstatement

The sections referring to reinstatement from administratively inactive status remain unchanged from the current regulations. The reinstatement sections relating to other statuses are set forth below.

Administratively Suspended

Under this Final Rule (37 CFR 11.11(f)(1)), any registered practitioner, or person granted limited recognition, who has been administratively suspended for less than five years may be reinstated on the register provided the patent practitioner is not a party to a disciplinary proceeding. Thus, the Final Rule eliminates the requirement that a registered practitioner who is administratively suspended for more than two years (but less than five years) take and pass the registration examination in order to be reinstated. To apply for reinstatement, the practitioner will need to submit an application form supplied by the OED, demonstrate compliance with the provisions of § 11.7(a)(2)(i), submit a declaration or affidavit attesting to the fact that the practitioner has read the most recent revisions of the patent laws and the rules of practice before the Office, and pay the fees set forth in § 1.21(a)(9)(i) and (ii).

However, under this Final Rule, any administratively suspended registered practitioner or person granted limited recognition who seeks reinstatement more than five years after the effective date of administrative suspension, also shall be required to file a petition to the OED director requesting reinstatement and providing objective evidence that they continue to possess the necessary legal qualifications to render valuable service to patent applicants. The objective evidence may include taking and passing the registration examination.

Resigned

Any registered practitioner who has been resigned for less than five years may be reinstated on the register provided the practitioner is not the subject of a disciplinary investigation or a party to a disciplinary proceeding. Thus, the Final Rule eliminates the requirement that a registered practitioner who was resigned for more than two years (but less than five years) take and pass the registration examination in order to be reinstated. To apply for reinstatement, the practitioner will need to submit an application form supplied by the OED, demonstrate compliance with the provisions of § 11.7(a)(2)(i), submit a declaration or affidavit attesting to the fact that the practitioner has read the most recent revisions of the patent laws and the rules of practice before the Office, and pay the fees set forth in § 1.21(a)(9)(i) and (ii).

However, under this Final Rule any registered practitioner who seeks reinstatement after having been in resigned status for five years or more also shall be required to file a petition to the OED director requesting reinstatement and providing objective evidence that they continue to possess the necessary legal qualifications to render valuable service to patent applicants. The objective evidence may include taking and passing the registration examination.

C. Discontinued Fees

This section describes fees that are being discontinued. The purpose of this action is to help streamline the patent fee schedule while also focusing USPTO workforce efforts on producing products that benefit the general public rather than producing outputs for individual customers.

Table 10—Discontinued Fees

Fee description

Current fees

large

(small)

[micro]

entity

Final rule

fees

large

(small)

[micro]

entity

Dollar

change

large

(small)

[micro]

entity

Percentage

change

large

(small)

[micro]

entity

FY 2018

unit cost

FY 2019

unit cost

Copy of Patent Technology Monitoring Team (PTMT) patent bibliographic extract and other DVD (optical disc) (currently at § 1.19(j))

$50

Discontinued

−$50

n/a

n/a

n/a

Copy of U.S. patent custom data extracts (currently at § 1.19(k))

100

Discontinued

−$100

n/a

n/a

n/a

Copy of selected technology reports, miscellaneous technology areas (currently at § 1.19(l))

30

Discontinued

−30

n/a

n/a

n/a

For USPTO-assisted recovery of ID or reset of password for the Office of Enrollment and Discipline Information System (currently at § 1.21(a)(6)(i))

70

Discontinued

−70

n/a

15

18

In January 2018, to comply with Executive Order 13681 (Improving the Security of Consumer Financial Transactions), select computer service fees were discontinued and the services made free. The three changes to the fees at 37 CFR 1.19 follow that trend. The service fees in § 1.19 will be eliminated, and the Office will instead provide these services in a slightly modified form (

i.e.,

electronic) for free.

The first fee being discontinued is the current 37 CFR 1.19(j) fee for a copy of the Patent Technology Monitoring Team (PTMT) patent bibliographic extract and other DVDs. PTMT patent bibliographic data is currently available online for free, curtailing the need for the USPTO to send out extracts on disc.

The second fee being discontinued is the current 37 CFR 1.19(k) fee for a copy of U.S. patent custom data extracts. With the elimination of this service fee, the USPTO will create the common customizations and release them online, free to the public, at the same time the data is released. Further customizations will be discontinued. Additionally, PatentsView (

http://www.patentsview.org

), while not an official USPTO data source, meets many of the needs of those requesting custom data extracts at no charge to the consumer.

The third fee being discontinued is the current 37 CFR 1.19(l) fee for a copy of selected technology reports in miscellaneous technology areas. Selected technology reports are currently available online for free, curtailing the need for the USPTO to send out paper copies of the reports.

Upon consideration of public comments, a fourth fee being discontinued is the fee for the USPTO-assisted recovery of ID or reset of password for the Office of Enrollment and Discipline Information System. This fee is being removed, as it is unnecessary.

VI. Discussion of Comments

Comments and Responses

The USPTO published a proposed rule on July 31, 2019, soliciting comments on the proposed fee schedule. In response, the USPTO received comments from four intellectual property organizations and 40 individuals, attorneys, law firms, corporations, and other associations. These comments are posted on the USPTO's website at

https://www.uspto.gov/FeeSettingAndAdjusting.

The summaries of comments and the Office's responses to the written comments follow.

General Fee Setting Approach

Comment 1:

One commenter stated support for the proposed patent fee schedule. The commenter noted that the USPTO must continue to focus on reducing pendency and backlogged applications. Increased fees result in increased revenues, which allow for additional examiners to be hired. The commenter expressed that an increase in funding for examining allows applications to be processed faster and reduces the current backlog. Further, the focus on increasing up-front fees allows the USPTO to collect fees for the most cost-intensive operations.

Response:

The USPTO appreciates the feedback from the commenter and is committed to achieving the goals developed in consultation with the stakeholder community as set forth in the Strategic Plan. The USPTO has carefully considered the balance of front-end and back-end fees. In this Final Rule, the balance between front-end and back-end fees is not significantly impacted. However, as certain technology lifecycles grow shorter, it is important that the USPTO not rely too heavily on fees paid late in the life of a patent. Therefore, the Office is slightly rebalancing the fees to recover the initial search and examination costs earlier in the life of the patent.

Comment 2:

Several commenters expressed support for the Office's work to ensure adequate funding. They are supportive of the goals of this fee setting, especially recovering aggregate estimated costs of patent operations and optimizing patent timeliness and quality.

Response:

The USPTO appreciates the feedback from the commenter and is committed to pursuing the goals in the Strategic Plan in a fiscally responsible manner.

Comment 3:

One commenter expressed support for the operating reserve, its goals, and the detailed supporting information contained in the NPRM.

Response:

The USPTO appreciates the feedback from the commenter. The operating reserve is an important tool that helps mitigate financial and operational risks and facilitate execution of multi-year plans in order to achieve the goals set forth in the Strategic Plan. The operating reserve also allowed the USPTO to remain open

and operational during the 35-day lapse in appropriations during FY 2019.

Comment 4:

One commenter stated that the USPTO should continue to prioritize patent quality, and if fee increases are needed, the increased resources should be devoted to ensuring examiners receive the time and resources they need to assess each application and all the relevant prior art. The commenter noted it is important that patent policy be crafted to limit the possibility that low-quality patents get in the way of technical and economic progress.

Response:

The Office's strategic goal to optimize patent quality and timeliness recognizes the importance of innovation as the foundation of American economic growth and competitiveness. Through this goal, the Office diligently works to balance timely examination with improvements in patent quality, particularly the reliability of issued patents. Based on assumptions and estimates found in the FY 2021 Budget, the fee schedule in this Final Rule will recover the aggregate estimated costs of patent operations, including achieving the Office's strategic goals.

Comment 5:

One commenter suggested that the Office consider phasing in fee increases to provide patentees adequate time to prepare for and adapt to the increased costs.

Response:

The Office realizes that higher fees will affect budgets. In the same way, the USPTO is experiencing an increase in aggregate costs, and the fee increases are necessary in order to deliver on the priorities listed in the Strategic Plan. The Office notes the time frame associated with the fee setting process inherently provides for the phasing in of fee changes. For example, this fee setting process began with a proposal presented to the PPAC in August 2018, and the fee schedule in this Final Rule will not take effect until fall 2020, with the non-DOCX filing surcharge effective January 2022. As part of the fee setting process, the public had two opportunities to review and comment on the fee proposals. The public and PPAC feedback allowed the USPTO to refine the fee proposal in both the NPRM and this Final Rule.

Comment 6:

One commenter noted stakeholder concerns about the increasing uncertainty of patent rights and encouraged the USPTO to carefully consider whether excessive fee increases might have the unintended consequence of discouraging filings.

Response:

The Office appreciates the commenter's concern and carefully considered the fee schedule in this Final Rule. The Office undertook an elasticity analysis (

i.e.,

an assessment of the degree to which changes in fee rates may affect demand for services) as part of this rulemaking, and a description of elasticity estimates can be found at

https://www.uspto.gov/FeeSettingAndAdjusting.

Comment 7:

One commenter expressed support for the reduction in fees based on organization size.

Response:

The USPTO appreciates the feedback from the commenter and is committed to providing, as allowed by statute, fee reductions for small and micro entity innovators to facilitate access to the patent system.

Comment 8:

Multiple commenters noted the need for the USPTO to consider smaller entities when raising fees. Some noted that fee increases are prohibitive for

pro se

inventors, small entities, and micro entities and feel they will be disproportionately affected by these fee increases.

Response:

The USPTO appreciates the concern about increasing fees. For small businesses and individual filers, the fees for small and micro entity rates are tiered, with small entities at a 50 percent discount and micro entities receiving a 75 percent discount on the fees for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents. Small or micro entity discounts are available for those who are eligible in 86 of the 125 large entity fee rates being set or adjusted in this Final Rule.

Comment 9:

One commenter requested that the USPTO carefully consider whether further reductions in the fees are possible for small entities, and especially micro entities, while maintaining the legitimate goals articulated in the fee proposal. Similarly, another commenter suggested that, instead of increasing the fees, the USPTO could provide more financial assistance to individual inventors who can prove their individual inventor status.

Response:

The Office does not have the legal authority to provide further reductions in the fees for small and micro entities or to provide direct financial assistance. However, the USPTO notes that under the fee structure included in this Final Rule, an indirect financial assistance to small and micro entities is provided in the form of subsidizing the cost of patent application prosecution. For example, the costs to the Office, from filing through issue, exceed the fees paid by a micro entity who maintains a patent through the full term. Further, small entity fees only cover the costs to the Office if a patent is maintained for the full term. Therefore, maintenance fees paid by large entity patentees and small entity patentees who maintain their patent for a full term are used in part to subsidize the filing, search, and examination costs for all applicants, including small and micro entities.

Comment 10:

One commenter questioned what the Office could do to encourage greater participation by small and micro entities in obtaining and maintaining patents.

Response:

Helping small businesses and independent inventors with limited resources is important to the USPTO. It has several free or reduced fee programs to assist independent inventors and small businesses in securing patent protection for their inventions, such as the Patent Pro Bono Program, Pro Se Assistance Program, and Law School Clinic Certification Program. More information on these programs can be found on the USPTO website:

•

https://www.uspto.gov/ProBonoPatents

•

https://www.uspto.gov/ProSePatents

•

https://www.uspto.gov/LawSchoolClinic

Another advantage that the USPTO offers for small and micro entities is reduced fees. An applicant who meets the micro entity requirements is eligible for a 75 percent reduction on most fees, and small entity status offers a 50 percent fee reduction.

Comment 11:

One commenter stated that it is important to keep barriers to entry (fees) low enough that startups can obtain patents (

e.g.,

application and examination fees), maintain them (

e.g.,

maintenance fees), and challenge others' low-quality patents that should not have been issued in the first place (

e.g.,

AIA trial fees). The commenter stated it is essential for startups to be able to reap the benefits at each stage.

Response:

The USPTO agrees that it is important to keep front-end fees low enough so as not to prevent entry into the patent system. The USPTO also designs the fee structure so that fees to obtain and maintain a granted patent increase only as the age of the patent increases to minimize the financial impact early in the life of a patent application or patent. In this Final Rule, the balance between front-end and back-end fees is not significantly impacted. The USPTO continues to set front-end fees below the cost to the Office to provide those services, in order to encourage innovation. While this Final Rule increases the issue and first stage maintenance fees, the fee schedule continues to maintain those fees below second stage maintenance fees and keeps the balance of front-end and back-end fees substantially the same. The

USPTO also maintains small and micro entity discounts for the fees for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents.

Comment 12:

One commenter suggested that the Office should reduce the cost of filing certain patent applications by allowing an applicant to defer payment of some fees without penalty.

Response:

In the future, the USPTO may consider changes to the timing of fee payments for search and examination. Currently, however, except for provisional applications, each application for a patent requires the appropriate search and examination fees in addition to the patent application filing fees. Deferring payment of some fees would require a large enough operating reserve to sustain operations during the period in which fee collections would be lower due to the delayed payment of fees. The adjusted fee schedule set forth in this rulemaking will help replenish and grow the patent operating reserve to position the USPTO for future changes, such as those suggested by the commenter.

Comment 13:

One commenter noted the USPTO's tendency to follow or align with patent practices in other countries, in fee structure and other aspects of the patent system. The commenter hopes the leaders and government agencies of our country are aware of the long-term consequences of the actions they take.

Response:

The Office and the administration carefully analyze all policy decisions before implementation. This includes considering best practices of other countries' IP systems. When appropriate, the Office may implement practices similar to other national IP offices.

Changes to policies are considered after public comments have been reviewed and a cost-benefit analysis has been performed (Regulatory Impact Analysis). Enactment of policy change occurs if generally supported by public comment and the corresponding cost-benefit analysis displays a positive, long-term impact.

Across-the-Board Adjustment to Patent Fees

Comment 14:

One commenter stated the fee increase should only reflect a cost-of-living increase to keep pace with inflation.

Response:

The USPTO appreciates the concern about rising fees and continuously evaluates its processes and costs to ensure the Office is achieving the optimal value from the resources used to carry out operations. Despite that, the USPTO must adjust fees to recover the aggregate estimated cost to the Office for processing, activities, services, and materials relating to patents, including cost-of-living increases and administrative costs of the Office with respect to such patent fees over a multi-year period.

Comment 15:

One commenter expressed that the fee for the USPTO-assisted change of address should be eliminated.

Response:

The USPTO would like to remind customers that they are able to perform this process online as a self-service option free of charge. The change of address fee is only charged if it is requested that the USPTO perform this task instead of the customer utilizing the self-service options. The USPTO is not targeting this fee for a specific increase. Instead, this fee is increasing as part of the group of fees subject to the 5 percent across-the-board adjustment to patent fees. This fee was set in a previous rulemaking, and that structure is not changed in this Final Rule.

Comment 16:

One commenter expressed that the fee for the USPTO-assisted recovery of ID or reset of password should be eliminated.

Response:

The fee for USPTO-assisted recovery of ID or reset of password for registered practitioners has been removed as unnecessary.

Comment 17:

One commenter noted that the NPRM does not state a rationale for the second and subsequent RCE fee to be different than the RCE fee for a first request.

Response:

The individual RCE fees were set at different amounts in a previous rulemaking, the January 2013 Final Rule (which set forth the rationale for the difference in those fees), and that structure is not changed in this Final Rule. The USPTO is not targeting these fees for a specific increase. Instead, the fees for RCEs—both for the first request and for second and subsequent requests—are being adjusted by the across-the-board adjustment to patent fees.

Comment 18:

One commenter wrote that the increase in the second and subsequent RCE fee would hurt small entity applicants and small entity law firms. The Initial Regulatory Flexibility Analysis offered no explanation justifying that differential effect on small entities.

Response:

The USPTO is not targeting the RCE fees for a specific increase. Instead, the fees for RCEs—both for the first request and for the second and subsequent requests—are being adjusted by the across-the-board adjustment to patent fees. The USPTO would like to note that small and micro entity applicants will continue to receive the small and micro entity discounts, which set the fee rates significantly below cost to examine second and subsequent RCE filings. Additionally, the Regulatory Flexibility Analysis analyzed applicants' sensitivity to changes in fee rates by entity size, including RCE fees for small entities. This impact is also included in the RIA completed for this rulemaking, which is available at

https://www.uspto.gov/FeeSettingAndAdjusting.

Comment 19:

One commenter stated that the methodology for calculating the unit cost for second and subsequent RCE filings is not in the Activity Based Information and Patent Fee Unit Expense Methodology document.

Response:

The commenter can find this information in the “Setting and Adjusting Patent Fees during Fiscal Year 2020—Activity Based Information and Patent Fee Unit Expense Methodology” document, on page 22, before Table 2. “Similarly, the same incremental approach is used to determine the expense of the second and subsequent RCE. The two scenarios presented to determine incremental expense for the second RCE are slightly different than for the first RCE, but the same basic method applies. The scenarios are: (1) The expense of a single application that has already performed one RCE, and (2) the expense of a single application that has completed a second RCE. All other calculation methods remain the same.” Additionally, the detail on the exact calculations for FYs 2016, 2017, and 2018 can be found on page 41 of the “USPTO Fee Unit Expense Calculation Detail” document under the heading “Latest patent fee setting information.” Both documents can be found at

https://www.uspto.gov/FeeSettingAndAdjusting.

Comment 20:

One commenter suggested that the proposed fee for submission of an information disclosure statement (IDS) is too high and may discourage prompt disclosure of material references. The commenter suggested that if the fee is increased, the Office could consider a tiered rate structure with a discounted IDS fee for submitting an IDS with fewer than five or 10 references, or below a certain page count for non-patent literature.

Response:

There is no fee for filing of an IDS if it is filed before the mailing of a first Office action. The USPTO is not targeting these fees for a specific increase. Instead, the fee for submission of an IDS is increasing as part of the group of fees subject to the 5 percent across-the-board adjustment to patent fees that is being set to help the USPTO

keep pace with inflationary cost increases. The single IDS fee was set in a previous rulemaking, and that structure is not changed in this Final Rule. The USPTO will consider the commenter's suggestions for changes to the structure and fee amount for IDS fees for future fee adjustments.

Comment 21:

One commenter suggested the proposed increase to the fee for extension of time for response within the first month is too high. The commenter stated the increased fee makes it more difficult for practitioners to provide a thorough response, especially for complex issues where input and review may be required from multiple inventors, licensees, and/or owners. The commenter indicated that the need for extensions of time may be outside of the applicant's control when extensions are required to maintain pendency after a response to a final Office action.

Response:

The Office recognizes that there are instances in which an applicant would need to extend the time period for responding to an Office action. However, an applicant may file a first after final reply within two months of the final rejection to avoid some of the costs associated with maintaining pendency after a reply to a final Office action. The USPTO is not targeting these fees for a specific increase. Instead, all fees for extensions of time for response are being increased as part of the 5 percent across-the-board adjustment to patent fees that are being set to help USPTO keep the pace with inflationary cost increases. Differences in the rate of increase result from rounding (the rounding rules are discussed in Part V: Individual Fee Rationale, A. Across-the-Board Adjustment to Patent Fees).

Comment 22:

One commenter suggested that increases in fees for extensions of time for response will fall disproportionately on small firms and solo practitioners. The commenter noted that fees for extensions of time for response beyond the third month are greater than the filing fees for a new application. The commenter believes that, with essentially no cost to the USPTO, this appears to be a penalty, not a reasonable fee increase.

Response:

These fees were set in a previous rulemaking, and the structure is not changed in this Final Rule. The USPTO is not targeting these fees for a specific increase. Instead, the increase in fees for extensions of time for response is part of the across-the-board adjustment to patent fees that is being set to help the USPTO keep pace with inflationary cost increases. Extension of time fees are intended to encourage early submission of an applicant's response to facilitate compact prosecution.

Comment 23:

One commenter stated that the increases in the notice of appeal fee and fee for forwarding an appeal in an application or

ex parte

reexamination proceeding to the Board should take into account the rate of reversal, in that the applicant should not bear the entirety of the cost of what could be interpreted as an error made by the Office.

Response:

The Office appreciates the feedback. Regardless of the outcome, the cost to render a decision on the appeal remains the same. The Office has limited the increase in both the notice of appeal fee and the fee for forwarding an appeal in an application or

ex parte

reexamination proceeding to the Board to the 5 percent across-the-board adjustment to patent fees. As a matter of policy, the Office has set the combined notice of appeal and fee for forwarding an appeal in an application or

ex parte

reexamination proceeding to the Board to less than half of the unit cost for deciding an appeal.

Targeted Fee Adjustments

Maintenance Fee Surcharge

Comment 24:

One commenter asked what information the USPTO had about the use of the maintenance fee grace period and the consequences. The commenter was concerned that higher fees could lead to greater conflict possibilities between clients and attorneys. A commenter suggested that the Office initiate procedures to notify patentees, by United States Postal Service (USPS) mail and email to all registered email addresses, of both the due date for the maintenance fees to be paid and entrance into the grace period.

Response:

The USPTO continuously monitors maintenance fee payments, including payments made during the grace period. While over 95 percent of maintenance fee payments are made in the six-month payment window prior to the grace period, the Office does recognize that a patentee may need the additional six-month grace period to make a decision on renewing their patent rights. Therefore, the Office lowered the proposed maintenance surcharge fee to $500 for large entities in the NPRM, compared to the initial proposal of $1,000.

It is the responsibility of the patentee to ensure that maintenance fees are paid in a timely manner to prevent the expiration of a patent. Patentees are expected to maintain their own record and docketing systems. The Office does provide some notices as reminders that maintenance fees are due, but the notices, errors in the notices or in their delivery, or the lack or tardiness of notices in no way relieve a patentee from the responsibility to make timely payment of each maintenance fee to prevent the patent from expiring by operation of law. The notices provided by the Office are courtesies in nature and intended to aid patentees. The Office's provision of notices in no way shifts the burden of monitoring the time for paying maintenance fees on patents from the patentee to the Office.

Comment 25:

One commenter stated that those who delay payment of a maintenance fee include small entities, micro entities, and independent inventors, for whom the payment of a maintenance fee is often a significant investment. Forcing such entities to pay a higher surcharge fee does not appear to be justified in this circumstance.

Response:

The Office recognizes that the maintenance fee surcharge during the grace period affects small and micro entities as well as independent inventors. The Office lowered the proposed maintenance fee surcharge to $500 for large entities in the NPRM, compared to the USPTO's initial proposal to PPAC of $1,000. Additionally, small and micro entity discounts apply to the maintenance fee surcharge as well as to the maintenance fees themselves.

Comment 26:

One commenter noted that no cost to the public of the six-month grace period was identified in the NPRM. Additionally, the commenter noted that a competitor would still need to wait until the expiration of the grace period to know that the maintenance fee has not been paid.

Response:

This rulemaking does not modify the maintenance fee grace period, nor does it change the timeline for submitting maintenance fee payments. The rulemaking simply adjusts the surcharge fee for submitting a maintenance fee payment during the six-month grace period, which provides patentees the option for an additional six months to submit maintenance fee payments. It is not anticipated that this fee adjustment will have a significant impact on patentees, since more than 95 percent of patent holders submit maintenance fee payments prior to the grace period. The impact of the fee adjustment to the maintenance fee grace period is included in the cost-benefit analysis provided in the RIA, available at

https://www.uspto.gov/FeeSettingAndAdjusting.

The Office cannot provide individuals legal advice on the status of a patent. The Office's provision of notices of maintenance fee payments in no way shifts the burden of

monitoring the time for paying maintenance fees on patents from the patentee or other relevant stakeholders to the Office.

Comment 27:

One commenter wanted to know what other IP offices have late payment surcharges for maintenance fees, along with more information on those offices' maintenance/annuity schedules.

Response:

The USPTO allows for payment of maintenance fees up to six months prior to the payment due date and up to six months after the due date (grace period) if accompanied with a surcharge. This practice is similar to other national or regional IP offices like the European Patent Office and the Japan Patent Office. Both of these offices impose a substantial surcharge for late payment of such fees, which, in the case of Japan, is a 100 percent surcharge for late payment.

Each national or regional IP office has its own maintenance/annuity schedule, which can be found on its website. Below are links to two of the national/regional IP offices' fee schedules, which include maintenance/annuity fees:

European Patent Office:

•

Fee Schedule:

https://my.epoline.org/portal/classic/epoline.Scheduleoffees

•

About Renewal Fees:

https://www.epo.org/law-practice/legal-texts/html/guidelines/e/a_x_5_2_4.htm

Japan Patent Office:

•

Fee Schedule:

https://www.jpo.go.jp/e/system/process/tesuryo/hyou.html

•

About Renewal Fees:

https://www.jpo.go.jp/e/faq/yokuaru/fees.html#anchor4-3

Comment 28:

One commenter stated that charging surcharge fees for late payments on patent maintenance filings and encouraging earlier payment defies Congress. In the commenter's opinion, Congress determined that the public should have clear notice of the expiration of a patent on the 4th, 8th, and 12th anniversaries of it being issued. The commenter believed the USPTO's proposal suggests the public should know on the 3

1/2

, 7

1/2

, and 11

1/2

anniversaries. The commenter suggested there is no statutory delegation noted by the USPTO of the authority to hold such an opinion, let alone act on it.

Response:

The USPTO has specific statutory authority to charge fees under title 35 of the U.S.C. and the Trademark Act of 1946. The USPTO also has specific authority to set and adjust those fees as in the current rulemaking under section 10 of the AIA. This Final Rule does not modify the maintenance fee grace period, which is set in 35 U.S.C. 41(b)(2), nor does it change the timeline for submitting maintenance fee payments. The rulemaking simply adjusts the surcharge fee for submitting a maintenance fee payment during the six-month grace period. The Office cannot provide legal advice to individuals on the status of a patent, but a higher surcharge may encourage more patent holders to pay maintenance fees before the grace period begins.

Request for Expedited Examination of a Design Application Fee

Comment 29:

Several commenters stated that the increase has not been adequately justified as based on the cost of recovery or value to the recipient, noting that while the fee had not increased since November 2000, an increase of 1.6 percent annually would only put the fee at $1,256 in 2021. They further stated that the NPRM only opaquely describes the Office's need without any calculation or demonstration of burden hours and threatens to close the program without the full increase, improperly discouraging applicant behavior. Commenters asked for further justification from the Office for the amount of the proposed increase. One commenter also suggested the Office may consider removing the requirement of a pre-examination search, which would help applicants by alleviating some of the financial burden associated with filing a request for expedited examination.

Response:

The Office received numerous comments that the fee increase to $2,000 was too great and would deter applicants from using the service. These comments were considered, and in response, the Office has chosen not to implement the proposed fee of $2,000. Instead, the non-discounted fee for an application will be set at $1,600. Discounts for small and micro entities will continue to be available.

Applicants who wish to have the examination of their design applications expedited must file a request for expedited examination and comply with the other requirements set forth in 37 CFR 1.155. The Office notes that the unit cost presented for this service only accounts for the initial processing of the request and does not include additional resources expended. From the time a request for expedited examination is filed in a design application, the application is expedited at every touch point during its prosecution. This includes initial processing, deciding the request to expedite, search and examination, publication, and any appeal that may be taken to the Board. The pendency for these applications, from granting of the request to expedite until first Office action, is currently just over one month. Expediting each step of the process for these applications causes the Office to expend resources that increase its costs with respect to these applications. Further, the Office needs to account not only for the increase in costs over the past twenty years, but also the anticipated costs of providing this service into the future, even with maintaining the requirement for a pre-examination search. Accordingly, the Office determined that the fee for this service needs to be increased if the service is to be continued. The USPTO believes that this new fee amount, as well as the associated small and micro entity discounts, will provide the Office the ability to continue offering this service to applicants. Further, the Office notes this is an optional fee paid only by those who wish to receive the benefit of a faster decision on their application.

Comment 30:

A few commenters noted that design applications are limited to a single claim, meaning the proposed increase would cause applicants to pay roughly twice as much to expedite the examination of four design patent claims as they would to expedite the examination of four utility patent claims.

Response:

The Office acknowledges that design applications are limited to a single claim. The process of examining a design application differs from the process of examining a utility application. Based on the lifetime costs of expediting a design application, the Office has determined that the fee for this service needs to be increased if the service is to be continued. However, the Office has carefully considered all of the comments and, in response, has chosen not to implement the proposed fee of $2,000. Instead, the non-discounted fee for an application will be set at $1,600. The USPTO believes that this new fee amount, as well as the associated small and micro entity discounts, will provide the Office the ability to continue offering this service to applicants.

Comment 31:

Multiple commenters stated that the proposed increase in the request for expedited examination of a design application fee would disproportionately harm individual inventors and small entities.

Response:

The Office has carefully considered all of the comments and, in response, has chosen not to implement the proposed fee of $2,000. Instead, the non-discounted fee for an application will be set at $1,600. The Office will continue to offer the 50 percent small entity discount and the 75 percent

micro entity discount, which should not disproportionately harm individual inventors and small entities. The fees set in this Final Rule make the fee for small entities $800 and the fee for a micro entity $400. Further, the Office notes this is an optional fee paid only by those who wish to receive the benefit of a faster decision on their application.

Comment 32:

A few commenters noted that the process to obtain design protection in the U.S. is significantly longer than in many countries. Not all applicants and circumstances can wait for the normal lengthy U.S. examination process to be completed. The Office should not impose further barriers to obtaining timely design protection for those applicants who may need it.

Response:

The process to obtain a design patent in the U.S. takes longer than in some other countries because, unlike some other patent systems, the USPTO performs an examination for design patent applications. The Office agrees that expedited examination can be a benefit to applicants in numerous situations. As a result, the Office will continue to offer expedited examination for design applications. Additionally, the Office has chosen not to raise the fee for expedited examination of design applications to $2,000. Instead, the large entity fee for an application is being raised to only $1,600. The Office will continue to offer the 50 percent small entity discount and the 75 percent micro entity discount.

Comment 33:

One commenter noted that some industrial designs can be protected through copyright law but stated that designs that do not qualify for copyright protection should have an affordable expedited procedure to obtain IP rights. The commenter also noted that copyright law might not always be effective for protection of designs.

Response:

An applicant should determine what forms of IP protection are appropriate for each design. For those inventions where an applicant has determined that design patent protection is warranted, the applicant may expedite the examination of an application, when needed, as the Office will continue to offer the service. Based on comments received, the Office has chosen not to raise the fee for expedited examination of design applications to $2,000. Instead, the large entity fee for an application is being raised to only $1,600. The Office will continue to offer a discount for small and micro entities.

Utility and Reissue Issue and Maintenance Fees

Comment 34:

One commenter noted that a stated rationale for the proposed substantial increases to issue and first stage maintenance fees is that “technology lifecycles [have grown] shorter,” and, therefore, “It is important that the USPTO not rely too heavily on fees paid late in the life of a patent.” The commenter argued that in many industries, including telecommunications and pharmaceuticals, this is not necessarily true. Therefore, the commenter did not believe that shifting the burden of fee increases to the issue and first maintenance fees is warranted.

Response:

In accordance with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the USPTO cannot differentiate IP policy by technology. Therefore, the Office must structure its fee schedule to align with the technology lifecycles of all industries and cannot establish different fee schedules for different technologies.

While many technologies have not experienced a change in their lifecycle, for others there have been significant changes. Additionally, the aggregate average patent lifecycle is impacted by changes in the composition of patents granted by the USPTO. To account for these changes, the USPTO is increasing the issue and first stage maintenance fees. There has not been an adjustment to these fees since 2013.

Comment 35:

One commenter noted that it is important to set fees so that, during the entire lifecycle of a patent, a patentee can pay fees at points in time where sufficient information is available to make an appropriate decision about the commercial merits of obtaining/maintaining a patent.

Response:

The fees over the life of a patent begin low and then gradually increase. The USPTO carefully considered the balance of front-end and back-end fees. In this Final Rule, the balance between front-end and back-end fees is not significantly impacted. The Office is slightly rebalancing the back-end fees to recover the initial search and examination costs earlier in the life of the patent.

AIA Trial Fees

Comment 36:

Several commenters stated that the Office should finish collecting and analyzing costs before increasing the AIA trial request fee and the post-institution fee. One commenter indicated that pre-institution costs may decrease due to higher settlement rates and lower institution rates. Other commenters indicated that most of the additional work after

SAS Institute Inc.

v.

Iancu,

138 S. Ct. 1348 (2018) (

SAS

) occurs post-institution. Accordingly, the commenters propose that the increase should be limited to the post-institution fee.

Response:

The USPTO is committed to maintaining the PTAB's ability to provide fair, timely, and high-quality decisions. The

SAS

decision significantly affected the operations of the PTAB by increasing the amount of time spent per case and, thereby, increasing costs in both pre- and post-institution stages. The NPRM proposed fees based on the Office's best estimates, taking into consideration the cost increases already experienced, plus future inflationary cost growth. Since then, the Office has collected and analyzed the additional cost data available through the end of FY 2019. In addition, the Office has taken into account uncertainties resulting from changes in the way in which AIA trials are conducted. These uncertainties are discussed further below.

While the unit cost data shows that post-institution costs have increased more than pre-institution costs, pre-institution costs have also increased. The Office has modified its pre-institution practice to take into account the Supreme Court's

SAS

decision. For example, prior to

SAS,

the PTAB did not always address all arguments at institution. Post-

SAS,

for purposes of deciding whether to institute trial on a petition, the Office has committed to provide details to the parties to the largest extent practicable, including responding to arguments in a patent owner's preliminary response that were not the basis for the decision whether or not to institute.

In addition, in response to requests from stakeholders, the Office has modified its approach to concurrent petitions challenging the same patent or patents in the same family filed by the same petitioner. Specifically, the Board now considers whether to exercise its discretion to limit the number of these parallel petitions that may, if the threshold is met, be instituted. Similarly, the Board has undertaken a closer review of petitions to determine whether they raise issues that were considered by the examiner during

ex parte

prosecution or during other proceedings before the Office. To evaluate these requests, the Board must make close comparisons between the challenges to determine whether the Board should exercise its discretion and institute a trial. Such comparisons require analyzing the prior art cited in the petitions and evaluating the reasons given by the petitioners for filing additional petitions. As this development in AIA trial practice is relatively recent (within the last 12 months), the Office does not yet have an

accurate model to predict how many requests it will receive and how much additional effort will be necessary to evaluate them. To account for these uncertainties, it is necessary to set the pre-institution fees for

inter partes

reviews at $19,000. This 23 percent increase is less than the 25 percent increase proposed in the NPRM but above the FY 2019 unit cost. The pre-institution fee is set at more than the FY 2019 unit cost to take into account the uncertainties outlined above that arose in that year and are expected to continue in FY 2020 and beyond.

The post-institution fee has been set at $22,500 for

inter partes

review, which is above the increase proposed in the NPRM but considerably lower than the FY 2019 actual unit cost. As a result of the

SAS

decision, there has been an increase in the number of remands to the PTAB, which has increased the post-institution amount of work and costs. At this time, it is unclear whether the post-institution costs will remain at the current level or will decrease after the

SAS

remands have been fully addressed. Accordingly, the post-institution fee is set above the proposed NPRM fee, which is above the pre-

SAS

FY 2017 unit costs but below the post-

SAS

FY 2019 unit costs. The Office continues to evaluate the data as it becomes available to better understand the long-term impact of

SAS

on post-institution costs.

Post-grant review and covered business method review fees will be maintained at the rates proposed in the NPRM, at $20,000 for pre-institution and $27,500 for post-institution. These fee rates are above the respective

inter partes

review fees, due to the additional work involved with post-grant and covered business method reviews, but below the FY 2019 actual unit costs for post-grant reviews and covered business method reviews due to uncertainties about future costs. Specifically, post-grant reviews and covered business method reviews may raise additional issues beyond those raised in

inter partes

reviews, such as patent eligibility, written description, enablement, indefiniteness, and public use. Further, given the additional issues that may be raised, post-grant reviews and covered business method reviews provide 33 percent higher word limits for petitions and patent owner responses and preliminary responses. While the actual unit costs for post-grant and covered business method review have typically been higher than the unit costs for

inter partes

reviews for these reasons, it is harder to determine the precise cost of post-grant and covered business method reviews. Due to a relatively small number of trials (approximately 60 post-grant reviews or covered business method reviews annually), the data on actual unit costs can vary from year to year. Therefore, it rem

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