# Setting and Adjusting Patent Fees During Fiscal Year 2025

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2024-06250

## Record

- **Collection:** Federal Register
- **Document type:** Proposed Rule
- **Published:** April 3, 2024
- **Citation:** 89 FR 23226

## Text

DEPARTMENT OF COMMERCE
Patent and Trademark Office
37 CFR Parts 1, 41, and 42
[Docket No. PTO-P-2022-0033]
RIN 0651-AD64
Setting and Adjusting Patent Fees During Fiscal Year 2025

AGENCY:

United States Patent and Trademark Office, Department of Commerce.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The United States Patent and Trademark Office (USPTO) proposes to set or adjust patent fees as authorized by the Leahy-Smith America Invents Act (AIA), as amended by the Study of Underrepresented Classes Chasing Engineering and Science Success Act of 2018 (SUCCESS Act). The proposed fee adjustments are needed to provide the USPTO with sufficient aggregate revenue to recover the aggregate costs of patent operations in future years (based on assumptions and estimates found in the agency's Fiscal Year 2025 Congressional Justification (FY 2025 Budget)), including implementing the USPTO 2022-2026 Strategic Plan (Strategic Plan).

DATES:

The USPTO solicits comments from the public on this proposed rule. Written comments must be received on or before June 3, 2024 to ensure consideration.

ADDRESSES:

Written comments on proposed patent fees must be submitted through the Federal eRulemaking Portal at
https://www.regulations.gov.
To submit comments via the portal, commenters should go to
https://www.regulations.gov/docket/PTO-P-2022-0033
or enter docket number PTO-P-2022-0033 on the
https://www.regulations.gov
homepage and select the “Search” button. The site will provide search results listing all documents associated with this docket. Commenters can find a reference to this document and select the “Comment” button, complete the required fields, and enter or attach their comments. Attachments to electronic comments will be accepted in Adobe portable document format (PDF) or Microsoft Word format. Because comments will be made available for public inspection, information that the submitter does not desire to make public, such as an address or phone number, should not be included in the comments.

Visit the Federal eRulemaking Portal for additional instructions on providing comments via the portal. If electronic submission of comments is not possible, please contact the USPTO using the contact information below in the
FOR FURTHER INFORMATION CONTACT
section of this document for special instructions.

FOR FURTHER INFORMATION CONTACT:

Brendan Hourigan, Director, Office of Planning and Budget, at 571-272-8966, or
Brendan.Hourigan@uspto.gov;
or C. Brett Lockard, Director, Forecasting and Analysis Division, at 571-272-0928, or
Christopher.Lockard@uspto.gov
.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Introduction

The USPTO publishes this notice of proposed rulemaking (NPRM or proposed rule) under section 10 of the AIA (section 10), Public Law 112-29, 125 Stat. 284, as amended by the SUCCESS Act, Public Law 115-273, 132 Stat. 4158, which authorizes the Under Secretary of Commerce for Intellectual Property and 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 agency. Section 10 prescribes that fees may be set or adjusted only to recover the aggregate estimated costs to the USPTO for processing, activities, services, and materials relating to patents, including administrative costs with respect to such patent fees. Section 10 authority includes flexibility to set individual fees in a way that furthers key policy factors, while considering 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. PPAC held a public hearing on the USPTO's preliminary patent fee proposals on May 18, 2023, and released a report (PPAC Report) on August 14, 2023, containing its comments, advice, and recommendations on the preliminary fee proposals. The USPTO considered and analyzed the PPAC Report before publishing the fee proposals in this NPRM.

B. Purpose of This Action

Based on a biennial review of fees, costs, and revenues that began in fiscal year (FY) 2021, the USPTO concluded that fee adjustments are necessary to provide the agency with sufficient financial resources to facilitate the effective administration of the U.S. patent system, including implementing the USPTO 2022-2026 Strategic Plan, available on the agency website at
https://www.uspto.gov/StrategicPlan.
The USPTO reviewed and analyzed the overall balance between the agency's estimated revenue and costs over the next five years (based on current projections) under this proposed rule. The proposed fees will help stabilize the USPTO's finances by offsetting the forecasted increase in aggregate costs and maintaining the patent operating reserve in the desired operating range. The patent operating reserve mitigates financing risk and enables the agency to deliver reliable and predictable service levels, while positioning it to undertake initiatives that encourage participation in the innovation ecosystem.

The individual fee proposals align with the USPTO's strategic goals and its fee structure philosophy, including the agency's four key fee setting policy factors: (1) promote innovation strategies; (2) align fees with the full costs of products and services; (3) facilitate effective administration of the U.S. patent system; and (4) offer application processing options as discussed in detail in Part IV: Rulemaking Goals and Strategies. The proposed fee adjustments will enable the USPTO to accomplish its mission to drive U.S. innovation, inclusive capitalism, and global competitiveness. The USPTO's goal is to drive innovation, entrepreneurship, and creativity for the benefit of all Americans and people around the world.

C. Summary of Provisions Impacted by This Action

The USPTO proposes to set or adjust 455 patent fees for undiscounted, small, and micro entities (any reference herein to “undiscounted entity” includes all entities other than those with established entitlement to either a small or micro entity fee discount, see Part II: Legal Framework for more information), including the introduction of 73 new fees.

Overall, the routine fees to obtain a patent (
i.e.,
filing, search, examination, and issue fees) will increase under this NPRM relative to the current fee schedule to ensure financial sustainability and accommodate increases needed to improve the predictability and reliability of patent intellectual property (IP) protection (discussed in detail below). Applicants who meet the eligibility criteria for small or micro entity discounts will continue to pay a reduced fee for the fees eligible for discount under AIA section 10(b). Additional information describing the proposed fee adjustments is included in Part V: Individual Fee Rationale in this rulemaking and in the

“Table of Patent Fees—Current, Proposed, and Unit Cost” (Table of Patent Fees) available on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting.

D. Summary of Costs and Benefits of This Action

This proposed rule is economically significant and requires a Regulatory Impact Analysis (RIA) under Executive Order 12866 Regulatory Planning and Review, (Sept. 30, 1993). The USPTO prepared an RIA to analyze the costs and benefits of the NPRM over a five-year period, FY 2025-2029. The RIA includes an analysis of how well the four alternatives align with the rulemaking strategies and goals, which are comprised of strategic priorities (goals, objectives, and key performance strategies) from the Strategic Plan; and fee setting policy factors. From this conceptual framework, the USPTO assessed the absolute and relative qualitative costs and benefits of each alternative. Consistent with OMB Circular A-4, “Regulatory Analysis,” this proposed rule involves a transfer payment from one group to another. The USPTO 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 proposed rule. The costs and benefits identified and analyzed 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 USPTO did not identify any monetized costs and benefits of this proposed rule, but found this proposed rule has significant qualitative benefits and only minimal costs.

The qualitative costs and benefits that the RIA assesses are: (1) fee schedule design—a measure of how well the fee schedule aligns to 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 described in the NPRM, Strategic Plan, and FY 2025 Budget. Based on the costs and benefits identified and analyzed in the RIA, the fee schedule proposed in this NPRM offers the highest net benefits. As described throughout this document, the proposed 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 proposed fee changes are targeted in support of one or more fee setting policy factors. Lastly, this proposed rule secures the aggregate revenue needed to maintain patent operations and achieve the strategic priorities encompassed in the rulemaking goals and strategies (see Part IV: Rulemaking Goals and Strategies). The proposed fee schedule produces sufficient aggregate revenue to fund the strategic objectives to issue and maintain robust and reliable patents; improve patent application pendency; optimize the patent application process to enable efficiencies for applicants and other stakeholders; and enhance internal processes to prevent fraudulent and abusive behaviors that do not embody the USPTO's mission. Table 1 summarizes the RIA results. Additional details describing the costs and benefits can be found in the RIA, available on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting.

Table 1—Proposed Patent Fee Schedule Costs and Benefits, Cumulative FY 2025-2029

Qualitative costs and benefits

Costs:

Fee Schedule Design
Minimal.

Benefits:

Secure Aggregate Revenue to Recover Aggregate Costs
Significant.

Fee Schedule Design
Significant.

Net Benefit

Significant benefit.

II. Legal Framework

A. Leahy-Smith America Invents Act—Section 10

The AIA was enacted into law on September 16, 2011. Public Law 112-29, 125 Stat. 284. Section 10(a) of the AIA authorizes the Director of the USPTO to set or adjust by rule any patent fee established, authorized, or charged under 35 U.S.C. for any services performed or materials furnished by the agency. Fees under 35 U.S.C. may be set or adjusted only to recover the aggregate estimated costs to the USPTO for processing, activities, services, and materials related to patents, including administrative costs to the agency with respect to such patent operations. See 125 Stat. at 316. Provided that 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) requires the Director to publish the final fee rule in the
Federal Register
and the USPTO's
Official Gazette
at least 45 days before the final fees become effective.

Section 10 authorized the USPTO to set or adjust patent fees within the regulatory process. The USPTO has used the AIA's fee setting authority to achieve its key fee setting policy factors and to generate the aggregate revenue needed to recover the aggregate costs of operations and strategic patent priorities in final rules published in FY 2013 (Setting and Adjusting Patent Fees, 78 FR 4212 (Jan. 18, 2013)), FY 2018 (Setting and Adjusting Patent Fees During Fiscal Year 2017, 82 FR 52780 (Nov. 14, 2017)), and FY 2020 (Setting and Adjusting Patent Fees During Fiscal Year 2020, 85 FR 46932 (Aug. 3, 2020) (FY 2020 Final Rule)).

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

The 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, updated section 10(i) terminates the Director's authority to set or adjust any fee under section 10(a) upon expiration of the 15-year period that began on September 16, 2011, and ends on September 16, 2026.

C. Unleashing American Innovators Act of 2022

On December 29, 2022, the President signed into law the Consolidated Appropriations Act, 2023, which included the Unleashing American Innovators Act (UAIA). The UAIA increased fee discounts for small entities from 50% to 60% and fee discounts for micro entities from 75% to 80% for fees for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents. The UAIA also increased fee discounts for small entities from 75% to 80% for filing a basic, nonprovisional utility application electronically. See Consolidated Appropriations Act, 2023, Public Law 117-328; Reducing Patent Fees for Small Entities and Micro Entities Under the Unleashing American Innovators Act of 2022, 88 FR 17147 (Mar. 22, 2023).

D. Small Entity Fee Reduction

Section 10(b) of the AIA, as amended by the UAIA, requires the USPTO to reduce by 60% 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.

E. Micro Entity Fee Reduction

Section 10(g) of the AIA amended 35 U.S.C. chapter 11, by adding section 123 concerning micro entities. The AIA, as amended by the UAIA, provides that the USPTO must reduce by 80% the fees for micro entities for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents.

F. Patent Public Advisory Committee Role

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

When adopting fees under section 10, the Director must provide PPAC the proposed fees at least 45 days prior to publishing in the
Federal Register
. PPAC then has 30 days to deliberate, consider, and comment on the proposal, as well as hold public hearing(s) on the proposed fees. Then, before the USPTO issues any final fees, PPAC must make a written report available to the public of the comments, advice, and recommendations of the committee regarding the proposed fees. The USPTO must consider and analyze any comments, advice, or recommendations received from PPAC before finally setting or adjusting fees.

Consistent with this framework, on April 20, 2023, the Director notified PPAC of the USPTO'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 on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting.
PPAC held a public hearing at the USPTO's headquarters in Alexandria, Virginia, on May 18, 2023, where members of the public were given an opportunity to provide oral testimony. Transcripts of the hearing are available for review on the USPTO website at
https://www.uspto.gov/sites/default/files/documents/PPAC_Hearing_Transcript-20230518.pdf.
Members of the public were also given an opportunity to submit written comments for PPAC to consider, and these comments are available on
Regulations.gov
at
https://www.regulations.gov/document/PTO-P-2023-0017-0001.
On August 14, 2023, PPAC issued a written report setting forth in detail their comments, advice, and recommendations regarding the preliminary proposed fees. The report is available on the USPTO website at
https://www.uspto.gov/sites/default/files/documents/PPAC-Report-on-2023-Fee-Proposal.docx.
The USPTO considered and analyzed all comments, advice, and recommendations received from PPAC before publishing this NPRM. Further discussion of the PPAC Report can be found in Part IV: Rulemaking Goals and Strategies and Part V: Individual Fee Rationale.

III. Estimating Aggregate Costs and Revenues

Section 10 prescribes that patent fees may be set or adjusted only to recover the aggregate estimated costs to the USPTO for processing, activities, services, and materials relating to patents, including administrative costs with respect to such patent fees. The following is a description of how the USPTO calculates aggregate costs and revenue.

Step 1: Estimating Prospective Aggregate Costs

Estimating prospective aggregate costs is accomplished primarily through the annual USPTO budget formulation process. The annual budget is a five-year plan for carrying out base programs and new initiatives to deliver on the USPTO's statutory mission and implement strategic goals and objectives. First, the USPTO projects 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 considers 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 USPTO). The USPTO looks at indicators such as the expected growth in Real Gross Domestic Product (RGDP), a 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.

The expected 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 USPTO uses a patent pendency model to estimate 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/learning-and-resources/statistics/patent-pendency-model.

Next, the USPTO calculates budgetary spending requirements based on the prospective aggregate costs of patent operations. First, the USPTO estimates the prospective costs of status quo operations (base requirements). Then, the base requirements are adjusted for anticipated pay increases and inflationary increases for the budget year and four outyears. The USPTO then estimates the prospective costs for expected changes in production workload and new initiatives over the same period. The USPTO reduces cost estimates for completed initiatives and known cost savings expected over the same five-year horizon. A detailed description of the budgetary requirements, aggregate costs, and related assumptions for the Patents program is available in the FY 2025 Budget.

The USPTO estimates that the Patents program will cost $3.973 billion in FY 2025, including $2.835 billion for patent examining; $90 million for patent trial and appeals; $159 million for patent information resources; $24 million for activities related to IP protection, policy, and enforcement; and $866 million for general support costs necessary for patent operations (
e.g.,
the patent share of rent, utilities, legal, financial, human resources, other administrative services, and Office-wide information technology (IT) infrastructure and IT support costs). See Appendix II of the FY 2025 Budget. In addition, the USPTO will transfer $2 million to the Department of Commerce Inspector General for audit support.

Table 2 below provides key underlying production workload projections and assumptions from the FY 2025 Budget used to calculate aggregate costs. Table 3 (see Step 2) presents the total budgetary requirements (prospective aggregate costs) for FY 2025 through FY 2029 and the estimated collections and operating reserve balances that would result from the proposed adjustments contained in this NPRM. 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. There are risks that could materialize over the next several years (
e.g.,
adjustments to examination capacity, recompetition of contracts, changes in workload, inflationary increases, 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 2—Patent Production Workload Projections, FY 2025-2029

Utility, plant, and reissue
(UPR)

FY 2025
FY 2026
FY 2027
FY 2028
FY 2029

Applications *
609,400
615,400
623,600
629,600
642,200

Application growth rate
2.1%
1.0%
1.3%
1.0%
2.0%

Production units **
557,000
577,300
602,300
621,100
639,000

Unexamined patent application backlog
817,900
820,200
811,600
789,400
780,000

Examination capacity ***
8,833
9,276
9,589
9,867
10,135

Performance measures (UPR):

Average first action pendency (Months)
20.7
20.7
21.0
20.6
21.3

Average total pendency (months)
26.1
27.2
26.6
26.4
25.7

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

** Each serial new (
i.e.,
non-request for continued examination) application carries 1 production unit or 2.0 counts, a fraction of which is awarded for each major Office action type. In most but not all cases, requests for continued examination carry a fraction of a production unit (
e.g.,
1.75 counts) and the credit for a first action is reduced by a corresponding amount.

*** In this table, Examination Capacity is the UPR examiners onboard at end-of-year, as described in the FY 2025 Budget.

Step 2: Estimating Prospective Aggregate Revenue

As described above in Step 1, the USPTO's prospective aggregate costs (as presented in the FY 2025 Budget) include budgetary requirements related to planned production, anticipated new initiatives, and a contribution to the patent operating reserve required for the USPTO to maintain patent operations and realize its strategic goals and objectives for the next five years. The prospective aggregate costs become the target aggregate revenue level that the new fee schedule must generate in a given year over the five-year planning horizon. To estimate aggregate revenue, the USPTO references the production models used to estimate aggregate costs and analyzes relevant factors and indicators to calculate or determine prospective fee workloads (
e.g.,
number of applications and requests for services and products).

Economic activity is an important consideration when developing workload and revenue forecasts for patent products and services because economic conditions affect patenting activity. 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. These indicators correlate with patent application filings, which are a key driver 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 USPTO 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 proposal 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 USPTO accounts for how applicant behavior will change at different fee amounts projected for the various patent services. The USPTO previously 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, request for continued examination (RCE) fees, appeal fees, AIA trial fees, and maintenance fees, including distinctions by entity size where applicable. Additional information about how the USPTO estimates elasticity is provided in “Setting and Adjusting Patent Fees during Fiscal Year 2020—Description of Elasticity Estimates,” available on the USPTO website at
https://www.uspto.gov/sites/default/files/documents/Elasticity_Appendix.docx.

Patent fees are collected for patent-related services and products at different points in time within the patent application examination process and over the life of the pending patent application and granted patent. Maintenance fee payments account for about half of all patent fee collections and 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 mean the USPTO collects fewer fees. 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 (see table 3) 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 patent issue fee workloads), 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 USPTO adjusts individual fee rates up or down based on cost and policy decisions, estimates the effective dates of new fee rates, and then multiplies the resulting fee rates by workload volumes (including elasticity adjustments) to calculate a revenue estimate for each fee. For the aggregate

revenue estimates shown below, the USPTO assumes that all proposed fee rates will become effective on January 18, 2025. Using these figures, the USPTO sums the individual fee revenue estimates, and the result is a total aggregate revenue estimate for a given year (see table 3). The aggregate revenue estimate also includes collecting $50 million annually in other income associated with recoveries and reimbursable agreements (offsets to spending).

Table 3—Patent Financial Outlook, FY 2025-2029

Dollars in millions
FY 2025
FY 2026
FY 2027
FY 2028
FY 2029

Projected fee collections
3,972
4,238
4,338
4,305
4,314

Other income
50
50
50
50
50

Total projected fee collections and other income
4,022
4,288
4,388
4,355
4,364

Budgetary requirements
3,975
4,102
4,268
4,431
4,600

Funding to (+) and from (−) operating reserve
47
186
120
(76)
(236)

End-of-year operating reserve balance
840
1,028
1,148
1,074
837

Over/(under) minimum level
522
700
807
720
469

Over/(under) optimal level
(35)
126
209
99
(175)

IV. Rulemaking Goals and Strategies

A. Fee Setting Strategy

The strategy of this proposed rule is to establish a fee schedule that generates sufficient multi-year revenue to recover the aggregate costs of maintaining USPTO patent operations. The overriding principles behind this strategy are to operate within a sustainable funding model that supports the USPTO's strategic goals and objectives, such as optimizing patent application pendency through the promotion of efficient operations and filing behaviors, issuing robust and reliable patents, and encouraging access to the patent system for all stakeholders.

The USPTO assessed this proposed rule for alignment with four key fee setting policy factors that promote a particular aspect of the U.S. patent system: (1) 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; (2) Aligning fees with the full costs of products and services recognizes that some applicants may use particular services in a more costly manner than other applicants (
e.g.,
patent applications cost more to process when more claims are filed); (3) Facilitating the effective administration of the U.S. patent system seeks to encourage patent prosecution strategies that promote efficient patent prosecution, resulting in compact prosecution and reduction in the time it takes to obtain a patent; and (4) Recognizing that patent prosecution is not a one-size-fits-all process and, where feasible, offering application processing options. Part V: Individual Fee Rationale describes the reasoning for setting and adjusting individual fees, including the design benefits of the proposed fee schedule. The RIA, available on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting,
also discusses fee schedule design benefits.

B. Fee Setting Considerations

The balance of this sub-section presents the specific fee setting considerations the USPTO reviewed in developing the proposed patent fee schedule: (1) historical cost of providing individual services; (2) the balance between projected costs and revenue to meet the USPTO's operational needs and strategic goals; (3) ensuring sustainable funding; and (4) PPAC's comments, advice, and recommendations on the USPTO's initial fee setting proposal. Collectively, these considerations inform USPTO's chosen rulemaking strategy.

1. Historical Cost of Providing Individual Services

The USPTO sets individual fee rates to further key policy considerations while considering the cost of a particular service. For instance, the USPTO has a longstanding practice of setting basic filing, search, and examination (“front-end”) fees below the actual cost of processing and examining applications to encourage innovators to take advantage of patent rights and protections.

The USPTO considers unit cost data provided by its Activity Based Information (ABI) program to decide how to best align fees with the full cost of products and services. Using historical cost data and forecasted application demands, the USPTO can align fees to the costs of specific patent products and services. Additional information on the USPTO's costing methodology in addition to the last three years of historical cost data is provided in the document titled “Setting and Adjusting Patent Fees during Fiscal Year 2025—Activity Based Information and Patent Fee Unit Expense Methodology,” available on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting.
Part V: Individual Fee Rationale describes the reasoning and anticipated benefits for setting some individual fees at cost, below cost, or above cost such that the USPTO recovers the aggregate costs of providing services through aggregate fee collections.

2. Balancing Projected Costs and Revenue

In developing this proposed patent fee schedule, the USPTO considered its current estimates of future year workload demands, fee collections, and costs to maintain core USPTO operations and meet its strategic goals, as found in the FY 2025 Budget and the Strategic Plan. The USPTO's strategic goals include: (1) driving inclusive U.S. innovation and global competitiveness, (2) promoting the efficient delivery of reliable IP rights, (3) promoting the protection of IP against new and persistent threats, (4) bringing innovation to impact, and (5) generating impactful employee and customer experiences by maximizing agency operations. The following subsections provide details regarding updated revenue and cost estimates, cost-saving efforts taken by the USPTO, and planned strategic improvements.

a. Updated Revenue and Cost Estimates

Projected revenue from the current fee schedule is insufficient to meet future budgetary requirements (costs) due largely to unforeseen economic and

policy factors since the USPTO last exercised its rulemaking authority to set patent fees in the FY 2020 Final Rule. As further discussed below, increased fee discounts for small and micro entities under the UAIA have reduced revenue estimates. Higher-than-expected inflation in the broader U.S. economy and government-wide pay raises have increased the USPTO's forecasted operating costs. Also, the USPTO has undertaken efforts to increase special pay rates and offer other incentives to recruit and retain examiners and other employees in patent specific job series in order to remain competitive in the job market for science, technology, engineering, and mathematics (STEM) workers. Absent the proposed increase in fees, the USPTO will be unable to collect sufficient fees at current fee rates to recover aggregate operating costs necessary to finance ongoing operations.

On December 29, 2022, the President signed into law the Consolidated Appropriations Act, 2023, which included the UAIA. The law reduced barriers to entry into the patent system by increasing small entity discounts from 50% to 60% and micro entity discounts from 75% to 80%. The USPTO estimated as part of its Fiscal Year 2024 Congressional Justification (FY 2024 Budget) that these discounts would reduce projected fee collections by $74 million in FY 2023 (partial year impact) and at least $100 million per year beginning in FY 2024 (full year impact). In addition to increased entity discounts, the UAIA increases costs through its provision that requires that the USPTO establish a new Southeast Regional Office and four new community outreach offices—including one in northern New England. The USPTO must also conduct a study to determine whether additional offices are required to achieve AIA mandates and to increase participation of underrepresented inventors in the patent system.

Higher-than-expected inflation in 2021 and 2022 in the broader U.S. economy increased the USPTO's operating costs above previous estimates for labor and nonlabor activities such as benefits, service contracts, and equipment. Salaries and benefits comprise 70% of all patent-related costs, and employee pay raises enacted across all U.S. government agencies—including the USPTO—in 2023 and 2024 were much larger than previously budgeted. Federal General Schedule (GS) pay was raised by 4.6% in 2023 and 5.2% in 2024; before 2023 the last time GS pay was raised by at least 4% was in 2004. The FY 2025 Budget includes an estimated 2.0% civilian pay raise planned in calendar year (CY) 2025 and assumed 3.0% civilian pay raises in CY 2026-29, as well as inflationary increases for other labor and nonlabor activities.

Similarly, the USPTO seeks to adjust the patent special rate table (pay) for the first time since 2007. In 2007 the special rate table was set 11.4% to 31.4% above the GS pay table for the Washington, DC area because patent-related job fields require a highly educated and technical STEM workforce. This specialization has historically posed recruitment challenges for the agency, and the increased pay rates kept the USPTO competitive with private sector compensation opportunities. The differential above the general schedule has diminished over the years—to 0.0% to 20.5% in 2023 because of cost-of-living-adjustments to the GS pay scale that were not similarly applied to the special rate table—reducing the USPTO's competitive edge amongst both private and other Federal agencies. The objective of the special rate table change is to provide competitive compensation to patent employees, thereby reducing attrition and enhancing recruitment of qualified talent.

The USPTO's recruitment and retention efforts go beyond adjustments to examiner pay. In support of its strategic goal of generating impactful employee and customer experiences by maximizing agency operations, the USPTO strives to be a model employer through its diversity, equity, inclusion, and accessibility (DEIA) practices. The agency will build upon its existing diversity and foster greater inclusion to empower the USPTO workforce to serve the IP community successfully. The USPTO will research and implement leading-edge practices related to hiring, development, advancement, accessibility, and retention, based on behavioral science research and data, to better integrate DEIA practices throughout the agency.

b. Cost-Saving Measures

The USPTO recognizes that fees cannot simply increase for every improvement deemed desirable. The USPTO has a responsibility to stakeholders to pursue strategic opportunities for improvement in an efficient, cost-conscious manner. Likewise, the USPTO recognizes its obligation to gain operational efficiency and reduce spending when appropriate.

The USPTO's FY 2025 Budget submission includes cost reducing measures such as releasing leased space in Northern Virginia and a moderate reduction in overall IT spending. In FY 2025, the USPTO estimates $4,569 million in total spending for patent and trademark operations. This is a $122 million net increase from the agency's FY 2024 estimated spending level of $4,447 million. The net increase includes a $224 million upward adjustment for prescribed inflation and other adjustments, and a $102 million downward adjustment in program spending and other realized efficiencies. This estimate builds on the $40 million in annual real estate savings assumed in the FY 2024 Budget submission to include additional annual cost savings of $12 million through releasing more leased space in Northern Virginia. The combined reduction in real estate space amounts to almost 1 million square feet and an estimated annual cost savings of approximately $52 million. Also, the USPTO is actively pursuing IT cost containment. The FY 2025 budget includes a relatively flat IT spending profile despite upward pressure from inflation, supply chain disruptions, and government-wide pay raises; ongoing IT improvements that offer business value to fee-paying customers; and data storage costs increasing proportionally with the USPTO's forecasted growth in patent and trademark applications. The USPTO will achieve this cost containment goal via modern equipment in a new data center that will cost less to maintain and by retiring legacy IT systems. Both of these cost containment measures will further improve the USPTO's cybersecurity posture and increase system resiliency.

c. Efficient Delivery of Reliable IP Rights: Quality, Backlog, and Pendency

The USPTO continuously works to improve patent quality, particularly the predictability, reliability, and robustness of issued patents. See the USPTO's Quality Metrics web page,
https://www.uspto.gov/patents/quality-metrics,
for more information on patent quality including (1) statutory compliance measures, (2) process measures, and (3) perception measures. The USPTO's strategic goal to “promote the efficient delivery of reliable IP rights” recognizes the importance of innovation as the foundation of American economic growth and global competitiveness as well as the role the USPTO plays in encouraging these principles. The USPTO is committed to improving pendency to deliver timely, efficient services that help innovators bring their ideas and products to impact more quickly and efficiently. The USPTO diligently works to balance timely examination with improvements in patent quality; particularly, the

robustness and reliability of issued patents while remaining mindful that patent applications are becoming increasingly more complex and that technologies are converging. To address these challenges, the USPTO must continue to develop and equip examiners with additional guidance, training, tools, advanced technology, and procedural resources.

The USPTO is pursuing initiatives to enhance patent quality and the clarity and completeness of the official record during prosecution of an application, including encouraging applicants to begin filing patent applications in DOCX format, automating pre-examination procedures, expanding examiner training, and working on additional guidance for examiners and the PTAB. Current guidance initiatives include refresher guidance on obviousness under 35 U.S.C. 103 and enablement under 35 U.S.C. 112, and new guidance on how examiners should analyze inventorship issues for artificial intelligence (AI)-assisted inventions. See Updated Guidance for Making a Proper Determination of Obviousness, 89 FR 14449 (February 27, 2024); Guidelines for Assessing Enablement in Utility Applications and Patents in View of the Supreme Court Decision in Amgen Inc. et al. v. Sanofi et al., 89 FR 1563 (December 21, 2023); Inventorship Guidance for AI-Assisted Inventions, 89 FR 10043 (February 13, 2024). The USPTO is also increasing patent examination quality and efficiency via initiatives such as the Global Dossier Initiative (see
https://www.uspto.gov/patents/basics/international-protection/global-dossier-initiative
), and by providing examiners with advanced technologies and tools for identifying prior art, such as the artificial intelligence (AI)-based “More Like This” and “Similarity Search” features in the Patents End-to-End (PE2E) search suite (see 1494 Off. Gaz. Pat. Office 251 (January 11, 2022) and 1504 Off. Gaz. Pat. Office 359 (November 15, 2022)). More information on the USPTO's AI initiatives, including the Artificial Intelligence (AI) and Emerging Technologies Partnership, is available at
https://www.uspto.gov/initiatives/artificial-intelligence.

The USPTO recognizes that optimal pendency helps inventors and investors bring innovation to impact. The growing demand for patent services requires that the USPTO embrace new ways of delivering these critical IP services. Therefore, the USPTO is also working to identify policies, process changes, and technologies to improve patent pendency. Some of these efforts will focus on operational improvements to the patent examination process, including aligning the patent workforce with the incoming workload in the most efficient manner. Other efforts will target improvements to how applicants and other customers engage with the USPTO and navigate the prosecution process. For example, the USPTO has enhanced its website to increase access to our resources and enhance customer service for inventors and practitioners, including modernizing and updating the Patent Basics and Patents Petitions pages, adding a Virtual Assistant on select pages, and providing an updated and modern general website search tool. The USPTO has also upgraded its computer systems, including transitioning from legacy systems to Patent Center for the electronic filing and management of patent applications in November 2023. Patent Center, a web-based platform that allows users to file and manage patent applications and requests, provides improved system performance and a more intuitive user interface for an enhanced user experience. The USPTO is committed to continuously improving the customer experience on our websites to enhance and modernize accessibility, design, and overall satisfaction in our digital space. For information on additional enhancements to our online services, visit our web improvements page at
https://www.uspto.gov/about-us/website-improvements.
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 that has seen an increase in operating costs is the work carried out by the Patent Trial and Appeal Board (PTAB) and the Central Reexamination Unit (CRU). These units play a key role in providing an efficient system for amending or voiding any patent claims that overreach and stunt innovation, inclusive capitalism, and global competitiveness. To ensure that post-issuance challenges to patent rights through the PTAB and the CRU help protect innovation and investments to commercialize innovation, the USPTO will invest in new tools and resources that increase communication, knowledge sharing, and collective problem solving. These strategic investments will enable the USPTO to identify and continue to implement guidelines and best practices to serve the patent system.

3. Sustainable Funding

All aspects of estimating the five-year forecast for aggregate cost, aggregate revenue, and the patent operating reserve are inherently uncertain because they are based on numerous, multifaceted planning assumptions predicated on external indicators of economic IP activity to forecast demand, as well as internal workload drivers derived from production models. Maintaining a viable operating reserve is a key consideration as the USPTO sets patent fees. To mitigate the risk of uncertain demand, the USPTO maintains a patent operating reserve. The U.S. Government Accountability Office (GAO) considers operating reserves a best practice for user fee-funded government agencies like the USPTO. The patent operating reserve enables the USPTO to align fees and costs over a longer horizon and to improve its preparation for, and adjustment to, fluctuations in actual fee collections and spending.

The USPTO manages the operating reserve within a range of acceptable balances and assesses its options when projected balances fall either below or above that range. Minimum planning targets are intended to address immediate, unplanned changes in the economic or operating environments as the reserve builds to the optimal level. The minimum and optimal planning targets are reviewed every three years to ensure the reserve operating range (between minimum and optimal targets) mitigates the severity of an array of financial risks. Based on the current risk environment, including various risk factors such as economic and funding uncertainty and the high percentage of fixed costs in the Patents program, the USPTO established a minimum planning level of 8% of total spending—about one month's operating expenses (estimated at $318 million and $368 million between FY 2025 through FY 2029)—and an optimal long-range target of 22% of total spending—about three months' operating expenses (estimated at $875 million and $1,012 million between FY 2025 through FY 2029).

Based on current cost and revenue assumptions in the FY 2025 Budget, the USPTO forecast that in FY 2024 estimated aggregate costs will exceed aggregate revenue and the operating reserve will be used to maintain operations. The fee proposals contained in this NPRM are projected to increase patent fee collections to the point that they exceed spending requirements, and forecasted excess fee collections will replenish the patent operating reserve each year from FY 2025 through FY

2027. Based on this forecast, the USPTO will achieve its optimal level of three months operating requirements for the patent operating reserve in FY 2026. The USPTO then expects to use the patent operating reserve to fund operating expenses in FY 2028 and FY 2029 as the current projection for fee collection growth slows but projected patent spending requirements continue to increase.

These projections 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. As seen in table 3, set forth in Part III: Estimating Aggregate Costs and Revenue, the operating reserve balance can change significantly over a five-year planning horizon, underscoring the USPTO's financial vulnerability to varying risk factors and the importance of fee setting authority.

The USPTO will continue to evaluate long-term planning assumptions to determine the appropriate course of action beyond FY 2027 to ensure the Patents program is not vulnerable to changes in the economy that reduce annual revenue, unexpected cost increases, and other financial risks. The USPTO will also continue to assess the patent operating reserve balance against its target balance annually, and at least every three years, the USPTO will evaluate whether the minimum and optimal target balance remain sufficient to provide the stable funding the USPTO needs. Per the USPTO's operating reserve policy, if the operating reserve balance is projected to exceed the optimal level by 10% for two consecutive years, the USPTO will consider fee reductions. The USPTO will continue to regularly review its operating budgets and long-range plans to ensure the prudent use of patent fees.

4. Comments, Advice, and Recommendations From PPAC

In the report prepared in accordance with the AIA fee setting authority (available on the USPTO website at
https://www.uspto.gov/sites/default/files/documents/PPAC-Report-on-2023-Fee-Proposal.docx
) PPAC supports the USPTO in seeking adequate revenue to recover the costs for the USPTO fulfill its role in supporting the country's innovation ecosystem. In addition, PPAC recognizes that “the USPTO is in the best position to assess its own needs and balance the tradeoffs in setting individual fees.” PPAC Report at 6. PPAC expressed general support for the increase in patent fees, noting that timely, high-quality search and examination requires an appropriately compensated work force with adequate time to complete the search and examination process, as well as reliable, state of the art IT infrastructure. However, PPAC expressed concerns over some of the individual proposed fee adjustments and their potential impacts on patent applicants and holders. In general, PPAC urged the USPTO to provide more detail and justification on how additional revenue will be used to increase patent quality and reliability. The USPTO has included additional information in this NPRM to further address some of the concerns of PPAC and the public. See Part V: Individual Fee Rationale.

Regarding the proposed changes to fees for excess claims, PPAC expressed support for the proposed fee increases. However, they also emphasized their belief that the public wants more certainty that the revenue generated from an increased fee will go toward examination and giving examiners additional time to evaluate such cases. The USPTO appreciates this concern and the current patent examination production time approach provides examiners with additional time to review excess claims. The proposed fees would contribute to recovering the costs to the USPTO for this additional examination time.

PPAC expressed support for the proposed decreases to fees for extensions of time for provisional applications. PPAC also expressed support for the proposals to increase suspension of action fees and fees for unintentional delay petitions. Part V: Individual Fee Rationale provides more details on these proposals.

In general, PPAC expressed support for the USPTO's proposal to implement a tiered fee structure for information disclosure statements (IDSs). PPAC recommended a legislative proposal to clarify inequitable conduct rules, which may have a significant impact on applicant behavior. They noted that under the current inequitable conduct case law, there is increased pressure on practitioners to cite every possible reference if they do not want to risk the practitioner's right to practice or the enforceability of the patent. The USPTO appreciates this suggestion and will give it further consideration. PPAC also recommended that if any additional fees are paid, the additional money should go to allowing examiners more time to consider the additional references. The USPTO notes that it is current USPTO policy to provide examiners with additional time to review large IDSs and the proposed fees would pay for this additional time. Only 13% of applications contain 50 or more applicant-provided citations, and thus would incur one of these proposed fees. The proposal would place the service costs of large IDSs on those applicants who file them.

PPAC supports the proposal to create a third tier for requests for continued examination (RCEs). PPAC notes that the proposed increases would “allow the costs of continued examinations to be recovered directly from those applicants requesting multiple RCEs, instead of relying on other fees to subsidize the costs.” PPAC Report at 4.

The report noted opposition to the proposed fee for electronically submitted assignments. PPAC argues that transparency of patent ownership is key to patent data integrity and a fee for assignment recordation would be an impediment to keeping assignment data up to date. The USPTO's initial fee proposal was designed to reduce the number of frivolous assignment submissions. However, the USPTO agrees with PPAC's assessment that keeping up-to-date assignment data outweighs the processing efficiency gains the USPTO expects from the proposal. Therefore, the USPTO is dropping its proposal to raise the recordation fee for an electronically submitted assignment. PPAC expressed conditional support for the continuing applications proposal if the USPTO drops the year three provision and only requires the proposed fee for year seven or after. PPAC's rationale for this modification is that three years is too short of a period, as there may not be an Office action at this point in prosecution, particularly if the application is in the national stage of an international application filed under the Patent Cooperation Treaty (PCT) or is classified in an art area with significant backlog. In response to these concerns the USPTO notes that as of April 2023, traditional total pendency is 2.1 years, which is below the three-year threshold for the first tier of the proposal. However, in view of PPAC's concerns about pendency, and the admittedly longer pendency for PCT applications, the USPTO proposes to modify the tiers to slide the threshold dates later in time. This NPRM therefore proposes the first tier at five years and the second tier at eight years. See Parts V: Individual Fee Rationale and VI: Discussion of Specific Rules for further details regarding the modification of this proposal.

Regarding the proposed fee for the After Final Consideration Pilot Program (AFCP 2.0), PPAC expressed the view that this proposal is problematic as it requires paying a fee with no guarantee of an interview. PPAC offered support for an AFCP 2.0 fee if: (1) the program is changed such that the applicant is guaranteed an interview; or (2) under the current program, a fee is assessed only if the interview is granted. The USPTO recognizes PPAC's concern but notes that the AFCP 2.0 program is costly to the agency and is heavily used by applicants; more than half of after-final responses come via this program. The costs of this program are currently subsidized by other fees. While the USPTO appreciates that some applicants may be unwilling to pay for a program that may not result in a favorable outcome or an interview with the examiner, the USPTO must make its patentability decisions in accordance with the appropriate legal standards that govern the USPTO and incurs costs to provide the service regardless of the outcome. The USPTO notes that a significant portion of the cost for AFCP 2.0 comes from the initial consideration of the request by the patent examiner. If the USPTO is unable to recover the cost of the AFCP 2.0 program from participants, it will need to consider terminating the program due to its cost. See Part V: Individual Fee Rationale for additional details regarding this proposal.

PPAC expressed a lack of support for the proposal to increase fees for design applications, recommending the USPTO prioritize addressing pendency issues before applying increased fees, as many design applicants are already paying expedited fees beyond the basic filing, search, and examination fees, given the current pendency. PPAC also suggests that the USPTO's concerns about recovering its costs in the design area could be addressed by a change in the law that allows for the implementation of maintenance fees for design patents. The USPTO acknowledges PPAC's concern regarding design application pendency and recognizes that some design applicants are paying expedited fees. Recovering more of the design costs from design applicants better aligns fees to the cost of services performed by the USPTO, and it also incents design applicants to make more appropriate economic decisions. With respect to PPAC's concern about expedited fees, in FY 2022 about 19% of design applicants requested expedited handling. See Part V: Individual Fee Rationale for additional details regarding the rationale for increasing design patent fees.

Regarding the patent term adjustment (PTA) proposal, PPAC offered support for increasing the fee if the proposal is modified such that no fee is assessed by the USPTO if a PTA adjustment is made due to a USPTO calculation error. The USPTO notes that a fee for this applicant-requested service has been in place since calendar year 2000 and has only increased $10 since enacted. Moreover, this fee helps recover a portion of the costs for applicant-requested manual redeterminations of PTA under 35 U.S.C. 154(b). While there are about 500 service requests each year, many concern the IDS safe harbor under 37 Code of Federal Regulations (CFR) 1.704(d)(1) and thus could have been avoided if the applicant had used the USPTO-provided form (PTO/SB/133) to invoke the safe harbor. With respect to PPAC's suggestion of adding a refund component to the proposal, the USPTO's rationale for this fee increase is to recover a greater percentage of the costs associated with the service that are incurred regardless of the outcome.

PPAC expressed general support for the patent term extension (PTE) proposal but suggested the USPTO consider if such a large increase in the fees is optimal, particularly the initial fee given start-up companies may be resource constrained. By law, this service is only available to owners of patents on certain human drugs, food or color additives, medical devices, animal drugs, and veterinary biological products, and is designed to restore some patent term that was lost while awaiting premarket government approval from a regulatory agency. Because such development and premarketing activities are extremely expensive, it is unlikely that any resource-constrained companies would qualify for PTE services.

PPAC expressed a lack of support for the terminal disclaimer proposal, noting disagreement with the USPTO's justification and suggesting that the fee will place an unfair burden on filers with limited resources who may be tempted to give up patent term in exchange for a less expensive and more compact prosecution. While the USPTO appreciates PPAC's concerns, the agency believes that under-resourced applicants are unlikely to be affected by these fees, as a double patenting rejection necessitating a terminal disclaimer would not be made unless they had sufficient resources to file multiple applications with closely-related subject matter. This presumption is supported by data collected by the USPTO that shows only about 1% of terminal disclaimers are filed by micro entities.

PPAC expressed a lack of support for the proposed fee for requesting additional words in an inter partes or post-grant petition, noting that it may favor well-resourced petitioners given the added expense to prepare longer papers. After careful consideration of the comments and recommendations provided in the PPAC Report and in testimony at the public hearing, the USPTO has decided to withdraw this proposal.

PPAC expressed a lack of support for the proposal to establish a new fee for parties requesting a review of a PTAB decision by the Director. PPAC felt a fee was not warranted because a review by the Director ensures the PTAB decisions are consistent. PPAC also expressed concern that adding a fee for this previously free service may adversely affect individual inventors and small company applicants. In response to these concerns, the USPTO has provided additional justification and data. Part V: Individual Fee Rationale offers this additional information.

In summary, the USPTO appreciates the general support by PPAC and its stakeholders for an increase in patent fees sufficient for aggregate fees to recover aggregate costs. After careful consideration of the comments, concerns, and suggestions provided in the report, and keeping in mind the goals of this proposed rule, the USPTO elected to make changes to three of the fee proposals initially presented to PPAC. The fee structure proposed herein will ultimately allow the USPTO to maintain patent operations and continue its path towards achieving the goals and objectives laid out in the Strategic Plan. The USPTO looks forward to receiving additional comments on this revised proposal during the public comment period.

C. Summary of Rationale and Purpose of the Proposed Rule

The USPTO estimates that the proposed patent fee schedule will produce sufficient aggregate revenues to recover the aggregate costs of patent operations and ensure financial sustainability for effective administration of the patent system. This proposed rule aligns with the USPTO's four key fee setting policy factors and supports the USPTO's mission-focused strategic goals.

V. Individual Fee Rationale

The USPTO projects that aggregate revenue generated from the proposed patent fees will recover the prospective

aggregate costs of patent operations as laid out in the FY 2025 Budget. As detailed previously, PPAC recognizes the importance of ensuring the USPTO's financial sustainability, stating that, “[t]o support its role in the country's innovation system, the USPTO requires adequate funding.” PPAC Report at 5. PPAC also acknowledges the need to fund additional strategic investments, commenting that “[t]imely, high-quality search and examination require an appropriately compensated work force with adequate time to complete the same, supported by state of the art and reliable IT infrastructure.” PPAC Report at 5-6.

The USPTO did not set each individual proposed fee necessarily equal to the estimated costs of performing activities related to the fee. Instead, as described in Part IV: Rulemaking Goals and Strategies, some proposed fees are set at, above, or below their unit costs to balance four key fee setting policy factors: (1) promoting innovation strategies; (2) aligning fees with the full costs of products and services; (3) facilitating effective administration of the U.S. patent system; and (4) offering application processing options. For example, the agency sets many initial filing fees below unit cost to promote innovation strategies by removing barriers to entry to the patent system. To balance the aggregate revenue loss of fees set below cost, the USPTO must set other fees above cost in areas less likely to reduce inventorship (
e.g.,
maintenance).

For some fees proposed in this NPRM, such as extension of time fees, the USPTO does not maintain individual historical cost data for services provided; instead, the agency considers the policy factors described in Part IV: Rulemaking Goals and Strategies to inform fee setting. For example, facilitating effective administration of the U.S. patent system enables the USPTO to: (1) foster an environment where USPTO personnel 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 faster dissemination of patented information; and (3) help recover costs for activities that strain the patent system.

The proposed fee changes are grouped into three categories: (A) an across-the board-adjustment to patent fees; (B) an adjustment to front-end fees; and (C) targeted fees. Part VI: Discussion of Specific Rules contains a complete listing of fees set or adjusted in the proposed patent fee schedule, including small and micro entity fees. This information is also listed in the Table of Patent Fees available on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting.

This proposed rule includes one procedural amendment (D) expanding the applicability of the rule allowing applicants to obtain a refund of search and excess claims fees paid in an application through express abandonment.

A. Across-the-Board Adjustment to Patent Fees

The broader U.S. economy has experienced higher-than-expected inflation the last two years and, in turn, increased USPTO operating costs relative to baseline estimates for labor and nonlabor activities such as benefits, service contracts, and equipment. Also, the agency's estimates of future costs in the FY 2025 Budget include a 2.0% civilian pay raise planned in CY 2025 and an assumption of 3.0% civilian pay raises in CY 2026-29, as well as inflationary increases for other labor and nonlabor activities. To keep the USPTO on a stable financial track sufficient to recover the aggregate costs of patent operations and to support the agency's strategic objectives, the USPTO proposes adjusting, by approximately 5%, all patent fees not covered by the targeted adjustments discussed in section C. The USPTO estimates that new fees would not be implemented until FY 2025, more than four years after the agency's last fee adjustment in October 2020. A 5% across-the-board increase in 2025 would be equivalent to just a 1.2% annual increase, well below the prevailing inflation rate the last few years. The agency is not proposing a larger across-the-board increase in line with inflation because the across-the-board adjustment is intended to supplement the additional revenue collected from the targeted adjustments. Also, the USPTO will continue its ongoing efforts to improve operational efficiency and reduce spending when appropriate.

The 5% 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 NPRM. If changes to the assumptions underlying the USPTO's cost and revenue estimates result in significant changes to the financial outlook, the agency will refine the size of the across-the-board adjustment, either upward or downward, such that fees are set at a level that secures aggregate cost recovery and ensures a reasonable pace for operating reserve growth to the optimal level.

For patent fees with small and micro entity fee reductions, the proposed undiscounted fee is rounded up or down to the nearest $5 by applying standard arithmetic rules. The resulting proposed fee amounts are more convenient to patent users and permit the USPTO to set small and micro entity fees at whole dollar amounts when applying applicable fee reductions. Therefore, some smaller fees will not change since a 5% increase would round down to the current fee, while other fees would change by slightly more or less than 5%, depending on rounding. For patent fees that do not have small and micro entity fee reductions, the proposed fees are rounded to the nearest dollar by applying standard arithmetic rules. The proposed fee adjustments in this category are listed in the Table of Patent Fees available on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting.

B. Adjustment to Front-End Patent Fees

The USPTO proposes to adjust all filing, search, and examination fees not covered by the targeted adjustments as discussed in section C by an additional 5% on top of the 5% across-the-board adjustment, for a total front-end increase of 10%. The current fee schedule, implemented by the FY 2020 Final Rule, set filing, search, and examination fees below the costs of performing these services to achieve low barriers to entry into the innovation ecosystem. These front-end fees are subsidized by other fee collections, primarily maintenance fees. This proposal will marginally recover some, but not all, additional filing, search, and examination costs earlier in the patent life cycle, thus mitigating the risk of potentially lower maintenance fee payments in the future while remaining consistent with a low barrier to entry policy.

Similar to the across-the-board adjustment, for fees that have small and micro entity fee reductions, the undiscounted fee is rounded up or down to the nearest $5 by applying standard arithmetic rules. Therefore, the proposed fee rates may not be precisely 10% higher than the current fee rates. The proposed fee adjustments in this category are listed in the Table of Patent Fees available on the fee setting section of the USPTO website at
https://www.uspto.gov/FeeSettingAndAdjusting.

C. Targeted Adjustments to Patent Fees

The USPTO proposes the following fee adjustments for the reasons stated below. The proposed fees are based on changes in undiscounted fee amounts; the percentage changes for small and micro entity fees would be the same as the percentage change for the undiscounted fee rate, and the dollar change would be 40% or 20% of the undiscounted change. A discussion of the rationale for each fee is divided into 14 categories according to function, as follows:

1. After Final Consideration Pilot Program 2.0

Table 4—After Final Consideration Pilot Program 2.0 Fees

Description
Entity type

Current
fee

Proposed
fee

Dollar
change

Percent
change

FY 2022
unit cost

Consideration of AFCP 2.0 request
Undiscounted
New
$500
n/a
n/a
n/a

Consideration of AFCP 2.0 request
Small
New
200
n/a
n/a
n/a

Consideration of AFCP 2.0 request
Micro
New
100
n/a
n/a
n/a

The USPTO proposes a new fee for participation in the AFCP 2.0. The agency created this program in May 2013 and has renewed it repeatedly. There is currently no fee for participation in this program. See After Final Consideration Pilot Program 2.0, 78 FR 29117 (May 17, 2013), and the program's section of the USPTO website at
https://www.uspto.gov/patents/initiatives/after-final-consideration-pilot-20.

Under customary examination practice, after the close of prosecution, amendments that will place the application either in condition for allowance or in better form for appeal may be entered, and the applicant may also hold an interview with the examiner. See 37 CFR 1.116(b) and section 714.12 of Manual of Patent Examining Procedure (MPEP) (9th ed., Rev. 07.2022, February 2023), which may be viewed on or downloaded from the USPTO website at
https://www.uspto.gov/MPEP
or
https://mpep.uspto.gov.
The AFCP 2.0 was designed to encourage continued collaboration between examiners and applicants after close of prosecution and reduce pendency by avoiding RCEs and continued prosecution applications (CPA). The program requires that applicants submit a response with a nonbroadening amendment to at least one independent claim, and in return, affords the examiner additional time to consider the response. See Guidelines for Consideration of Responses After Final Rejection under 37 CFR 1.116(b) under the AFCP 2.0, available on the USPTO website at
https://www.uspto.gov/sites/default/files/patents/init_events/afcp_guidelines.pdf.
If the response will require further search and/or consideration that would take longer than the allotted time, the examiner will not admit the request under the program. Otherwise, if the response meets the program requirements, the examiner will consider the response, and will either: (1) mail a notice of allowance if the application is in condition for allowance or (2) contact the applicant to schedule an interview to discuss the amendment if the application is not in condition for allowance.

The AFCP 2.0 program offers several benefits to participating applicants. Under customary practice, after a final rejection, applicants have no right to unrestricted further prosecution. The AFCP 2.0 provides a participating applicant an opportunity to potentially have the examiner consider an amendment that would otherwise not be considered at this stage, possibly precluding the need to file an RCE or a CPA. This consideration saves applicants the higher fees associated with those filings and, in the case of the RCEs, saves applicants from patent term adjustment consequences. See MPEP section 2731 for more information on patent term adjustment. Moreover, participation in the program is not necessary to hold an interview after final rejection, or to have an amendment filed and entered after close of prosecution, see MPEP sections 713.09 and 714.13. An AFCP 2.0 request should be filed only when an applicant would like to file a substantive amendment after close of prosecution that may require additional time for an examiner to consider and/or search.

The AFCP 2.0 is a popular program; since 2016, applicants have filed more than 60,000 requests annually. These requests make up over half of the USPTO's after-final responses during this time. Due to its popularity, costs to administer the AFCP 2.0 are significant. In FY 2022, the USPTO estimates more than $15 million in incurred costs associated with examiners considering the AFCP 2.0 submissions. This cost is in addition to the cost for examiners to initially consider the AFCP 2.0 request and any consultation costs with supervisors and primary examiners. These examination costs represent time that could otherwise be used to examine new applications.

The USPTO is reconsidering the policy choice of continuing to offer the AFCP 2.0 program for free without recouping costs from applicants utilizing it. As noted by the Government Accountability Office (GAO) in Federal User Fees: A Design Guide, Report No. GAO-08-386SP (May 2008), available at
https://www.gao.gov/products/gao-08-386sp:

If those benefiting from a service do not bear the full social cost of the service, they may seek to have the government provide more of the service than is economically efficient. User fees may also foster production efficiency by increasing awareness of the costs of publicly provided services and therefore increasing incentives to reduce costs where possible.

Thus, without a fee to recover the cost of the program, the agency is considering not renewing (
i.e.,
terminating) the program. A large part of the AFCP 2.0's popularity is due to economic inefficiencies where participants receive program benefits for only a fraction of the program's costs (because applicants pay only indirectly via future maintenance fees). That said, the USPTO also recognizes that the program has some indirect benefits to the patent system by reducing overall pendency. If there is sufficient public support for the proposed fees, the improved economic efficiencies of aligning fees with direct beneficiaries (program participants), together with indirect benefits, would favor continuing the program. Accordingly, the USPTO is proposing to charge fees for filing a request for consideration under the AFCP 2.0: $500 for undiscounted applications, $200 for applications receiving a small entity discount, and $100 for applications receiving a micro entity discount.

At this time, the USPTO is not proposing any further changes to the AFCP 2.0. For example, the agency will not change the program to guarantee an

examiner interview if an AFCP 2.0 request is admitted under the program. The USPTO appreciates that some applicants may be unwilling to pay for a program that might not result in a favorable outcome or guarantee an examiner interview. Regardless of the outcome, the agency incurs costs to provide the service and must make its patentability decisions in accordance with appropriate legal standards. A significant portion of the AFCP 2.0's cost is initial consideration of the request by the patent examiner. Moreover, as noted previously, applicants may file amendments and participate in interviews after a final rejection without filing an AFCP 2.0 request. Further, a majority of the AFCP 2.0 requests (60% for utility and 80% for design) meet program requirements, meaning that either the application is allowed or an interview is granted.

The USPTO expects the percentage of compliant AFCP 2.0 requests to increase as applicants become more selective with the amendments filed, due to the fee. Accordingly, the agency does not expect a significant percentage of applicants to pay the fee without an opportunity for either allowance of the application or an interview with an examiner. Also, since undiscounted entities have historically filed 83% of all AFCP 2.0 requests, the USPTO does not anticipate the proposed fees having a disproportionate impact on small or micro entities.

2. Continuing Application Fees

Table 5—Continuing Application Fees

Description
Entity type

Current
fee

Proposed
fee

Dollar
change

Percent
change

FY 2022
unit cost

Filing an application or presentation of benefit claim more than five years after earliest benefit date
Undiscounted
New
$2,200
n/a
n/a
n/a

Filing an application or presentation of benefit claim more than five years after earliest benefit date
Small
New
880
n/a
n/a
n/a

Filing an application or presentation of benefit claim more than five years after earliest benefit date
Micro
New
440
n/a
n/a
n/a

Filing an application or presentation of benefit claim more than eight years after earliest benefit date
Undiscounted
New
3,500
n/a
n/a
n/a

Filing an application or presentation of benefit claim more than eight years after earliest benefit date
Small
New
1,400
n/a
n/a
n/a

Filing an application or presentation of benefit claim more than eight years after earliest benefit date
Micro
New
700
n/a
n/a
n/a

The USPTO is proposing new fees in § 1.17(w) for presenting certain benefit claims in nonprovisional applications. These new fees would apply to nonprovisional applications (“later-filed” applications) that have an actual filing date more than five years, or more than eight years, later than the earliest filing date for which benefit is claimed under 35 U.S.C. 120, 121, 365(c), or 386(c), and § 1.78(d) (the “Earliest Benefit Date” (EBD)). When the later-filed application is a utility or plant patent application, the EBD is also the date from which the 20-year patent term is calculated under 35 U.S.C. 154(a)(2). The EBD is also known as the “patent term filing date.” For more information about benefit claims, see MPEP 210 and 211
et seq.,
for more information about the patent term filing date see MPEP 804 subsection I.B.1(a), and for more information about patent term, see MPEP 2701.

The proposed fee set forth in § 1.17(w)(1) would be due when the later-filed application's EBD is more than five years, and no more than eight years, earlier than its actual filing date, and would be $2,200 for undiscounted applications, $880 for applications receiving a small entity discount, and $440 for applications receiving a micro entity discount. The proposed fee set forth in § 1.17(w)(2) would be due when the later-filed application's EBD is more than eight years earlier than its actual filing date, and would be $3,500 for undiscounted applications, $1,400 for applications receiving a small entity discount, and $700 for applications receiving a micro entity discount.

Payment of these fees would be required at the time a prompting benefit claim (
i.e.,
a benefit claim that causes the EBD of the later-filed application to be more than five or eight years earlier than its actual filing date) is presented in the later-filed application. If the prompting benefit claim is presented at the time of filing the later-filed application, the applicable § 1.17(w) fee would be due at filing. If the prompting benefit claim is presented at a later time, the applicable § 1.17(w) fee would be due concurrently with the presentation of the prompting benefit claim. If the later presentation of the prompting benefit claim is by way of a petition for acceptance of an unintentionally delayed benefit claim under § 1.78(e), the applicable § 1.17(w) fee would be due in addition to the petition fee under § 1.17(m).

Because the proposed fees in § 1.17(w) are based on the application's EBD, presenting multiple benefit claims at the same time will not incur multiple fees. However, if benefit claims are presented at multiple times during an application's pendency, a second fee may be due if the later-presented benefit claim changes the application's EBD to be more than eight years earlier than the actual filing date. In this situation, the amount due under § 1.17(w)(2) for the later presentation will reflect any prior payment under § 1.17(w)(1) for the earlier presentation. For instance, if the fee under § 1.17(w)(1) was paid at the time of filing, and a prompting benefit claim requiring payment of the § 1.17(w)(2) fee is presented at a later time, the additional amount owed is the difference between the current fee amount stated in § 1.17(w)(2) and the amount of the previous payment under § 1.17(w)(1).

The following examples illustrate the most common situations anticipated to require payment of the proposed fees under § 1.17(w). For purposes of these examples, the agency assumes that all requirements for claiming benefit under 35 U.S.C. 119, 120, 121, 365(c), or 386(c), and § 1.78 are satisfied, and that all fees are paid at the undiscounted rates listed in table 5, supra.

Example 1:
Application A is a nonprovisional application filed on July 7, 2025. The Application Data Sheet (ADS) present upon A's filing contains a benefit claim under 35 U.S.C. 120 to nonprovisional application N filed on February 3, 2020, which is the only benefit claim in the application. A's EBD is February 3, 2020, which is more than five years, and no more than eight

years, earlier than A's actual filing date of July 7, 2025. In this example, the § 1.17(w)(1) fee of $2,200 is due upon A's filing.

Example 2:
Application B is a nonprovisional application filed on July 8, 2025. The ADS present upon B's filing contains a benefit claim under 35 U.S.C. 120 to nonprovisional application O filed on February 4, 2021, and a benefit claim under 35 U.S.C. 119(e) to provisional application P filed on March 11, 2020. The USPTO's records indicate that O also contains a benefit claim under 35 U.S.C. 119(e) to provisional application P. In this situation, P's filing date is not the EBD, because § 1.17(w) does not encompass benefit claims under 35 U.S.C. 119(e). Instead, B's EBD is February 4, 2021, which is less than five years earlier than B's actual filing date of July 8, 2025. In this example, no fee would be due under § 1.17(w).

Example 3:
Application C is a nonprovisional application filed on July 9, 2025. The ADS present upon C's filing contains benefit claims under 35 U.S.C. 120 to nonprovisional application Q filed on February 5, 2020, and to nonprovisional application R filed on March 12, 2019. C's EBD is March 12, 2019, which is more than five years, and no more than eight years, earlier than C's actual filing date of July 9, 2025. In this example, the § 1.17(w)(1) fee of $2,200 is due upon C's filing.

Example 4:
Application D is a nonprovisional application filed on August 10, 2028. The ADS present upon D's filing does not contain any benefit claims. Two months after D's filing, the applicant files a second ADS containing a benefit claim under 35 U.S.C. 120 to nonprovisional application S filed on February 6, 2020, which is the only benefit claim in the application. Because this newly added benefit claim causes D's EBD to become February 6, 2020, which is more than eight years earlier than D's actual filing date of August 10, 2028, the § 1.17(w)(2) fee of $3,500 is due upon filing of the second ADS.

Example 5:
Application E is a nonprovisional application filed on August 11, 2028. The ADS present upon E's filing does not contain any benefit claims. Eighteen months after E's filing, the applicant files a second ADS containing a benefit claim under 35 U.S.C. 120 to nonprovisional application T filed on February 7, 2020, which is the only benefit claim in the application. Because this newly added benefit claim causes E's EBD to become February 7, 2020, which is more than eight years earlier than E's actual filing date of August 11, 2028, the § 1.17(w)(2) fee of $3,500 is due upon filing of the second ADS. In addition, because this benefit claim is delayed (not submitted within the required time period in § 1.78(d)), a petition for acceptance of an unintentionally delayed benefit claim under § 1.78(e) and the petition fee under § 1.17(m) are also required.

Example 6:
Application F is a nonprovisional application filed on August 14, 2028. The ADS present upon F's filing contains a benefit claim under 35 U.S.C. 120 to nonprovisional application U filed on April 18, 2023, which is the only benefit claim in the application. F's EBD is April 18, 2023, which is more than five years, and no more than eight years, earlier than F's actual filing date of August 14, 2028. Accordingly, the § 1.17(w)(1) fee of $2,200 is due upon F's filing. Two months after F's filing, the applicant files a second ADS containing a benefit claim under 35 U.S.C. 120 nonprovisional application V filed on February 10, 2020. This newly added benefit claim causes F's EBD to become February 10, 2020, which is more than eight years earlier than F's actual filing date of August 14, 2028, and thus prompts the fee in § 1.17(w)(2). Because the fee in § 1.17(w)(1) was previously paid, the previous payment is subtracted from the amount now due under § 1.17(w)(2). Accordingly, the amount due upon filing of the second ADS is $1,300 (the current fee amount of $3,500 set forth in § 1.17(w)(2) less the $2,200 previously paid under § 1.17(w)(1)).

The proposed fees will recover more costs related to continuing applications from filers of such applications, encourage more efficient filing and prosecution behaviors, and partially offset foregone maintenance fee revenue resulting from later-filed continuing applications.

Continuing applications, which include continuation, divisional, and continuation-in-part applications filed under the conditions specified in 35 U.S.C. 120, 121, 365(c), or 386(c) and § 1.78, represent a large and increasing share of patent applications. From FY 2010 to FY 2022, total serialized filings rose about 44%, including a moderate increase in noncontinuing applications (about 25%) and a large increase in continuing applications (about 100%), due almost entirely to increased continuation filings. Since FY 2010, divisional and continuation-in-part applications remained flat at annual levels of about 22,000 and 19,000, respectively. However, continuation applications have tripled, from about 40,000 in FY 2010 to about 122,800 in FY 2022, and now represent about 34% of serialized filings.

The volume and rapid increase of continuing applications negatively impacts the USPTO's workload and docketing practices. For example, it is difficult for the agency to balance patent resources between the examination of “new” (
i.e.,
noncontinuing) applications disclosing new technology and innovations, and continuing applications, which, in some cases, are a repetition of previously examined applications either issued as patents or that have become abandoned. See
e.g.,
FY 2021 pendency statistics review presented at the PPAC quarterly meeting on Nov. 18, 2021, available on the USPTO website at
https://www.uspto.gov/sites/default/files/documents/20211115-PPAC-FY21-pendency-stats-review.pdf
(note that about 80% of continuations have a patented parent).

Continuing applications filed long after their EBD are less likely to have a patent term long enough for the USPTO to recover the costs of its search and examination. The patent fee structure is designed to encourage innovation by maintaining low barriers to entry, which the agency accomplishes by keeping initial filing fees for utility, plant, and design applications below the costs for preexamination, search, and examination. The USPTO recovers the remaining cost of performing the work from maintenance fee payments made after issuance of a utility patent. See
e.g.,
the FY 2022 Agency Financial Report at 45-46, available on the USPTO website at
https://www.uspto.gov/AnnualReport.
Maintenance fees are due 3.5 years, 7.5 years, and 11.5 years from the issue date of a utility patent. See 35 U.S.C. 41(b)(1). During FY 2022, maintenance fees collected from utility patentees represented 53.8% of patent revenue, about one-third of which derived from payment of the 11.5-year fee. This revenue is vital to providing the necessary aggregate financing to fund patent operations. Thus, the fees proposed in this NPRM help compensate the USPTO for foregone maintenance fee revenue from continuing applications filed long enough after their EBD for their term to be less than 11.5 years.

If future workloads for continuing applications were to remain steady at FY 2022 levels, about 16% of continuing applications (approximately 22,000) would pay the proposed § 1.17(w)(1) fee, and an additional 11% of continuing applications (approximately 15,000) would pay the proposed § 1.17(w)(2) fee. Based on FY

2022 data, of the applications that would be affected by this proposal, about 69% are undiscounted, about 30% receive a small entity discount, and about 1% receive a micro entity discount. The USPTO also anticipates that the proposed fees will be relatively technology-neutral, with the most affected area being Technology Center 3700 (which examines technologies including mechanical engineering, manufacturing, gaming, and medical devices/processes) because it receives a much higher proportion of late-filed continuing applications than other areas.

3. Design Application Fees

Table 6—Design Application Fees

Description

Entity
type

Current
fee

Proposed
fee

Dollar
change

Percent
change

FY 2022
unit cost

Basic filing fee—Design
Undiscounted
$220
$300
$80
36
$250

Basic filing fee—Design
Small
88
120
32
36
250

Basic filing fee—Design
Micro
44
60
16
36
250

Basic filing fee—Design CPA
Undiscounted
220
300
80
36
930

Basic filing fee—Design CPA
Small
88
120
32
36
930

Basic filing fee—Design CPA
Micro
44
60
16
36
930

Design search fee or Design CPA search fee
Undiscounted
160
300
140
88
574

Design search fee or Design CPA search fee
Small
64
120
56
88
574

Design search fee or Design CPA search fee
Micro
32
60
28
88
574

Design examination fee or Design CPA examination fee
Undiscounted
640
700
60
9
835

Design examination fee or Design CPA examination fee
Small
256
280
24
9
835

Design examination fee or Design CPA examination fee
Micro
128
140
12
9
835

Design issue fee
Undiscounted
740
1,300
560
76
574

Design issue fee
Small
296
520
224
76
574

Design issue fee
Micro
148
260
112
76
574

Hague design issue fee
Undiscounted
740
1,300
560
76
n/a

Hague design issue fee
Small
296
520
224
76
n/a

Hague design issue fee
Micro
148
260
112
76
n/a

International Design Application First Part U.S. Designation Fee
Undiscounted
1,020
1,300
280
27
n/a

International Design Application First Part U.S. Designation Fee
Small
408
520
112
27
n/a

International Design Application First Part U.S. Designation Fee
Micro
204
260
56
27
n/a

(Part II Designation Fee) Issue Fee Paid Through the International Bureau in an International Design Application
Undiscounted
740
1,300
560
76
n/a

(Part II Designation Fee) Issue Fee Paid Through the International Bureau in an International Design Application
Small
296
520
224
76
n/a

(Part II Designation Fee) Issue Fee Paid Through the International Bureau in an International Design Application
Micro
148
260
112
76
n/a

The USPTO is proposing increases in the fees for filing, search, examination, and issuance of design patent applications. These proposals adjust the fees to account for inflationary cost increases, and to recover a larger portion of design costs from design applicants.

The proposed design fee increases will affect national design application filings and international design application filings that designate the United States under the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs, July 2, 1999 (“Hague Agreement”).

As shown in the table above, the combined total of filing, search, examination, and issue fees for a design application that proceeds to issuance would increase from $1,760 to $2,600 for undiscounted applications, from $704 to $1,040 for applications receiving a small entity discount, and from $352 to $520 for applications receiving a micro entity discount. Note that under the Hague Agreement and its implementing regulations in the United States, including § 1.1031, the required fees (known as “designation fees”) for international design application filings that designate the United States are set by reference to the national fees. Thus, the first part of the designation fee corresponds to the sum of the filing fee, search fee, and examination fee, and the second part of the designation fee corresponds to the issue fee. See MPEP 2910 for more information about international design application fees.

Despite these increases, the proposed fees will not achieve full recovery of design costs. On an individual basis, the proposed fees including the issue fee do not fully recover the cost of examining and issuing a design application even when the applicant paid the undiscounted rate. On an aggregate basis, design fee payments will not fully recover design costs because most design applications qualify for discounted fees. For example, of the design applications filed in FY 2023, 28% paid the micro entity fee amount, 38% paid the small entity fee amount, and only 34% paid the undiscounted fee amounts. The USPTO is required by law to reduce most patent fees by 60% for small entities and by 80% for micro entities. See Part II: Legal Framework, supra. As a result of the heavy use of these discounts by design applicants, the USPTO's collections from design fees have been significantly below design costs for more than 10 years. For example, based on the most recently

available cost data (FY 2022), the unit cost for a design application was $2,233, and for a design Continued Prosecution Application, $2,913. The collections (in the same year) from design fees averaged only $1,125 per application, resulting in an average shortfall of about $1,108 per application. Assuming the unit cost remains the same in FY 2023, the average shortfall would increase to about $1,220 per application based on FY 2023 collections from design fees, which averaged only $1,013 per application.

Because USPTO operations are financed solely by user fees, the agency must make up the shortfall in the design area through fees set in other patent areas. While the USPTO has raised design fees twice in the last 10 years, those increases were not large enough to eliminate the shortfall over the long term. Thus, design costs continue to be subsidized by other fees, primarily utility patent maintenance fees. This subsidy has grown in recent years, as shown in figure 1. The graph depicts average fee collections per design application (“average collections”) in dark gray, and the average shortfall or subsidy per design application (“average subsidy”) in light gray. The average subsidy in FY 2022 was $1,108, and in FY 2023 was $1,220 (estimated based on FY 2022 unit cost).

Figure 1: Subsidization of Design Applications Over Time

EP03AP24.044

The patent fee structure is designed to encourage innovation by maintaining low barriers to entry into the patent system. The USPTO accomplishes this goal by keeping initial filing fees for utility, plant, and design applications below the agency's costs for preexamination, search, and examination, and by recovering remaining costs of performing the work from maintenance fee payments made after issuance of a utility patent. See
e.g.,
the FY 2022 Agency Financial Report at 45-46, available on the USPTO website at
https://www.uspto.gov/AnnualReport.
Although the USPTO is not permitted to establish maintenance fees for design or plant patents (see 35 U.S.C. 41(b)(3)), the maintenance fees it collects from utility patentees represented 53.8% of patent revenue in FY 2022. This revenue is vital to providing the necessary aggregate revenue to recover the aggregate cost of patent operations.

Because design fee payors do not bear the full costs of design services, a disconnect between fees and costs, as currently exists in the design patent area, can lead to overuse of discounted services. See
e.g.,
Federal User Fees: A Design Guide, Report No. GAO-08-386SP (May 2008), available at
https://www.gao.gov/products/gao-08-386sp,
and the Patent and Trademark Office: New User Fee Design Presents Opportunities to Build on Transparency and Communication Success, Report No. GAO-12-514R (April 2012), available at
https://www.gao.gov/products/gao-12-514r.

Historically, this difference between design fees and design costs did not result in a significant subsidy because the annual volume of design applications was much lower than the annual volume of issued utility patents. Since 2014, however, the number of design applications has surged 50% (from 36,254 in FY 2014 to 54,476 in FY 2022) while the number of issued utility patents (and thus the volume of potential future maintenance fees) has increased only 7% (from 303,930 in FY 2014 to 325,455 in FY 2022). See
e.g.,
FY 2022 Workload Table 1, available on the USPTO website at
https://www.uspto.gov/AnnualReport.
Moreover, virtually all growth in design application filings is attributable to applications in which discounted fees are paid. From FY 2014 to FY 2022, the number of undiscounted design applications filed did not increase, but the number of small entity applications increased 24%, and the number of micro entity applications increased 313%. As a result, the entity spread for design applications changed dramatically. For example, in FY 2014, the entity spread for design applications was 50% undiscounted, 40% small

entity, and 10% micro entity; during FY 2022, the entity spread for design applications was 35% undiscounted, 35% small entity, and 30% micro entity. In contrast, the entity spread in utility application filings has remained the same from FY 2014 to FY 2022, at about 72% undiscounted, 24% small entity, and 4% micro entity.

The combination of these factors makes it challenging for the USPTO to balance the setting of design fees that appropriately encourage innovation while also incenting design applicants to make appropriate economic decisions and not overuse design services. For example, based on the FY 2022 unit cost and assuming that filing volume and entity spread remain stable, recovering the full cost of design services from design applicants would require total fees of about $4,000 for undiscounted applications. Abruptly raising fees to these levels could discourage innovation, so the USPTO is proposing a more moderate increase to $2,600 for undiscounted applications. After considering all relevant factors, the agency believes the proposed design fee increases strike a balance that still encourages innovation while bringing in increased revenue to recover more design costs.

4. Excess Claims Fees

Table 7—Excess Claims Fees

Description

Entity
type

Current
fee

Proposed
fee

Dollar
change

Percent
change

FY 2022
unit cost

Each independent claim in excess of three
Undiscounted
$480
$600
$120
25
n/a

Each independent claim in excess of three
Small
192
240
48
25
n/a

Each independent claim in excess of three
Micro
96
120
24
25
n/a

Each reissue independent claim in excess of three
Undiscounted
480
600
120
25
n/a

Each reissue independent claim in excess of three
Small
192
240
48
25
n/a

Each reissue independent claim in excess of three
Micro
96
120
24
25
n/a

Each claim in excess of 20
Undiscounted
100
200
100
100
n/a

Each claim in excess of 20
Small
40
80
40
100
n/a

Each claim in excess of 20
Micro
20
40
20
100
n/a

Each reissue claim in excess of 20
Undiscounted
100
200
100
100
n/a

Each reissue claim in excess of 20
Small
40
80
40
100
n/a

Each reissue claim in excess of 20
Micro
20
40
20
100
n/a

Each reexamination independent claim in excess of three and also in excess of the number of such claims in the patent under reexamination
Undiscounted
480
600
120
25
n/a

Each reexamination independent claim in excess of three and also in excess of the number of such claims in the patent under reexamination
Small
192
240
48
25
n/a

Each reexamination independent claim in excess of three and also in excess of the number of such claims in the patent under reexamination
Micro
96
120
24
25
n/a

Each reexamination claim in excess of 20 and also in excess of the number of claims in the patent under reexamination
Undiscounted
100
200
100
100
n/a

Each reexamination claim in excess of 20 and also in excess of the number of claims in the patent under reexamination
Small
40
80
40
100
n/a

Each reexamination claim in excess of 20 and also in excess of the number of claims in the patent under reexamination
Micro
20
40
20
100
n/a

Under § 1.16(h) and (i), the USPTO charges a fee for filing, or later presenting at any other time, each independent claim in excess of three, as well as each claim (whether dependent or independent) in excess of 20. The agency proposes to increase the § 1.16(h) and (i) excess claims fees. The § 1.16(j) multiple dependent claim fee is part of the across-the-board adjustment and not included in this targeted proposal as well as the counterpart excess claims fees applicable to reexamination proceedings and applications that are the national stage of an international application filed under the Patent Cooperation Treaty. These changes would provide more revenue to help recover the additional search and examination costs associated with excess claims, as well as prosecution costs not covered by front-end fees. These changes would also promote compact prosecution, and the USPTO believes applicants motivated by costs would be incentivized to not file excess claims. In FY 2021, only about 15% of applications contained more than 20 total claims, and about 8% of applications contained more than three independent claims.

The USPTO has increased excess claim fees several times during the last 20 years, which has been very effective at reducing excess claims from their peak in the early 2000s. A high frequency of applications filed with exactly 20 claims and a very low frequency of applications with claim counts exceeding 20 to help promote compact prosecution. In absence of the agency's proposed increases to excess claims fees, it anticipates that excess claims numbers would increase in response to proposed fees for certain continuing applications discussed previously in this proposal.

Continuing application and excess claim fees are naturally linked and likely to have counterbalancing effects. For example, an increase in continuing applications could result from raising only excess claims fees, and an increase in excess claims could result from raising only the fee for continuing applications (even in specific, lesser-occurring situations). The proposed increases in excess claims fees are intended to avert the latter scenario.

An applicant who files a nonprovisional utility application having three independent claims and 40 claims total—double the § 1.16(i) total claim-count threshold—is required to pay the § 1.16(i) fee for 20 excess claims.

Under the USPTO's proposed fee rates, an application with double the 20 total claim-count threshold would require an excess claims fee payment that equals the combined proposed fee amounts for filing, search, and examination. In other words, a double-sized application (three independent claims and 40 claims total) would require double the combined total in applicable fees for filing, search, and examination.

5. Extension of Time for Provisional Application Fees

Table 8—Extension of Time for Provisional Application Fees

Description

Entity
type

Current
fee

Proposed
fee

Dollar
change

Percent
change

FY 2022
unit cost

Extension for response within first month, provisional application
Undiscounted
$220
$50
−$170
−77
n/a

Extension for response within first month, provisional application
Small
88
20
−68
−77
n/a

Extension for response within first month, provisional application
Micro
44
10
−34
−77
n/a

Extension for response within second month, provisional application
Undiscounted
640
100
−540
−84
n/a

Extension for response within second month, provisional application
Small
256
40
−216
−84
n/a

Extension for response within second month, provisional application
Micro
128
20
−108
−84
n/a

Extension for response within third month, provisional application
Undiscounted
1,480
200
−1,280
−86
n/a

Extension for response within third month, provisional application
Small
592
80
−512
−86
n/a

Extension for response within third month, provisional application
Micro
296
40
−256
−86
n/a

Extension for response within fourth month, provisional application
Undiscounted
2,320
400
−1,920
−83
n/a

Extension for response within fourth month, provisional application
Small
928
160
−768
−83
n/a

Extension for response within fourth month, provisional application
Micro
464
80
−384
−83
n/a

Extension for response within fifth month, provisional application
Undiscounted
3,160
800
−2,360
−75
n/a

Extension for response within fifth month, provisional application
Small
1,264
320
−944
−75
n/a

Extension for response within fifth month, provisional application
Micro
632
160
−472
−75
n/a

The USPTO proposes a separate extension of time (EOT) fee structure for provisional applications in which fees would be decreased from current amounts by an average of 81%. Under EOT practice, if an applicant is required to reply within a nonstatutory or shortened statutory time period, the applicant may normally petition to extend the time period for reply with the requisite fee. The time extension may be up to the earlier of the expiration of any maximum period set by statute or five months after the time period set for reply, if a petition for an EOT under § 1.136(a), including the EOT fee set in § 1.17(a), is filed.

Currently, the EOT fees specified in § 1.17(a) apply equally to both provisional and nonprovisional applications. The USPTO proposes an average 81% EOT fee decrease in provisional applications under a new paragraph (u) of § 1.17, with an additional proposal that § 1.136(a) be amended to refer to EOT fees under both § 1.17(a) and new § 1.17(u). For patent applications other than provisional applications, the EOT fee structure retained under § 1.17(a) would be increased by 5%, in accordance with the across-the-board proposal.

With fees reduced by 81% on average, the proposed separate EOT fee structure for provisional applications would benefit filers in all entity status categories. The agency envisions that micro entity provisional application filers would benefit most. As explained in the Director's April 20, 2023, letter to PPAC:

“The USPTO's fee review concluded that applicants who have certified micro entity status in provisional applications are more than twice as likely to request EOT as compared to other applicants. Thus, we are proposing reduced EOT fees for provisional applications by an average of 81% to reduce financial and entry barriers and further foster inclusive innovation.”

Some micro entity applicants need time extensions to accommodate attempts to meet additional formality requirements associated with establishing micro entity status. Another consideration favoring this proposal is that provisional applications are not examined; therefore, there is less urgency to expedite processing.

6. Information Disclosure Statement Size Fees

Table 9—Information Disclosure Statement Size Fees

Description
Entity type

Current
fee

Proposed fee

Dollar
change

Percent
change

FY 2022
unit cost

Filing an Information Disclosure Statement that causes the cumulative number of applicant-provided items of information to exceed 50 but not exceed 100
Undiscounted
New
$200
n/a
n/a
n/a

Filing an Information Disclosure Statement that causes the cumulative number of applicant-provided items of information to exceed 100 but not exceed 200
Undiscounted
New
$500, less any amount previously paid
n/a
n/a
n/a

Filing an Information Disclosure Statement that causes the cumulative number of applicant-provided items of information to exceed 200
Undiscounted
New
$800, less any amounts previously paid
n/a
n/a
n/a

Sections 1.97 and 1.555 provide applicants and patent owners the opportunity to submit an information disclosure statement (IDS) containing items of information for consideration by the examiner. In a patent application, to be considered, the IDS must meet the timing requirements of § 1.97 and the content requirements of § 1.98. In a reexamination proceeding, the IDS must meet the content requirements of § 1.98(a). There are no specific regulatory limits to the number of items of information that may be included in an IDS. Most applications contain relatively few items of information submitted by applicants for consideration. Approximately 77% of applications have fewer than 25 applicant-cited items of information submitted during prosecution.

The USPTO receives large IDS submissions in a small percentage of applications. Based on the agency's most recent data, in approximately 13% of applications applicants submit over 50 total items of information and in 8% of applications applicants submit over 100 items of information. In an even smaller subset of applications, the number of applicant-submitted items can be quite large, sometimes in the thousands or even tens of thousands.

In many instances, these large IDS submissions contain clearly irrelevant, marginally relevant, or cumulative information. It is onerous for examiners and hinders the USPTO's statutory obligation to timely examine applications under 35 U.S.C. 154 to consider large numbers of clearly irrelevant, marginally relevant, or cumulative information. Additionally, large IDS submissions are costly for the agency to consider. Therefore, the USPTO suggests, as a best practice, that applicants and patent owners avoid filing large IDS submissions by eliminating clearly irrelevant, marginally relevant, or cumulative information. See MPEP 2004, item 13.

In 2006, the USPTO attempted to address large IDS submissions by proposing new requirements, including that IDSs with more than twenty citations be accompanied by an explanation of relevance. See Changes To Information Disclosure Statement Requirements and Other Related Matters, 71 FR 38808 (July 10, 2006). The proposal was not adopted; instead, to provide some relief for examiners burdened with large IDS submissions, the agency began providing examiners additional time to consider large IDS submissions in applications.

On average, the USPTO provides examiners approximately 80,000 additional hours each year to consider large IDS submissions in applications, costing the agency $10 million annually. As there is currently no fee for large IDS submissions, this cost is subsidized generally by patent fees, primarily maintenance fees collected for patents that resulted from applications that did not contain large IDS submissions.

Accordingly, to have applicants and patent owners filing large IDS submissions cover more of the associated costs, the USPTO proposes to amend § 1.17 to implement a new IDS size fee based on the cumulative number of items of information submitted by an applicant or patent owner during the pendency of the application or reexamination proceeding. The proposed IDS size fee sets forth: (1) a first amount ($200) for a cumulative number of applicant-provided or patent-owner provided items of information in excess of 50; (2) a second amount ($500) for a cumulative number of applicant-provided or patent-owner provided items of information in excess of 100 but not exceeding 200, less any amount previously paid; and (3) a third amount ($800) for a cumulative number of applicant-provided or patent owner provided items of information in excess of 200, less any amounts previously paid.

For example, if an applicant submits a single IDS during prosecution with 101 items of information, the applicant would pay $500 under the proposed new § 1.17(v)(2) for exceeding 100 items of information, but not exceeding 200. In another example, if an applicant files a first IDS with 51 items of information, they would pay $200 under proposed new § 1.17(v)(1) for exceeding 50 items of information, but not exceeding 100. Subsequently, in that same application, if the applicant files a second IDS with 50 items of information, the cumulative number of items of information in the application would be 101. The applicant would then pay $500 under proposed new § 1.17(v)(2) for exceeding 100 items of information, but not exceeding 200, less the $200 previously paid under proposed new § 1.17(v)(1), for a total of $300.

Further, in that same application, if the applicant files a third IDS with 100 items of information, the cumulative number of items of information in the application would be 201. The applicant would then pay $800 under proposed new § 1.17(v)(3) for exceeding 200 items of information, less the $200 previously paid under proposed new § 1.17(v)(1) and less the $300 previously paid under proposed new § 1.17(v)(2), for a total of $300. Thus, in this example, the applicant would pay a combined IDS size fee of $800 for the three IDSs filed during the pendency of the application.

Additionally, the USPTO is proposing to amend § 1.98(a) to include a new content requirement for an IDS that will facilitate implementation of the proposed IDS size fee. Specifically, the USPTO is proposing to require that an IDS contain a clear written assertion by applicant and patent owner that the IDS is accompanied by the appropriate IDS size fee, or that no IDS size fee is required. This assertion is necessary because it ensures the record is clear as

to which fee the applicant or patent owner believes may be due (or that no fee may be due), with the IDS so the examiner can promptly ascertain whether the IDS is compliant. There would be no specific language required for the written assertion, but it should be readily identifiable on the IDS and clearly convey the applicable IDS size fee.

The agency envisions modifying USPTO Form PTO/SB/08 to include the requisite written assertion stylized as a set of check boxes corresponding to each potential IDS size fee, along with an additional box indicating that no IDS size fee is due. Since the form must be signed in accordance with § 1.33(b), certifications under §§ 1.4 and 11.18 apply. Applicants and patent owners would be strongly advised to use the PTO/SB/08 form, but it will not be required. The USPTO does not foresee general authorizations to charge fees or a specific authorization to charge any applicable IDS size fee as a compliant written assertion under the proposed requirement. It would be the applicant's and patent owner's responsibility to track the cumulative number of items of information submitted in the application and provide a written assertion of any applicable IDS size fee due. In accordance with § 1.97(i), an IDS filed in an application without the written assertion or the necessary IDS size fee will be placed in the file, but not considered by the agency. The applicant may then file a new IDS accompanied by the written assertion or necessary IDS size fee, but the date the new IDS is filed will be the date of the IDS for purposes of determining compliance with § 1.97. See MPEP 609.05(a). An IDS filed in a reexamination proceeding without the written assertion or the necessary IDS size fee will be placed in the file and will remain of record, but the IDS will not be considered.

Applicants are reminded that the duty of disclosure under §§ 1.56 and 1.555 only requires the submission of information material to patentability to the USPTO. Material information is described in §§ 1.56(b) and 1.555(b) as information that is not cumulative to information already of record and (1) establishes, by itself or in combination with other information, a prima facie case of unpatentability of a claim; or (2) it refutes, or is inconsistent with, a position the applicant takes in: (i) opposing an argument of unpatentability relied on by the USPTO, or (ii) asserting an argument of patentability. The United States Court of Appeals for the Federal Circuit uses an even higher standard for materiality than the § 1.56(b) and 1.555(b) standards by requiring “but-for” materiality, such that the USPTO would not have allowed a claim had it been aware of the undisclosed information. Neither the § 1.56(b) and 1.555(b) standards nor the Federal Circuit's “but-for” standard require the submission of clearly irrelevant or marginally relevant information.

The USPTO does not believe the proposed IDS size fee will have a large impact on patent applicants or owners. As stated previously, a majority of applicants do not submit large amounts of information for consideration. Based on current IDS filing volume, only 13% of applications will require the first-tier IDS size fee for submitting over 50 items of information. Even fewer applications will be subject to the succeeding two tiers, as only approximately 8% of applications contain over 100 items of information, and about 4% contain over 200 items of information. Additionally, the fee should not disproportionately impact small and micro entities. During FY 2022, small entities accounted for only 25% of applications that would incur a fee, while micro entities made up less than 1%. By placing more of the service costs for considering IDS submissions totaling over 50 items of information on the applicants who file such IDS submissions,

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2024-06250. Public record. Not legal advice.