INVENTIVE STEP

The America Invents Act granted the PTO the right, for the first time, to set its own fees.  Previously, PTO fees were set by Congress.

The PTO has now published its proposed fee schedule.  Not surprisingly, the fees are going up.  The PTO seeks to increase its funding to deal with backlog issues in applications and appeals.  But, as noted by Patently-O, the PTO is clearly also attempting to influence applicant behavior through its proposed fees.

Here are the PTO’s new fee proposals:

Basic filing, search, and exam fee:  $1,840 from $1,250 (up 47%);
More than 3 independent claims:  $460 each, from $250 (up 84%);
More than 20 toal claims:  $100 each, up from $60 (up 67%);
Request for Continued Examination (RCE):  $1,700 from $930 (up 83%);
Notice of Appeal:  $1,500 from $620 (up 142%), but the PTO proposes to waive the issue fee if the examiner withdraws the final rejection;
Proceeding with appeal:  $2,500 after examiner’s answer to move to board; there is no longer any fee for filing an appeal brief (was $620);
Issue and Publication fees:  $960 from $2,040 (DOWN 53%);
Maintenance fees:  $1,600, $3,600, $7,600 from $1,130, $2,850, $4,730 (up 42%, 26%, 61%, respectively).

The PTO notes that the combined filing/search/exam and issue/publication fees for obtaining a patent will actually decrease from $3,290 to $2,800.  Of course this means that rejected applications will be higher and issued patents lower.

These fees are a significant increase from the current system.  One could certainly argue that the basic filing fee should be raised to address the backlog, but a 47% increase seems a bit steep. 

The PTO’s count reform efforts to deal with RCE filings has obviously been a failure, such that it now proposes an 83% increase to the fee for filing an RCE in the hopes that this will discourage applicants from filing them.  Unfortunately, most RCE’s are dictated by examiners who refuse to consider anything after final rejection, so this will probably not help with that goal.  To truly reduce the number of RCE filings, the PTO needs to develop a better after final mechanism for handling amendments and finding patentable subject matter, as well as dealing with IDS submissions after the issue fee is paid.

The board is currently swamped with ex parte patent appeals.  To deal with this problem, the PTO proposes increasing the fees for filing a Notice of Appeal and proceeding to the board to $4,000, up from the current $1,240 ($620 for the notice and $620 for the appeal brief).  This is an increase of over 320%!  Again, that is unreasonable.  Perhaps the appeal problem should be attacked at the front end by improving examination and training examiners to work with applicants to find allowable subject matter during prosecution.  The one bone throne to applicants is that if the examiner withdraws the final rejection prior to the examiner’s answer (not an uncommon occurrence), the issue fee is waived.

The PTO is also proposing a significant increase in the maintenance fees due during the lifetime of the patent.  The stated reasoning is that by then the patent owner will know the true value of the patent and will have been able to reach the market for the patent.

Small/Micro-Entities

The above stated fees are for large entities.  Small entities (companies with less than 500 employees) will pay 50% of the stated amount. 

The real winners here are the new category of micro-entities.  Micro-entities receive a 75% discount on the stated fees.

To qualify as a micro-entity, the application must not include any inventor that have been named on 5 or more U.S. non-provisional patent applications.  The application must not be licensed or the inventors must not be legally obligated to license or assign the application to any entity that does not meet the micro-entity requirements.  The assignee and each inventor must have an income of less than 3 times the average gross income reported by the Department of Labor for the previous calendar year.

One group that successfully lobbied to be added to this definition are universities and “institutes of higher eduction.”  Thus, large entities will subsidize not only small or individual inventors, but also enormous universities with operating budgets in the billions of dollars.  A big win for them.

Next Steps

The PTO has sent the proposed fee structure to the Patent Public Advisory Committee (PPAC) and they will begin a series of public hearings.  PPAC will hold hearings, gather feedback from the public and prepare a report to the PTO.  After the hearings, the PTO will publish the final proposed rules on fees in the Federal Register, probably in June.  This will begin a 60-day comment period on the rules which they hope to implement by fall.

Passage of the America Invents Act in late 2011 allowed the PTO to proceed with its earlier announced plan for prioritized examination.  For payment of a rather large fee and several other requirements, an applicant can get a final PTO determination of patentability of his application in about a year.  New Commissioner for Patents Peggy Focarino provided some information on the status of the program in a post on the Director’s blog several weeks ago.  The information she provides is through the end of 2011.

As of that date, 1,694 petitions had been filed.  The PTO took an average of 40.8 days to process the applications from petition to completion of the pre-examination phase.  This compares favorably with the 69.6 days required for a standard application; the office, however, is working to cut down on this time.  Of the petitions filed, 1,231 had been decided by the end of the year, with 1,218 being granted (98.9%). 

First office actions have been issued in 648 of these applications an average of 30.7 days after approval of the petition, or 66.4 days after filing of the petition.  The PTO goal is 3 months from petition filing; they have met this in every case.

Notices of Allowance have been mailed in 23 applications, an average of 39.2 days after petition approval.  Final rejections have been mailed in 3 applications, an average of 34.3 days after petition approval.

For those applicants or practitioners concerned about whether Track I applications will be treated differently from others in terms of grant/denial rate, our examiners are being given exactly the same training, credits and incentives to accurately examine Track I cases as for all other cases, and no training, credits or incentives are being given to bias examiner decisions in any way. And as for the data, given the statistics provided above, so far there is no basis to believe there is any difference in result for Track I versus non-Track I processing, other than the significantly faster responsiveness.

So far, the PTO is performing admirably in its prioritized examination applications, easily beating the one year goal to final action.  The first patent issued under the program was filed Sept. 30, 2011 and issued Jan. 10, 2012, just 103 days (U.S. Patent No. 8,094,942 to Google).  The program is limited to 10,000 prioritized application during FY2012.  It will be interesting to see if the numbers for “regular” applications is affected by the program.

For applicants who need a quick decision on an application and have the money to participate, accelerated examination appears to be a great option so far.

The PTO today announced plans to open the long-awaited Detroit satellite office by July.

Detroit was announced as the site of the satellite office in December 2010.  By April, Congress had conspired to appropriate PTO funds causing the agency to postpone the opening of the office indefinitely.  The America Invents Act permits the PTO to open 3 satellite offices within the next 3 years.  With the resources now available, the PTO is moving forward with plans for Detroit.

Given the state of the economy in Michigan, Detroit is a good choice for the first satellite office.  The unemployment rate in Michigan dropped below 10% in November for the first time in 3 years.  There is a large number of unemployed engineers and scientists in the area, a world-renowned research university (my alma mater!), and not a large legal market.  In Washington, DC, patent examiners who spend some time at the PTO can command large salaries at area law firms.  That won’t be a problem in Detroit.

It is also a good move for President Obama politically.  While Michigan has been solidly Democratic for the last few elections, the state did elect a Republican governor in 2010.  The Republican presidential nominee may end up being someone who was born in Michigan and whose father served as the state’s governor.  The choice of Detroit can’t hurt his chances in the state.

In November, the PTO requested comments on locations for other satellite offices that it plans to open in the coming years, assuming the funds are available.  Comments must be provided by January 30.

Hal Wegner is reporting that Commissioner for Patents, Robert L. Stoll, will retire from the PTO at the end of the year.  

Stoll had replaced Jon Doll as Commissioner for Patents in October 2009.  He joined the PTO as a patent examiner in 1982 before moving to the aministrative side of the PTO in 1994 as Executive Assistant to the PTO Director.  In 1995, he became Administrator of the Office of Legislative and International Affairs.  In 2002, he became director of the Office of Enforcement, and in 2007 the Dean of Training and Education.

Deputy Commissioner for Patents Margaret (Peggy) Focarino will likely be tapped to replace Commissioner Stoll.  Focarino joined the PTO as a patent examiner in 1977 before moving to the Senior Executive Service in 1997.  In January 2005, Focarino became Deputy Commissioner for Patent Operations before being promoted to her current position in 2009.

September 30 marked the end of FY2011 for the PTO.  Time to refer again to the PTO’s Data Visualization Center to see how things are going.  The numbers below are comparisons of the numbers at the end of September 2011 with June 2011 and September 2010.

First Action Pendency – 28 Months

First action pendency continues to increase at the PTO.  In June, first action pendency was 27.2 months, while at the end of FY2010 it was 25.7 months.  Thus, it is taking 2.3 months longer to get a first office action now than a year ago.  The PTO is working to clear the oldest applications, but it appears to be slipping on numbers like this one.  A nearly 9% increase in time to first action is not a good sign.

“Traditional” Total Pendency – 33.7 Months

Traditional pendency has been fairly flat, up from 33.6 months in June, but down from 35.3 months at the end of FY2010.  Good progress was made early in FY2011, but it has now flattened out.

Application Pendency with RCEs – 40.9 Months

This number, like traditional pendency, saw good progress early in FY2010, but flattened out towards the end.  It was at 42.6 months at the end of FY2010, but at 40.6 months at the end of June.  Since June, the time has increased by 0.3 months.  A short term goal should be to get this number under 40 months; anything over 3 years is too long.

Applications Awaiting First Office Action – 669,625

The PTO continues its impressive performance in working through the backlog.  At the end of FY2010, the backlog of unexamined applications was 708,535 and at the end of June it was 695,086.  That’s a 5.5% reduction for the year and a 3.7% reduction for the quarter.  This comes despite the fact that application filings were up for the year.

Patent Application Allowance Rate – 48%, 64.4%

The first number counts RCE filings as abandonments, while the second number does not, but counts them as continuing prosecution.  These numbers are up from 47% and 63.4%, respectively, in June.  At the end of FY2010, the numbers were 45.6% and 61.1%, respectively.  While these numbers continue to show slow, steady improvement from earlier record low numbers, they also continue to demonstrate that many patents are allowed by forcing applicants to file RCEs that are not allowed initially.  This is another area where the PTO could significantly improve efficiency.

Number of Patent Examiners – 6,690

The budget crisis has stopped the PTO from the hiring that permitted a large influx of new examiners at the beginning of the fiscal year.  Instead, the number has been steadily falling from the high of 6,846 in February and from 6,775 in June.  For the year, the number of examiner is up by 562 from 6,128 last September, a 9.2% increase in the size of the examining corps.

Pendency from Application Filing to Board Decision - 81.4 Months

This crisis continues to get worse.   This number continues to climb–from 80.3 months in June and 76 months last September.  That’s up 1.4% since June and a 7.1% increase during FY2011 to over 6 3/4 years.  This is not acceptable, as new technologies become obsolete prior to getting a patent or decision by the Board.  The PTO hired a number of additional patent judges and attorneys to deal with this issue, but the sharp increase in the number of appeals filed has made tackling this an impossibility. 

At the end of FY2011, the Board had 23,963 pending appeals from ex parte application prosecution, up 35% during FY2011 from 17,754.  During FY2011, 13,501 new ex parte appeals have been filed, a 9% increase from last year.  Meanwhile, the Board has disposed of 7,292 such cases, about 2% more than FY2010.

In other types of cases before the Board, the number of new interferences is also up from 52 to 64, a 23% increase from FY2010.  The Board is 51 cases compared to 50 in FY2010.  The number of new ex parte reexam appeals filed during FY2011 was down from 158 to 125.  Meanwhile, the Board decided 173 of these cases, cutting its inventory from 74 to 26 such cases.  It made good headway here.

The other area of significant increase is inter partes reexams.  While 44 appeals were filed in FY2010, 114 were filed during FY2011, a pace for a 159% increase.  After disposing of 30 last year, the Board decided 86 during FY2011.  Clearly, inter partes reexamination proceedings are now being more widely used that Congress realizes.

Conclusion

The incredibly shrinking PTO backlog is a really good sign, but most other numbers are not keeping pace.  There is no concomitant decrease in pendency to first office action or total pendency.  These numbers will hopefully follows once the PTO gets the oldest cases out of the way.

The PTO must come up with a plan to deal with its crisis at the Board.  Applicants deserve the ability to get a final agency decision on a patent application within a reasonable time frame, which 81.4 months is not.  The PTO is working hard to try to hire more judges and patent attorneys to work on this situation, but Congress added to its workload as well.  The Board will soon need to deal with post grant oppositions and other procedures from the America Invents Act.

To truly fix these issues, Congress must end fee diversion permanently and permit the PTO to be fully funded so that it can be fully staffed to meet users’ needs.  Unfortunately, due to partisan politics and budget crises throughout the government, it missed the opportunity to do so this time around.  The patent community should continue to pressue congress to keep its hands off the PTO’s money.