[Federal Register: October 2, 2000 (Volume 65, Number 191)]
[Page 58746-58748]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Patent and Trademark Office

[Docket No. 000718211-0211-01]
RIN 0651-AB24

Study of Alternative Fee Structures

AGENCY: United States Patent and Trademark Office, Commerce.

SUMMARY: The United States Patent and Trademark Office (USPTO), in
response to certain provisions of the ``American Inventors Protection
Act of 1999,'' is proposing to study alternative patent fee structures
to determine how best to encourage maximum participation of the U.S.
inventor community in the patent system. In examining the evolution of
the current fee structure, the USPTO has identified several fee
structure issues which it considers important. These issues in several
cases involve fee structures unconstrained by current statutory
requirements, in keeping with the perceived intent of the Act. The
agency will prepare a report to Congress identifying critical fee
structure issues and will continue to evaluate these alternatives to
determine the effects of implementation. The USPTO asks for comments on
the issues raised and questions posed in this document.

DATES: To be ensured of consideration, written comments must be
received on or before October 31, 2000. No public hearing will be held.

ADDRESSES: Comments should be sent by electronic mail message via the
Internet addressed to barry.riordan@uspto.gov. Comments may also be
submitted by mail addressed to: Office of Corporate Planning, Crystal
Park One, Suite 807, Washington, D.C. 20231, or by facsimile to (703)
305-8138, marked to the attention of Barrett J. Riordan. If comments
are submitted by mail, the Office would prefer that the comments be
submitted on a DOS formatted 3\1/2\ inch disk accompanied by a paper

FOR FURTHER INFORMATION CONTACT: Barrett J. Riordan by telephone at
(703) 305-8475, by e-mail at barry.riordan@uspto.gov, by facsimile at
(703) 305-8138, or by mail marked to his attention and addressed to
Office of Corporate Planning, Crystal Park 1, Suite 807, Washington,
D.C. 20231.

SUPPLEMENTARY INFORMATION: The American Inventors Protection Act of
1999, Pub. L. 106-113, 113 Stat. 1501 (1999), Section 4204 (enacted
November 29, 1999), instructs the Director of the United States Patent
and Trademark Office to ``conduct a study of alternative fee structures
that could be adopted * * * to encourage maximum participation by the
inventor community in the United States.'' Such study is to be
submitted to Congress no later than one year after enactment.
    To assist in the preparation of this study, the USPTO requests
comments on the range of topics which could potentially be considered
therein. The USPTO is interested in comments that the public has
regarding these and other related fee issues that the respondent
believes to be appropriate. The USPTO encourages interested persons to

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respond to this notice by submitting written data, views, or arguments
regarding specific topics to be incorporated into this study. In
particular, the USPTO is interested in any comments directed toward the
questions posed below. Comments received will be relied upon heavily in
the study submitted in response to the legislative requirement stated
above, and also in assessments expected to be carried out subsequently.

1. Background and Purpose

    The current patent fee structure of the United States Patent and
Trademark Office is based on three major categories: (1) Patent
statutory fees; (2) patent non-statutory fees; and (3) Patent
Cooperation Treaty (PCT) fees.
    Patent statutory fees consist of the patent processing fees (i.e.,
filing, issue, and maintenance fees) and PCT national stage application
fees that were set by statute in Public Law 97-247 and Public Law 102-
204 (35 U.S.C. 41(a) and (b)). Public Law 97-247 also provided for a 50
percent reduction of these fees for small entities--individual
inventors, small businesses and non-profit organizations (35 U.S.C.
41(h)). This reduction remains in force today.
    Patent non-statutory fees consist of all other patent processing
fees, as well as fees for products and services related to patents. The
Director must establish these fees to recover the average cost to the
Office of providing the products and services (35 U.S.C. 41(d)).
However, the following three patent service fees are set by statute:
the fee for assigning a patent, the fee for a copy of a patent, and the
fee for making photocopies of patent-related material.
    Patent Cooperation Treaty fees (except for those fee amounts set by
the World Intellectual Property Organization in accordance with the
Treaty) are set by the Director to recover the average cost to the
Office for processing applications under the Treaty (35 U.S.C. 41(d)
and 376(a)).
    The current fee structure has evolved from a growing recognition
beginning in the late 1970s that the USPTO should be self-financing.
Public Law 96-517, 94 Stat. 3018, Section 3, 35 U.S.C. 42, enacted on
December 12, 1980, entirely revised the patent fee system by giving the
Director the power to establish fees. As introduced, the bill provided
that the fee recovery level would be revised yearly to generate 60
percent of the revenue needed to operate the Office. However, in
response to criticism from small businesses and individual inventors
that the fees would place too great a burden on them, the Congress
reduced the cost recovery level for small entities to 50 percent of the
revenue needed.
    In order to further soften the impact on inventors, Public Law 96-
517 stated that patent fees were to be paid in installments over the
life of a patent. This system, known as maintenance fees, is used by
the European Patent Office and most European member countries, and
Japan, as well as many developing countries and has the advantage of
deferring payment until the invention begins to return revenue to the
inventor. Should the invention prove to have no commercial value, the
inventor has the option of permitting the patent to expire, thus
avoiding all further fees.
    Public Law 97-247, enacted on August 27, 1982, further reduced fee
burdens on small entities (individual inventors, small businesses and
non-profit organizations) by reducing patent statutory fees by 50
percent for them. Later, in November 1990, with the enactment of the
Omnibus Budget Reconciliation Act, Public Law 101-508, 104 Stat. 1388-
391, 35 U.S.C. 41, the USPTO became fully fee-funded, but retained the
50 percent fee reduction for small entities.

Fee Issues

    In accordance with the intent of Congress, the USPTO wishes to
determine what, if any, changes should be made to the USPTO's fees to
encourage maximum participation in the patent system by the inventor
community and still meet the legislative requirement to fund patent
operations fully out of user fees. In so doing, the USPTO seeks
comments on the following issues as well as any others that might be
deemed relevant.

A. Cost Recovery

    OMB Circular A-25 establishes agency guidelines for assessing user
charges to the general public and requires full cost recovery through
accurate fees consistent with statute. A May 1997 GAO Report on
Intellectual Property focused on USPTO's inability to match costs with
fee revenues and thereby satisfy A-25 requirements. Since that time,
the USPTO has developed an activity-based costing system that is used
to prepare financial statements, make decisions regarding fee amounts,
formulate budgets, and for other financial management purposes. For
instance, today it is possible to consider fee differentiation by
degree of examination complexity or other patent characteristics
affecting the average costs of different aggregate classes of
applications. To what extent should the USPTO rely upon actual average
costs in designing fees and fee structures? Should some existing fees
be subdivided; e.g., should search and examination fees be charged
separately from application fees? Should the examination fee be scaled
based on the cost of prosecuting the application? At what point(s)
during the application process and/or during an issued patent term
(through maintenance fees, for example), should fees be charged?

B. Maintenance Fees

    Although required by statute since 1982, maintenance fees continue
to be criticized by some inventors. They view these fees as a tax on
their right to control their inventions over the entire patent term and
want them totally eliminated. Others favor almost a converse approach
to maintenance fees. They point out that the maintenance fee concept
was originally adopted to provide patent holders flexibility in the
face of uncertainty before the fact as to whether or not the patent
would be commercially viable. Instead of requiring the entire
investment up front, owners were given the option to pay out gradually
and relinquish their patent rights when that made economic sense. They
further point out that the current structure requiring payment of
maintenance fees at 3.5, 7.5, and 11.5 years after issue is not tied to
specific milestones in the patent life cycle and, thus, the USPTO
should provide additional flexibility by making maintenance fees
payable annually over the entire term of the patent. What is the proper
role of maintenance fees in the patent fee structure?

C. Small Entity Fees

    Small entities have paid reduced fees since 1982. Major small
entity fees are half of those charged to large entities, as determined
legislatively. This fee reduction represents an advantage to certain
inventors, and elimination of these reductions would appear to be a
possible alternative fee structure adjustment. Should preferential
treatment for small entities be eliminated? On the other hand, it can
be argued that the current 50 percent reduction does not go far enough.
The current fee structure provides a 50 percent reduction to the major
patent fees (e.g., filing, issue, maintenance) paid by all small
entities equally: small businesses; non-profits; and independent
inventors. However, some believe that independent inventors are more
innovative than the other small entities and, at the same time, are
more sensitive to cost factors. Lower costs associated with innovation
would permit independent inventors to

[[Page 58748]]

exercise their innovativeness more fully, to the overall benefit of the
economy. This argument implies that this group should be paying fee
amounts that are reduced to an even greater extent than is currently
done for small entities; that is, a new fee category should be created
for independent inventors and extremely small (micro) entities. How
should the patent fee structure define and treat small entities?

D. Electronic Filing

    The USPTO has the achievement of a totally electronic system for
receiving applications as one of its major goals. In order to create
incentives for customers to file electronically, it has been suggested
that the fee structure charge more for paper applications, which are
more costly to process. Should the patent and trademark fee structures
differentiate between electronic and paper filings? If such a
differentiation is determined to be an effective means of encouraging
electronic filing, should it be imposed immediately or phased in over a
period of years?

E. Unity of Invention

    The European Patent Office, Japanese Patent Office, and USPTO
reached a Trilateral agreement on harmonizing unity of invention
practice at the Sixth Annual Trilateral Conference held in Tokyo in
1988. The Trilateral agreement allows a patent application to include a
group of inventions so linked as to form a single general inventive
concept, termed unity of invention. This agreement, adopted for PCT
practice, differs substantially from current U.S. restriction practice.
While this is not primarily a fee structure issue, full adoption of
unity of invention would mean that more inventions are contained in
fewer applications, with a resultant increase in average examination
costs per application. Under the current fee structure, this would
significantly reduce revenue from application, issue, and maintenance
fees and thereby necessitate an increase in these or other fee amounts.
If unity of invention were adopted, how should the resulting excess of
costs over revenue be recovered through the fee structure? For example,
it is believed that within certain technology areas, the number of
patent applications and issues and their associated fee revenue would
decline substantially, although the examination workload would not
change. Should such technologies bear the burden of resulting fee
increases or should the excess cost increment be apportioned uniformly?
    In light of the substantial fee level adjustments that unity of
invention would require, what are its precise benefits to the inventor

    Dated: September 26, 2000.
Q. Todd Dickinson,
Under Secretary of Commerce for Intellectual Property and Director of
the United States Patent and Trademark Office.
[FR Doc. 00-25225 Filed 9-29-00; 8:45 am]