[Federal Register Volume 65, Number 191 (Monday, October 2, 2000)]
[Notices]
[Pages 58746-58748]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-25225]


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DEPARTMENT OF COMMERCE

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 [email protected]. 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 
copy.

FOR FURTHER INFORMATION CONTACT: Barrett J. Riordan by telephone at 
(703) 305-8475, by e-mail at [email protected], 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 
community?

    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]
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