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Post-GSK: Where Do We Go from Here? – Increased Fees for Continuations

    By Kevin E. Noonan —

The following is part of a continuing series on how to address the
very real problems facing the U.S. Patent and Trademark Office.

Uspto_seal
A day after the day of rejoicing for inventors, patent practitioners,
examiners, and seemingly all of civilization, fair-minded people will
concede that the U.S. Patent and Trademark Office faces a daunting
task.  After years of neglect – from Congress raiding the users’ fees,
an inadequate number of examiners, technology-driven increases in the
number of applications filed, and a "count" system that has not
rewarded a style of examination that encourages prosecution to a
definitive end point – the Office is facing a massive backlog of
applications without sufficient resources to process them in a timely
manner.

If the patent bar is gladdened by District Court Judge Cacheris’
decision enjoining implementation of the new rules – representing an
attempt, albeit a misguided one, on the part of the Office to address
the pendency and backlog problems – it behooves us to propose
alternatives.  Patent Docs
will be posting a series of such proposals, and we invite our readers
to provide their own ideas.  As they used to say in the days of the
counterculture, "if you are not part of the solution, you are part of
the problem."  Patent Office management clearly thinks the patent bar
is part of the problem; it would be satisfying to prove them wrong.

Increased filing fees for continuation applications

Under the current fee regime, Patent Office filing fees can be broken down into fixed and variable, where the fixed fees are charged for every application but the variable fees are applicant-dependent.  For example, the fees for a utility application containing no more than 3 independent claims and 20 total claims is made up of the basic filing fee ($310.00, 37 C.F.R. § 1.16(a)(1)), a search fee ($510.00, § 1.16(k)), and an examination fee ($210.00, § 1.16(o)); all values are for large entities, and the basic filing fee is waived if the application is filed electronically.  Applicant-dependent fees include fees for filing more than 3 independent claims ($210.00 per claim, § 1.16(h)), total claims in excess of 20 ($50.00 per claim, § 1.16(i)) and a surcharge for filing multiply-dependent claims ($370.00, § 1.16(j)).  The Office also charges more for extra sheets of an application ($260.00 per 50 sheets in excess of 100 total; specification, claims, abstract and drawings), a fee reduced for applications filed electronically.

Several comments received at Patent Docs have suggested that one way of handling the backlog of unexamined applications would be to charge applicants a series of increasing fees for each additional continuation or request for continued examination (RCE) filed in an application.  Suggestions have included a 25% surcharge for the second continuation or RCE, a 50% surcharge for the third, a 100% surcharge for the fourth, etc.  Similarly, it has been suggested that claims in excess of 25 have an additional surcharge (some suggestions are as much as $200 per claim, and double that for claims in excess of 50).  The rationale is that these applications are the cause of the backlog and Patent Office burden, using (maybe even overusing if not actually abusing) Office resources that cannot be used for other (presumably more deserving) applicants, and that our capitalist system supports such a "pay-as-you-go" or "pay-for-play" approach.

The difficulty with these suggestions is that they fall into the same trap that caused (or at least encouraged) the ill-conceived Patent Office "new rules."  First, they blame the applicant for years of neglect, underfunding, and mismanagement at the Office.  Second, they are to be applied indiscriminately against applicants with inventions that legitimately require more than 25 claims to fully protect them.  And while they are frankly intended to influence behavior, brief consideration suggests that the behavior they produce will not solve the problem.  For applicants, burdensome excess claims fees will encourage multiple filings, on the same day, of the same application with claims directed towards different aspects of the invention (compositions, methods of making, methods of using, etc.).  It is unlikely that the problems in the Patent Office will be solved by encouraging more applications to be filed.  Examiner behavior will also be influenced; if an examiner "knows" that an invention isn’t patentable, but cannot craft an Office action that does not provoke an applicant to abandon the application or appeal the asserted rejection(s), the examiner will simply be able to continue to reject the claims until the cost of another RCE or continuation becomes too burdensome.  And the examiner will be increasing fees for the Office, a behavior unlikely to be discouraged by PTO management.  The experience of applicants in the biotechnology arts relating to restriction practice is indicative of the problem:  during the past 10 years it has not been uncommon for the Office to issue multiple (in excess of 10) restricted groups, with a view towards reducing examiner burden and increasing divisional application filings (having claims of more restricted scope).  Any policy that encourages examiners to "stick to their guns" with a negative consequence for applicants is no better than the new rules the Office promulgated on August 21st; they would put a premium on intransigence among those examiners who believe they "know something is unpatentable when they see it."  This result would also be expected to increase pendency times.

Any system of increasing fees would have to protect those applicants who can least afford excessive patent filing fees.  Exempting small entities is one possibility in this regard.  However, it is not clear that even large corporations (like GSK) would be able to continue to pursue their applications if the fees, and the time in prosecution, increased dramatically.  GSK’s strongest argument was that an applicant, any applicant large or small, has an expectation of fair and timely examination, and that this expectation (and any resulting patent) is the benefit obtained in exchange for full disclosure of the claimed invention.  One of the great weaknesses in the new rules was that they frustrated this reasonable expectation, and it would be unfortunate indeed if this frustration became a part of any proposal to address the real problems the Patent Office faces.

For additional articles in the "Post-GSK" series, please see:

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3 responses to “Post-GSK: Where Do We Go from Here? – Increased Fees for Continuations”

  1. MJC Avatar
    MJC

    I think the simplest solution is for the PTO to charge an hourly rate. An initial filing fee might include say 3 hours of examination, and if the application starts to become time consuming then the applicant would pay for additional time spent.
    For example, the filing fee gets the applicant 3 hours, and the examiner if he needs more time might request an additional fee for extra time spent with the office action. Say for example he used an extra 2 hours then the reply to the action might include a request for $200.
    The applicant might be entitled to appeal the fees to ensure the examiner really used this time, and that it was a reasonable time used for examination.
    If the application starts to consume more and more time with more prior art references, extra claims, etc then the examiner sends an additional notice to pay for more time with each office action.
    With continuations they would still be unlimited, but the time consumed by the examiner would continue to be billed. So too many claims, poor search reports, etc would end up costing the applicant more fees for the time spent.
    One advantage of this is that it becomes clear how many hours of work is needed to examine, and there is little pressure to hurry examination. Some examiners might take too long on occasion, but the fees could be appealed and compared to other examiners and how long they took on comparable applications.
    One can then estimate how many hours of examination are needed to clear the backlog, how much in fees is likely to be paid, and this says how much is available to hire and train more examiners.
    Applicants would get a better service this way. If there are disagreements then he can pay for more time to get the issues worked out. There is no need for a RCE so the PTO can make more fees, if there are disagreements and the applicant can pay then the process continues until resolved.
    The PTO could even limit the number of claims, and if the application went over this then the applicant could be charged for additional time spent by the examiner in doing searches. Since the examiner does this then attorney is not liable for doing it themselves. Also there might be a search agency in the PTO, like with the PCT system, which charges applicants according to an estimate for time spent in searching.
    The more complex an application, the more claims, the more confusing a specification, the worse the translation, poorly organized prior art searches, all these would make the examiner spend more time and so this would penalise the applicant. It would be in his interest to make the application as easy for the examiner to understand as possible.
    A bonus system could be used so that the examiners that finish more applications in less time get a bonus. However this would not count if the applicant filed an RCE, so an examiner trying to save time by cutting corners might end up spending more time later arguing with the applicant.
    Some examiners might be too easy on an application, allowing dubious claims to save time. This is probably happening already though to make quotas. The PTO would tend to discourage an examiner finishing too quickly to increase their revenues. Once the backlog was reduced the bonuses for finishing quickly might be reduced.
    This is market forces at work. Most people expect to pay for the time spent by a worker, the patent attorney himself charges by the hour. Paying for time prevents both sides wasting the other’s time, and doing a poor job which take more time to fix later.

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  2. NIPRA anonymous Avatar
    NIPRA anonymous

    How about this one: do away with RCEs entirely.
    In terms of continuing examination, the system seemed to work better pre-1999 when it actually took a little work on everyone’s part to go beyond compact prosecution.

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  3. DD Avatar
    DD

    Having recently joined the Patent Bar (as an agent) after many years of experience as an inventor and business-person, I find the current rules fight rather disturbing. If the PTO were a business, it would be bankrupt, and several CEO’s would have been fired by now. And despite the PTO’s assertion to the contrary, I firmly believe that recent proposed and implemented rules changes will INCREASE backlog rather than decrease it. The notion that carving each application into ever smaller and smaller pieces will increase overall efficiency appears ludicrous. I would be looking to reverse that trend, to revise procedures and accounting systems to encourage consolidation and concentration of effort to be able to take advantage of economies of scale and avoid the continual overhead of refamiliarization with old cases. People adapt to whatever systems are imposed on them, even when they involve bribes, dictators, and nonsensical rules, but in the long run, a system that reduces bureaucratic overhead and ensures that more quality time is spent on the business being regulated will be more competitive.
    Toward that end, here are some substantive proposals:
    1. Scrap the current continuation practice, RCE practice, restriction practice, claims limitations, and the “count” system in use for measuring examiner productivity. These are all counter-productive.
    2. Replace continuations and continuing examination with a procedure which allows applicants to pay for issuance of a patent on claims allowed to date, while continuing prosecution of additional claims. (It may be appropriate to put a time-limit on prosecution (say, five years total, or maybe two years of a “stop clock” timer [time running only when the ball is in applicant’s court to act].) The only reason to “restrict” any subject matter from a particular case should be when there is clearly no significant technical relationship between claims (unrelated inventions).
    3. Examine only independent claims during a first action (though, of course, any claim dependent from an allowable independent claim can be immediately allowed as well).
    4. Encourage and train examiners to use any appropriate procedures to expedite rather than delay prosecution. This should often include examiner-initiated interviews, requests for explanation, and the like as needed to establish early the “broadest REASONABLE” construction of claims, for example, or to make sure the examiner understands the underlying technology and intended claim to novelty. Encourage examiners to suggest minor changes that would make claims allowable and to point out when no permissible change is likely to make a claim allowable (and why).
    5. Rationalize the fee structure and incentive structures. If a particular practice is, on average, costing more examiner time than is being paid for, charge more for it! (Make sure you/we know what the costs actually are!) Develop an examiner evaluation process that actually measures the quality of examiner work and does not provide incentives for inappropriate behavior. To the extent that a “count” system is part of this, count something more like the number of independent claims processed to either allowance or abandonment, and certainly not the number of time that a particular matter is churned.
    6. Make the PTO a “business unit” more on the recent model of the US Post Office. Allow it to spend the money it takes in to do its business. Make PTO senior management accountable for such goals as managing backlog, issuing patents that withstand court review, passing quality audits, achieving customer satisfaction goals, etc.
    In short, I think we are overdue to think “outside the box” to revise our patent system in ways that actually promote and encourage US inventiveness and creativity rather than stifling it. It can be done! We just need to put some creative and inventive effort into reinventing the patent system. I look forward to seeing the new business method patents on how to run the PTO! (Well, actually, I rather hope that whatever methods we do collectively invent are dedicated to the public…)

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