After Loper Bright, the USPTO Should Reopen the Comment Period for FY 2025-2029 Patent Fees

On April 3, 2024, the United States Patent and Trademark Office (USPTO) published a 266-page Notice of Proposed Rulemaking (NPRM) on “Setting and Adjusting Patent Fees during Fiscal Year 2025” (89 FR 23226), with proposed selective and in some cases extraordinary increases in fees for the fiscal years 2025-2029. These proposed increases in fees for patent activities have been controversial among stakeholders.

The authority to set fees is provided in Section 10 of the Leahy-Smith America Invents Act, which allows the Director to set or adjust by rule any fee established, authorized or charged for services performed or materials furnished by the Office. Section 10(a)(2) states that fees may be set or adjusted ONLY to recover the aggregated estimated costs to the Office for processing activities, services and materials relating to patents.

The NPRM provided a period of just two months to review this 266-page dense and detailed document and submit comments to the USPTO, due June 3, 2024. Twenty-eight comments on the NPRM were posted (regulations.gov; PTO-P-2022-0033), many from large associations with patent-holding members, and with most critical of the increases on the basis that they seemed to be disproportionately promoting political goals.

The NPRM specifically refers to fiscal years 2025-2029. The USPTO fiscal year runs from October 1 to September 30. Therefore, fee increases for FY 2025-2029 could be set in a Final Rule starting any time after October 1, 2024.  A slide deck provided on the USPTO website in the “Fee Setting and Adjusting Page” simply states that “[t]he USPTO intends to issue a final rule in FY2025 following a review of comments received during the comment period.”

It is also noteworthy that the USPTO issued its “United States Patent and Trademark Office Fiscal Year 2025 Congressional Submission” in March 2024, prior to the publication of the requests for comments on the budget from the public on April 3, 2024. On pages 3-4 of the Executive Summary, the USPTO stated that “Recent comprehensive patent and trademark fee reviews concluded that fee adjustments are necessary to increase aggregate revenue (fee collections) and to refine certain fees to finance ongoing operations. For purposes of estimating fee collections, the Budget assumes revised trademark fee rates will take effect on November 23, 2024, and revised patent fee rates will take effect on January 8, 2025. These dates, as well as the proposals, may change as the agency goes through the process of publishing notices of proposed rulemaking (NPRMs), incorporating public feedback received during the comment periods, and drafting and publishing new rules.”

Loper Bright Changes the Game

A major change in agency law occurred after the publication of the fee setting NPRM on April 3, 2024, and more importantly, after the deadline to submit comments on June 3, 2024.  This is of course the issuance of Loper Bright v. Raimondo (603 U.S. __; 2024), in which the U.S. Supreme Court overruled the Chevron deference in effect for 40 years (Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc; 467 U.S. 837 (1984)), which directed courts to defer to an agency’s reasonable interpretation of an ambiguity in a law that the agency enforces. SCOTUS made it very clear that Chevron is dead, and the only proper analysis of an agency rule is found in the Administrative Procedures Act (APA), in which a reviewing court shall hold unlawful and set aside agency action (i) found to be arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law; (ii) contrary to a constitutional right, power, privilege or immunity; or (iii) in excess of statutory jurisdiction (among other grounds).

What do Loper Bright and the APA have to do with fee setting? The stakeholders were not given the chance to consider and comment on the proposed fees for FY 2025-2029 under the new U.S. Supreme Court mandated standard of review for agency action. After Loper Bright, an agency cannot add the Executive Branch’s policy initiatives and selective philosophies to statutory directives, unless explicitly authorized.

The USPTO’s NPRM stated that:

“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 cost of the 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.”

Questions to Consider

Putting aside for a moment the intended meaning of “fee structure philosophy” and “inclusive capitalism”, the stakeholders should be allowed to provide comments on at least the following, using a proper Loper Bright analysis:

1. Whether the term “aggregated estimated costs to the Office for processing activities, services and materials relating to patents” allows the Patent Office to aggregate all fees together by sharply increasing certain fees in a manner that appears to be discriminatory and policy driven  (i.e., potentially “arbitrary” under the APA)?
2. Whether raising targeted fees by several hundred percent is arbitrary?
3. Whether it is an arbitrary and unpersuasive argument that the Office needs to place a surcharge on continuations filed at the 5 and 8 year periods to make up for lost maintenance fees, when such continuation filings have been filed for many years, and further are authorized under 35 USC 120 without discrimination based on date of filing?
4. Whether it is arbitrary to disproportionately increase the fee to obtain a Patent Term Extension by 468% because the company obtaining drug approval can afford it?
5. Whether it is arbitrary and politically motivated to disproportionately increase the fees to file a terminal disclaimer, which is done electronically and in a perfunctory fashion (and among the cheapest submissions to handle administratively), prior to a final office action by 194%, after a final office action by 371%, on or after a Notice of Appeal by 547%, and in an issued patent by 724%?
6. Whether it is arbitrary to apply a fee at all with a requirement to submit a terminal disclaimer to overcome obviousness-type double patenting which is “judicially created” and “non-statutory” and which thus violates the Constitutionally required separation of powers?

We Need More Time

I urge the USPTO to reopen the comment period for fee setting to allow stakeholders to comment on the NPRM using the revised standard of agency review demanded by the U.S. Supreme Court. I also urge that the USPTO provide a comment period of at least three months, instead of two months, because of the difficulty in reviewing a financially-detailed 266-page tome and applying the correct legal analysis within a two month period.

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Author: maxkabakov
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