U.S. Chamber-Led Coalition Joins Voices Telling Commerce to Nix Valuation-Based Patent Fee Proposal

On Tuesday, a coalition of business organizations and policy experts led by the U.S. Chamber of Commerce raised several concerns related to potential new patent fees they said would amount to “fines” on patent owners in a letter addressed to the bipartisan leadership of the Judiciary Committees for both houses of Congress. Echoing warnings from industry insiders about the inherent difficulties of patent valuation, the U.S. Chamber’s letter questions the Trump Administration’s legal authority to implement such fees and says that the valuation-based fee framework would be “administratively unworkable.”

Isolating Contributions of Single Patents ‘Incredibly Difficult, if Not Impossible’

About two months after U.S. Secretary of Commerce Howard Lutnick, himself a named inventor on about 400 patents, publicly remarked at the National Inventors Hall of Fame induction ceremony that “[inventors] have a friend” in a Secretary of Commerce who “for the first time… understands the Patent Office,” news reports indicated that Trump Administration and Commerce Department officials were considering a new system of patent fees charging between 1% and 5% of the overall value of each U.S. patent.

This valuation-based framework for patent fees has ignited controversy before an official draft proposal has even been released. IPWatchdog Founder and CEO Gene Quinn recently wrote that a patent valuation framework for fees would be “catastrophically stupid,” pointing out that “patent valuation is more black magic than it is science” and that the Office has no experience with patent valuation. Quinn further argued that such a framework, if implemented, would do much to continue the dismantling of the U.S. patent system in favor of large corporations who patent for defensive purposes and against R&D companies driving innovation forward.

The letter sent by the U.S. Chamber’s coalition echoes many of these same concerns. A valuation-based framework for patent fees would upend the innovation ecosystem keeping America at the forefront of emerging technologies for generations in three concrete ways, the signatories argue. First of all, the signatories joined the growing chorus of voices recognizing the unpredictability and subjectivity of patent valuation. Noting that many popular consumer products could be protected by dozens or even hundreds of patents, each of which having multiple claims defining the patent’s scope, isolating the contribution of a single patent to a product’s overall value becomes “incredibly difficult, if not impossible,” the coalition writes.

Valuation-Based Patent Fee Framework Would Undermine Investments in Critical Sectors

The letter’s signatories also challenge the U.S. Patent and Trademark Office’s (USPTO) legal authority for implementing such a valuation-based framework for patent fees. Under Section 10 of the America Invents Act (AIA) of 2011, the USPTO has authority to set fees “only to recover the aggregated estimated costs to the Office” of the agency’s patent and trademark operations. “Imposing fees as a penalty for perceived patent value is outside that mandate and would likely invite serious legal challenges,” the U.S. Chamber’s coalition warns.

Most importantly in the coalition’s eyes, the proposed valuation-based framework for patent fees would trigger severe unintended consequences in semiconductors, pharmaceuticals and several other sectors for which the Trump Administration has worked to attract new investment. Pointing out that many R&D firms rely on patent licensing revenues to remain free from federal subsidies for their research programs, the coalition’s letter contends that valuation-based fees would disproportionately burden the finances of tax-paying property owners.

“To be clear, many of the undersigned organizations and individuals have supported efforts to appropriately increase patent fees” provided those funds are allocated to hire and train examiners, upgrade technology and reduce pendency. The potential shift to a valuation-based fee framework would achieve none of those goals, the coalition argues, while slowing America’s innovation ecosystem at a time when our nation is facing significant competition from major foreign economic and innovation rival China.

Signatories to the U.S. Chamber of Commerce’s letter include Small Business & Entrepreneurship Council; Consumer Technology Association; IEEE-USA; Former Federal Circuit Chief Judge Paul Michel; James Edwards, Executive Director, Conservatives for Property Rights; Economics Professor Kristina Acri, Professor Kristen Jacobsen Osenga, University of Richmond School of Law; Robert Stoll, Former Commissioner for Patents, USPTO; Suzanne Harrison, Former Chair, Patent Public Advisory Committee; Alliance of U.S. Startups & Inventors for Jobs; and more.

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