USPTO director David Kappos said the agency must raise revenue to cover costs, and cautioned those objecting to specific fee increases to propose other areas to increase fees instead.
"What we all have to realise is we’re in a zero-sum environment," Kappos said. "If we want to reduce this fee or that fee, we’re going to have to have an honest conversation about which fee we raise.”
None of the witnesses - all representatives of IP membership organisations - followed that advice, but each noted they are still reviewing the proposed rules and gathering feedback from their respective memberships. Instead, they accepted the idea of the agency recovering costs, but questioned the level of spending projected into future years.
Much of the projected spending, Kappos said, is targeted at reducing the agency's backlog of pending applications. AIPLA executive director Q Todd Dickinson said that is an admirable goal, but Congress' primary goal with the AIA was improving patent quality to reduce litigation.
“We should look for more cost-cutting or longer pendency” rather than simply increasing fees, Dickinson said.
Witnesses also objected to the USPTO's plan to build a reserve fund of three months of operating expenses over the next several fiscal years.
"The creation of an operating reserve fund of this magnitude in a short period of time will be a tempting target for congressional appropriators who are under pressure to find funds for other agencies," said IPO executive director Herb Wamsley. The AIA stipulates that revenue generated by the USPTO in excess of expenses will be stored in a reserve fund dedicated for agency use but controlled by the House and Senate Appropriations Committees.
The USPTO needs to understand that many patent applicants lack the ability to budget more money for agency fees, several witnesses said.
"The economic burdens on patent applicants are significant," said Robert Armitage of the IP Law Section of the ABA. "There's not great elasticity in budgets" for patent fees within corporations, universities or even individuals, he said.
"Patent departments are frozen" at most corporations, Wamsley said. Higher fees "can be absorbed only by reducing the number of patent filings", he added, asking whether this would be a result the USPTO would want.
There has been significant concern in the IP community regarding the doubling of fees for requests for continuing examination (RCE). The key is to reduce the need for applicants to pursue RCEs, some witnesses said.
"RCEs have exploded since 2000," Wamsley said, totalling 150,000 in 2010. He said patent applicants too often find themselves forced to pursue RCEs because examiners aren't effectively processing their applications. "We believe additional steps must be taken to reduce the number of RCEs," he said, rather than merely increasing the fees for the service.
USPTO senior adviser for financial management Michelle Picard defended the proposed RCE increases by noting they are intended to recover the cost of the proceedings.
"We're not just trying to increase fees," Picard said, insisting the agency also is reforming the process to reduce the need for them. "We're not putting our heads in the sand that there aren't other things going on in the [RCE] process" that need improvement, she said.
Witnesses were instructed by the Patent Public Advisory Committee chair Damon Matteo to restrict testimony to the PPAC's fee proposal, but Armitage took issue with those instructions, arguing the proposal's assumptions regarding future expenses are tied intricately with other reforms being implemented following the AIA's passage.
"I would urge the PPAC as part of any report to not look at fee-setting in isolation of other rulemakings," Armitage said.
Matteo responded his instruction focused solely on the day's testimony. "The committee is in violent agreement with you" on the importance of proceeding on fee increases in harmony with other reforms, he said.
This is new territory for the USPTO, which was authorised under last year's America Invents Act to set its own fees. Armitage noted that his organisation, as well as IPO and AIPLA, opposed giving the USPTO that authority, although he said he personally supported the move.
The USPTO will host a second hearing on patent fees February 23rd in Sunnyvale, California. Written comments are due February 29th to fee.setting@uspto.gov, although further feedback can be provided on an ongoing basis on the USTPO website.
A Notice of Proposed Rulemaking will be issued in June, with a final fee schedule published in December and implemented in February 2013.
