CAFC OK’s Fee-Based Regulation at PTO

The CAFC has now explicitly opened the door to fee-based regulation at the USPTO.

Figueroa v. U.S. (Fed. Cir. 2006).

Fighting a lost cause, Figueroa sued the U.S. government using PTO fees to fund other federal programs (fee diversion). From FY 1991 to FY 2004, for instance, the PTO collected about $11.1 billion in fee revenue and only spent about $10.6 billion.  The remaining $545 million was returned to the general fund.

Figueroa alleged that the PTO fees “exceeded congress’s power under the Patent Clause” of the Constitution and was also an un-apportioned (and thus unlawful) direct tax on intellectual property.

Using a rational-basis test, the two-judge majority found that Congress had plenty of reasons for charging the fees that it did. Most notably, the court found that an acceptable basis for high fees would be to provide incentives against certain types of patent prosecution activities.

[E]ven if fees exceeded the existing and predicted costs of operating the patent system, Congress could also rationally decide to set fees above what is needed to meet the funding needs of the PTO in order to deter the filing and prosecution of certain types of patent applications. The Supreme Court has recognized that Congress may legitimately impose taxes or fees in order to discourage undesirable behavior.

In particular, the court noted that high fees could be used to discourage the filing of applications associated with vanity patents, likely invalid patents, non-commercial uses, and patents designed to inhibit competition.

This gives constitutional backing to the fee-based regulation at the PTO, such as charging large fees for additional claims or continuations. In a recent letter to Jon Dudas, the IPO opposes any “collaborative” or “platinum plated” examinations because those “would discriminate against [patentees] with limited resources, draw the examining staff away from traditional examination, and create different classes of patents in the eyes of the courts.” [IPO Letter]

Links:

• Prior discussion of Figueroa [Court of Federal Claims].
• Information on the case from the prosecuting lawyer.
• Nipper’s discussion of the case.
• AIPLA amicus brief supporting Figueroa at the Court of Federal Claims.