More Money, More Problems: Could IPR/PGR Patent Office Filing Fee Increases Encourage Bad Patent Drafting?

In 2012, the America Invents Act introduced specialized proceedings in the Patent Office that allow almost anyone to challenge the validity of a U.S. patent in the Patent Office after the patent has issued, provided the challenger has not waited too long, has not directly or indirectly previously challenged the same patent, the challenger's petition meets all statutory and rule-based requirements, and the challenger is willing to pay the fees involved.

These proceedings are a game changer for companies doing any business in the U.S. related to innovation, whether its their own or their competitors’, because they provide a cost-effective alternative or supplement to U.S. patent litigation. At the end of the proceedings, a patent either is invalidated (partially or entirely) or it survives—either way, the proceedings can significantly impact the positions of the parties in a patent dispute.

The benefits of AIA post-grant proceedings in the Patent Office include:

(1)??? Post-grant proceedings must conclude within a statutorily mandated time frame that is significantly shorter than trial timelines in most federal district courts in the U.S. (less time usually means less money spent on litigation);

(2)??? Post-grant proceedings have very limited discovery compared to the wide-reaching discovery available in standard district court litigation (because discovery is one of the most expensive aspects of US patent litigation, less discovery means less money spent on litigation);

(3)??? Post-grant proceedings are decided by a panel of three administrative patent judges who are required to have technical backgrounds and experience as licensed and registered patent attorneys, as compared to federal district court judges or a jury, neither of which is required to meet any technical/patent law background requirements (more specialization can mean more specialized decisions and less money spent on litigation);

(4)??? Post-grant proceedings can give way to a "stay" or pause in co-pending district court litigation (less litigation can mean less money spent on litigation);

(5)??? Post-grant proceedings can dispose of and/or substantially narrow issues to be decided in district court, resulting in less litigation (and again, less litigation can mean less money spent on litigation);

Despite the many advantages, AIA post-grant proceedings have a unique cost not present in district court litigation: official USPTO filing fees. For every patent review request a challenger files, the Patent Office charges filing fees that are separate and apart from any fees a challenger pays the attorneys who prepare the request, and they are, for the most part, non-refundable.

USPTO filing fees vary depending on the type of proceeding.? Inter partes reviews (“IPRs”) challenge patents only for anticipation (i.e., lack of novelty) or obviousness and based solely on patents or printed publications.? Post-grant reviews ( “PGRs”) cover all unpatentability grounds, with a higher word count (18,000) compared to IPRs (14,000) and therefore have higher fees.?

USPTO fees are also generally divided into two types of fees.? “Request” fees cover the work required to evaluate a request and determine whether to proceed with a full review (in AIA terms, this is called “institution of trial”); and “post-institution” fees cover administration of the AIA trial after institution.? All fees are due at the time a challenger files a petition requesting review or the Patent Office can reject the petition for failing to comply with all applicable rules.

Now, to look at how much these fees are. Back in 2012, when the AIA first introduced IPRs and PGRs, USPTO filing fees for an IPR request challenging one patent with up to 20 claims would have run $27,500. For requests challenging more than 20 patent claims the Patent Office charged an additional $600 per claim ($200/claim request fee and $400/claim post institution fee).

Meanwhile, to request PGR of a 20-claim patent in 2012, a challenger would have to pay $35,800 in USPTO filing fees, plus an additional $800 for every challenged claim over 20.? And, recall, these fees are in addition to the attorney and expert fees, which can each range anywhere from $15,000 to $150,000 (or more) per petition, depending on the technology, the patent history’s complexity, availability of prior art, and various other factors.

That was nearly twelve years ago. Over the years, the USPTO has raised the filing fees several times, with the most recent increase taking effect in 2020.?

Today, if someone wants to challenge a patent with 20 claims, USPTO filing fees for an IPR will be $41,500 and $47,500 for a PGR.? To challenge more than 20 patent claims, the USPTO charges additional filing fees of $1,125 for an IPR and $1,525 for a PGR for each additional claim.? Here’s a detailed breakdown of current filing fees:

As high as these fees may seem, challengers get ready, because the USPTO wants to increase the IPR/PGR filing fees again—this time by 25%.? If approved, the fee increases will take effect on January 18, 2025, after which time challengers will have to pay at the very minimum $51,875 in filing fees to challenge up to 20 patent claims. For patents with? more than 20 claims, a challenger will have to pay an additional $1,410 for every patent claim the challenger seeks to have reviewed.

For PGRs, USPTO filing fees will start at $59,375 to challenge up to 20 patent claims, plus $1,910/claim for ever claim over 20 to challenge more than 20 patent claims.

So, for a patent with 40 claims challengers would be looking at paying $80,075 in IPR filing fees or $97,575 in PGR filing fees alone; for a patent with 60 claims, filing fees would jump to $108,275 for IPRs and $135,775 for PGRs; and so on.

These proposed fee hikes raise concerns, not only for putative challengers and the viability of these post-grant proceedings as an option for litigants altogether, but also for the integrity of the U.S. patent system.? AIA post-grant proceedings were supposed to provide a more cost-effective alternative to district court litigation, to reduce the burden on the court system, and to help eliminate weak patents from the U.S. patent system.? These fee increases, however, may make it cost-prohibitive for some potential challengers to request IPRs or PGRs, which could limit their options. As a result, companies who have been targeted in patent infringement litigation based on weak patents may have to choose between spending more money on district court litigation to invalidate the patents in court, which can take years, or settling out of court with less-than-favorable terms because they cannot afford protracted court litigation.? Neither option is ideal.

Another adverse side effect of the proposed USPTO fee hikes, particularly the fee increases for reviewing more than 20 patent claims, is intentional bad patent drafting to try to IPR/PGR-proof a patent. ?Some companies already obtain patents to initiate expensive district court litigation to quell competition instead of improving their market position by enhancing research and development, marketing, or sales approaches.?? But with IPR/PGR costs rising, companies could take things a step further and encourage counsel to draft patents that unnecessarily slice and dice patent claims to artificially inflate the number of claims that will issue in a patent, with a sole aim of making it too expensive for competitors to later challenge that patent. And if a company has the fortune of being assigned a Patent Office Examiner who, for whatever reason, allows applications to issue with minimal examination, the temptation to back-load patents with large numbers of claims that lack any patentably meaningful distinctions will be significant.

But what will such strategies ultimately do to the U.S. patent system? Fee hikes may not only discourage the use of AIA post-grant proceedings, but also incentivize a type of strategic patent drafting that decreases the quality of patents through attempts at IPR/PGR-proofing them, resulting in another influx of weak patents—a problem the AIA sought to solve with IPRs and PGRs in the first place.?

It's hard to say whether the USPTO fully appreciates these litigation-based concerns, but the Patent Office is still receiving public comments about the proposed fee increases, so if you are interested, you have until June 3, 2024 to make your views known by submitting a comment through this link (available at https://www.regulations.gov/docket/PTO-P-2022-0033; more information available at https://www.federalregister.gov/documents/2024/04/03/2024-06250/setting-and-adjusting-patent-fees-during-fiscal-year-2025).?

Regardless of which side of the debate one falls on, those considering filing IPRs/PGRs would be wise to file before January 18, 2025, when the fee increases will take effect, if approved.

For more information about AIA post-grant proceedings, contact the OBWB IPR Team at [email protected].