Yesterday, the United States Patent and Trademark Office (USPTO) issued a final rule on fees, titled “Setting and Adjusting Patent Fees during Fiscal Year 2017”. One of the changes related to the ex parte appeal fees. The USPTO considered comments from stakeholders and then altered the proposed increases to ex parte appeal fees presented in the Notice of Proposed Rule Making (of October 3, 2016). Thanks in part to two important points raised by AIPLA and IPO, the final rule did not raise the Notice of Appeal fee and only increased the appeal forwarding fee by $240 (for large entity).
The first point raised in the comments related to the Notice of Appeal fee. Under this argument, the Notice of Appeal fee should not be increased because many applications never make it to the Board after the appeal conference (after the appeal brief has been filed). The AIPLA comment put the figure at 33% for 2016 of applications with filed appeal briefs that resulted in reopened prosecution or a notice of allowance. Presumably, these applications that get kicked out of the appeal process have faulty rejections. With such a high figure, it makes little sense to punish the applicant for these faulty rejections discovered by the USPTO after filing a Notice of Appeal.
The USPTO heard this point. Thus, instead of increasing the Notice of Appeal fee to $1,000, the fee will stay at $800.
The second point was a more fundamental argument against appeal fees being increased. The commenters argued that the appellants should not have to pay a greater share of the appeal cost. The USPTO had previously showed that only 58% of the appeal costs are covered by the appeal fees. And it had recommended increasing that to a total of 72% of the costs. Not so fast, argued both AIPLA and IPO.
AIPLA and IPO pointed to the low affirmance rate of Examiners on appeal, arguing that appellants should not cover a greater share of the appeal cost when so many of the rejections are improper. In other words, such appeal costs are necessitated by rejections that should never have been introduced, as evidenced by low affirmance rates. Both cited to the official USPTO statistics on affirmance rates around 40%. Further increasing fees will only make the poor examination worse as it deters applicants from pursuing appeals.
As we have pointed out before, when trying to measure poor rejections overturned, affirmance rates are actually an underestimated figure. This is because if only one rejection among others gets affirmed to all claims, that can mask the other rejections that get reversed. Thus, 40% affirmance rate is a very conservative figure. And some grounds of rejection are consistently overturned much higher than others.
The USPTO appeared to be receptive to this argument as well. The USPTO decided to increase the fee for forwarding an Appeal to the Board to $2,240 (+$240) instead of $2,500 as proposed in the NPRM. This translates into a compromise of covering 63% of the total appeal costs–higher than the current 58%, but lower than the originally proposed 72%.
Prosecution strategy has always been tightly linked to official fees. A fee increase for a particular procedure will undoubtedly decrease interest in the procedure, at least to some extent. Here, as the fees for appealing did not significantly rise, appeals remain a viable course of action in certain situations. This is especially true as the fees for RCEs rose proportionately higher and as the backlog for ex parte appeals continues to plummet.
Here are quotes from the comments.
From AIPLA’s comment: it is unfair for the Office to equate the full cost of an appeal to the appellant. Current statistics from the Office indicate that Examiners are affirmed in 57.4% of PTAB decisions. See https://www.uspto.gov/sites/default/files/documents/fy2016_sep_e.pdf. Thus, in a significant number of cases, appellants are subjected to appeal fees that could have been avoided if a correct decision was made at the examination level.
From IPO’s comment: The reversal rate of Ex Parte Appeals by PTAB indicates that a large number of appeals are pursued to correct invalid rejections. Although the FRN states that “the true cost of Ex Parte Appeals is being significantly subsidized,” they might be in effect “subsidizing” improper examination processes to correct improper rejections. Moreover, many appeals never reach the PTAB because the examiner withdraws the final rejection upon receipt of the Appeal Brief to reopen prosecution or issue a Notice of Allowance.