Lutnick-Backed Patent Value Fee Proposal Blasted by Lawyers (1)

Business groups, patent lawyers, and an advocate for inventors slammed a reported plan by the Commerce Department to impose billions of dollars in new patent fees, calling it impractical and potentially beyond the powers of the executive branch.

The plan would impose a 1% to 5% fee on the value of the more than 2 million patents in force in the US, with the fees coming either in addition to or as a replacement for fees patent owners currently pay, according to the Wall Street Journal, which reported the outline of the Trump administration’s proposal on July 28.

Patent applicants and owners currently pay a variety of fees, including filing, search, examination, publication, and maintenance fees, which each range from hundreds of dollars to thousands of dollars per patent. The proposal, even in just its rough outline, has already sparked a backlash, highlighting the challenges facing the Trump administration as Commerce Secretary Howard Lutnick seeks new revenue to offset hefty tax cuts and fund the six-month-old government’s agenda.

The US issues hundreds of thousands of patents annually, and existing fees are expected to generate nearly $4.3 billion for the Patent and Trademark Office in the next fiscal year, according to its most recent budget proposal.

If unveiled, the plan would face insurmountable practical and legal hurdles, starting with the herculean task of valuing millions of patents, said Brad Watts, a senior vice president at the U.S. Chamber of Commerce who oversees its intellectual property agenda.

“Our members have expressed profound concerns regarding the notion of imposing a tax on the ‘value’ of their patents—a proposal that threatens to undermine the very foundation of America’s innovation ecosystem,” he said.

The Department of Commerce and US Patent Office didn’t respond to requests for comment.

The office of US Senate, Chris Coons, D-Del., a leading advocate for patent rights, said the proposal and its costs could be debilitating for intellectual property owners.

“The Trump administration should not use the USPTO and hard-working American innovators as spackle to cover over the massive hole they’ve punched in the deficit through their disastrous budget bill,” Coons’ spokesperson Will Baskin-Gerwitz said Wednesday. “This unprecedented increase in patent fees would deter innovation and encourage cutting-edge research and development to move overseas, kneecapping the United States in our race with China to develop the technologies that will define the rest of the 21st Century.”

Some patent attorneys, including former PTO Director Kathi Vidal, declined to comment citing a lack of publicly available details on the plan.

David Sanker, an attorney who helps inventors with applications, speculated that Lutnick’s plan could even be a trial balloon.

“For those of us who see how bad of an idea this is, we need to be vocal about it so we can kill off that trial balloon before it goes very far,” he said.

Patent valuation is notoriously difficult and subjective, said Paul Morinville, who has worked at several tech startups and groups that advocate for small inventors.

“It’s a voodoo science to get a patent professionally valuated and they’re never right,” he said. When a patent is litigated, “different sides can value the same patent at nothing or a billion dollars.”

The value of a patent can also fluctuate over time creating challenges over when it should be assessed for fee-generating purposes. A patent’s value, for example, can rocket if the underlying invention is widely adopted. Meanwhile, there’s an entire industry dedicated to trying to value certain patents, including those that are sold on the secondary market or enforced in an infringement suit.

“This isn’t like doing your family budget,” said Brian McGuire, a lawyer at RuggieroIP who assists inventors with the patent application process. He called valuation “fuzzy stuff.”

Watts at the Chamber said the valuation process raises difficult questions including “who would be responsible” for assigning values to the scores of patents issued in the US, and choices about whether the assessment would happen at issuance, at a later stage in the patent’s term, or continuously.

Each scenario “introduces uncertainty and complexity, creating a chilling effect” that “risks discouraging innovative companies from investing in groundbreaking ideas and transformative technologies,” Watts said.

In addition to the complexity of implementing and enforcing such a proposal, there would likely be legal challenges. Such a program would require a budget proposal, one that’s proportional to the agency’s expenditures, said McGuire. He pointed to a provision in the Patent Act that mandates fees collected by the PTO “only be used for expenses of the Office relating to the processing of patent applications” and other patent-related activities.

“I don’t think it’s even remotely within the agency’s statutory powers,” he said.