More justification needed: proposed USPTO trademark fee increases could hinder small businesses

  • IP expert Erik Pelton takes a detailed look at proposed USPTO fee rises
  • Fee rises could negatively impact small businesses and reduce new filings
  • Urges USPTO to go deeper into justifying the reasons for increased costs

In an exclusive guest post, Erik Pelton of Erik M Pelton & Associates explains how the proposed fee increases being mooted by the US Patent and Trademark Office (USPTO) could have a severe impact for small businesses, with concern that the registry has offered little justification for such significant changes.

Guest analysis

The USPTO recently held a public hearing with the Trademark Public Advisory Committee (TPAC) regarding its intent to set or adjust trademark related fees. The preliminary trademark fee proposal features many significant changes to the USPTO’s fee structure, including some increases of greater than 50%, as well as newly created fees. The objectives set forth by the USPTO for the changes are to better align fees with costs, ensure the accuracy and integrity of the register, recover more of the costs of TTAB matters, and address concerns in filing behavior regarding post registration filings.

Of those mentioned at the committee, several of the proposed changes are significant. Proposed new fees include $400 for a request for reconsideration, $100 for a letter of protest, $500 for a TTAB motion for summary judgment or oral hearing, and a $100 fee for each good or service deleted from a registration following a random audit. Some of the more noticeable increases proposed include Section 8 filings (increase from $125 to $225 per class), notices of opposition or petitions to cancel (from $400 to $600 per class), and TEAS RF applications (increase of $75 per class).

While a moderate increase in fees from time to time is normal, I am concerned that the USPTO’s current fee proposal with large increases and new fees will adversely affect small businesses. In addition, the USPTO’s justifications for the proposed increases merit far greater explanation, as few details regarding the objectives have been provided. Small businesses will feel the impact of the proposed changes and new fees the most. A Fortune 500 company with in-house counsel and a budget for IP protection will not be terribly impacted by increases of $100 here or $400 there. But a local restaurant, a software company started by college students last summer, or a new craft brewery will certainly be impacted. A loss of protection for them is a loss for the entire trademark system, diminishing the accuracy and completeness of the register.

For small businesses, the investment in trademark clearance and registration is even more important and more valuable, to guard them against the risks and expenses of trademark disputes and litigation. The costs of a trademark dispute can, and frequently do, crush small businesses. The fee structure of the USPTO should provide an incentive for brand owners to protect their trademarks, not act as a deterrent.

If small businesses do not register marks at the same or greater rates than today or cannot afford to litigate disputes, the harm will extend far beyond the USPTO. It will impact the small business engine of the US economy. Any study of new or increased fees should contemplate the impact on small businesses and could include the potential for reduced fees for smaller entities, as is done on the patent side.

Users asked to pay increased fees deserve greater detail regarding the justifications provided, namely the “aggregate estimated cost of the Trademark operation” and supporting “critical IT projects.” Few details have been shared in the initial proposal materials. According to the most recent annual TPAC report (page 24), the trademark operation collected $329m in FY2018 and spent $316m, and the trademark operating reserve grew to $135m. The TPAC report also noted that “the USPTO considered its 5-year financial outlook and determined that additional fee adjustments are not warranted at this time.”

If the fee increases are to cover escalating costs for IT projects, users deserve to know more about the expenses, the delays, and the projected improvements. Many IT enhancements are important and will benefit USPTO employees and users. While upgrading and modernizing the systems is no doubt difficult and costly, the delays to date have been significant and the expenditures have repeatedly surpassed budget.

Regarding the increases and new fees in the proposal (no decreases are included in the proposal), several merit specific mentions. In general, an increase in filing fees brings the possibility of a decrease in the number of new applications submitted, especially from small businesses, which would mean a less robust register. The proposed fees for new applications would enlarge the difference between TEAS+ and TEAS RF from $50 to $100. In my experience, many filers who do not use TEAS+ do so because of the limitations of the ID manual and/or the accounting and reporting difficulties that may ensue if TEAS+ status is lost. Increasing the gap between TEAS+ and TEAS RF filings will create real challenges for law firms and their clients.

The proposed new fee for filing a request for reconsideration is greater than the entire application fee and will result in fewer requests for reconsideration and thus more appeals and/or more abandonments. There are many good reasons to file a request for reconsideration, including many that avoid an appeal being filed or fully briefed and decided.

Anything greater than a moderate increase in renewal and maintenance fees may bring a decrease in renewal filings, especially among small businesses. Statistics from the USPTO’s 2018 Performance and Accountability Report (page 37) show a decrease in the renewal rate over the last few years, even before full implementation of the post-registration audit, from 32.4% to 29.1%. While improving the accuracy of the register is important, a decrease in renewals filings due to cost burdens will be a detriment to the overall welfare of the register. The audit program appears to be working to eliminate a fair amount of deadwood; more time and more education could continue to increase the effect.

Regarding the proposed TTAB fees, the fees for extensions of time for filing an appeal brief after the first extensions could discourage settlement negotiations with prior registrants and could in turn lead to more cancellation proceedings. I believe that new fees proposed for oral hearings and motions for summary judgment are unfair for trademark cases that are inherently complex and long, and I am unaware of any comparable fees from other courts or agencies. Furthermore, the fee proposed for each event is disproportionate: it is greater than the current fee for an entire proceeding or appeal. Again, small businesses would be more dramatically impacted by these fees.

Continued discussion of fee changes should also include the potential of raising other fees that would incentivize better behavior, such as renewals filed during the grace period, petitions to revive, and even greater charges for paper submissions. Perhaps the time has come for the USPTO to consider granting electronic registration certificates, with an optional fee for a physical certificate. Such a change might save millions of dollars annually in paper, labor, and postage.

While I believe that some fee adjustments are appropriate as the USPTO must keep pace with the growth in filings and accommodate the IT needs of the agency and its users, further dialogue with users, including small businesses, and more details regarding the justifications for the additional revenue, are necessary.

Erik Pelton is founder of Erik M Pelton & Associates, based in Virginia.

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