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Reacting to opposition from the patent community and Congress, the Patent and Trademark Office has curtailed its ambitious plans to overhaul the patent application process. The agency announced the final proposed revisions of its “21st Century Strategic Plan” on Feb. 4. At the same time, it submitted its new proposed fee structure — the element of the plan that initially drew the loudest protests — to Congress for approval. Under the revised proposal, application fees would still go up (see fee chart). But the PTO has abandoned the so-called punitive fees that were intended to discourage applicants from filing applications with excessive claims or merely slight variations on already existing patents. “We made it very clear from the beginning that this was a living document,” said PTO spokesman Richard Maulsby of the proposal, which was first floated last June. “We did what we hope any agency would do — listened and responded to input from the public.” In recent years, the agency has struggled in vain to keep up with an ever-increasing workload. During the technology and biotech boom of the 1990s, patent applications increased roughly 10 to 12 percent each year, said former PTO chairman Q. Todd Dickenson. Application backlogs are huge, and the time it takes to process an application is now more than two years. Concerns about quality have also been raised: the agency has been heavily criticized for issuing questionable patents, especially in the so-called business patent arena. The proposed overhaul is an attempt to address these issues “in an aggressive way,” Maulsby said. “Something had to be done.” But as initially drafted, the plan met with uniform opposition from the House Judiciary Subcommittee on Courts, the Internet and Intellectual Property. The patent community expressed its displeasure as well in a hearing held over the summer and written comments submitted to the office. In October, a coalition of intellectual property groups that included the American Intellectual Property Law Association, the International Trademark Association and the Intellectual Property Owners Association wrote a letter to the Office of Management and Budget setting out their objections to the proposal. In addition to the fee increase, the coalition opposed requiring patent applicants to commission prior art searches and allowing applicants to defer the examination of their patents. APPLICATION FEES TO GO UP Under the new plan, the basic application fee is $750 for small businesses and individuals and $1,000 for larger entities, compared with the current fees of $375 and $750, respectively. The fees, though higher, are “nowhere near as harsh as previously proposed,” said Lawrence H. Aronson, a partner with McDonnell Boehnen Hulbert & Berghoff in Chicago. He added, however, that individuals and small entities may experience sticker shock: “It could still deter some from filing patent applications.” The office also scrapped a plan to charge fees that increased exponentially as the application grew in size and complexity. That plan was an attempt to force applicants to simplify their submissions, which, especially in the biotech area, can run to several million pages. Under the original proposal, it was conceivable that the fee for a complicated patent could be “upwards of a million dollars,” Aronson said. “It was really astonishingly extreme.” As revised, fees will run $50 for each claim over 20, and $200 for each individual claim over three, up from $18 and $84 respectively. Claims define the scope of the patent. LENGTH SURCHARGE For the first time, the office is also proposing a surcharge for length. Patent applications over 100 pages will be charged $250 per every 50 additional pages. Overall, the fee package will increase revenues by 15 to 20 percent, said Dickenson, the former PTO director who is now a partner at Howrey Simon Arnold & White in Washington, D.C. Dickenson and others agreed that the fee increases seemed reasonable, with one important caveat. “The big question is diversion,” Dickenson said, referring to the fact that millions of dollars each year are taken from the PTO and used for other governmental purposes. Under President George W. Bush’s budget proposal announced last week, the office would lose about $100 million in diverted funds, a 40 percent decrease from the $162 million in fees the PTO lost in the 2003 budget. “It’s a step in the right direction,” Dickenson said, “but I’m still not sure what level of commitment there is to reducing or ending fee diversion.” GROUPS DEBATING SUPPORT The proposed fee diversion, though reduced, has kept the major IP groups from endorsing the new proposal. “We’re still debating whether we will come out in support of the fee package,” said Michael Kirk, executive director of the American Intellectual Property Law Association. “In and of itself, the package is not troubling to us,” he said. “The debate revolves around the question of fee diversion.” He expressed skepticism that the administration was truly committed to ending fee diversion. “They’ve accompanied the bill with some lip service that everyone should feel good that the diversion has been reduced and they hope to get rid of it in the future,” Kirk said. “But at the end of the day, they’re still doing it.” In addition to the new fee structure, the agency has tweaked other controversial aspects of the original plan. Under the revised proposal, the job of searching for prior art related to a patent application would be outsourced to private contractors rather than done in-house, as it is now. But the PTO now plans to handle outsourcing itself rather than require the applicant to do it. Patent lawyers say that with outsourcing, the devil will be in the details, which they are still awaiting. “Whether it’s a good or bad thing will depend on how it’s implemented,” said Bruce H. Bernstein, a partner at Greenblum & Bernstein in Reston, Va., and a former patent examiner. In another effort to reduce its workload, the office is also proposing to offer partial refunds to applicants who withdraw their applications before the process is completed. But patent lawyers doubted that refunds would work. “People are unlikely to abandon their applications, especially before the search,” said John Todaro, senior counsel at Darby & Darby. The office has also dropped a proposal to permit applicants to defer their examinations for up to a year and a half. This element was particularly unpopular with the IP community, said Todaro. “It would have let people file a very broad claim and then sit on it, leaving potential competitors [in the dark] about its scope.” Todaro echoed a commonly held view that overall, the finalized proposal was “something we could live with.” “It seems to be on the right road,” he said.

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