Due Process Challenges to the PTAB Fee Model?

If the PTAB Fee Model is Biased, Patent Owners Have Much Bigger Problems

Recently, a due process challenge has been raised to the PTAB fee model in New Vision Gaming v. SG Gaming Inc.  The argument, in a nutshell, is that because the fees for AIA trial proceedings include a separate component for the trial, currently $15,000, and that collection of this fee makes up about 40% of the PTAB’s yearly budget, that this amounts to “a structural bias unlike any other in the federal executive branch.”

But, if the USPTO is making decisions solely based upon potential revenue, patent owners have much bigger problems.

First, in New Vision, the Appellant argues that that a structural bias can violate the Due Process Clause even in the absence of any actual bias (relying on Tumey v. Ohio, 273 U.S. 510 (1927)).

The Appellant brief explains the structural bias of the PTAB (here) as:

" It is entirely user-fee funded, and the PTO’s budget is effectively based on its fee collections. The PTAB operates as a “business unit” with its own budget responsibilities. About 40% of the approximately $57 million in annual AIA fee collections depends on granting petitions to institute. The PTAB leadership APJs have dual roles as executive and adjudicator. The APJs making most institution decisions are subjected to performance reviews and management tools by PTAB leadership, and the APJ’s salary and bonus structures incentivize higher “production,” which means more institutions. Lastly, APJs lack the judicial independence of Article III judges or even administrative law judges.

I have a few concerns with this argument, not the least of which is how patents are granted in the first place—but, later for that.

APJs certainly have production requirements, but they are not rewarded for instituting trials.  Like patent examiner productivity, individual tasks are weighted based upon the amount of effort it takes to complete.  An institution decision can go either way (Yea/Nay), its productivity weight does not change for institution.  If this were not true, APJs would be none too pleased with the recent trend of discretionary denials, which, of course, also eliminates the trial fee.  Also, the institution rates have dropped every year with the exception of one, and will drop again this year.

But let’s accept that there is a bias toward institution.  At the end of the trial, after the fee has been earned, wouldn’t the manufactured outcome be appealed to the Federal Circuit who would step in to put an end to this money making scheme?  Of course it would—but nearly a decade of appeal stats indicate the exact opposite.  The PTAB is affirmed 70-80% of the time.  Not only is there no evidence of a structural bias, there is ample evidence to the contrary.

More fundamentally, if this fee-bias argument were accepted, Patent Owners will have much bigger problems. For fiscal year 2020, the USPTO operated on a $3.4 billion dollar budget. That budget is met through user fees, 38% of which stems from the maintenance fees of issued patents.  In other words, unless a substantial number of patents are granted every year to replace expiring patents, 38% of the agencies budget is put in jeopardy.  Are the thousands of examiners also granting patents to “maintain” their jobs through aptly named maintenance fees?  Seems to me that you can’t win this appellate argument (which I don’t expect to happen in any event) without losing the war. Patents granted in the name of fees don’t get a presumption of validity, they get the exact opposite.

Scott A. McKeown is an author of the Patents Post Grant