How USPTO will finesse the $400 penalty

The question is, what to do about the statutory penalty of $400 which Congress established when it passed the America Invents Act.  This penalty is for paper-filing when you should have e-filed.  And for many applicants it probably seems a bit unfair if the applicant’s reason for paper-filing was that USPTO failed to provide a mechanism for e-filing.

I wrote about this problem, and about Director Iancu’s comment, here.

The folks at the USPTO have faced a problem for the last few days.  They know that Congress said paper-filers should be punished with a $400 penalty.  They know that when Congress did this, Congress was relying upon the USPTO to make sure that e-filing would always be available.  This would, as a matter of common sense, require that USPTO provide a backup e-filing server that would continue working even if the main e-filing server might crash.  Unfortunately despite what amounts to a Congressional mandate to the USPTO to provide a reliable backup server, the USPTO never did provide the mandated reliable backup server.

So what to do about the $400 penalty?  USPTO realizes it would face a firestorm of criticism if it were to fail to refund the $400 penalties, and yet USPTO realizes that because the penalty is statutory, USPTO would need to go to Congress, with hat in hand, to ask for a special bill to permit giving the refunds.  Presumably such a trip to Capitol Hill to ask for a special bill would be met with embarrassing questions like “why did the USPTO not take steps many years ago, prompted by the previous massive system crashes, to make sure that the backup server would still be working even if the main server were to crash?”

So the problem for folks at the USPTO right now is to try to figure out a way to make an end-run around the plain language of the America Invents Act which imposes this statutory penalty.  Give back the $400 even though the plain language of the statute says that the $400 must be paid.  And here are the first hints of the end-run that is apparently being devised:

Applicants affected by this outage will have an option to avoid or receive a refund of paper filing fees. For such applicants, the director will prescribe a procedure for re-submitting applications electronically to receive a refund of the paper filing fee (or to not incur a fee if not yet paid). Applicants who follow this procedure will maintain their original filing dates for applications filed by paper during the outage. Details of this procedure will be identified on this page when they are ready. In the meantime, applicants should continue to file and pay associated fees pursuant to current laws and regulations.

The idea, it seems, is that anyone who has been hit by this penalty for paper-filing during the breakdown of the EFS-Web Contingency server will be invited to “resubmit” the patent application in EFS-Web.  Then, according to a procedure that is still in the making, USPTO would give this later electronically filed application the benefit of the earlier paper filing date.

The filer who included the $400 penalty fee with the paper filing would, it seems, be able to get a refund of that fee.

What about the filing fee, search fee, and examination fee that were likely already paid in the paper-filed case?  What will happen to all of that money?  Maybe USPTO will somehow waive rules right and left to permit those already-paid fees to be transferred over to the new application that came into existence by means of the EFS-Web filing.

Or maybe the USPTO will maintain a fiction that the new e-filed case is somehow “the same application” as the previously filed paper application, sort of like what USPTO says when a Request for Continued Examination is filed.

Meanwhile what will be done about the lost PTA (patent term adjustment) that will surely follow due to the e-filed filing date being some days or weeks after the paper-filed filing date?  Will USPTO manually adjust the PTA clocks for all of the cases affected by this massive system crash?  Or will patent owners have to file (and pay for) petitions, years from now, to get back those days of PTA that were lost due to this massive system crash?

Enormous time costs and professional-fee costs will likely be imposed upon practitioners and applicants by this procedure, all so as to save the USPTO the embarrassment of doing the right thing, which would be to go to Congress and get a special bill passed that would give the Director authority to waive the $400 penalty due to system failures.

Oh and one’s heart goes out to the patent owner who, TYFNIL, asserts one of these patents in court.  It is very predictable that the accused infringer will point to the fact that the application was paper-filed, and the fact that the statute says what it says about the requirement of paying the $400, and the fact that the $400 was not paid in the application that led to the patent-in-suit.  Yes, I imagine that after perhaps $50K of motion practice, the patent owner might manage to overcome the inevitable attack upon the patent for failure to pay the $400 penalty.

I have to assume that some patent owners might just suck it up and let the USPTO keep the $400 fee, just to save the $50K that would later have to be spent fighting that litigation motion practice.

6 Replies to “How USPTO will finesse the $400 penalty”

  1. Not to mention that the practitioner’s time involved in both the paper filing and follow up e-filing, requesting refund, and tracking all of these could easily cost more than the $400 refunded fee.

  2. Should the USPTO not be able to make a $400 goodwill payment to applicants who were forced to paper-file due to a server outage, and who subsequently request a refund?
    In this way, the legislatively-required fee would have been paid.
    Perhaps a subsequent “e-filing” could be done as a “duplicate” filing without additional fees, much like original documents are submitted after sending a fax.

  3. Often during the course of prosecution NON-STATUTORY fees are paid – e.g. extra claims or extra pages or an extension of time (or another petition needs to be filed). If the USPTO REALLY wanted to make good, these applicants would be credited $400 towards such fees. I know this doesn’t cover 100% of all patent applications, but …
    Also, this would impose an administrative burden on the USPTO.

  4. Oh man, this is going to open so many worms. For instance, what if a micro entity filer files the follow-up electronic application. do both applications now count towards the 4 maximum allowed micro-entity applications? If the Paris Convention requires priority claimed to the “first filed” application, does one now have to claim priority to both the original (paper) and the follow-up? And I’m guessing one will have to certify that both applications are identical, what if there is an inadvertent change or discrepancy?

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