Why it’s a bad idea to generally authorize charges to your Deposit Account

There’s a fascinating thread over at the EFS-Web listserv today, about general authorizations to charge USPTO Deposit Accounts.  As I will discuss in this blog post, I think that nowadays it is unwise to give a general-authorization-to-charge to the USPTO in a patent application.

I guess the first thing I should mention is that while there is indeed a fascinating thread today at the EFS-Web listserv, the fact is that at least once a week there is a fascinating thread at that listserv.  If your job includes patent prosecution, you should join that listserv.  You can always unsubscribe later if you decide it’s not for you.  And we won’t sell your email address to a spammer.

So here’s what came up today in the EFS-Web listserv.  A list member had filed a US patent application, and (this part is a bit out of the ordinary) received an Office Action after only two months.  She then filed an IDS, after the first Office Action but before three months had passed from the filing of the application in the first place.

Now it’s too bad this blog doesn’t come with a buzzer that readers can smack when they know the answer.  Because if it did, right now a whole lot of alert readers would be smacking the buzzer and raising their hand to say “you don’t have to pay the $180!”

And that’s exactly right.  Even if that first Office Action has already happened, if the three months has not passed yet, you get a free pass on having to pay the $180.

But our list member had included in her initial patent filing a general authorization to charge any and all fees to her USPTO Deposit Account.  And the USPTO person who processed the IDS pounced upon the fact that a first Office Action had already happened, and grabbed $180 from her Deposit Account.

Of course the USPTO person was wrong to have done this.  So our intrepid listserv member filed a petition to ask that the USPTO correct its mistake and refund the $180.

What she received back from the USPTO was a dismissal of her petition.  The petition Examiner said “it’s after the first Office Action so you gotta pay.  No refund.”

The petition Examiner was, of course, completely wrong.

I guess the next step would be for the list member to file an action in US District Court, seeking a mandamus ordering the Acting Director to give back the $180.  My best guess is that the service of the summons and complaint would prompt the Acting Director to instruct the petition Examiner to reverse his or her ruling and to give the money back.

It is experiences such as this which prompted my firm some fifteen years ago to discontinue making any authorization to charge our Deposit Account.  The thing to do is to add up (a) all of the times that USPTO will run off with money from your deposit account when you wish they had not, and (b) the small number of times you will have to pay a small fee to hand in some other fee late.  For most practitioners I think the former would far outweigh the latter.

Here is an example of how this can really go very wrong.  You enter the US national phase from some PCT that was prepared by European counsel and contains approximately an infinite number of claims due to multiple dependency.  You get everything filed and you figure in a day or two you will prepare and file the Preliminary Amendment to knock down the claim count to a normal total of twenty.  Meanwhile your friends in DO/EO/US (the people who process an entry into the US national phase) grab the case and work out the amount of your deficiency due to excess claims.  Let’s see, $80 per excess claim times infinity equals … infinity!

So they help themselves to all of the twenty thousand dollars in your deposit account.  Or a hundred thousand dollars if that is how much was in your account that day.  Or half a million dollars if that is what was in your account that day.  I am not making this up.  Filers have lost thousands and tens of thousands of dollars from this kind of mistake when entering the US national phase.

So why is it that so many firms have a firm practice of always authorizing all possible fees to be charged to the firm’s Deposit Account?

The answer of course comes from the old days when it was necessary to pay the filing fee to get a filing date.   The worry back in those days was, what if we pay by check, and the Express Mail package reaches the USPTO and the check bounces?  Or the check somehow gets misplaced at the USPTO?  Any of a variety of mishaps could lead to a complete loss of the filing date and, in those days, a loss of all substantive rights.  So in those days it probably rose to the level of malpractice for a practitioner (a) to fail to maintain a Deposit Account with thousands of dollars in it and (b) to fail to authorize charging anything and everything to that Deposit Account.

Nowadays things are different, in so many ways.

First, when you file a US patent application you do it by means of EFS-Web.  And you can pay by credit card and you will learn instantly whether the credit card transaction went through or not.  If there was any problem with the credit card you would learn about it right away and could take corrective action.  (Or you can pay by Deposit Account or EFT, and again you will learn instantly whether it worked or not.  But then you miss out on the opportunity to collect lots of frequent flyer miles.)

Second, the consequences of failure (the payment somehow not going through despite the filer watching things closely) are small compared to the old days.  Failure to pay the fee does not, nowadays, mean loss of a filing date.  Yes, you will have to pay a late fee for handing in the fee late, but that is not the same thing as losing a filing date.

Third, for some fact patterns nowadays even the loss of a filing date does not lead to a loss of substantive rights, because the US is now in harmony with the Patent Law Treaty.  So for example if you were rushing to file within 12 months of a foreign priority application, or to file within 12 months of a US provisional application, and if you were to miss the 12-month date, you could probably obtain a Restoration of Priority under the PLT.  Same thing for filing a US design application within 6 months of a foreign priority design application and missing the six-month date.

The alert reader will point out that there are still some situations where failure to pay a filing fee does lead to loss of a filing date.  One example is entry into the US national phase, and the second is the filing of a US trademark application.  But for the entry into the US national phase, loss of the 30-month date will still not necessarily lead to a loss of all substantive rights, because you may be able to revive it.

So the old-fashioned reasons for always authorizing the USPTO to charge anything that it wishes to your Deposit Account just don’t work, not the way they used to.   And there are very good reasons not to give such a general authorization.

What do you think about general authorizations to charge your Deposit Account?  Post a comment please.