Why this change to USPTO’s credit card limit?

Sometimes the USPTO does things and I cannot immediately figure out the reason why.  Here is one of them, brought to my attention by alert reader Dana M. Stangel.  Today I logged in to pay an Issue Fee, and this big brightly colored banner appeared at the top of the USPTO web page.  It says:

Temporary Increase to Credit Card Daily Limit
The daily limit per credit card account has increased from $24,999.99 to $99,999.99. The temporary increase will remain effective through June, 1, 2020.

Well in one sense of course I know exactly why the USPTO did this.  It must be the novel coronavirus.  Any time in Spring of 2020 that any government agency or large organization does any really big thing that is temporary and makes no apparent sense, the explanation is coronavirus.  I get that.  

But what exactly is going on here?  How did the USPTO pick “times four” as the amount of the increase?  How did USPTO pick June 1?  Why was there ever a limit in the first place?  

Upon some reflection I realized I know the answer.  It has to do with credit card commissions, which government agencies generally intensely dislike having to pay.

Normally if you make an arrangement to be able to take credit cards as a mode of payment, the contract that you will have to sign will contain language forbidding you from charging the commission through to the customer.  Saying this differently, the contract will contain language that requires you to absorb the commission.  Our firm uses Stripe to process most of our credit card payments, and the commission that we incur is 2.9% plus 30¢ per transaction.  And the standard Stripe contract requires us to absorb that commission.

Years ago many states passed laws giving special bargaining power to government agencies.  They were able to force the credit card companies to modify the standard contract so that a government agency would be able to charge the commission back to the customer.  You run into this every time you pay for a license plate for your car using a credit card, and you get dinged a “convenience fee” for the transaction.  

When I was first in practice, the USPTO did not accept credit cards.  The usual payment mechanism was the “deposit account”.  You would send a check for five or six figures of money every few weeks to some address in Chicago and the USPTO would credit the money to your deposit account, and you would draw upon the deposit account when paying fees in patent and trademark cases.  This worked okay for high-volume filers but was of course completely unworkable for pro se filers.

After many years of foot-dragging, the USPTO finally ceded to the inevitable and started accepting credit cards as a mode of payment.  I imagine there was debate within the USPTO as to whether or not to charge convenience fees.  The problem of course is that if on some particular day the USPTO were to start accepting credit cards without charging convenience fees, it would be completely predictable that some of the high-volume filers that used to use deposit accounts would switch to credit cards.  This would instantly cut the USPTO’s revenues by a very predictable amount. 

In recent times a typical year of fee collections might add up to around $3 billion.  There are plenty of dinosaur corporations and law firms that continue to use deposit accounts as their chief way of paying USPTO fees.  But many filers choose to collect the frequent flyer benefits or purchasing points or rebates that can be gotten by using particular credit cards to pay USPTO fees.  I imagine that at least half of the fees paid to the USPTO are paid by credit card, or at least $1.5 billion annually.  I assume the USPTO negotiates a better commission than the standard Stripe commission, but still it would be at least 2%.  So the USPTO loses perhaps $30 million annually in credit card commissions.  

This discussion helps to explain why there was this $24,999.99 limit in the first place.  The point of the limit was to try to divert some fee payments away from credit cards (where the USPTO incurs commissions) and over to other payment modes such as deposit accounts and ACH transfers (where the USPTO does not incur such commissions).  

I will tell you that at our firm, at least, the $24,999.99 has never actually diverted any of our USPTO spending away from credit cards!  Whenever we smack up against that limit on a particular credit card at the USPTO, we simply move on and use another credit card.  We have multiple credit cards set up in USPTO’s Financial Manager system for this purpose.

But anyway, yes, it is clear that USPTO’s announcement that this limit will temporarily be increased from $24,999.99 to $99,999.99 is basically the USPTO’s way of saying “due to the novel coronavirus we are willing to absorb more commissions than usual”.