The following are the comments our firm submitted today regarding the USPTO’s proposed trademark fee changes and increases:
Docket No.: PTO–T–2022–0034
Comments of Erik M. Pelton & Associates, PLLC Regarding “Setting and Adjusting Trademark Fees During Fiscal Year 2025”
The following are the comments of Erik M. Pelton & Associates, PLLC® (“EMP&A”), in response to the Notice of Proposed Rulemaking, published on March 26, 2024, in the Federal Register at 89 Fed. Reg. 20,897 (March 24, 2024) (“Rulemaking”). Since 1999, EMP&A has represented thousands of clients in U.S. trademark prosecution, maintenance, and litigation. EMP&A’s clients have received over 4,000 U.S. trademark registrations and have been involved in dozens of disputes before the Trademark Trial and Appeal Board (“TTAB”). In addition to representing myriad small business trademark owners, EMP&A itself is a small business and the owner of more than a dozen U.S. trademark registrations.
Prior to starting his own firm, Erik M. Pelton, the firm’s founder, worked as a USPTO Examiner from 1998 to 1999. Attorneys from EMP&A are actively involved in numerous organizations, including INTA, ABA, AIPF, and AIPLA. Mr. Pelton supervised the Trademark Clinic at Howard University School of Law from 2020 to 2024 and has been an adjunct trademark law professor at Georgetown University since 2023.
In general, we do not oppose across-the-board fee increases to match the growth in expenses. We understand and support the need to increase fees to cover rising costs, align fees with internal costs, and provide financial security for the agency. However, we are concerned that the Rulemaking’s impact on small businesses will be significant. Small businesses make up a large portion of the American economy: over 99% of employers are small businesses, and in recent decades small businesses have created more than 60% of new jobs.[1] Moreover, according to a 2013 report from WIPO, small and medium-sized enterprises rely more heavily on trademarks than patents.[2] Unfortunately, small businesses typically do not have associations, in-house counsel, or the resources to comment on proposals like these.
General Comments Regarding New Fee Structure
The Rulemaking contains several new features that increase the complexity and unpredictability of filing and prosecuting a trademark application, which are likely to adversely impact those without experienced counsel.[3] The Lanham Act (15 U.S.C. § 1052) directs the USPTO to register trademarks unless one of a limited number of prohibitions applies:
No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it …
In other words, the Lanham Act creates a structure whereby trademark applications are presumed to be registrable but for one of the statutory prohibitions. We believe the Rulemaking will create new procedural hurdles for applications that impede their presumed registrability, resulting in fewer applications being filed, approved, and registered.
In our assessment, a better alternative would be to distribute the costs of processing applications evenly across all applicants. A standard application fee for all would be more predictable and fairer; it would be without any penalty for the type of identification of goods or services used, without any penalty for the number of characters used in the identification, and without any penalty for nuanced requirements such as a domicile address, color claim, or translation. For example, a filing fee of $400 per Class for all applications, without any possible additional penalties or surcharges, would treat all applicant’s equally.[4],[5] Such a fee would cover the historical cost ($373 according to USPTO materials) and allow some padding for inflation and cost increases.
Impact on Small Businesses
The Rulemaking creates new procedures and penalizes imperfect applications by imposing additional costs, upending the established practices of the USPTO and trademark applicants. We believe that it would be prudent for the USPTO to ensure that the trademark application fee structure provides an incentive for small businesses to protect their trademarks.[6] We are concerned that the fee increases and changes will add to the burdens for small businesses seeking to obtain trademark protections. The investment in trademark clearance and registration for a small business is even more significant and valuable; it helps guard them against the risks and expenses of trademark disputes and litigation. The Rulemaking, however, is likely to provide the opposite outcome, limiting small business’ access to the benefits of trademark registration, which in turn could allow for even more overreaching enforcement efforts from big businesses.
Concerns Regarding Several Specifics of the Rulemaking
New Fee for Free-form Descriptions of Goods or Services
We have concerns regarding the new fee for using a free-form description of goods or services, rather than choosing from pre-approved options in the ID Manual. Many goods or services are described well in the ID Manual. But sometimes the ID Manual entries are too detailed and specific; sometimes they do not appropriately describe an applicant’s goods or services; and other times they feature more specification than is required to serve as a sufficiently definite identification.[7] Pro se applicants may choose inaccurate descriptions or descriptions for which specimens of use are not available. We are also concerned that requests to update the ID Manual may not be responded to in a timely fashion, given that such requests will likely increase. Finally, the Rulemaking sets the cost for choosing a free-form identification at $200 per class, which increases the application filing fee by more than 50%. Such an increase outpaces the additional examination burdens; a free-form identification fee of $50 or $100 would be more reasonable, while still incentivizing applicants to use the ID Manual.
New Fee for Insufficient Information
The Rulemaking features a new fee of $100 per class if an applicant fails to provide sufficient information across any one of twenty categories. The proposed penalization adds another layer of complexity to an already very intricate application process, along with the potential for additional costs. Again, this leads to increased unpredictability for applicants and their counsel. Notably, many of the “[r]equirements for a base application” are not affected by the number of classes in an application. For example, an applicant’s name, domicile address, legal entity, citizenship, color statement, and mark description, are uniform across all classes in an application and require the same time and attention irrespective of class count. We propose that the USPTO reconsider whether the fee imposed for such information deficiencies should be per class or, more reasonably, per application.
Letter of Protest Fee
Letters of Protest frequently aid the examination of applications and help increase the Register’s reliability. As a result, the proposal to triple the fee from the current $50 to $150 is not reasonable and will disincentivize third parties from providing information that can assist examiners who are, according to the USPTO’s own data, facing a huge backlog.
Greater Transparency Needed on USPTO Budget and IT Expenditures and Projects
The Rulemaking does little to detail or justify the overall financial needs of the USPTO, including the increased IT costs. At the end of FY2022, the USPTO’s trademark operating reserve was $208.7M, which is considerably above the minimum operating reserve level of $120M. Surprisingly, despite significant projected rent savings, the TPAC FY2023 annual report issued last fall, forecasted a trademark operating reserve of $92M at the end of FY 2026.[8] This means that the USPTO trademark operation is operating at a loss and at a real risk of dipping below the minimum level of reserves within two and a half years.[9] According to the USPTO’s materials, this is due, in part, to a historically low rate of post-registration filings.[10],[11] Not discussed, however, is the impact of IT expenditures and delays on the budget. Importantly, the USPTO’s forecasting presumes that the proposed fee increases (along with newly created fees) will not lead to any decline in the number of new applications being filed; however, such an assumption may prove incorrect.
We understand that the USPTO needs to ensure proper funding and that filing levels have dropped from recent all-time highs. But details on where and how the USPTO trademark operation spends its money have been largely absent from the published materials. There has been no public discussion of alternatives that might assist in balancing the budget while filings are lower, such as cuts to some spending,[12] reducing overtime, employee buyouts, or a hiring freeze.
IT improvements are certainly valuable and needed, but the general public and users of the USPTO’s systems are entitled to know more about what specific improvements are scheduled and upcoming, and why the costs and delays have escalated over previous projections. For example, no details were provided to the public about the cost of the new trademark search system, or for how long the USPTO was aware of the need to retire TESS by a certain date. A March 13, 2019, report from the Office of Inspector General of the U.S. Department of Commerce (OIG-19-012-A) titled “USPTO Needs to Improve Management over the Implementation of the Trademark Next Generation System,” noted the tremendous delays and cost overruns in trademark IT expenditures at that time.[13] In the five years since that report, we believe the USPTO has not sufficiently discussed and addressed, in public forums, the concerns it raised. Because the primary effect of the Rulemaking is to generate more revenue and fees for the USPTO, we believe the USPTO is obligated to more openly discuss how it spends its funds.
Finally, if the USPTO’s investments in IT enhancements and updates over the last few years come to fruition soon (for example, the retirement of TRAM), they should lead to considerable savings of time (and thus expenses) in processing trademark applications. We encourage greater discussions with and feedback from users about how IT improvements and software tools could potentially reduce USPTO costs and examiner hours.
Impact of Proposed Fees on Equity
The proposed fee increases and procedural hurdles created by the Rulemaking are inconsistent with the Office’s goal of increasing access to IP protections for individuals and businesses that are part of underserved and disadvantaged communities. We applaud the USPTO’s efforts to narrow the gender gap and to support inventors and rights holders from minority communities. But across-the-board trademark fee increases, combined with the increased complexity in predicting the total cost of applications, could very well set back those efforts.
We implore the USPTO, at a minimum, to search for ways to conduct greater outreach to populations historically underserved by intellectual property rights. In our opinion, the interests of equity would minimize fee increases for new trademark applications and prevent the newly created fees and the unpredictability that they will bring. We also suggest that the USPTO consider exploring reduced trademark application fees for small businesses and first-time applicants to promote trademark protection in communities that have been disadvantaged over the years.
Conclusion
Trademark fee increases are understandable as costs rise. However, we implore the USPTO to work to minimize the impact of the increases on small businesses. The Rulemaking features increased application fees and complexities that will no doubt adversely affect small businesses, and thus could easily impact the entire trademark Register and the American economy. Additionally, the public is entitled to greater transparency regarding the fee increase justifications, including the USPTO’s expenditures on IT upgrades.
Sincerely,
Erik M. Pelton & Associates, PLLC
[1] U.S. Chamber of Commerce, https://www.uschamber.com/small-business/state-of-small-business-now.
[2] See https://www.wipo.int/edocs/pubdocs/en/intproperty/944/wipo_pub_944_2013.pdf at p.9
[3] We recognize that from the USPTO’s position reviewing applications, the changes may decrease complexity.
[4] There are examination time savings when applicants file multiple co-pending applications that feature identical information but for one category, namely the mark (logo vs words, for example) or the class. The USPTO could explore discounting filing fees for such filings because the time and effort to review them is reduced.
[5] Higher fees for Petition to Revive and post-registration grace period filings would help better incentivize timely action and generate additional fees from filers who have fail to comply with deadlines.
[6] To our knowledge, the USPTO does not collect or maintain statistics in trademark cases on small versus large entity applications. Collecting and tracking the filing and renewal information related to small businesses could help the USPTO better understand the needs of small business applicants, and thereby better align the USPTO with its goal of reducing the burden on small businesses.
[7] One example is the term “education”, which is featured in 378 current entries including “Children’s educational toys for developing fine motor, oral language, numbers, counting, colors and alphabet skills sold in a fabric bag which has a clear vinyl window for viewing small trinkets and toys securely contained within the bag itself” and “Research in the field of education.”
[8] Also unreported by the USPTO is the saving generated when printed registration certificates were stopped, along with the fees generated by the new 3-month office action extension fee.
[9] The USPTO’s FY 2025 Budget estimates a reserve of $85M at the end of FY2025. https://www.commerce.gov/sites/default/files/2024-03/USPTO-FY2025-Congressional-Budget-Submission.pdf
[10] Note that our comments to the USPTO in 2020 predicted such a decrease. See https://www.regulations.gov/document/PTO-T-2019-0027-0001/comment.
[11] In addition, the Rulemaking’s proposed increases to post-registration fees may add to the decline in such filings.
[12] For example, we recommend undertaking a cost–benefit analysis of the IPR Attaché Program.
[13] https://www.oig.doc.gov/OIGPublications/OIG-19-012-A.pdf (“July 2017 estimates for TMNG placed the final cost at $260.7 million, with completion planned for 2021— more than eight times the initial estimated cost and 7 years later than originally planned. TMNG’s escalating costs and schedule delays are, in part, the result of inadequate oversight, planning, and a flawed process to correct deficiencies.”).
Photo of Erik Pelton testifying at the TPAC 2023 trademark fee hearing
