Trademark fee proposal comments at USPTO hearing by Erik Pelton focus on small business impact

This afternoon, I provided comments to the USPTO’s Trademark Public Advisory Committee regarding proposed changes (increases) to many trademark fees. My comments touched on numerous topics, but focused in large part on the impact that USPTO trademark filing fee increases will have on small businesses.

Below are the remarks I prepared for today. More details on the fee proposal can be found on the USPTO website here. The hearing was videotaped, and hopefully the video will be made available here.

For more details regarding about the proposal and all the fee changes, see: https://www.uspto.gov/about-us/performance-and-planning/fee-setting-and-adjusting#tmfee-info

You can email comments of your own to comments to the USPTO at: TMFRNotices@uspto.gov

Trademark Fee Proposal Comments

I appreciate the opportunity to speak with you today. Erik M. Pelton & Associates is a boutique trademark firm in Falls Church, Virginia. Since 1999, our firm has registered more than 3000 U.S. trademarks for clients who are overwhelmingly small businesses. We have also represented parties in many TTAB proceedings. Our attorneys are actively involved in INTA and the ABA’s IP Law section, as well as other organizations. The firm also owns numerous trademark registrations of its own.

First, I would like to discuss the proposals through the lens of small businesses. 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. According to a 2013 report from WIPO, small and medium-sized enterprises rely on trademarks much more than patents.

Small businesses in general don’t have an association or a stable of lawyers to work on comments to proposals like these. Yet they will be the most impacted.

For small businesses, the investment in trademark clearance and registration is even more important and more valuable, to guard them against the risks and expenses of trademark disputes and litigation. The costs of a trademark dispute – even one where the facts and law are on their side – can, and frequently do, crush small businesses. It would thus be prudent to ensure that the fee structure of the USPTO provides an incentive for small businesses to protect their trademarks.

As to the process for the fee proposal thus far, although we understand there will be additional opportunities to comment, there were few if any discussions with stakeholders or in public TPAC meetings prior to the proposal’s release.

The proposed changes were announced less than a month ago, providing limited time for stakeholders to prepare and organize comments for today and for the upcoming written comment deadline. As a result, the feedback at this stage is not as extensive as it would be with more time.

Regarding the justifications cited in the materials for the fee changes, we certainly support the goal of a more accurate Register – as well as one that is more robust, capturing a higher percentage of marks that are in use.

More information regarding the justification of additional revenue to recover cover costs would be useful. According to the most recent annual TPAC report, the trademark operation collected $329m in FY2018 and spent $316m, and the trademark operating reserve grew to $135m. The TPAC report also noted that in FY2018 “the USPTO considered its 5-year financial outlook and determined that additional fee adjustments are not warranted at this time.” What has changed? One plausible explanation is the continued IT delays and growing IT costs. According to the TPAC report “The total TMNG cost from inception through August 2018 has been $178.8M.”

Many IT enhancements are important and will benefit USPTO employees and users. For example, users would benefit tremendously from more upgrades to the TTAB’s online docketing and filing system; enhancements to TESS queries and results; image searching; more user-friendly interfaces; and much more.

Completion of the desktop tools to be used by hundreds of examiners has been repeatedly delayed. Of course, there have been numerous useful IT improvements in recent years – for example the ID manual, APIs, TSDR, the electronic Gazette – as well as many more made behind the scenes.

While upgrading and modernizing the systems is no doubt difficult, time consuming, and costly, the delays to date have been significant and the expenditures have repeatedly surpassed budget. As the USPTO asks users for more money, we urge it to share greater details and transparency about past and future IT expenses.

The increasing costs of TTAB proceedings are cited as a separate consideration. Has the cost per proceeding increased along with number of proceedings? Given technology enhancements and the 2017 Board rule changes, the costs per proceeding should be decreasing. If they are not, perhaps the issue merits separate study and discussion.

Finally, I would like to comment about a few of the specific proposed increases. I note there is not a single fee decrease featured in the proposal. But I will mostly leave it to the others speaking to share their specific concerns.

The proposed fees for new applications would enlarge the difference between TEAS RF and TEAS+ from $50 to $100. We do not support such a gap; It is our experience that a majority of those who do not use TEAS+ choose not to use it because of the limitations of the ID manual and/or the accounting and reporting difficulties that may ensue if TEAS+ status is lost.

Furthermore, increased application filing fees will be felt disproportionately by smaller businesses – those who benefit the most from USPTO registration. I also note that any increase in filing fees may decrease the number of new applications, especially from small businesses, which would mean a less robust register.

The proposed fee for filing a request for reconsideration is greater than the entire application fee and will result in fewer requests for reconsideration meaning more appeals and/or more abandonments. There are many good reasons to file a request for reconsideration – and many that avoid an appeal from being filed or from being fully briefed and decided.

I am aware that there has been a huge increase in recent years in letter of protest filings, in part from a Facebook group. Although many letters of protest may not result in USPTO action, those that are approved aid in examination, saving the USPTO time and money. Many avoid the need for a later opposition that is far more expensive for both the parties and the USPTO. We encourage exploration of other ways to address the increase in these filings, including more public education about the circumstances when letters of protest are appropriate.

Regarding renewal and maintenance fees, the proposed increases will likely decrease renewal filings, especially among small businesses. We believe that the audit program is working to eliminate a fair amount of deadwood. More time and more education could continue to increase the effect.

Regarding the TTAB fees proposed,

• We oppose the fees for extensions of time for filing an appeal brief after the first extension. The internal costs of such extensions should small. Extensions may result in less work for TTAB by resolving the case, and the fees may discourage settlement negotiations with prior registrants (which could in turn lead to more cancellation proceedings). For many of the same reasons, we oppose the proposed increase for extensions of time to oppose.
• Regarding fees proposed for oral hearings and motions for summary judgment: As a matter of equity and justice, we do not believe these are fair. Discouraging oral hearings is a disservice to the Bar and to the parties, and to fair determinations of trademark cases that are inherently complex and long. Furthermore, the fee proposed for each is greater than the fee for an entire proceeding or appeal. Again, it is clear that small businesses would be much more dramatically impacted by these fees.

We also have a few other general thoughts on trademark fees

• We wonder whether there was discussion about raising other fees that would incentivize better behavior. For example, why not charge significantly more for renewals filed during the grace period? Or for petitions to revive? Or even greater charges for anything submitted on paper? Was a separate fee for receiving an optional paper registration certificate considered? How about reduced fees for smaller entities, like on the patent side? Or an across the board increase to all fees of 10% or some other amount? For Ex Parte appeals, perhaps separate fees for the “notice of appeal” commencing the process versus “filing an appeal brief”? Many notices of appeal are simultaneous with requests for reconsideration, or to request suspension while a cited registration is in the renewal or grace period. Such appeals are often resolved or dropped before briefing and thus save the USPTO costs.

To conclude, we believe that while some fee adjustments are appropriate, the process, justifications, and the selection of which fees to adjust and how much to adjust them ought to be re-examined and restarted. While we firmly support the need for IT improvements we would like to see more transparency.

We want to reiterate that small businesses will unquestionably be more burdened by increased and new fees. A Fortune 500 company with in-house counsel and a budget for IP protection, will not be terribly impacted by increases of a hundred dollars here or $400 there. But the local restaurant a few blocks away on King Street, the software company started by college students last summer, and the snack company that recently begin selling in the market down the street, certainly will be impacted. A loss of protection for them is a loss for the entire trademark system and diminishes the accuracy and completeness of the register.

If small businesses don’t register their marks at the same or greater rates than today, and if they can’t afford to litigate disputes when justified by the law and the facts, the harm will extend far beyond the USPTO. It will impact the small business engine of the US economy.

The slides indicate that we are near the beginning of this process. But there are already substantial recommendations on the table. We suggest that it would be prudent to take a step back, hold several public forums with stakeholders and in TPAC meetings to discuss the justifications, proposal, and alternatives, and then put forth a revised proposal. Reaching out to small business groups to explore the impact on them would also be tremendously value.

Thank you for the opportunity to speak today. The USPTO’s openness to users is much appreciated. There is no doubt that ensuring quality examination and maintaining a register with millions of records and hundreds of millions of documents and data points is a tremendous undertaking, but one with incredible value to the public and to trademark owners. The trademark operation has accomplished much in recent years, such as growing the examiner corps, providing useful APIs, educating the public via videos and the Trademark Expo, engaging with stakeholders on many issues, and combatting online cyberattacks and fraudulent filings. We believe there is consensus that incentivizing accuracy on the register is a worthy goal, and that the IT challenges are considerable and costly. But before moving forward with these significant fees, deeper engagement and discussion is warranted, including a review of the impact on small businesses.