Annual Escalating Patent Fee Proposal

I love the stuff that ya’ll email me (or comment) after I write a post that challenge my thinking.  While occasionally the notes are hostile (which is mostly just entertaining), they are usually really thought provoking even when I disagree.  And, when they give me a new way to think about something, they are really satisfying.  For all of you out there that read this blog – you guys are great – thanks for helping me think!

Last week I got an interesting proposal to deal with the problem of patent trolls.  Here it is. 

“It seems to me as though the solution to patent trolls is a pricing issue.

If patents were to get progressively more expensive over time, a patent holder would have to weigh the financial return of a patent against the cost of maintaining it. For example:

Patent Fees
Year 1 — $1,000
Year 2 — $10,000
Year 3 — $100,000
Year 4 — $1,000,000
Year 5 — $10,000,000
Year 6 — $100,000,000
Year 7 — $1,000,000,000

The model above protects really valuable patents and sets patents that aren’t valuable free. Pharma could live with the fee schedule above, and software companies which have patents that are really core to a business would be protected for 4-5 years, an eternity on the Internet.”

What do you think?  What’s the fundamental flaw in this?

  • Andrew

    Sounds like a great way to destroy the small time inventor

  • As a small time product developer (I shun the "inventor" term for so many reasons). The costs are beyond the capability for someone of my ilk to protect my designs in a legal manner. Only business competition would be the answer to protection, now I'm aware that there's a wholly reasonable answer to this (do away with patents, little guys go away big guys steal rampantly.) But I can see that some middle ground could be found, that doesn't penalize continually the larger companies either. A percentage of revenue to maintain the patent may be an option. Lower initial costs, but shorter lengths of time for patents (maybe only 5 years, but at the end of 5 years, it can be increased to 10years with a percentage of gross revenue for that product/concept) Thus a functional window for protection would exist, while obsolescence and needless cost can be avoided (Find me a tech patent that isn't dead in the water in 5years in any direction). Just my quick 2 cents. (It did get me thinking though, Thanks again Brad!)

  • The problem is that small companies that depend on patents to protect themselves against big companies would be unable to afford those patents, and in the non-software arena, five years is not very long at all.

  • Understood.  I guess I’m only applying this to software (in my thinking) assuming I fail at invalidating all software patents.

  • Similar escalating fees have been proposed for copyright. A huge flaw in current copyright law is that Disney wants iron clad protection for Mickey. By providing them with a hundreds years of protection, we also gave a hundred years of protection to orphan works. Orphan works need to go into the public domain so that preservations can protect them. Escalating fees would also prevent licensing companies from sitting on huge piles of older works without making them available as a strategy to force you into buying newer works with high licensing fees.

  • Ironic that a company that profited so much from public domain works (Sleeping Beauty, Snow White, etc.) has fought so hard against the public domain.

  • maybe the curve should be redrawn to more of a hockey-stick shape. perhaps even by industry/category/sic of the patent. so a pharma patent would have a long low-cost plateau and then it would spike. a software patent would have a few years of low costs and then it would start to rise and then it would spike. there could be reasonable processes to push out an increase a year (or maybe two) if a company were on the cusp.

  • Four notes:

    1) The first year fee of 1000$ is too low and would create a craze on patent registering which can cause a lot of noise for others looking to register something meaningful

    2) You should add to your account another two years for the patent registration process (slow system) and your "first" year in the list actually becomes the third year in calendar time for an inventor (pending protection)

    3) This formula can cause companies to strategically draft new different patents that cover other areas of an innovation every year so eventually they can drop older patents who are costly and keep new ones who also protect their core assets.

    4) If there is something good to do with the money, for example give it to entrepreneurial students, then it is a good idea:)

  • Griffin Boyce

    I think copyright law needs an overhaul — more of a rollback to previous years' law.

    People in general seem to favor just endless amounts of copyright protection after death, but few people really know what that looks like. Many of the works of Arthur Conan Doyle still have ironclad protection — including the character of Sherlock Holmes. In contrast, the Sydney Paget illustrations for the series are public doman, as he died before Doyle.

    It's actually a pretty interesting take on the subject of US copyright as Sherlock Holmes has narrowly been "saved" by changing copyright laws several times. Well, it's as interesting as really dry law gets anyway 😉

  • … assuming of course the 3+ year lag to get a patent approved is fixed.

  • An easy alternative to this is only charging the troll who purchases the rights to the patent that amount. The fees are a bit steep (logarithmic) and I suspect there would be WAY too much infighting in Congress to pass it.

  • It's worth noting that before 1977 copyright used to require renewal, so that there was a speed bump halfway through the maximum term of protection where the author would have to at least stand up and say they wanted the extra protection. Orphan works are obviously a smaller problem under such a regime.

    I don't enough of the stats to say if we have an orphan works problem in patents, but those don't seem to be the kinds of patents the Brads and others are concerned about, so I guess a renewal provision wouldn't get them much closer to the world they want.

  • One minor issue I could imagine cropping up is that because the initial years are going to be the cheapest, there's a disincentive to actually file the patent; you'd want to wait until you're ready to seize the market. This wouldn't be a problem if we did priority by first-to-file, but we use first-to-invent, so you could feasibly wait.

    Basically a system like this would resurrect the "submarine" patent problem that we largely did away with by changing the patent term start from issuance date to filing date. Now we'd have secret things invented by not yet filed, so as to milk the early years best and then abandon the patent when the fees got too high.

    I'm not convinced the benefits wouldn't still outweigh the costs, but it's a wrinkle, fwiw.

  • The fundamental flaw is that it tinkers with a system that is fundamentally broken. Patents should be granted for things like drugs and physical devices. They should not be granted for software and business methods. Don't tinker, if you do the other side will somehow win.

    James Mitchell

  • joe

    There already is such a fee. It is called a maintenance fee and is in three steps after issuance.

  • We are not a "first to invent" system — first to file is what matters for patents, being first to invent only matters when it comes to invalidating. it's not like the first to invent gets to take ownership of someone else's patent, they can simply (and at great cost) work to have it invalidated.

  • KSR

    You mean "exponential". The logarithm is the inverse notion.

  • Of course, I stand corrected.

  • TThe escalating fee proposal is essentially a working requirement, which the US has always rejected. Although, Joe is correct that we already have escalating maintenance fee. As the US moves towards a knowledge economy we are going to need strong property rights in our technology not systems that give away our technology.

    Brad you seem fundamentally confused about patents. They do not inhibit or restrict the free flow of information. They actually encourage the free flow of information, this is a major goal of patents. In the US we setup patent depository libraries for this purpose. Without patents people keep their ideas as trade secrets limiting the free flow of information and the ability of others to build on earlier work. Patents also encourage people to not reinvent the wheel. Instead of having 500 firms providing Visacalc, patents encourage people to innovate. They do this by providing a financial incentive to those who invent and by discouraging people from making me-too products. Your anti-patent proposals do not encourage innovation and if followed will ensure that the US becomes a second rate nation.

    Dale B. Halling, Author of the “Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation.”

  • Griffin Boyce

    Or tax patent sales.

  • I've always liked the idea of a defensive patent – a patent that you are registering to establish it as current state of practice. This would signal an intent that one doesn't intend to impede anyone else's use of the patent, as well as protect yourself from patent suits.

  • Not necessarily related to the sliding scale, but it seems to me that with the exponential rate that technology is moving forward, the duration of patents should be inversely proportional. How quickly does 'technology' (an admittedly nebulous term) double these days relative to when patents were first created. If we were to follow that trend, patents would expire far far sooner than they do.

  • Theater of the Absurd: JPEG. MPEG. So, there should be patents on everything Fourier, all low pass filters, all Hilbert space projections (would you believe Banach space projections?), the bass tone control on old hi-fi sets, principle components, all idempotent transformations, all transformations, 2 + 2 = 4?

    Software Patents: The whole situation is a FUBAR SNAFU, legal mud wrestling illuminated by burning money.

    Entrepreneurial Resolution: Try to bob, weave, stay out of the view of the other guys' lawyers. If they can't see you, then they can't target you. Hope that somehow software patents get tossed into the dumpster. Remember: Don't have to outrun the bear; just have to outrun enough other people trying to outrun the bear.

    Short Term Approach: Turn the whole subject into a new river of lawyer jokes. I don't have any just now; don't feel like laughing.

    General Situation: Can't expect everything to be tidy; history shows that big things were done, and everything tidy was at best fantasy. Should still be able to do big things.

    Ironic Retaliation: All software people should file patents on everything having to do low temperature, air-tight, controlled temperature, water-bath cooking as in posts of user nathanm at!

  • Another issue is that, if, for whatever reason, the time required to commercialize the patent turns out to be longer than expected, this is a good way to shut down the commercialization process. Unless some acquirer had particular expertise in commercialization relevant to that particular patent, who would want to buy a high-priced, uncertain-return asset like that patent? The company would be essentially dead.

    Would it be possible to somehow make a company "bet" on when the patent would be commercialized? So, for instance, a company could pay a larger sum now for a longer time to commercialization; a patent troll would have to pay quite a great deal to keep the patent for 12 years without commercializing it, while a real start-up might pay a moderate sum to keep the patent for a couple of years. Then there could be a balloon sum due at the end of the term, with the option of relinquishing the patent instead of paying the money. That would do about the same thing.

  • Perhaps you've never filed a patent…
    1) The current fee is far less than that, and doesn't get more expensive over time.
    2) The times suggested are from the grant date, not the application date, as are all patent grants.
    3) They already do this, overwhelming the patent office. The problem is the patents are then granted. This sliding scale makes that model untenable.
    4) I don't see what this has to do with it.

    Like I said, I don't think you've ever filed a patent. You should, it's fun. Costs about 10-15K per patent from any competent counsel.

  • Hi David,

    Thanks for the opportunity to clear my thoughts in my comment which apparently were not clear enough:)

    1) The current fee for the US is 980$ for the first 3.5 years and in Europe it costs much more – around 5K Euro ( I am adding Europe since as an Israeli we usually try to file in Europe and the US and I know many other companies do so as well as an international strategy. As for the changes in fees over time today it gets more expensive but of course not in the acceleration pace suggested above. Check out the USPTO fee schedule for more info. My suggestion was to make the first year more costly in order to keep only serious stakeholders in the game, something like 10K and not 1K.
    2) You are right that the explicit discussion here is about calculation from grant date but if you follow the logic of acceleration you can see that from year 3 and 4 it is becoming a serious price to pay for an average growing startup. My comment was to pay attention to the duration a patent application takes, which is around 2-3 years before approval. This long time actually gives similar protection as if it was granted basically for free. This early free protection is a factor to take into consideration while devising a fee schedule. For example a better schedule in my eyes would be to make the cost of the first three years following grant into 10K fixed and to start acceleration only from year 4. This way new businesses can have enough time to become established while the initial high cost can scare those who file patents just for fun.
    3) My idea here is that big companies with deep pockets can easilly play the system. Imagine they have an asset that they want to protect where they can theoretically file several patents that can protect the same innovation – with this assumption they can file a patent every year and let a patent die every 6 years when it becomes heavyweight (100M) – this way they get protection without paying the heavy toll.
    4) Although this point was ended with a smile stil I think it is a serious topic. If the USPTO was to get 100M per long standing patent then it would sum up to serious money (I wonder if someone knows the statistics of registered patents for calculating potential annual revenues for the USPTO with this schedule). Simply giving the money to the USPTO would not be very straightforward from different perspectives and since we are discussing a new schedule I think it should fit also political atmosphere.

    As for my personal experience, since you asked:), I have my name on 7 filings already though honestly I never considered that too be too much fun or something to be very proud of.

    Thanks again,

  • My take on the patent troll problem is it could be solved in a pretty straightforward way without charging escalating fees to hold an issued patent.

    If the original intent of the patenting concept was/is to protect the inventor while he/she commercializes the idea then the solution lies in focusing on that value proposition.

    Simply make it possible for duly vetted third parties to challenge any patent and patent holder to produce evidence they have, or are in process of, commercializing the patent.

    This commercialization of the patent by the holder could be done either by the assignee, the inventor or through a contracted third party. When challenged officially via USPTO website they would have to show evidence to the USPTO that they are making a significant and ongoing effort to produce a product or service that implements the novel elements of the system, method and mechanism that are taught in the patent.

    A patent could be challenged by USPTO itself or by any USPTO registered third party who has been certified as qualified to make challenges. (Patent attorneys, patent Agents or anyone who passes a "Patent Challenger" test form the USPTO)

    A patent could be challenged no more that once a year and proof of commercialization by the patent holder would be public record. Patents holders who are challenged to prove progress to commercialization but who have not delivered product as yet would be able to file with USPTO for "non-Publication" of details of the proof of their progress toward commercialization so as to protect them from being forced to make early disclosure of product launch content and plans.

    If the patent holder fails within some timeframe (1 year) to provide proof to the USPTO of progress toward or actual commercialization then the USPTO should expire the patent immediately and make it public domain and open for general use.

    Another variation here after the holder fails to prove progress to commercialization would be to open the patent for "adoption" for 6 months during which entities could file to "adopt" they patent by showing they have commercialized the patent concepts and can show the earliest progress toward commercialization compared to other potential "adoptive" entities.

    One nice outcome of this might allow a former employee of the assignee of a patent, whose name is on an awarded patent to that company, to file to "take custody" of a patent from their former employer if that employer is not meeting the commercialization requirements. Nice incentive here for companies to proactively try and retain their productive inventors as well as commercialize patents they have issued to them.

    I'm guessing you could get more than 50% of the issued off the books in this manner, generate a lot more focus on implementing novel concepts/ideas/products, and get us back to a useful patent system that encourages innovation and innovators and puts the hurt on trolls.

    Thoughts on this?

  • I agree with that – make people commercialize the patented technology and show that they are either currently using it (software companies) or heavily investing in commercializing it (biotech, etc.). If you don't meet one of those two – you lose the patent. But it still leaves the problem of people sitting on patents that are using them, but shouldn't be able to protect them. So I guess the cost curve should still apply (if you aren't making enough money by year 7 to justify the $1M then the patent probably isn't valuable enough to worry about anyway, especially in software).

  • Thanks for the clarifications, with the added context your comments make a lot of sense and are certainly things that need to be considered.

  • David Locke

    I don't see this as a means of preventing patent trolls. What it will do is increase the value of the eventual court action.

    What would like to see is a requirement that the patent be commercialized, in the sense of the idea being brought to the market. Since patent trolls never take anything to market, this would put a crimp in, but not cripple their operation. They would just fund a dummy company to fail. Patents can be valuable enough to make any apparent trap simply the cost of doing business. in a business like patent trolling and spam where you do practically nothing, you are raising the bar to force them to do just a bit.

    I think software patents are bogus period. I see no real way of stopping patent trolls. The courts forced the issuance of software patents to restrict an end the profitability of the software industry, and it is working.

  • Mohan

    Increase in cost of maintaining a patent means cost of purchasing products most likely goes up as well.

  • patenthitman

    Speaking of patent troll… I'd like to suggest a defense to patent trolls and frivolous patent lawsuits!

  • We don't need patents to protect us from "500 firms providing visicalc". We *have had* hundreds of companies and products in the spreadsheet and template-based calculation genre, and competition and the market have worked well to encourage innovation in spreadsheet software. The cost of "reinventing the wheel" in software is so low it doesn't need to be fought. Creating "me too" products doesn't need to be discouraged.

    As for the flow of information, software, unlike things like the methods of producing physical hardware, can't be hidden… in virtually all cases the software itself is self-descriptive and publishing the software publishes the methods.

    Software patents push software innovation out of the country and are themselves making the USA a second-class nation.

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