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Archived updates for Monday, October 16, 2006

USPTO Fees Not Unconstitutional

In Figueroa v. U.S. (October 11, 2006), the U.S. Court of Appeals for the Federal Circuit held that Congress may constitutionally impose patent fees in an amount above what is used to fund the PTO.

Miguel Figueroa ("Figueroa") contended that the statutory patent fees imposed on him in 2001 and 2002 for filing his patent application and issuing his patent violated art. I, § 8, cl. 8 of the United States Constitution (the "Patent Clause"), because the statute was designed to generate revenue to fund federal programs other than the United States Patent and Trademark Office ("PTO"). Figueroa also contended that the fees constituted an impermissible direct tax in violation of art. I, §§ 2 & 9, cl. 4 (the "Direct Tax Clauses").

According to Circuit Judge Dyk,

In Eldred v. Ashcroft, 537 U.S. 186 (2003), the Supreme Court addressed the scope of Congress’s authority under Article I, § 8, clause 8, as it relates to copyrights. The petitioner in Eldred argued that the 1998 Copyright Term Extension Act,8 which extended the duration of existing and future copyrights by 20 years, exceeded Congress’s authority under the clause. Eldred, 537 U.S. at 195-96. . . The Court rejected the petitioner’s contention that the extension of copyright terms was categorically beyond Congress’s power under the Clause, based on "an unbroken congressional practice" of enacting such extensions dating back to the first Congress in 1790. Id. at 199-200.

The Supreme Court in Eldred went on to consider whether there was a rational basis for the legislation. It upheld the challenged legislation, finding rational bases for the conclusion that it "promotes the Progress of Science." Id. . . .

We reject Figueroa’s contention that the fees were categorically beyond Congress’s power under the Patent Clause because Congress under that Clause cannot impose fees that exceed the costs of operating the PTO. . . .

Contrary to Figueroa’s argument, the Patent Clause does not limit fees that Congress may impose to the amounts directly appropriated for operating the PTO. The patent system that Congress has established need not be, and is not, limited
to the PTO. United States ex rel. Bernardin v. Duell, 172 U.S. 576, 583 (1899) ("[C]ongress may provide such instrumentalities in respect of securing to inventors the exclusive right to their discoveries as in its judgment will be
best calculated to effect that object."). Indeed, we have previously explained that the Constitution does not require "even that there be a PTO." Constant v. Advanced Mirco-Devices, Inc., 848 F.2d 1560, 1564 (Fed. Cir. 1998). Thus, for
example, in the process of construing the Patent Act’s non-obviousness provision, the Supreme Court in Graham expressly recognized that the federal courts have a role in "the administration of the patent system," insofar as courts 537 U.S. at 205-07. share with the PTO the task of enforcing the requirements for patentability. Graham, 383 U.S. at 6, 18.11 Moreover, Congress may constitutionally impose fees for patent application and issuance to serve a purpose other than raising revenue. As the Court recognized in Eldred, Congress may legitimately seek to advance other public policy goals related to the objectives of the Patent Clause by enacting legislation pursuant to the Clause. See Eldred

We conclude that Congress under the Patent Clause is not limited to enacting legislation to fund the PTO. . . .

The decision then moved to the second step in the Eldred analysis and concluded that the fees imposed did satisfy the rational basis requirement.

On the Direct Tax Clauses, Circuit Judge Dyk wrote

Figueroa next contends that the PTO’s assessment of present-level patent fees amounted to an unconstitutional Direct Tax, and thus an unlawful exaction, insofar as those fees were used to fund non-PTO programs. Article I, section 2, clause 3 of the Constitution provides that "direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers." U.S. Const. art. I, § 2, cl. 3. The Constitution also provides that "[n]o Capitation, or other direct, Tax shall be laid, unless in the Proportion to the Census or Enumeration herein before directed to be taken." Id. art. I, § 9, cl. 4. Since patent fees are uniform for all patentees regardless of their state of residence, Figueroa contends, they
constitute an unapportioned direct tax in violation of Article I, section 9, clause 4.

It is doubtful that the patent fees, paid for the privilege of securing a patent grant, should be viewed as taxes rather than payments for a privilege. See Boyden, 441 F.2d at 1043 (One "is privileged to seek the [patent] monopoly only upon compliance with the conditions which Congress has imposed . . . [including] the payment of fees required for the administration of the patent laws."). However, we conclude that, even if patent fees constitute a tax on intellectual property, they are an excise tax rather than a direct tax and need not be apportioned. . . .

In her concurrence Circuit Judge Newman agreed that

the evidence did not clearly establish that Congress was extracting more money from patentees than the government spends in administering the system. Thus his potentially viable constitutional arguments of illegal exaction and improper taxation were not demonstrated so clearly and convincingly as to establish a constitutional violation.

Mr. Figueroa also makes a strong argument that the unduly high fees are a burden on the constitutional purpose to promote the useful arts. Although without doubt the patent system should not be unnecessarily burdened, the absence of quantification and hard evidence of the effect of the fee structure weakens the constitutional force of this argument.

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