Fee diversion - guess what? It’s constitutional

Posted by J. Matthew Buchanan

October 19, 2006

The appropriators scored a major victory last week when the Court of Appeals for the Federal Circuit ruled that the practive of diverting patent fees to non-patent purposes (e.g., homeland security and other programs) survives constitutional scrutiny.

In Figueroa v. United States [.pdf], a patent applicant challenged the constitutionality of excessive fees (fees that exceed the cost of Patent and Trademark Office operations) and their diversion. Importantly, the Court ruled that the patent applicant did, in fact, have standing to challenge the fees.

On the issue at hand, the government argued that the Patent Clause preamble does not limit congressional authority to charge patent fees at all. That is, the government argued that the patent fees do not need to be related to the promotion of progress in science and the useful arts in any way. The Court assumed that a ‘limit’ exists, but declined to decide this issue.

Following the direction of the Supreme Court in Eldred v. Ashcroft (537 U.S. 186 (2003)), the Court analyzed the statutory fee structure for a “rational relationship between the present level of patent fees and Congress’s legitimate objectives under the Patent Clause.” The Court rejects the notion that the actual reason for enacting the legislation is at issue, indicating that “[t]he question, rather, is whether there is a rational basis on which Congress could conclude that the level of fees served legitimate congressional objectives.”

Oddly, the Court then offers three separate and sufficient reasons for the legislation: funding the overall patent system, keeping pace with future costs of administering the PTO and the system, and deterring “the filing and prosecution of certain types of patent applications.”

Regarding this last point, the Court stated:

“Congress could rationally seek to discourage applications for patents that would later likely be found invalid….applications for inventions where the patent is sought only for the sake of personal recognition…and applications from inventors who seek the patent only as a means of inhibiting innovation by competitors.

Did the Court include these comments in the opinion to underscore the breadth of the deference it will give Congress on patent fees? It’s almost as if the Court is saying “the rational relationship test is so weak that Congress could base patent fee legislation on an anti-patent objective.”

So fee diversion is legal…and the appropriators now have a Federal Circuit decision in their back pocket. The practice is likely here to stay unless Congress feels enough political pressure to end it.

Crouch: CAFC OK’s Fee-based Regulation at PTO.

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