Public Comments on USPTO Proposed Attributable Ownership Rules

27 May 2014 PharmaPatents Blog

The USPTO proposed attributable ownership rules would require the public disclosure of the “attributable owner” of patent applications and patents. In this article, I outlined some of my concerns with the proposed rules. Here, I provide a review of some of the written comments submitted to the USPTO in response to the Federal Register Notice. 

Of the 67 public comments on the rules posted on the USPTO website, the majority of voices are in loud opposition. Most opposing comments touch on the same issues. Rather than repeating those detailed analyses, the following vignettes give a flavor of the opposition.

I. The proposed rules are not necessary

The Notice of Proposed Rule Making justifies the rules as vital to the patent system, both for the functioning of the USPTO and for the functioning of business and the courts. The critics noted that not only has the USPTO functioned for decades without these rules, but that there is no evidence that the rules would address a current problem. Rather, the rules may create additional problems for the USPTO. For example, the Pharmaceutical Research and Manufacturers of America (PhRMA) noted that “The rules clearly will create a cost for both the PTO and all patent owners. Before enacting the rules, the cost-benefit ratio should be studied and the decisions should be data driven.”

The comments also challenged the assumption that there is a widespread and intractable problem with hidden enforcement entities that justify broad rules affecting all patents and applications, and noted that the other alleged benefits were very generalized. As noted by PhRMA:

[T]he actual benefits are speculative at best: . . . [these] varied and far-reaching goals that are likely not best addressed by one set of rules [and the] notice does not provide adequate support to demonstrate a connection between the proposed rules and how they will achieve the listed objectives. With respect to the PTO’s asserted objective of reducing abusive patent litigation, such litigation only can arise when a patent has been asserted. Despite the fact that the number of patents that are actually asserted is thought to be approximately 2% of all granted patents, the rules would apply to all patents and patent applications. Therefore, the proposed rules are not narrowly tailored to address these collective objectives.

II. The proposed rules exceed the rule making powers of the USPTO

In my previous article, I commented that the proposed rules not only exceed the authority of the USPTO, but conflict with the USPTO’s own interpretations of the AIA, interfere with standing requirements, and create confusion with other statutes and agencies. Along these lines, PhRMA pointed out that “Because the proposed rules require more than adherence to existing law, they are substantive and beyond the PTO’ s authority” noting that they appear to be based on turning an “optional procedure to protect patent assignments into a mandatory procedure to protect patent validity “ PhRMA particularly challenges the legality of the rules as applied to issued patents because “The Supreme Court has long held that once the PTO issues a patent, that patent cannot be canceled unless cancellation is expressly authorized by statute. The proposed rules regarding issued patents starkly contrast with this established law to the extent that they suggest that the PTO may cancel an issued patent unless the attributable owner is identified with each maintenance fee payment.”

III. The proposed rules impact legitimate privacy interests

The proposed rules proceed from the point of view that increased transparency is necessary for the functioning of the patent system, and that there is little countervailing interest in secrecy or confidentiality. Numerous submissions, including by some favoring the rules in general, were seriously concerned about the effect the rules could have on current licenses (which are typically confidential) and on future licensing activities. A coalition of six university associations, representing large research universities listed this as their primary concern:

A requirement to disclose exclusive licensees in these cases could have a chilling effect on the ability of our member institutions to commercialize their inventions and/or could reduce their value.

Private industry echoed the same concerns. For example, Novartis stated:

License confidentiality is often critical in industries with long R&D timelines like pharmaceuticals, because the very existence of a license agreement can reveal information about an otherwise confidential business plan or research direction that could be unfairly exploited by competitors (e.g., R&D priorities, disease type or area, state of development, commercialization strategy). The identity of the parties to the transaction can also reveal this type of information, undermining incentives for one side or both to enter into such transactions.

IV. The exclusion of governments and associated entities creates problems and undermines the proposed rules

Proposed 37 CFR § 1.271(e) exempts government entities from the reporting requirements. Many commenters stated that this made no sense in the context of the rules. For example, Lawrence Pope stated:

Certainly, government-held patent applications are subject to power of attorney concern, double patenting and the disqualification of prior art due to common ownership. And third parties would certainly want to understand who owned patents of interest even if the holder was a government entity.

Intellectual Ventures noted that the large loophole in proposed § 1.271(e) would benefit large state owned entities, to the detriment of private industry:

Private firms would be required to disclose their corporate structure and interests under the proposed rules, but competing state-owned entities (SOEs) would be exempt. The savings clause “(other than a corporation or unincorporated entity engaged in commerce)” in Proposed Rule 1.271(e) can be easily avoided by a foreign SOE by assigning ownership of the patents/applications to a state-owned “research” institution (i.e., not engaged in commerce).

Given that many of the largest corporations are SOEs, the exclusion could have serious impacts on competition due to differential treatment of government versus private entities.

V. The USPTO has underestimated the cost and complexity of compliance

In the Notice of Proposed Rulemaking, the USPTO estimates that it would cost less than $40 to determine attributable ownership for each application, and that the total economic burden of the rules would be $43 million per year. While those supporting the rules did not provide any detailed cost analysis, many of those opposing the rules provided detailed analyses that demonstrate that the USPTO has greatly underestimated the costs and complexity of compliance with the proposal rules.

For example, the USPTO likely has underestimated the number of times attributable ownership would have to be determined and updated. The USPTO assumes, based on experience with patent assignments, that less than 4% of applications and patents would change attributable ownership in a year. Intellectual Ventures observed that the USPTO calculations did not account for the fact that all of the 1.2 million pending applications would require a determination of attributable ownership in the first year. Patent attorney Carl Oppendahl commented that attributable ownership could change daily for any publicly listed corporation because the far-reaching definition of attributable ownership extends to corporate investors. Giving Facebook as an example he writes:

The “ultimate parent entities” portion of the investigation requirement would, among other things, require Facebook to obtain a shareholder list for each of these companies. It is safe to assume that (for example) the shareholder list for [Facebook investor] Wells Fargo would change almost daily…. Arguably since “each change” is to be reported, Facebook would have to file an updated “attributable owners” list daily. Perhaps Facebook could be given the weekends off, and would only have to file two hundred or so reports per year.

Other comments focused on the costs of doing a single attributable ownership determination, which greatly exceeded the 0.1 hr and $40 estimate found in the rules. Carl Oppendahl provided estimates that exceeded $50,000 for a medium to large corporation, and $24,000 for a start-up.

Intellectual Ventures identified the root cause of the USPTO’s budget error as the assumption that determining attributable ownership would be akin to determining title. They point out that the USPTO failed to recognize the many ways that the determination of title holder is far simpler than the analysis required to comply with the proposed attributable ownership rules. Indeed, determining attributable ownership is more complex than determining whether a company is a small entity, but the USPTO has recognized that those costs may not outweigh the benefits of small entity status. As IV notes,

Despite the clear economic benefit to the patent owner, the USPTO itself has recognized that the cost of investigating entitlement to claim small entity status, for many applicants, “may outweigh the benefit of claiming small entity status.” 65 Fed. Reg. 54604, 54613 (Sep. 8, 2000).

Even for a simple filing, comments stated that the 0.1 hr/$40 estimate was wildly inaccurate. As PhRMA noted, “The AIPLA 2013 Economic Survey states that the mean charge for paying maintenance fees was $355 for all locations (Table 1_112), and maintenance fee payments are automated and thus much more straightforward than attributable ownership information” Indeed, the Notice itself contradicts the 0.1 hr burden. As pointed out by GlaxoSmithKline, the supporting documents provided with the rules estimated that it would take 0.3 hr merely to process a submission of attributable ownership.  If the USPTO estimated 0.3 hr merely to process the paperwork, the 0.1 hr to determine attributable ownership was plainly wrong and shows that the USPTO was acting “in an area where the Office likely has little knowledge and expertise, namely determining attributable owners within a modern corporation”

That the USPTO  grossly underestimated costs is underscored by the fact that the source of the USPTO’s $100 maximum was the $100 minimum estimate provided by the AIPLA in comments on the previously proposed Real Party In Interest rules, which were much less onerous than the presently proposed rules. In its comments on those proposed rules, the AIPLA provided an estimate of between $300 and $1,000 per application. Using those estimates, Intellectual Ventures costs would exceed $100 million annually, and could reasonably exceed $ 1 billion. Overall, numerous public comments indicate that the proposed attributable ownership rules would cost several hundreds of millions to billions of dollars.


The majority of comments oppose the proposed rules, and many repeat comments and concerns raised in response to the proposed Real Party In Interest rules. Indeed, it is frustrating to stakeholders that the proposed attributable ownership rules not only failed to address those concerns, but exacerbate them by proposing even more onerous disclosure requirements.  In any event, based on more realistic cost estimates alone, the rules should require OMB review. Perhaps OMB will be more receptive to stakeholder concerns.

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