The End of Ownership Obfuscation?
USPTO issued its rulemaking Federal Register notice on how it will address the requirements for better reporting on the Real Party In Interest for patents — The ultimate owners and others with an interest in the patent. USPTO has created yet another new term, Attributable Ownership, to describe those with an interest in a patent. The Federal Register notice is very comprehensive with USPTO providing extensive commentary on why the rules are necessary and consistent with its mission. One of the most fascinating aspects of the notice as the estimates on how many attributable ownership updates will need to be filed and the estimated compliance costs to those affected by the rules.
The 3% Solution
USPTO's historical information points to very low rates of change in ownership.
The Office's assignment records show that fewer than three percent of the patents in force have a recorded assignment document reflecting some type of ownership transfer during the life of the patent, which leads to the inference that changes in ownership during the life of a patent are relatively infrequent (e.g.,
changes in ownership will occur in fewer than three percent of patents).
Based on the 3% number, the number of changes in ownership and control are very low. But we believe USPTO is about to learn a lot about the linear algebra and multi-dimensional arrays of patent ownership because we all know that the information sent to USPTO doesn't comport with the reality of the patent market. Let's start with their numbers.
|The Number||All Patents||Small & Micro|
|Small & Micro %|
|New Patent Applications||437,000||131,000||30%|
|Pending Applications as of October 2013||1,249,000||337,000||27%|
|Number of Applicants on Pending Applications||50,000||14,000||4%|
Applications including continuing applications but not request for continued examination for Fiscal Year 2013 — October 1, 2012 through September 30, 2013.
|Transaction||All Patents||Small & Micro|
|Small & Micro %|
|Issue Fee Payments||266,481||68,574||23%|
|First Stage Maintenance Fee||153,875||27,076||17.60%|
|Second Stage Maintenance Fee||99,249||16,692||16.82%|
|Third State Maintenance Fee||75,470||11,273||14.94%|
|Estimated Attributable ownership updates each year @ Issuance||266,481||68,574||25.73%|
|Estimated Attributable ownership updates each year @ Maintenance Fees||329,000||55,000||16.72%|
|Updates to attributable owner data for reexaminations||1000||—||—||Requests for supplemental examination||31||—||—|
|Petitions for PTAB Trial Proceedings for covered business methods||536||—||—|
|Estimated number of ownership data due to PTAB trials.||1200||—||—|
USPTO's text has a typo — the notice rounds 266,481 to 297,000 instead of 267,000.
USPTO's estimated total number of entities that will be filing Attributable Ownership information associated with the new rules proposed in the Federal Register.
|Type||All Patents||Small & Micro |
|Applicants filing ownership info at time of patent application||437,000||131,000|
|Changes during patent pendency — 4% of the applicaitons||50,000||14,000|
|Applicants filing ownership info at time of issuance fee payment||297,000||69,000|
|Applicants filing ownership info at time of fee payment||329,000||55,000|
|Updates due to ex parte reexaminations procedues||1,000||—|
|Patents involved in PTAB procedures||2,000||—|
Cost — $43+ Million
As part of the rulemaking process USPTO needs to provide estimates of the cost. The Federal Register notice cites "Estimated Total Annual (Hour) Respondent Cost Burden at $43,494,090 per year. This assumes 111,810 hours times the $389/hour attorney rate suggested by the AIPLA 2013 Economic Survey. The real cost of providng this information will be a byproduct of the complexity of the entity and ownership structures for patents. Most businesses can report their ownership information without the services of a $389/hour patent attorney or can check the box when they pay their maintenance fees saying there is no change in ownership to report. Complex patent ownership arrangements are another story. The Federal Register notes,
The simplicity or complexity of the proposed definition of attributable owner with respect to any particular application or patent is driven by the simplicity or complexity of the ownership arrangement of the particular application or patent, which is ultimately within the control of the applicant or patent owner.A live by the sword, die by the sword situation. Overly complex business strategies designed to obfuscate ownership will now need to be documented in a way that can be accommodated by USPTO's systems.
The USPTO numbers have some spongy aspects but provide solid insight into how few patents have changes in ownership information over their life that are made public via changes in the USPTO Assignee Database. In the patentsphere patents change hands in private with no USPTO participation unless there is a need for a lien. At present, there is a level of complexity in every aspect of the ownership life of a patent that is not found with any other property or asset owned by individuals or corporations. We are about to find out exactly how many patents firms like Intellectual Ventures, Acacia Research and RPX have an interest in. We'll also find out how many operating companies have outsourced their patent monetizations to hired guns while simultaneously being righteously indignant about patent trolls.
There is another interesting aspect of these numbers. We are about to find out how many enforceable patents are owned by someone other than the inventor or firm listed on the face of the patent or in the Assignee Database. It will be very hard for firms that own patents that changed hands in private to complain about the filing burden because such complaints will only amplify the lack of ownership information and reinforce the need for reporting of the real owners of patents.