The Trump administration is considering changing the U.S. patent maintenance fee structure from the existing three fixed flat fees to an annual, value‑based “tax” model where patent holders would pay 1%–5% of the estimated value of their patents to maintain them after grant.[1] The intention is to raise revenue and reduce the government’s budget deficit. However, the proposed changes have the potential to dramatically remodel the biotech industry’s intellectual property landscape as well as to disrupt its current business models. The new fee structure could also undermine the US patent system’s goal of incentivizing innovation. News of the proposed changes led to an immediate decline in the stock prices of several major players in the biotech space, as investors anticipated higher costs and potential profit reductions.[2]
Currently, many pharmaceutical and biotech companies file broadly, and maintain all of their issued patents for strategic reasons, including defensive patents to block competitors, and for licensing to generate revenue. Biotech often relies on venture capital and licensing deals anchored on patent strength. Higher maintenance fees could lead to fewer filings, weakened IP positions, and reduced funding availability.
Depending on how patents are valued, these changes may disproportionately impact small biotech startups and academic spinoffs, which typically rely on patents to attract investors and commercial partners. Faced with tight budgets and long developmental timelines, these entities may mitigate the upkeep costs by using trade secrets to protect innovations, provisional filings to delay filing full applications, and defensive publishing to block competitors.
Large biotech companies may also shift their IP strategies. For example, they may maintain fewer but higher‑value patents. They may also reduce their investment in R&D if profits on their most successful products are reduced by the proposed fees. Because maintenance fees are not due on pending applications, another strategy may be to delay issuance of allowed applications by filing requests for continuation (RCE) or continuation applications, although this too can be expensive given the recently implemented priority claim fees.
Many questions remain, most importantly how patent valuations would be determined. Valuing a patent is inherently subjective and complex, leading to uncertainty, which may further chill investment and innovation. However, the proposed fee changes are likely to face significant legal challenges. In 35 U.S.C. § 41, Congress specified the amount of maintenance fees for patents and authorized the Director to adjust the fees “to reflect any fluctuations occurring during the previous 12 months in the Consumer Price Index, as determined by the Secretary of Labor.” Thus, it appears that the executive branch has limited authority to set patent maintenance fees, and therefore, the President’s proposal would likely require a change to the law. It remains to be seen if Congress has any interest in making a change with potentially far-reaching impacts.
Editor: Brenden S. Gingrich,Ph.D.
[1] https://www.wsj.com/politics/policy/patent-system-overhaul-18e0f06f
[2] https://finance.yahoo.com/news/biotech-stocks-dip-trump-administration-201353984.html
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