Introduction: A Radical Shift in IP Policy

The  the Trump administration wants to charge patent holders 1% to 5% of their patent鈥檚 value to maintain the patent after grant. If implemented, this would mark a dramatic departure from the traditional flat-fee model. Framed as a revenue-raising measure, the plan would drastically reshape the U.S. innovation landscape.

Potential Impacts on Innovators

Small innovators would be disproportionately affected by the newly proposed fees. Smaller entities often rely on the patent system to protect their inventions but lack the financial resources to absorb significant cost increases. As a result of these fee changes, many smaller companies may opt to use other avenues to protect their innovations, such trade secrets, or may forego investing in IP protection altogether. 

Depending on how the value of patents is assessed, larger tech firms, while more capable of absorbing the costs, could respond by filing fewer but more strategically valuable patent applications. This could reduce the prevalence of ‘defensive’ filings and low-value patents, potentially streamlining the system. 

Specifically in the biotech and pharmaceuticals spaces, patent protection is critical due to high risks and long timelines associated with product development. The proposed fees could significantly raise the already substantial costs of bringing new products to market. Small biotech firms may find it difficult to protect or license their breakthroughs, potentially leading to reduced investment at early development stages. Medical device manufacturers face similar pressures, where the cost-benefit balance of patenting may shift unfavorably. 

The proposal could also result in industry consolidation, more strategic partnerships, or a shift toward trade secrets鈥攄evelopments that may hinder open innovation and collaboration. The net effect could be a leaner patent landscape focused on higher-quality applications and a reduction in 鈥減atent thickets,鈥� but potentially at the cost of accessibility and innovation diversity.

How Companies Might Adapt

If the proposal moves forward, companies may explore various strategies to mitigate the impact of the new fees. One likely response is increased reliance on trade secrets, especially for software and process innovations that are easier to keep confidential.

Firms may also shift their patenting focus to international jurisdictions with more predictable or affordable IP regimes. Open innovation models, such as defensive publishing or open-source licensing, could gain popularity as a way to prevent competitors from patenting similar inventions.

Patent pooling and consortia may become more common, allowing companies to share the costs of filing and maintaining patents. Additionally, provisional filings could be used more strategically to delay full applications and manage financial risk.

Broader Implications

The proposed fee structure raises broader concerns about equity and U.S. competitiveness. Higher fees could exacerbate the divide between well-funded incumbents and new entrants, encouraging market concentration and likely reducing diversity in innovation.

The new fees would almost certainly reduce the overall number of filings. There is a strong argument that reduced filings would result in higher-quality patents. While fewer filings might improve patent quality, the cost barrier could prevent disruptive but underfunded ideas from reaching the market. Fewer patents would also raise the stakes of patent disputes.

On the global stage, the U.S. could lose its competitive edge if innovators relocate R&D to countries with more accessible IP protections. Moreover, tying fees to patent value introduces significant uncertainty, as valuation is inherently subjective and prone to dispute.

Of course, the implications of the impact of the proposed fee structure depends greatly on how the valuation is calculated and how it is applied to the patents.  Does each individual patent get charged a percentage of revenue of a patented method, system, or product even though the system or product may be protected by dozens or hundreds of patents? Or does the percentage fee get distributed over all the patents attributable to the patented method, system, or product? There could be a scenario in which it is actually better for companies to get more patents to reduce the fees if the percentage is applied across an entire patent portfolio. For example, if a bicycle company makes $1M from sales of an innovative bicycle and there are 1,000 patents on the bicycle and the fee is 1% of revenue distributed over the total number of patents, the fees per patent are $10 and $10,000 for the portfolio of 1,000 patents. Given this example reduces the revenue to the government, it is unlikely to be applied in this manner; however, implementation details for the proposal are missing and whatever the details become, patent owners will find ways to reduce what they are to pay.

Potential Legal Challenges to the Proposal

The proposed fee changes are likely to face significant legal challenges. Under 35 U.S.C. 搂 41, Congress, not the executive branch, has the authority to set patent fees. Historically, courts have deferred to the USPTO on fee-setting when changes are modest and tied to cost recovery. However, a sweeping, revenue-driven increase could be struck down or stayed unless Congress explicitly authorizes it. Any attempt to implement such a change unilaterally would certainly be contested in court, with challengers likely arguing that a drastic fee hike oversteps executive authority.  

Additionally, the Administrative Procedure Act (APA) requires that regulatory changes undergo a notice-and-comment rulemaking process. Failure to comply with this process could result in successful legal challenges. There may also be constitutional concerns. If the fees are prohibitive, small businesses could argue that the fees violate Due Process or Equal Protection clauses, although such claims may be difficult to win.

In sum, the Trump Administration proposal is fraught with questions and uncertainty.  Congress and the courts should work to ensure that whatever the proposal is, it is thoroughly vetted and implemented by the correct branch of government.

In our prior article, we discussed instances in which the U.S. Patent and Trademark Office (USPTO) and the district courts made different findings with regard to patent eligibility under 35 U.S.C. 搂 101. A recent nonprecedential Federal Circuit decision, Aviation Capital Partners, LLC v. SH Advisors, LLC, No. 24-1099 (Fed. Cir. May 6, 2025), highlights a critical procedural point: District courts are not required to accept findings made by the USPTO as true at the pleading stage 鈥� unless those findings are specifically alleged in the complaint.

This issue came to the forefront on appeal after the Delaware District Court dismissed Aviation Capital鈥檚 patent infringement complaint under Rule 12(b)(6), finding the asserted patent claims ineligible under 搂 101. The plaintiff-appellant, Aviation Capital Partners (doing business as Specialized Tax Recovery (鈥淪TR鈥�)), argued on appeal that the district court erred by failing to accept the USPTO鈥檚 prior eligibility analysis, which favored patent eligibility, as a factual finding at the motion to dismiss stage.

Specifically, STR contended that the USPTO鈥檚 conclusion 鈥� made during prosecution 鈥� that the claims were 鈥渋ntegrated into a practical application鈥� and 鈥渃ontained significantly more than an abstract idea鈥� should have been accepted as a true factual finding by the District Court as part of deciding the motion to dismiss. But the Federal Circuit rejected that argument outright, stating:

• STR additionally argues that, in deciding the motion to dismiss, the district court was required to assume as true the Patent Office鈥檚 鈥渇actual finding that the claims were integrated into a practical application and contained significantly more than an abstract idea.鈥� Appellant鈥檚 Br. 23鈥�25. We disagree. 鈥淸F]or the purposes of a motion to dismiss we must take all of the factual allegations in the complaint as true . . . .鈥� Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (emphasis added). Here, the complaint included no factual findings made by the Patent Office. J.A. 16鈥�32; Oral Arg. at 4:38鈥�5:45 (complaint alleged the Patent Office made two legal determinations but alleged no factual findings). Accordingly, the district court did not err by declining to accept as true any unalleged factual findings that the Patent Office may have made in its 搂 101 eligibility analysis.[

This passage underscores the procedural rigor applied to motions to dismiss: The court is bound only to the facts actually pled in the complaint. While STR tried to import the examiner鈥檚 analysis into the record, the Federal Circuit made clear that any 鈥渇actual findings鈥� by the USPTO must be explicitly alleged for a district court to credit them at the motion to dismiss stage.

Implications for Litigants and Drafting Complaints Where Examiner Made Comments Regarding 搂 101 Eligibility

This ruling serves as a practical guidepost for practitioners navigating 搂 101 disputes post-Alice. Litigants cannot assume that favorable examiner conclusions 鈥� such as an 鈥渋ntegration into a practical application鈥� 鈥� will be treated as facts unless those determinations are squarely and specifically alleged in the complaint.

The USPTO鈥檚 current guidance instructs examiners to evaluate whether a claim is 鈥渋ntegrated into a practical application鈥� and whether it includes 鈥渟ignificantly more鈥� than an abstract idea 鈥� criteria that may allow applications to clear the 搂 101 hurdle during prosecution. Yet, as Aviation Capital confirms, the deference afforded to such examiner determinations may vary, and on a Rule 12(b)(6) motion, only factual allegations specifically made in the complaint must be taken as true. This begs the question 鈥� if a patent owner explicitly alleges factual findings made by an examiner during prosecution regarding 搂 101, is that sufficient to defeat a motion to dismiss? Though nonprecedential, Aviation Capital suggests as much.

Takeaway

The Aviation Capital decision is a sharp reminder that litigators must be deliberate in pleading factual support for eligibility. To preserve arguments based on examiner findings, those examiner findings must be more than background 鈥� they must be alleged facts in the complaint, not just cited conclusions.

Otherwise, courts remain free to assess eligibility from a clean slate. And as this decision reaffirms, that assessment may diverge from what the USPTO previously concluded.

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[1] Aviation Capital Partners, LLC v. SH Advisors, LLC, No. 24-1099 at 7 (Fed. Cir. May 6, 2025).

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