How Will the Cannabis World Look When Marijuana Is Rescheduled?
A few weeks ago, someone at a holiday party asked “Whitt, why doesn’t Budding Trends take on the weighty legal issues of the day and instead resort to cheap pop culture references and puns?” I thought about responding with a quote from “Run Like an Antelope” but then it hit me: Maybe we should give some thought to a more high-minded discussion about the practical implications of marijuana rescheduling. (Editor’s note: This exchange did not actually happen.) So, I guess set the gear shift for the high gear of your soul, and let’s dive in.
It has been said that our greatest hopes and our worst fears are seldom realized. I think the recent efforts by DEA to reschedule marijuana from Schedule I to Schedule III is a good example of both. Those looking for news that marijuana is soon to be freely available nationwide will be disappointed, as, we suspect, will those who fear that rescheduling will immediately destroy the existing marijuana industry. It’s like Tom Petty reminded us, “most things I worry about, never happen anyway.”
None of This Matters if Marijuana Is Not Rescheduled, and That’s Far from a Settled Question
All of this is, of course, moot if marijuana is not rescheduled. While rescheduling is considered by many to be a fait accompli (oh yeah, Budding Trends dropping French on you) – and I agree it is more likely than not that marijuana will be rescheduled, although not in 2025 – there are a number of potential roadblocks standing in the way. We previously wrote about the process here.
But even if marijuana is not rescheduled in the near future, hopefully the discussion below will be helpful in thinking through the practical implications if marijuana is rescheduled in the future.
280E in the Rearview
It is widely assumed by many that one of the certain impacts of rescheduling is that marijuana operators would no longer be subject to the draconian tax consequences of 280E.
We previously wrote on the subject:
One of the most significant impediments to the growth of marijuana operators, and dispensaries in particular, is 26 U.S.C 280E. That one-sentence provision may be the biggest hurdle to the development of the marijuana industry in the United States. It dictates that:
“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”
280E has crippled the marijuana industry, often exacting an effective tax rate north of 60% for operators. “Within the meaning of schedule I and II of the Controlled Substances Act” is the ballgame. If marijuana is rescheduled to Schedule III, 280E would no longer apply and marijuana operations would be taxed as normal businesses – provided that Congress did not specially enact a marijuana tax.
Obviously, state tax laws may still penalize marijuana businesses akin to 280E, but some states proactively exempted licensed cannabis businesses from those impacts.
One question that has stuck in my mind is whether rescheduling marijuana to Schedule III would remove state-legal operators from the ambit of 280E, or would that benefit only be afforded to businesses who manufactured, distributed, and sold FDA-approved Schedule III products (i.e., not most state-licensed operators at present)?
This is a question of statutory interpretation, and I think it comes down to how the government characterizes marijuana that is not compliant with Schedule III requirements. Is non-compliant marijuana still a Schedule III substance? If so, does it somehow become Schedule I or II? If not, then it would appear that that 280E does not capture non-compliant marijuana because that provision appears to be limited on its face to Schedule I and II substances. I think the better reading is that, while non-compliant marijuana operators may face consequences as discussed immediately below, 280E will no longer include marijuana.
Another related question of great interest to marijuana operators currently sitting on huge overdue tax bills is whether rescheduling marijuana would have a retroactive effect eliminating the existing tax liabilities for marijuana operators. Generally speaking, changes to tax laws are not retroactive unless Congress expressly says so. It strikes me as very unlikely that lawmakers will be interested in allowing marijuana operators who have not paid their full tax bills for years (and in some instances publicly admitted as much) to simply walk away from those obligations.
State Medical Programs
So, if marijuana is rescheduled, what happens to existing marijuana businesses operating under the auspices of state laws? This, as well as the fate of adult-use operators discussed immediately below, may be the most consequential yet unclear aspects of rescheduling.
State-licensed marijuana operators have existed in a sort of legal limbo since their inception. How, if at all, will the rules change for state-licensed operators if marijuana is rescheduled?
The way I see it, there are three paths forward for state-licensed marijuana operators if marijuana is rescheduled:
The federal government, in a break from more than a decade of quasi-official federal policy, could actually follow the Controlled Substances Act and require marijuana operators to meet the requirements for Schedule III substances.
There is no practical change and the federal policy of non-enforcement of most marijuana operations remains in place, along with a similar posture from the states with marijuana regimes.
There is no immediate change in federal enforcement policy, but states tighten marijuana rules over time to allow for a gradual change such that access to marijuana is not immediately shut off as the federal government and marijuana operators take the steps necessary to treat marijuana like other Schedule III substances.
In a nutshell, the path chosen will answer what I believe is the most interesting and critical question in this whole discussion: Does the government intend for marijuana scheduling to be a dead letter or does the government intend to regulate marijuana as a controlled substance?
That answer will govern whether and, if so, how the federal government will regulate state-licensed cannabis operators – including potential enforcement actions.
Of the three paths above, the first strikes me as the least likely and the last strikes me as the most likely. Why? I am skeptical that the federal government would shut down existing access to marijuana (i.e., state-licensed operators) under the guise of making marijuana more available. That certainly does not comport with the statements of the political supporters of rescheduling or the spirit of rescheduling. And make no mistake, it will take years of clinical trials and FDA approval for the first marijuana medication (in a specific formulation with a specific indication) to be approved for use by patients.
I do think, however, that there will be political pressure from certain companies that do develop FDA-approved marijuana medications to curtail the state markets. Why would a company spend the substantial time and money to develop a Schedule III medication for FDA approval for a specific indication when someone can just buy marijuana to be used for any purpose from a dispensary down the street?
State Adult-Use Programs
Like state-licensed medical marijuana operators, state-licensed adult use operators have also been operating in legal purgatory, albeit with probably less legal certainty than medical operators.
To be very clear: Rescheduling marijuana under the Controlled Substances Act will do absolutely nothing to the legality of adult-use marijuana. Schedule III regulates medications prescribed by physicians and does not contemplate the recreational use of any Schedule III product.
But what does this actually mean for adult-use programs and individual operators as a practical matter? Well, as with several of the points above, we’ll see.
It is certainly possible that the federal government will continue its hands-off approach to adult-use marijuana programs. It is also possible that the federal government – and potentially some state governments – will use the ability to access federally legal marijuana by prescription to scrap existing adult-use programs. But if I was a betting man (and I am), I would bet that at least in the short term there would not be much impact, if any, to adult-use regimes.
Interstate Commerce
When it comes to transporting marijuana across state lines with Schedule III approval and appropriate federal and state licenses, interstate commerce should not be a problem.
When it comes to transporting unlicensed marijuana, theoretically it would remain illegal, and it will come down to the federal government’s appetite to enforce interstate transportation of marijuana.
Banking
Here is another instance where it depends on whether the federal government insists that marijuana products comply with the rules of Schedule III.
If the federal government insists on strict compliance with Schedule III, then any non-conforming products would likely fall within the ambit of anti-money laundering statutes. If, on the other hand, the government treats all marijuana as Schedule III, then banks may be able (albeit perhaps uninterested initially) to bank all marijuana businesses.
Private Investment
I expect there will be an immediate influx of private capital to marijuana businesses if marijuana is rescheduled. Momentum will (at least appear to) be on the side of marijuana businesses. A number of funds that have formal or informal policies governing investment in marijuana businesses will immediately investigate the opportunities. And investors will be even more motivated because it appears that 280E would no longer provide a substantial tax headwind for growth of those businesses.
This could all be thwarted if the federal government immediately makes clear that it will vigorously enforce the requirements of Schedule III, meaning that it will be extremely cash-intensive to develop profit-generating products. As noted above, I think that is unlikely, but it would certainly be an impediment to obtaining private capital.
Big Pharma/Pharmacies
The multibillion-dollar question: What role, if any, will big pharmaceutical companies and pharmacies play in the event marijuana is rescheduled?
I suspect big pharma won’t rush into the marijuana space, in part because of all the uncertainties discussed above and in part for reputational reasons. But I will be on the lookout for quiet investments by Big Pharma in companies researching and developing marijuana formulations that meet the requirements of Schedule III.
If things break a certain way, you may be able to get the best weed ever made courtesy of a brand-name pharmaceutical company. But I do believe we are years away from that happening.
Intellectual Property
This area of the law could be particularly interesting because the USPTO will have a layer of input on top of the Department of Justice and state regulators. If a product complies with Schedule III, it will have the ability to be protected by United States intellectual property laws, including trademarks and patents. If it does not comply with Schedule III, the USPTO could independently conclude that such products may not avail themselves of those protections.
Conclusions
[Deep exhale] For years, cannabis activists and legal scholars have debated the possibility and the wisdom of rescheduling marijuana. Now that we may – and I stress may – be on the horizon, it seems there are just as many questions as answers about what the implications of that change would be. So much of those implications depend on things that we do not yet know. For example, will a Trump HHS/DOJ/DEA take a different position than the Biden HHS/DOJ/DEA? Will states change their rules in response to rescheduling? And how will financial institutions and private investors react to those developments.
China’s National Intellectual Property Administration Issues Guidelines for Patent Applications for AI-Related Inventions
On December 31, 2024, China’s National Intellectual Property Administration (CNIPA) issued the Guidelines for Patent Applications for AI-Related Inventions (Trial Implementation) (人工智能相关发明专利申请指引(试行)). The Guidelines follow up on CNIPA’s draft for comments issued December 6, 2024 in which only a week for comments were provided. The short comment period implied CNIPA did not actually want comments and is in contravention of the not-yet-effective Regulations on the Procedures for Formulating Regulations of the CNIPA (国家知识产权局规章制定程序规定(局令第83号)) requiring a 30-day minimum comment period. Highlights follow including several examples regarding subject matter eligibility.
There are four types of AI-related patent applications:
Patent applications related to AI algorithms or models themselves
Artificial intelligence algorithms or models, that is, advanced statistical and mathematical model forms, include machine learning, deep learning, neural networks, fuzzy logic, genetic algorithms, etc. These algorithms or models constitute the core content of artificial intelligence. They can simulate intelligent decision-making and learning capabilities, enabling computing devices to handle complex problems and perform tasks that usually require human intelligence.
Accordingly, this type of patent application usually involves the artificial intelligence algorithm or model itself and its improvement or optimization, for example, model structure, model compression, model training, etc.
Patent applications related to functions or field applications based on artificial intelligence algorithms or models
Patent applications related to the functional or field application of artificial intelligence algorithms or models refer to the integration of artificial intelligence algorithms or models into inventions as an intrinsic part of the proposed solution for products, methods or their improvements. For example: a new type of electron microscope based on artificial intelligence image sharpening technology. This type of patent application usually involves the use of artificial intelligence algorithms or models to achieve specific functions or apply them to specific fields.
Functions based on artificial intelligence algorithms or models refer to functions implemented using one or more artificial intelligence algorithms or models. They usually include: natural language processing, which enables computers to understand and generate human language; computer vision, which enables computers to “see” and understand images or videos; speech processing, including speech recognition, speech synthesis, etc.; knowledge representation and reasoning, which represents information and enables computers to solve problems, including knowledge graphs, graph computing, etc.; data mining, which calculates and analyzes massive amounts of data to identify information or laws such as potential patterns, trends or relationships. Artificial intelligence algorithms or models can be applied to specific fields based on their functions.
Field applications based on artificial intelligence algorithms or models refer to the application of artificial intelligence to various scenarios, such as transportation, telecommunications, life and medical sciences, security, commerce, education, entertainment, finance, etc., to promote technological innovation and improve the level of intelligence in all walks of life.
Patent applications involving inventions made with the assistance of artificial intelligence
Inventions assisted by artificial intelligence are inventions that are made using artificial intelligence technology as an auxiliary tool in the invention process. In this case, artificial intelligence plays a role similar to that of an information processor or a drawing tool. For example, artificial intelligence is used to identify specific protein binding sites, and finally obtains a new drug compound.
Patent applications involving AI-generated inventions
AI-generated inventions refer to inventions and creations generated autonomously by AI without substantial human contribution, for example, a food container autonomously designed by AI technology.
AI cannot be an inventor:
1. The inventor must be a natural person
Section 4.1.2 of Chapter 1 of Part 1 of the Guidelines clearly states that “the inventor must be an individual, and the application form shall not contain an entity or collective, nor the name of artificial intelligence.”
The inventor named in the patent document must be a natural person. Artificial intelligence systems and other non-natural persons cannot be inventors. When there are multiple inventors, each inventor must be a natural person. The property rights to obtain income and the personal rights to sign enjoyed by the inventor are civil rights. Only civil subjects that meet the provisions of the civil law can be the rights holders of the inventor’s related civil rights. Artificial intelligence systems cannot currently enjoy civil rights as civil subjects, and therefore cannot be inventors.
2. The inventor should make a creative contribution to the essential features of the invention
For patent applications involving artificial intelligence algorithms or models, functions or field applications based on artificial intelligence algorithms or models, the inventor refers to the person who has made creative contributions to the essential features of the invention.
For inventions assisted by AI, a natural person who has made a creative contribution to the substantive features of the invention can be named as the inventor of the patent application. For inventions generated by AI, it is not possible to grant AI inventor status under the current legal context in my country.
Examples of subject matter eligibility:
The solution of the claim should reflect the use of technical means that follow the laws of nature to solve technical problems and achieve technical effects
The “technical solution” stipulated in Article 2, Paragraph 2 of the Patent Law refers to a collection of technical means that utilize natural laws to solve the technical problems to be solved. When a claim records that a technical means that utilizes natural laws is used to solve the technical problems to be solved, and a technical effect that conforms to natural laws is obtained thereby, the solution defined in the claim belongs to the technical solution. On the contrary, a solution that does not use technical means that utilize natural laws to solve technical problems to obtain technical effects that conform to natural laws does not belong to the technical solution.
As an example and not a limitation, the following content describes several common situations where related solutions belong to technical solutions.
Scenario 1: AI algorithms or models process data with specific technical meaning in the technical field
If the drafting of a claim can reflect that the object processed by the artificial intelligence algorithm or model is data with a definite technical meaning in the technical field, so that based on the understanding of those skilled in the art, they can know that the execution of the algorithm or model directly reflects the process of solving a certain technical problem by using natural laws, and obtains a technical effect, then the solution defined in the claim belongs to the technical solution. For example, a method for identifying and classifying images using a neural network model. Image data belongs to data with a definite technical meaning in the technical field. If those skilled in the art can know that the various steps of processing image features in the solution are closely related to the technical problem of identifying and classifying objects to be solved, and obtain corresponding technical effects, then the solution belongs to the technical solution.
Scenario 2: There is a specific technical connection between the AI algorithm or model and the internal structure of the computer system
If the drafting of a claim can reflect the specific technical connection between the artificial intelligence algorithm or model and the internal structure of the computer system, thereby solving the technical problem of how to improve the hardware computing efficiency or execution effect, including reducing the amount of data storage, reducing the amount of data transmission, increasing the hardware processing speed, etc., and can obtain the technical effect of improving the internal performance of the computer system in accordance with the laws of nature, then the solution defined in the claim belongs to the technical solution.
This specific technical association reflects the mutual adaptation and coordination between algorithmic features and features related to the internal structure of a computer system at the technical implementation level, such as adjusting the architecture or related parameters of a computer system to support the operation of a specific algorithm or model, making adaptive improvements to the algorithm or model based on a specific internal structure or parameters of a computer system, or a combination of the two.
For example, a neural network model compression method for a memristor accelerator includes: step 1, adjusting the pruning granularity according to the actual array size of the memristor during network pruning through an array-aware regularized incremental pruning algorithm to obtain a regularized sparse model adapted to the memristor array; step 2, reducing the ADC accuracy requirements and the number of low-resistance devices in the memristor array through a power-of-two quantization algorithm to reduce overall system power consumption.
In this example, in order to solve the problem of excessive hardware resource consumption and high power consumption of ADC units and computing arrays when the original model is mapped to the memristor accelerator, the solution uses pruning algorithms and quantization algorithms to adjust the pruning granularity according to the actual array size of the memristor, reducing the number of low-resistance devices in the memristor array. The above means are algorithm improvements made to improve the performance of the memristor accelerator. They are constrained by hardware condition parameters, reflecting the specific technical relationship between the algorithm characteristics and the internal structure of the computer system. They use technical means that conform to the laws of nature to solve the technical problems of excessive hardware consumption and high power consumption of the memristor accelerator, and obtain the technical effect of improving the internal performance of the computer system that conforms to the laws of nature. Therefore, this solution belongs to the technical solution.
Specific technical associations do not mean that changes must be made to the hardware structure of the computer system. For solutions to improve artificial intelligence algorithms, even if the hardware structure of the computer system itself has not changed, the solution can achieve the technical effect of improving the internal performance of the computer system as a whole by optimizing the system resource configuration. In such cases, it can be considered that there is a specific technical association between the characteristics of the artificial intelligence algorithm and the internal structure of the computer system, which can improve the execution effect of the hardware.
For example, a training method for a deep neural network model includes: when the size of training data changes, for the changed training data, respectively calculating the training time of the changed training data in preset candidate training schemes; selecting a training scheme with the shortest training time from the preset candidate training schemes as the optimal training scheme for the changed training data, the candidate training schemes including a single-processor training scheme and a multi-processor training scheme based on data parallelism; and performing model training on the changed training data in the optimal training scheme.
In order to solve the problem of slow training speed of deep neural network models, this solution selects a single-processor training solution or a multi-processor training solution with different processing efficiency for training data of different sizes. This model training method has a specific technical connection with the internal structure of the computer system, which improves the execution effect of the hardware during the training process, thereby obtaining the technical effect of improving the internal performance of the computer system in accordance with the laws of nature, thus constituting a technical solution.
However, if a claim merely utilizes a computer system as a carrier for implementing the operation of an artificial intelligence algorithm or model, and does not reflect the specific technical relationship between the algorithm features and the internal structure of the computer system, it does not fall within the scope of Scenario 2.
For example, a computer system for training a neural network includes a memory and a processor, wherein the memory stores instructions and the processor reads the instructions to train the neural network by optimizing a loss function.
In this solution, the memory and processor in the computer system are merely conventional carriers for algorithm storage and execution. There is no specific technical association between the algorithm features involved in training the neural network using the optimized loss function and the memory and processor contained in the computer system. This solution solves the problem of optimizing neural network training, which is not a technical problem. The effect obtained is only to improve the efficiency of model training, which is not a technical effect of improving the internal performance of the computer system. Therefore, it does not constitute a technical solution.
Scenario 3: Using artificial intelligence algorithms to mine the inherent correlations in big data in specific application fields that conform to the laws of nature
When artificial intelligence algorithms or models are applied in various fields, data analysis, evaluation, prediction or recommendation can be performed. For such applications, if the claims reflect that the big data in a specific application field is processed, and artificial intelligence algorithms such as neural networks are used to mine the inherent correlation between data that conforms to the laws of nature, and the technical problem of how to improve the reliability or accuracy of big data analysis in a specific application field is solved, and the corresponding technical effects are obtained, then the solution of the claim constitutes a technical solution.
The means of using artificial intelligence algorithms or models to conduct data mining and train artificial intelligence models that can obtain output results based on input data cannot directly constitute technical means. Only when the inherent correlation between the data mined based on artificial intelligence algorithms or models conforms to the laws of nature, the relevant means as a whole can constitute technical means that utilize the laws of nature. Therefore, it is necessary to clarify in the scheme recorded in the claims which indicators, parameters, etc. are used to reflect the characteristics of the analyzed object in order to obtain the analysis results, and whether the inherent correlation between these indicators, parameters, etc. (model input) mined by artificial intelligence algorithms or models and the result data (model output) conforms to the laws of nature.
For example, a food safety risk prediction method obtains and analyzes historical food safety risk events to obtain header entity data and tail entity data representing food raw materials, edible items, and food sampling poisonous substances, and their corresponding timestamp data; based on each header entity data and its corresponding tail entity data, and its corresponding entity relationship carrying timestamp data representing the content level, risk or intervention of each type of hazard, corresponding four-tuple data is constructed to obtain a corresponding knowledge graph; the knowledge graph is used to train a preset neural network to obtain a food safety knowledge graph model; and the food safety risk at the prediction time is predicted based on the food safety knowledge graph model.
The background technology of the program description records that the existing technology uses static knowledge graphs to predict food safety risks, which cannot reflect the fact that food data in actual situations changes over time and ignores the influence between data. Those skilled in the art know that food raw materials, edible items or food sampling poisons will gradually change over time. For example, the longer the food is stored, the more microorganisms there are in the food, and the content of food sampling poisons will increase accordingly. When the food contains a variety of raw materials that can react chemically, the chemical reaction may also cause food safety risks at some point in the future over time. This program predicts food safety risks based on the inherent characteristics of food changing over time, so that timestamps are added when constructing the knowledge graph, and a preset neural network is trained based on entity data related to food safety risks at each moment to predict food safety risks at the time to be predicted. It uses technical means that follow the laws of nature to solve the technical problem of inaccurate prediction of food safety risks at future time points, and can obtain corresponding technical effects, thus constituting a technical solution.
If the intrinsic correlation between the indicator parameters mined by artificial intelligence algorithms or models and the prediction results is only subject to economic laws or social laws, it is a case of not following the laws of nature. For example, a method of estimating the regional economic prosperity index using a neural network uses a neural network to mine the intrinsic correlation between economic data and electricity consumption data and the economic prosperity index, and predicts the regional economic prosperity index based on the intrinsic correlation. Since the intrinsic correlation between economic data and electricity consumption data and the economic prosperity index is subject to economic laws and not natural laws, this solution does not use technical means and does not constitute a technical solution.
The full text is available here (Chinese only).
Animator Sues Disney for $10 Billion Over Alleged Moana Copyright Theft
Animator Sues Disney for $10 Billion Over Alleged Moana 2 Copyright Theft. An animator has filed a lawsuit against Disney, accusing the company of appropriating the concept for the Moana franchise from his long-standing screenplay without his permission. Buck Woodall submitted the lawsuit in a federal court in California on Friday, claiming that Disney incorporated […]
Important Update: USPTO Fee Changes Effective January 2025
Highlights
Patent fees will increase across most categories, including filing, maintenance, and excess claims, on Jan. 19, 2025
New surcharges will apply to continuations filed six or nine years after the earliest benefit date (EBD); PTAB petitions will experience increases across the board
Trademark fees also will see adjustment including a unified application fee that will replace the TEAS Plus/Standard system, as well as others. Additional surcharges will apply for missing information, custom descriptions, and lengthy filings.
The U.S. Patent and Trademark Office (USPTO) is set to increase fees beginning Jan. 19, 2025, for patent-related fees, and Jan. 18, 2025, for trademark-related fees as part of routine updates at the USPTO to maintain alignment with operational costs and resource requirements. Tables that summarize targeted fee increases for the most common types of filings with the USPTO are included below. A global 7.5 percent increase is being applied to all filings that do not have a targeted fee increase.
Patent-Related Fees
Current Fee
Fee Effective 1/19/2025
Percentage Increase
Filing Fees
Utility Patent Application Fees
$1,820
$2,000
10%
Utility patent application issue fees
$1,200
$1,290
7.5%
Design patent application fees
$1,020
$1,300
27%
Design patent issue fees
$740
$1,300
76%
Claim Fees
Each independent claim in excess of 3
$480
$600
25%
Each claim in excess of 20
$100
$200
100%
Request for Continued Examination (REC) Fees
First RCE
$1,360
$1,500
10%
Second and subsequent RCE
$2,000
$2,860
43%
New Continuing Application Surcharge
Applications filed six (6) years or more after the earliest benefit date
$2,700
Applications filed nine (9) years or more after the earliest benefit date
$4,000
Information Disclosure Statement (IDS) and IDS Size Fees**
IDS filing fee
$260
$280
8%
IDS with 51 to 100 items of information
$200
IDS with 101 to 200 items of information
$500 less any amount previously paid
IDS with more than 200 items of information
$800 less any amount previously paid
Terminal Disclaimer Fees
Filing of Terminal Disclaimer
$170
$183
8%
Maintenance Fees
Fee due at 3.5 years
$2,000
$2,150
8%
Fee due at 7.5 years
$3,760
$4,040
7%
Fee due at 11.5 years
$7,700
$8,280
8%
Patent Term Extension (PTE) Applications Fees**
Application for PTE fee
$1,180
$2,500
112%
Initial Application for interim extension fee
$440
$1,320
200%
Request of a supplemental redetermination after a notice of final PTE determination
$1,440
Petition Fees
Petition Associated with Unintentional Delay of More Than 2 Years
$2,100
$3,000
43%
Patent Trials and Appeals Board (PTAB) Fees
Request of Review of PTAB Decision by Director Fees
$452
Petition for PTAB
25% increase for all PTAB trials
*Key adjustments are shown below for undiscounted (large) entity fees; small entities generally receive a 60 percent discount and micro entities generally receive a 75 percent discount on these undiscounted fees.**Fee applies to all entities with no discounts being given to small or micro entities.
Trademark-Related Fees
Current Fee
Fee Effective 1/19/2025
Percentage Increase
Application and Registration Fees
Unified Base Application Fees, per class*
$350
Intent-to-Use Applications (Statements of Use and Amendments to Allege Use) Fees, per class
$100
$150
50%
Madrid Protocol Applications (Application fee filed with WIPO (Section 66(a))), per class
$500
$600
20%
Post-Registration Maintenance Fees
Section 8 Declarations (filed between the 5th and 6th year after registration)
$225 per class
$325 per class
45%
Section 9 Renewals (filed every 10 years)
$300 per class
$325 per class
8%
Section 15 Declarations (Declaration of Incontestability)
$200 per class
$250 per class
25%
Section 71 Declarations
$225 per class
$325 per class
45%
Renewal fee filed at WIPO
$300 per class
$325 per class
8%
Petitions
Petition to the Director Fee
$250
$400
60%
Petition to Revive an Application Fee
$150
$250
67%
Letter of Protest Fee
$50
$150
300%
*The distinction between TEAS Plus and TEAS Standard applications will be eliminated and a single base application fee of $350 per class will apply to applications under Trademark Act Sections 1 and 44.
New surcharges will also be in effect for each of:
Insufficient Information: A $100 fee per class will be charged for applications lacking required details, such as the applicant’s name, domicile address, or entity type.
Custom Identifications: Using custom descriptions for goods or services instead of selecting from the USPTO’s ID Manual will incur a $200 fee per class.
Excessive Text Length: An additional $200 fee per class will apply for each set of 1,000 characters exceeding the initial 1,000 characters in custom descriptions.
For patent applications, we suggest considering a comprehensive review of your portfolio, at least with respect to each of the following:
Continuation applications that would have benefit dates of more than six or nine years
Information Disclosure Statements with over 50 cumulative prior art listings
Second or subsequent RCEs
Design patent applications
With respect to trademarks, those looking to file new applications with long or unusual descriptions of goods and services may consider filing these applications before the fees for using free-form text boxes and additional characters go into place.
Takeaways
If you are planning to file a new patent or trademark application, submit a renewal, or pay maintenance fees in the near future, it may be advantageous to do so before Jan. 19, 2025, or Jan. 18, 2025, respectively, to take advantage of the current fee structure before the increases take effect.
USTR Removes WeChat From List of Notorious Markets for Counterfeiting and Piracy, Adds Douyin
On January 8, 2025, the Office of the United States Trade Representative (USTR) released the 2024 Review of Notorious Markets for Counterfeiting and Piracy. Of note, the USTR removed Weixin (WeChat), a social media ‘super-app’ from the Review. Nonetheless, “China continues to be the number one source of counterfeit products in the world. Counterfeit and pirated goods from China, together with transshipped goods from China to Hong Kong, China, accounted for 84% of the value (measured by manufacturer’s suggested retail price) and 90% of the total quantity of counterfeit and pirated goods seized by U.S. Customs and Border Protection (CBP) in 2023.” Five China-based online markets remain on the list with Douyin (TikTok) replacing WeChat.
China-related excerpts from the Review regarding online markets follow. The full text is available here.
BAIDU WANGPAN
This cloud storage service is operated by Baidu, the largest search-engine provider in China. Users of this service are able to share links to files stored on their accounts with other users, and infringing content is reportedly disseminated widely through social media and other piracy linking sites. Baidu has been the subject of several copyright infringement cases in China brought by other content distributors, but right holders report little change in the site’s enforcement measures. Although Baidu has several tools to take down unauthorized content, according to right holders, procedures for filing complaints are applied unevenly and lack transparency. Additionally, takedown times are reportedly lengthy, and right holders often have to repeatedly follow-up with Baidu to ensure that pirated content does not reappear on the platform. Right holders report little progress in Baidu’s actions to suspend or terminate repeat infringers.
DHGATE
Headquartered in China. DHgate is one of the largest business-to-business cross-border e-commerce platforms in China, although it primarily serves purchasers outside of the country. This year, stakeholders have welcomed the introduction of a pilot IP enforcement program that includes a new portal for complaints, new procedures for screening of products and of prospective sellers, and enhanced penalties for repeat and high-volume infringers. Stakeholders have also expressed appreciation for DHgate’s efforts to increase engagement and collaboration with right holders. In its submission for this year’s List, DHgate described its significant investment in AI-based screening tools to detect and remove counterfeit goods, its vendor verification process that screens and blacklists repeat infringers, its pilot program and other efforts to resolve right holder complaints, and its efforts to cooperate with law enforcement authorities, including publishing a law enforcement guide and assisting with several investigations involving health and safety matters. DHgate’s reported successes also include proactively removing twice as many listings for infringing goods in 2023 as compared to 2022. However, some stakeholders continue to report that the platform contains a high volume of counterfeits and the repeat infringer policy is ineffective. They also note the platform appears to connect Chinese sellers and manufacturers specializing in counterfeits with wholesale buyers outside of China. Although some brand owners have successfully reduced counterfeits through collaboration with DHgate, others have reported mixed results. Sellers of counterfeit goods reportedly continue to evade detection by using code words and digitally blurred logos. DHgate has implemented policies to regulate influencers promoting products listed on its platform through posting on third-party websites, and right holders indicate that they need more time to determine the impact of these policies. Given that many stakeholders welcomed DHgate’s recent initiatives but continue to raise concerns, DHgate should further work to improve its proactive detection procedures, seller vetting process, and screening for repeat infringers.
DOUYIN SHANGCHENG (DOUYIN MALL)
Douyin Shangcheng (Douyin Mall) is a shopping platform under Douyin, the Chinese online platform offering short-form video, live stream, and e-commerce functionalities owned by ByteDance, also the parent company of Tiktok. Douyin has upgraded its e-commerce functions to include Douyin Mall as both a standalone application and an integrated feature accessible from the Douyin application. Douyin Mall allows users to scroll through suggested products or search for products and click through the Douyin Mall interface to view short videos or livestream videos about the products. From such videos or livestreams, users can use the shopping cart function to conduct purchases. Douyin contends that it has notice and takedown mechanisms, with multiple reporting portals for right holders to submit complaints, as well as a one-stop “IPPRO” platform for right holders to submit and manage IP infringement reports. Douyin also described its efforts to screen proactively for specific terms, to train proactive identification 25 models to target counterfeit products or sellers, and to cooperate with right holders and enforcement authorities, including on the pursuit of criminal cases offline. However, stakeholders have described a “rocketing” increase in the amount of counterfeit goods on the platform, an ineffective notice and takedown system, and reported lengthy delays in response to takedown requests, with little to no feedback on right holders’ complaints. Douyin should address concerns about the prevalence of counterfeits on its platform, including questions about the effectiveness of its proactive screening mechanisms and its system for managing IP infringement complaints.
PINDUODUO
Headquartered in China. Pinduoduo, a social commerce app, is one of the largest e-commerce platforms in China. Right holders report that Pinduoduo continues to offer a high volume of counterfeit goods on their platform. As in previous years, stakeholders continue to highlight concerns about Pinduoduo’s unwillingness to engage with brand owners to resolve issues or develop improved processes. Although the platform claims to have implemented anti-counterfeiting initiatives to assist with accurate product descriptions and combat misinformation from merchants, right holders convey that excessive delays in takedowns remain a problem and can take up to two weeks or more. Other longstanding issues remain unresolved, including onerous evidentiary requirements and lack of proactive measures to screen sellers and listings, as well as lack of transparency with enforcement processes, such as penalty mechanisms and decisions rejecting takedown requests. This year, right holders again noted Pinduoduo’s ineffective seller vetting and raised concerns about the platform’s reported practice of labeling sponsored listings as “authorized sellers,” giving the appearance of legitimacy to counterfeit products and misleading consumers into believing that they are purchasing from the legitimate manufacturer or a licensed distributor. Right holders also continue to report difficulties in receiving information and support from Pinduoduo in pursuing follow-on investigations to uncover the manufacturing and distribution channels of the counterfeit goods.
TAOBAO
Taobao, one of the largest e-commerce platforms in the world, is Alibaba’s platform for Chinese consumers. Alibaba has proactively engaged with right holders and the U.S. Government to improve its anti-counterfeiting processes and tools across its platforms, including Taobao. Although Alibaba emphasizes its ongoing engagement with enforcement authorities to combat the sale of counterfeits, right holders continue to express concern that a recent structural reorganization by Alibaba has left the platform with fewer anti-counterfeiting resources to conduct investigations. Right holders recognized Alibaba’s investment in anticounterfeiting measures and industry engagement efforts in recent years, but they also continued to report high volumes of counterfeit products and pirated goods, such as PDF copies of books. Right holders highlighted the need for improvements to address the site’s infringement reporting process and stringent criteria required for takedown notices, such as the requirement to identify specific piracy indicators within listings that infringers have kept deliberately vague. Furthermore, stakeholders convey that despite their ability to report obvious counterfeits that they identify on the platform for fast processing, high-quality counterfeits that are sold at prices similar to their authentic counterparts are not easily identified. Alibaba contends that its automated reporting platform is user friendly and only requires right holders to upload registration certificates to prove their rights or document their unregistered copyrights by filling out a specific form. USTR will continue to monitor the transparency and effectiveness of Taobao’s anti-counterfeiting efforts, including the evidentiary requirements for takedown requests.
Interoperability Doesn’t Imply Derivative Work
The US Court of Appeals for the Ninth Circuit explained that to be a derivative work, a program interoperative with another must actually incorporate aspects of the underlying work. The Court further ruled that licensees of a copy of a computer program are not “owners” of the copy and therefore are not entitled to make copies for the purposes permitted by 17 U.S.C. § 117(a). Oracle International Corp. v. Rimini Street, Inc., Case No. 23-16038 (9th Cir. Dec. 16, 2024) (Bybee, Bumatay, Bennett, JJ.)
Rimini provides third-party support for Oracle software and is a direct competitor with Oracle in the software support services market. For more than a decade, Oracle and Rimini have been involved in what the Ninth Circuit describes as a “pitched copyright war.” This latest battle relates to changes Rimini made to its business model after a district court determined that Rimini had infringed Oracle’s copyrights. Rimini developed a new process for servicing customers using Oracle software and sought a declaratory judgment that its revised process did not infringe Oracle’s copyrights. Oracle counterclaimed for copyright infringement and Lanham Act violations.
The district court found that Rimini created infringing derivative works because its new process interacted and was usable with Oracle software. The district court found that Rimini violated Oracle’s PeopleSoft and Database licensing agreements and made several statements violating the Lanham Act. The court struck Rimini’s affirmative defense to copyright infringement under 17 U.S.C. § 117(a), granted Oracle summary judgment that Rimini infringed Oracle’s copyrights, and issued a permanent injunction against Rimini. Rimini appealed.
Derivative Works
The Ninth Circuit disagreed with the district court’s analysis of Rimini’s new process, noting that the district court focused on an “interoperability test,” which does not exist under the text of the Copyright Act or in precedent. In effect, the district court’s test would find that if a product interoperates with a preexisting copyrighted work, then it must be derivative. The Ninth Circuit explained that while the Copyright Act uses broad language to describe derivative works, the derivative work must actually incorporate the underlying work. For Rimini’s new process to be a derivative work, it must incorporate Oracle’s copyrighted work, either literally or nonliterally. The Court found that just because Rimini’s new process interacted with Oracle’s software, that was insufficient to find it was a derivative work.
Affirmative Defense: Section 117(a)
The Copyright Act permits an owner of a copy of a computer program to make a copy or adaptation of that program for certain purposes under 17 U.S.C. § 117(a). The Ninth Circuit vacated the district court’s ruling, striking Rimini’s affirmative defense under Section 117(a), because the district court erred in determining whether Oracle’s customers “owned” a copy of Oracle’s software, PeopleSoft. The Court explained that to determine whether a party is an “owner of a copy” of a computer program, the courts look to whether the party has “sufficient incidents of ownership” over the “copy” of the software, in view of the totality of the parties’ agreement. Factors that the Court considered include:
Whether the copyright owner specifies that a user is granted a license
Whether the parties’ arrangement significantly restricts the user’s ability to transfer the software
Whether the agreement imposes notable use restrictions
The Ninth Circuit noted that other incidents of ownership may be considered, including whether the user paid significant consideration to develop the programs for the sole benefit of the user and whether the user could use the program forever, regardless of whether the parties terminated their relationship.
Copyright Infringement
The Ninth Circuit vacated the district court’s ruling that Rimini’s creation of “gap customer” environments on its systems containing Oracle’s Database program infringed Oracle’s copyright because the plain language of the licensing agreement did not prohibit third-party support providers from possessing a copy of Oracle’s software to further a client’s internal business operations. The Ninth Circuit also vacated the district court’s ruling that Rimini’s use of automated tools to deliver PeopleSoft program updates to clients constituted copyright infringement, to the extent that the conclusion rested on the district court’s erroneous view of “derivative work.”
False Advertising
The Lanham Act prohibits a person from making a false or misleading description or representation of fact about goods or services in commercial advertising or promotion. But false advertising doesn’t extend to statements of opinion and puffery. The Ninth Circuit found that Rimini’s security-related statements did not constitute false advertising under the Lanham Act, except for a statement about “holistic security.” Some of the statements were about the relative security of services offered by Oracle and Rimini, which the Court held were puffery. Some of the statements were about the need for software patching, which the Court could not say were so specific and measurable as to become actionable under the Lanham Act. The Ninth Circuit reversed the district court’s ruling as to these statements.
However, the Ninth Circuit affirmed the district court’s finding that Rimini’s offer of holistic security, which the Court accepted to mean multilayered security protection, was false because Rimini does not offer multilevel security.
Motivation MIA? Federal Circuit Sends IPR Back to the Drawing Board
The US Court of Appeals for the Federal Circuit vacated and remanded a Patent Trial & Appeal Board decision, finding that the Board erred by failing to explain its holding and reasoning regarding a motivation to combine prior art references. Palo Alto Networks, Inc. v. Centripetal Networks, LLC, Case No. 23-1636 (Fed. Cir. Dec. 16, 2024) (Stoll, Dyk, Stark, JJ.)
Centripetal Networks owns a patent directed to correlating packets in communications networks, introducing an innovative system designed to enhance network security. The patent focuses on packets (small data segments that collectively form larger communications) and their correlation across network boundaries.
Palo Alto Networks challenged the patent’s validity in an inter partes review (IPR) and argued its obviousness based on three prior art references. The first reference described a system using hashing techniques to identify packets traversing network address translation boundaries and teaching how to correlate packets across such boundaries to identify hosts transmitting or receiving them. The second reference detailed methods for detecting unauthorized traffic directed to unused IP addresses, notifying administrators of potential threats, and enabling automated responses, such as blocking or filtering malicious traffic. The reference taught notifying administrators how to manage packets involved in malicious activity after they crossed a network boundary.
Palo Alto argued that combining the packet correlation techniques of the first reference with the notification mechanisms of the second addressed a key claim limitation of the challenged patent. Palo Alto contended that transmitting an indication of a malicious host, as taught by the second reference, naturally followed from the correlation system described in the first. However, the Board found that Palo Alto failed to provide sufficient evidence or argument to show that a person of ordinary skill in the art (POSITA) would recognize the claimed responsiveness between the first reference’s packet correlation and the second reference’s notification mechanisms. Palo Alto appealed.
The Federal Circuit vacated and remanded the Board’s decision, finding that the Board erred by failing to clearly articulate its rationale regarding the motivation to combine the prior art references and whether their combination satisfied the critical limitation of the challenged patent claim. The Court emphasized that the proper inquiry in an obviousness analysis is not whether each reference individually discloses all claim elements but whether their combination would have rendered the invention obvious to a POSITA.
Palo Alto maintained that the Board did not dispute the existence of a motivation to combine and improperly searched for a “bridge” solely within the two references. Centripetal countered that Palo Alto had not established a motivation or provided evidence of a necessary connection – or “bridge” – between the prior art and the claimed invention.
The Federal Circuit determined that the Board’s decision lacked a definitive finding on whether a POSITA would have been motivated to combine the first reference’s correlation techniques with the second reference’s notification step. The Court noted that Palo Alto presented logical and evidentiary support as to why such a combination would make sense, arguing that without a notification step, the correlation techniques alone would be ineffective for mitigating malicious activity – a gap that the second reference could address.
The Federal Circuit also rejected Centripetal’s claim that the Board had analyzed the proposed combination. It clarified that Centripetal’s assertion was based solely on the Board’s recital of Centripetal’s arguments, not an independent evaluation. The Court explained that summarizing a party’s position does not constitute a substantive analysis or finding.
Practice Note: The Federal Circuit’s ruling highlights the necessity of thorough and holistic analysis in obviousness inquiries and reinforces that references must be considered together to determine their combined effect on the claimed invention.
Transparency Is the Best Medicine: Device Parts Don’t Justify Orange Book Listing
The US Court of Appeals for the Federal Circuit affirmed a district court’s delisting of patents from the Orange Book because the patent claims did not “claim the drug that was approved” or the active ingredient of the drug that was approved. Teva Branded Pharmaceutical Products R&D, Inc., et al. v. Amneal Pharmaceuticals of New York, LLC, et al., Case No. 24-1936 (Fed. Cir. Dec. 20, 2024) (Prost, Taranto, Hughes, JJ.)
Teva owns the product that Amneal sought to delist, ProAir® HFA Inhalation Aerosol. The ProAir® HFA combines albuterol sulfate (the active ingredient) with a propellant and an inhaler device to administer the drug. Although the US Food and Drug Administration (FDA) approved Teva’s ProAir® HFA as a drug, the ProAir® HFA contains both drug and device components (the device components being the physical machinery of the inhaler). Teva lists nine nonexpired patents in the Orange Book for its ProAir® HFA.
Amneal filed an abbreviated new drug application (ANDA) seeking approval to market a generic version of the ProAir® HFA that uses the same active ingredient. Amneal asserted that it did not infringe Teva’s nine patents listed for the ProAir® HFA. Teva sued for infringement of six of those patents. Amneal filed counterclaims for antitrust and for a declaratory judgment of noninfringement and invalidity and sought an order requiring Teva to delist the five patents that it asserted against Amneal. Amneal moved for judgment on the pleadings on the ground that Teva improperly listed the asserted patents. The district court granted Amneal’s motion, concluding that Teva’s patents “do not claim the drug for which the applicant submitted the application.” The district court ordered Teva to delist its patents from the Orange Book. Teva appealed.
On appeal, Teva argued that a patent can be listed in the Orange Book if the claimed invention is found in any part of its new drug application (NDA) product. Teva argued that a patent “claims the drug” if the claim reads on the approved drug (i.e., if the NDA product infringes that claim). Teva also argued that according to the Federal Food, Drug, and Cosmetic Act’s broad definition of the word “drug,” any component of an article that can treat disease meets the statutory definition of a “drug.” With this interpretation, Teva’s patents “claim the drug” as the claim dose counter and canister components of the ProAir® HFA.
The Federal Circuit rejected Teva’s interpretation as overbroad because it would allow the “listing of far more patents than Congress has indicated.” The Court rejected Teva’s argument that a patent claiming any component of a drug is listable, explaining that Teva cannot list its patents just because they claim the dose counter and canister parts of the ProAir® HFA.
The Federal Circuit also rejected Teva’s argument that even if Teva’s statutory arguments were rejected, the Federal Circuit must remand the case to the district court to construe the claims. In doing so, the Court rejected Teva’s interpretation of the word “claims” in the listing and counterclaim/delisting provisions, explaining that the listing provision identifies “infringing” and “claiming” as two distinct requirements, and that to be listed, a patent must both claim the drug and be infringed by the NDA product.
The Federal Circuit explained that “infringing the claimed invention has several distinct features that differentiate it from claiming the invention.” In contrast to infringement, which is assessed by facts “out in the world,” claims require “examining the intrinsic meaning of the written patent document.” A product can infringe a patent “without meeting all of the claim elements” and often has additional features.
Teva further argued that a claim qualifies as claiming a drug “even if it only claims device parts.” The Federal Circuit rejected this contention, stating that “it is apparent that a product regulatable and approvable as a drug contains an active ingredient” and noting that “devices have a distinct approval pathway.” The presence of distinct drug and device pathways means that even if a product can simultaneously satisfy the linguistic elements of both, it can only be regulated as a drug or a device, and devices are “characterized more by their purely mechanical nature” (as was the case with Teva’s patents). The Court determined that the “active ingredient” ultimately classifies a drug or biological product, and not the “dosage form.”
Teva further argued that since the FDA designated ProAir® HFA as a combination product, the device components were statutorily a drug. In rejecting this contention, the Federal Circuit again noted the statutory focus on a drug’s active ingredient: an “approved drug” is “an active ingredient,” and to be listed it must meet several requirements, “including that it was identified in an NDA and that the FDA considered whether the active ingredient is safe and effective.” The Court concluded that “including a drug in a combination product does not transform each and every component of that combination product into a drug,” and that “a combination product does not become a drug just because it is regulated as a drug.”
Finally, Teva argued that its patents did claim an active ingredient since each patent has one claim that requires “an active drug.” The Federal Circuit explained that the FDA does not approve drugs based on “reference to some vague active ingredient in the abstract” and that the mere presence of those words was far too broad and would permit “any active ingredient in any form.”
Practice Note: In the slip opinion, at pp 4-12, the Federal Circuit delivers extraordinarily detailed treatise on FDA practice, NDA process, the Hatch-Waxman Act (ANDA practice), Paragraph IV certification, the delisting statute (21 U.S.C. § 355(j)(5)(C)(ii)(I)) and the Orange Book Transparency Act of 2020 (21 U.S.C. § 355(b)(1)(A)(viii)).
Preparing for a Restaurant Financing or Sale Transaction: Considerations for 2025
Go-To Guide:
Restaurant Industry Observations for 2025
The Importance of ‘Transaction Fitness’
Corporate/Company Documentation
Intellectual Property/Trademarks
Leases/Real Estate
Employees and Labor-Related Matters
Tax
Licenses & Permits
Material Contracts
Information Privacy and Security Laws
Franchising Matters
Restaurant leaders and investors enter 2025 with cautious transaction optimism. As expected, 2024 proved a challenging year for many restaurant groups. Inflation, new legislation in parts of the country (i.e., the FAST Act in California and elimination of the tip credit in some markets), cost-conscious consumers, and escalating labor and food costs kept operators scrambling on multiple fronts.
Although challenges may persist in 2025, the prevailing sentiment among some operators and investors is that the business climate will improve and transaction activity may increase.
This may serve as welcome news for restaurant businesses seeking to engage in a sale or financing process.
As we focus on our New Year’s resolutions, for those restaurant businesses contemplating a transaction in 2025, a commitment to getting your company in “transaction shape” is a worthy goal.
Continue reading the full GT Advisory.
Additional Authors: Alison R. Weinberg-Fahey, Ryan C. Bykerk, Jason B. Jendrewski, Alicia Sienne Voltmer, Ellen M. Bandel, Joseph J. Curran, Jeffrey K. Ekeberg, David A. Zetoony, Kyle C. Lennox, David W. Oppenheim, and Breton H. Permesly
Being First is Important
Every January brings a burden to each of us: New Year’s Resolutions! Many of these resolutions include “firsts” that we try to implement throughout the new year (or typically… just through the first few weeks of the new year). This January, you may notice that this is the first monthly IP column by Z. Peter […]
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