USPTO Operations Remain Stable Amid Government Shutdown, Federal Courts Face Funding Strains Impacting IP Litigation

The United States Patent and Trademark Office (USPTO) continues to operate without interruption during the current government shutdown, owing to its unique fee-funded model. Jarom Kesler, an expert on intellectual property, noted that the agency "could potentially run in perpetuity" because it is one of the few, if not the only, profitable agencies within the U.S. government. As long as the USPTO can sustain operations through collected fees, it is expected to maintain full functionality despite broader federal funding lapses.

Kesler further observed that there has been no discernible "chill effect" on patent filings or trademark applications during the shutdown. This resilience is attributed to the fact that most USPTO users are private entities not directly impacted by federal funding interruptions. While some organizations dependent on federal grants might eventually feel effects if the shutdown persists, their numbers are relatively small compared to the private sector stakeholders engaging with the USPTO.

Significant policy changes have emerged under the current administration, affecting both USPTO operations and patent law enforcement. Kesler highlighted that many patent examiners utilize "hoteling," a remote work arrangement that has been in place for over a decade, allowing the agency to reduce physical office space needs. Although the previous administration sought to bring examiners back to physical offices, union contracts have largely preserved remote work rights for unionized employees. Supervisors and non-union staff, however, have been called back to onsite work.

On the policy front, the USPTO director recently altered the implementation of inter partes reviews (IPRs), a quasi-judicial process allowing patents to be challenged within the agency as an alternative to federal court litigation. Historically, IPRs have resulted in the invalidation of 80 to 90 percent of challenged patents over the past five to six years. Under the new directives, Kesler anticipates a substantial decline in IPR activity, potentially reducing the number of patents invalidated through this mechanism.

Meanwhile, federal courts that adjudicate patent and trademark disputes are facing operational challenges due to funding constraints exacerbated by the shutdown. Unlike the USPTO, these courts rely on congressional appropriations and have limited reserve funds. During the last government shutdown, courts managed to operate for 35 days, but current reserves are reportedly insufficient to sustain similar durations. Some quasi-judicial bodies, such as the International Trade Commission (ITC), have already suspended operations and postponed all proceedings indefinitely.

Essential court personnel, including judges and clerks, are expected to maintain limited functions, but the scope of ongoing activities remains uncertain. Kesler emphasized that backlogs in patent litigation have been growing, partly due to turnover within the Department of Justice and the popularity of certain courts among patentees. While some jurisdictions experience heavy caseloads, others see minimal patent-related filings, resulting in uneven impacts across the federal judiciary.

Regarding the evolving landscape of intellectual property amid technological innovation, Kesler addressed the complex issues surrounding artificial intelligence (AI). He noted that copyright and trade dress infringement claims related to AI training data remain unsettled, with ongoing debates about whether such uses qualify as "fair use." He predicted that forthcoming litigation will clarify these legal boundaries.

Despite technological advances, the fundamental patent application process has remained largely unchanged for approximately 70 years, aside from improvements in enabling technologies. Political influences, however, have shaped patent policy trends, with shifts toward either expanding or limiting patent protections depending on the administration. Currently, the USPTO is promoting stronger patent protections, particularly encouraging innovation in AI-related fields.

Kesler encouraged innovators to pursue patent protection actively, especially in emerging technology sectors, noting that patents are constitutionally protected and vital to economic growth. He acknowledged that while patent policy can be influenced by partisan politics, the core patent system remains a critical driver of innovation.

In summary, the USPTO's fee-funded structure has insulated it from immediate shutdown impacts, allowing continued support for inventors and businesses. Conversely, federal courts and related adjudicatory bodies face operational uncertainties that may delay patent and trademark litigation. Policy shifts and technological developments continue to shape the intellectual property landscape, underscoring the importance of adaptability within the system.