PREVAIL Act Overhauls Patent Challenge System: Dedicates All USPTO Fees to New Innovation Fund

The PREVAIL Act, short for the Promoting and Respecting Economically Vital American Innovation Leadership Act, is a major overhaul of the U.S. patent system, focusing heavily on how patent validity is challenged at the Patent Office. If you run a business, develop software, or invent anything, this bill changes the rules of the road for defending your intellectual property—and for those who try to challenge it.

The core of the bill tightens procedures at the Patent Trial and Appeal Board (PTAB), the administrative court that handles patent challenges like inter partes review (IPR). It introduces a formal code of conduct for PTAB judges, modeled after those used for federal judges (SEC. 3). More importantly, it creates a “Single Forum Rule,” meaning if a patent challenge is started at the PTAB, the petitioner (the challenger) can no longer file or continue the same validity arguments in federal court or at the International Trade Commission (ITC) (SEC. 4 and SEC. 5). This is designed to stop companies from fighting the same patent battle in three different places at once, which should reduce costs, but it also forces challengers to pick their venue carefully.

The Money Trail: Ending the USPTO Fee Sweep

One of the most significant changes is structural: it ends the practice of “fee diversion” at the U.S. Patent and Trademark Office (USPTO). Currently, fees paid by inventors and companies often get swept into the general government treasury rather than being fully reinvested in the USPTO. The PREVAIL Act mandates that all fees collected—from patents and trademarks—must be deposited into a new, dedicated “Innovation Promotion Fund” to be used solely for running the USPTO (SEC. 7). For inventors, this means the money they pay to file and maintain patents is guaranteed to be used for improving application processing times, search tools, and other services, rather than being redirected to unrelated government spending. This provides crucial financial stability for the agency.

Tighter Rules for Challenging Patents

If you’re a company that frequently uses the IPR process to challenge patents, the bill makes things tougher. First, it cracks down on who counts as a “real party in interest.” If someone provides funding—directly or through a proxy—to help a petitioner run a patent challenge, that funder is now considered a “real party in interest” and must be disclosed (SEC. 4 and SEC. 5). This prevents anonymous funding of challenges and subjects those funders to the same legal restrictions as the petitioner, including being barred (estopped) from raising the same arguments later.

Furthermore, the bill raises the bar for challenging an existing patent claim in IPR or post-grant review (PGR), requiring the challenger to prove invalidity by “clear and convincing evidence”—a higher standard than currently used (SEC. 4 and SEC. 5). This is a big win for patent owners. However, if the patent owner tries to amend their patent during the review, the challenger only needs to prove the new substitute claim is invalid by a “preponderance of the evidence.” This lower standard for substitute claims means patent owners can’t just sneak in slightly different claims without facing a real fight, providing a necessary check on their ability to amend the patent.

Support for Students and Small Business

The bill also throws a bone to university-affiliated inventors and small businesses. It expands the definition of a “micro entity” for patent fee purposes to include applicants who are employed by, or assign their rights to, an institution of higher education (SEC. 8). For a graduate student or professor inventing something new, this means lower fees, making it cheaper to protect their ideas. Separately, the bill requires the Small Business Administration (SBA) to analyze the impact of patent ownership and litigation on small businesses and mandates that the USPTO make all its public search facility materials available online for free, leveling the playing field for small companies doing preliminary research (SEC. 9).

Overall, the PREVAIL Act is a decisive move to strengthen the rights of patent owners and streamline the legal process by forcing patent challenges into a single, dedicated venue. While the dedicated funding for the USPTO is a huge benefit for the innovation ecosystem, the stricter rules and higher evidentiary burdens for challengers mean that taking on an existing patent will now be a more costly and difficult endeavor.