Trade-Agency Fight Tests Whether PTO Fee Errors Can Doom Patents

A patent fight over memory chips at a US trade agency is testing whether curable fee errors at the US Patent and Trademark Office can be turned into a filing-day weapon in import-ban cases.

Avalanche Technology Inc. says Everspin Technologies Inc.’s radiation-resistant memory chips—used in aerospace, defense, and enterprise storage systems—infringe four magnetic-memory patents.

The case at first glance might appear as a typical patent case at the US International Trade Commission.

But in a motion seeking to end the trade agency’s probe, Everspin told Administrative Law Judge Doris Johnson Hines that Avalanche paid reduced PTO fees for years after licensing patent rights in ways that affected its eligibility for the small-entity discounts the company claimed.

That, Everspin said, left Avalanche short of the full maintenance fees needed to keep three of the patents enforceable when it filed complaints in January at the ITC and in Delaware federal court.

The unusual procedural clash has little to do with chip design and everything to do with the broader consequences.

Under federal patent law and PTO rules, qualifying small entities can pay patent fees at a 60% discount, but that status can disappear if patent rights are licensed to larger companies. Should that happen, PTO regulations allow patent applicants to correct the error by paying the full fees.

The risk, legal observers say, is that mistakes long viewed as fixable in patent practice could become powerful early leverage in import-ban cases.

Christine Lehman, a former ITC investigative attorney and managing partner at Reichman Jorgensen Lehman & Feldberg LLP who has handled dozens of ITC investigations, found the timing issue troubling.

Everspin’s claim that Avalanche’s patents weren’t enforceable “at the time of filing” is “scary for complainants,” she said. Companies that discover threshold filing defects at the ITC sometimes have to withdraw and refile their complaints at a strategic disadvantage, Lehman said, potentially losing timing advantages in fast-moving import cases.

The filing errors at the heart of the dispute may be less exotic than the litigation suggests.

In some growing companies, licensing deals and patent portfolios are managed by different teams, creating opportunities for changes in fee eligibility to go unnoticed until years later.

By then, enforcement budgets can be “roughly hundreds of times more” than the cost of obtaining the patents—creating powerful incentives for entities accused of infringing patents to scrutinize old filing records for technical vulnerabilities, said David B. Gornish, a former patent litigator who advises companies on obtaining and enforcing patents at Eckert Seamans.

Mistake Versus Fraud

Casting a further shadow on patent applicants’ ability to correct fee errors, the PTO itself recently became wary of small-entity discounts, warning that they’re vulnerable to abuse.

In a 2025 notice, the agency said it would pursue statutory penalties for false small-entity and micro-entity certifications. In March 2026 it also reminded applicants to conduct a “reasonable inquiry” before claiming reduced-fee status—guidance Everspin cited in urging the ITC to scrutinize Avalanche’s correction efforts.

Avalanche doesn’t dispute that its small-entity filings were mistaken, but it told the ITC the errors were made “in good faith” and corrected after Everspin raised the issue.

Avalanche “failed to appreciate,” through “mistake and inadvertence,” that licensing its patents to a larger company disqualified it from paying reduced fees, it said. The company said Everspin identified no case where the PTO rejected corrective payments or deemed patents expired because of a mistaken entity-status claim, calling the termination bid “unfounded speculation.”

Everspin argues the issue is hardly trivial, estimating Avalanche’s erroneous small-entity filings produced “potentially hundreds of thousands of dollars in fee savings” across a portfolio of more than 300 patents and applications, including assets Avalanche now seeks to enforce.

The patents remain expired or unenforceable unless and until the PTO accepts Avalanche’s corrective submissions, Everspin said.

The timing issue carries extra weight because the ITC is now the dispute’s main battleground.

The commission said in late February that it had launched the investigation, and a federal judge in Delaware soon afterward granted Everspin’s unopposed request to pause the parallel district court case pending the trade-agency probe and related appeals.

A ‘Tall Ask’

Gornish said he’d be “taken aback” if Everspin’s motion succeeds.

The company is asking the ITC to “snuff out property rights” that federal law generally presumes valid and enforceable, he said, based on precedent that doesn’t clearly say mistaken small-entity fee payments automatically cause patents to expire.

“This is a tall ask,” Gornish said. If the agency doesn’t reject the theory “with strong language,” he warned, patent owners and prosecutors “will have yet another catastrophic ‘gotcha’ trip wire to stress over.”

US patent law has long distinguished between intentional fee misrepresentations and good-faith administrative mistakes, with the latter often curable through deficiency payments rather than outright forfeiture, said Dennis Crouch, a law professor at the University of Missouri who runs the Patently-O blog.

The harder question here, he said, is whether the ITC treats that kind of fix as sufficient if the defect existed on the day the complaint was filed.

Lehman said her expectation is that the trade agency may wait to see whether the PTO accepts Avalanche’s deficiency payments before taking the extraordinary step of removing the challenged patents from the investigation.

Avalanche already has asked the PTO to accept corrective payments, while Everspin is pressing the ITC judge to act first.

If the trade agency treats a curable fee mistake as grounds to knock patents out when a complaint is filed, Gornish warned, it could set off a “five alarm fire across the patent bar.”