The United States Patent and Trademark Office is collecting $1 million per day that it is not allowed to use, thanks to the fact that Congress recessed for the elections without passing a budget for fiscal year 2011. What that means is that the Patent Office is frozen in place with a budget that restricts the amount of funds that the Patent and Trademark Office can use. Thus, they are taking in the work and only capable of using a portion of the fees collected for operations. That means there is a $1 million per day national innovation tax being imposed because Congress refuses to let the Patent Office keep the money it collects for services to be rendered.
This type of Congressional bookkeeping, which would get corporate officers thrown in jail, conjures up how we got in trouble with Social Security. Siphoning money that should have been marked for the Social Security trust fund allowed spending to grow for generations without consequence, until now. But why divert funds from the USPTO? The USPTO budget is a paltry $2 billion per year, unlike the huge sums available to be “borrowed” from through the Social Security diversion.
The $1 billion diverted from the USPTO since 1992, under both Republican and Democratic Administrations, as well as Republican controlled and Democratic controlled Congresses, really means nothing to the overall federal budget. It does, however, means a lot for the USPTO, which simply cannot reinvest in ongoing operations when Congress after Congress has their hands in the pocket of innovators who pay fees and fund the Patent Office. Not only is the Patent Office not providing the type of service required to facilitate the innovation asset creation of the private sector, but a portion of every dollar collected is turned over to the general Treasury. Its almost like the Tony Soprano is demanding “a taste” from earnings.
During the Inventors Conference at the USPTO on November 5, 2010, USPTO Director David Kappos gave the lunch presentation. The first person to be allowed to ask a question was Jeffrey Grayzel, an inventor of medical devices and President of G3 Medical Development. Prior to asking his question he expressed frustration with the fact that the Patent Office is not allowed to keep the funds taken in, and suggested that perhaps with a new Congress there might be an opportunity. He implored everyone in the room to write their Congressman and demand that they look into the Patent Office budget and to demand adequate funding of the Patent Office so that it can fulfill its mission. The entire room erupted with clapping and cheering.
Director Kappos was also asked whether there were any plans to allow the community to access the patent search platform that is available to patent examiners. Kappos explained that it was simply not possible for the Patent Office to provide access to its systems to a greater extent than already allowed because the IT systems are “too fragile.” In fact, the state of disrepair that the computer systems at the USPTO are in is almost unfathomable.
Collections that are unusable at a rate of $1 million a day means that the USPTO is on track to have Congress siphon off $365 million from the agency that is responsible for creating wealth through the recognition of intellectual property assets. It is unconscionable that user fees are diverted away from the Patent Office while the IT infrastructure are the USPTO is falling apart, the backlog of unexamined patent applications is still over 700,000 applications and the average total pendency is close to three years.
The fact that the USPTO is unable to use all of the money it collects is almost always a shock for those not familiar with the deceptive budgetary practices of Congress. Since 1992 the United States Congress has siphoned money away from the Patent Office, which means that the costly user fees paid by those seeking a patent or trademark are not going to the operation of the Office, but rather go toward other projects and programs that have nothing to do with innovation or the administration of applications at the Patent Office.
The USPTO is an oddity really when you think about it. What other federal government agency provides a fee for service? Fee for service is not the government model, but it has always been the Patent Office model. The patent system is in place to reward innovators for the disclosure of their inventions in exchange for a limited period of exclusivity. The amount of money that it costs to obtain a patent can be significant, particularly when a patent attorney is engaged, but even if inventors would represent themselves the fees are substantial. The filing fee for a small entity (i.e., independent inventor, small business or inventor) is $545 for up to 20 claims. If you want more than 20 claims in your patent application then you pay extra at a rate of $26 per claim. If you want more than 3 independent claims you pay for additional independent claims at a rate of $110 per claim. These sums are doubled if the applicant is not a small entity. On top of these application fees there is a publication fee, an issue fee, and a host of other fees that range from paying for the full 6 months you are given under the law to respond to Patent Office actions (i.e., you have to pay for automatic extensions to enjoy the entirety of your legally allotted time), fees to get additional consideration from an examiner, fees to correct mistakes (even inadvertent mistakes) and fees to keep the patent in force once it issues.
It is not at all an exaggeration to say that virtually everything you want to do at the Patent Office costs money. If the Patent Office incorrectly holds your application abandoned you must pay a fee to petition the Patent Office to correct the mistake. So working with the United States Patent and Trademark Office is much like dining at Ruths’ Chris Steakhouse; everything is a la carte.
You might expect that inventors and patent owners would be upset by all the fees charge by the Patent Office. It would be incorrect to say that anyone is every happy about paying a fee, but by and large the user community is not adverse to paying fees, even higher fees, because even with fees that are higher what you get for your money is well worth the investment. What the entirety of the user community agrees with, however, is that the fees collected should actually be able to be used by the Patent Office, and if there are excess sums collected then they should be used to reinvest in the Office.
Those in the industry are all too familiar with the fact that year after year the Patent Office is treated like the red-headed stepchild of the federal government. The budget of the Patent Office, at about $2 billion a year, is hardly a rounding error for so many other agencies and divisions of the federal government, yet its income is raided year after year. Even last year the Congress siphoned off at least $70 million, although they did let the Patent Office keep $129 million more than they would have. They act like siphoning off $70 million instead of $199 million, means they support innovation. Are those in Congress really so dense? I know, you are right, they probably are!
What could the Patent Office do with an extra $1 million a day? They could do an awful lot really. Being able to keep that amount of money would represent a revenue increase of about 20%. That additional money could be used to put a down payment on upgrading the IT infrastructure, which would allow for streamlining of the application process and high quality examinations. Instead, that additional $1 million per day raised for the general coffers of the United States Treasury represents a national innovation tax at a time when we need more innovation, because innovation that leads to patents creates jobs.
But at least the Patent Office will get something out of all of this — increased work! Yes, they can’t keep the additional 20% in revenue, but they get an increase in workload to the tune of about 20%. So thanks to the national innovation tax imposed by Congress siphoning off funds will result in it being even hard for team Kappos to reduce the backlog and decrease pendency. So the national innovation tax will be a drag on the economy, prevent businesses from gaining the assets they need to raise capital, expand and hire. Exactly what we should be doing in a recovery, right? Absurd!