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Coburn Amendment: End to Fee Diversion in Senate Bill


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: February 3, 2011 @ 11:06 pm
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Senator Tom Coburn (R-OK)

Earlier today the current version of patent reform legislation in the United States Senate, S. 23 titled “Patent Reform Act of 2011,” was marked up in the Senate Judiciary Committee.  The amendments offered by the Senators seemed relatively minor for the most part, with one notable exception.  Senator Tom Coburn (R-OK) presented an amendment to the bill that would once and for all put an end to fee diversion and allow the United States Patent and Trademark Office to access its fees.

The Coburn Amendment would create a specialized fund within the Department of Treasury known as the “United States Patent and Trademark Office Public Enterprise Fund.”  The PTO Director would have access to monies in the Fund for expenses ordinarily and reasonably necessary for running the Office.  Perhaps most importantly, the Fund could grow so monies in the Fund could be accessed by the Director without fiscal year limitation.  This could allow the Fund to grow in certain years to a critical mass that may be needed for capital expenditures. This is a brilliant idea and one that the industry needs to get behind wholeheartedly.

We shouldn’t celebrate just yet though.  I am hearing through the grapevine that nobody expects an end to fee diversion to be a part of any patent reform legislation that is ultimately enacted. I am told there is “no appetite for ending fee diversion” in many corners of Capitol Hill, and I have heard more than one insider say that the word on Capitol Hill is this: “government revenue is government revenue.”

The prevailing view seems to be that the Patent Office is a part of the government.  The Patent Office generates fees.  Those fees, therefore, belong to the United States government to do with as they wish.  The fact that USPTO fees are collected in exchange for certain promises to perform work, as well as the promise to maintain a functioning patent system, does not seem to matter to at least some on Capitol Hill.  We need to change that thinking and every stakeholder should support the Coburn Amendment.

As everyone in the industry knows, the under-funding of the United States Patent and Trademark Office is responsible for the enormously bad shape the agency is in.  The USPTO is user fee funded.  Fees are charged for services provided, and fees are charged in order to keep patent rights current.  These fees, however, do not all go to the operation of the Office.  Since 1992 close to $1 billion in fees have been collected but not allowed to be kept by the USPTO, and this year because filings and fee collections are high the USPTO is on pace to collect close to $400 million that it will not be allowed to use.

How does this happen?  Congress dictates how much money the Patent Office can spend so when they collect more than Congress has authorized them to spend the surplus is turned over to the United States Treasury.  At a time when politicians are increasingly talking about innovation, with President Obama talking about innovation paving the way to winning the future, it is about time that they put their votes where their rhetoric is.  Stopping fee diversion and allowing the USPTO to keep user fees to fund ongoing operations, expand and modernize is essential if we are going to allow innovation to pave the way to a better economy — an innovation economy.

There are so many forces favoring and opposing so many aspects of patent reform.  In truth this isn’t the Patent Reform Act of 2011, it might as well be the Patent Reform Act of 2005 Part VI.  We in the industry have been fighting among ourselves for years and every year Congress decides not to act at all.  Granted, there are a good number of things in the Patent Reform Act of 2011 that are not “reform” at all.  It would be better to call is the “Patent Change Act of 2011,” but the fact that it isn’t the reform we need shouldn’t provoke us to lose sight of the fact that the Coburn Amendment to S. 23 is essential.  The Coburn Amendment is something that we all can and should agree with, which means we all need to support the Amendment.

The fact is that the Patent Office is really a ponzi-like scheme, where user fees 3 or 4 years hence will pay for your examination on the application you file today.  To deliver on the work promised when they cash your filing fee check today they have to rely upon filings continuing to come in, and the benevolence of Congress allowing the Patent Office to keep any of the fees it collects.  This is insane!  The Patent Office ought not to be a revenue generating source.  Secretary of Commerce Gary Locke has continued to say it is the Administration’s goal to get down to 10 month average pendency.  I personally don’t think that can or will happen, but if there is any hope to even get down to 18 months the Patent Office needs more resources.  They need to be able to keep the fees they collect.

Putting an end to fee diversion is not at all a done deal, and everyone with a stake in the patent and innovation industries needs to make sure that they take steps to do whatever they can to let our elected leaders know that the Coburn Amendment must be supported.  The Patent Office must be properly funded.

The core text of the Coburn Amendment is reproduced below.  A well deserved tip of the hat to Senator Coburn.  Now it is time to rally the troops!

(c) USPTO REVOLVING FUND.—

(1) ESTABLISHMENT.—There is established in the Treasury of the United States a revolving fund to be known as the ‘‘United States Patent and Trademark Office Public Enterprise Fund’’. Any amounts in the Fund shall be available for use by the Director without fiscal year limitation.

(2) DERIVATION OF RESOURCES.—There shall be deposited into the Fund on or after the effective date of subsection (b)(1)—

(A) any fees collected under sections 41, 42, and 376 of title 35, United States Code, provided that notwithstanding any other provision of law, if such fees are collected by, and payable to, the Director, the Director shall transfer such amounts to the Fund, provided, however, that no funds collected pursuant to section 9(h) of this Act or section 1(a)(2) of Public Law 111-45 shall be deposited in the Fund; and

(B) any fees collected under section 31 of the Trademark Act of 1946 (15 U.S.C. 1113).

(3) EXPENSES.—Amounts deposited into the Fund under paragraph (2) shall be available, without fiscal year limitation, to cover—

(A) all expenses to the extent consistent with the limitation on the use of fees set forth in section 42(c) of title 35, United States Code, including all administrative and operating expenses, determined in the discretion of the Under Secretary to be ordinary and reasonable, incurred by the Under Secretary and the Director for the continued operation of all services, programs, activities, and duties of the Office, as such services, programs, activities, and duties are described under—

(i) title 35, United States Code; and

(ii) the Trademark Act of 1946; and

(B) all expenses incurred pursuant to any obligation, representation, or other commitment of the Office.

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Posted in: Congress, Gene Quinn, IP News, IPWatchdog.com Articles, Patent Reform, Patents, USPTO

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

5 comments
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  1. “If we’re going to compete with the rest of the world, we’ve got to have the most up-to-date patent system possible, provide the tools the PTO needs to separate the wheat from the chaff, help business bring new products to market and create jobs,” [Vermont Senator] Leahy said at the committee’s business meeting this morning.

    Gene:

    There’s reform and then there is deform.
    Sometimes it’s hard to tell apart the Kool-Aid from the fruit punch.

    Link is here

  2. “The Patent Office generates fees. Those fees, therefore, belong to the United States government to do with as they wish. The fact that USPTO fees are collected in exchange for certain promises to perform work, as well as the promise to maintain a functioning patent system, does not seem to matter to at least some on Capitol Hill.”

    This is a classic representative democracy problem. Ending fee diversion would universally benefit everybody it affects, but would universally cost any legislator who would be in a position to vote for it.

    I’d love to see an end to fee diversion, but I can’t see it being a politically viable legislative initiative unless it’s done quickly in the wake of Obama’s big speech.

  3. IANAE-

    I agree with you expect where you say voting to end fee diversion would cost any legislator. Why would it cost them anything? The amount of money we are talking is a few hundred of millions of dollars. It would seem to me that those who stood up for a deficit neutral way to encourage innovation would not face any costs, but rather would be celebrated.

    -Gene

  4. It would seem to me that those who stood up for a deficit neutral way to encourage innovation would not face any costs, but rather would be celebrated.

    It’s not exactly deficit-neutral, because the diverted fees are currently being spent on whatever. If they ended diversion, they’d have to find the money elsewhere or cut spending.

    Also, I’m sure all the excitement about innovation will die down quite thoroughly by the time the next election rolls around, and people with bigger problems will be asking where all the jobs are, since it’s been two whole years since they passed this supposed innovation-encouraging bill, even though it takes longer than that for even a single affected patent to issue. They won’t be in the mood to celebrate, because they’ll be too busy voting out of office the administration that couldn’t magically fix the economy overnight.

  5. Even though it might not be immediately politically viable, nonetheless the Coburn Amendment is a welcome indication that some of our legislators “get it.” Of course, I know Congress may be unwilling to deprive itself of a favorite slush fund, but with time and continued pressure, eventually it just might have to stop raiding the USPTO.
    http://www.aminn.org/webcast-aipr-patent-reform-presentation-us-patent-and-trademark-office