Earlier today President Obama signed the America Invents Act at Thomas Jefferson High School in Alexandria, Virginia. Patent reform is now a reality, and over the next 18 months there will be massive changes to U.S. patent law. The Patent Office has already been working on regulatory reforms to the Appeals process and to the Reexamination process, so with the changes in this legislation along with the rulemaking necessary to implement the law there will be little that remains the same by March 16, 2013, when all aspects of the legislation have gone into effect. Virtually nothing that you know about patent law and/or patent process today will be relevant come March 16, 2013.
There are certain aspects of the patent reform legislation that will go into effect immediately, or nearly immediately. One example of a near immediate change is the treatment of fees paid to the United States Patent and Trademark Office. Effective 10 days after the legislation is signed fees will go up at the USPTO, thanks to a 15 percent surcharge.
The legislation explains:
There shall be a surcharge of 15 percent, rounded by standard arithmetic rules, on all fees charged or authorized by subsections (a), (b), and (d)(1) of section 41, and section 132(b), of title 35, United States Code. Any surcharge imposed under this subsection is, and shall be construed to be, separate from and in addition to any other surcharge imposed under this Act or any other provision of law.
As you might imagine, many are rushing to pay whatever fees they can prior to the implementation of this 15 percent surcharge. This, however, will hurt the Patent Office, perhaps significantly. You see, we are approaching the end of FY 2011 and the USPTO has long since collected the amount of money Congress appropriated for them for FY 2011. That means that any sums over and above what the Office was appropriated will be collected and turned over to the General Treasury to be used by the government for purposes other than the business of the Patent and Trademark Office.
Those rushing to pay fees before September 26, 2011, will save 15%, but the Patent Office will not have access to that money. The budgetary calendar resets on October 1, 2011, which marks the start of Fiscal Year 2012. While the America Invents Act does not put an end to fee diversion key Congressmen in the House of Representatives pledged that they would allow the USPTO to keep 100% of the user fees collected. Thus, presumably, fees paid starting October 1, 2011, would go to the USPTO to use for the purpose intended by the payor; namely the examination of applications and ongoing business operations of the agency.
The language of the America Invents Act is quite peculiar and largely misleading relating to the issue of fees. A quick read suggests that there is an end to fee diversion because the USPTO will be allowed to use 100% of fees collected. The Act says:
There is established in the Treasury a Patent and Trademark Fee Reserve Fund. If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund. To the extent and in the amounts provided in appropriations Acts, amounts in the Fund shall be made available until expended only for obligation and expenditure by the Office in accordance with paragraph (3).
However, 35 U.S.C. 42(c) will still include language saying: “To the extent and in the amounts provided in advance in appropriations Acts…” This isn’t completely clear by reading the Act itself, but if you follow what is being removed and what is being kept, Congress is still retaining the right to appropriate funds to the USPTO. Thus, the USPTO will get to keep 100% of their funds provided that is what is authorized in advance in appropriations Acts. What this means is that the status quo is unchanged. Despite the slight of hand in the Act the Patent and Trademark Office will only get 100% of user fees collected provided that is what Congress appropriates.
In all likelihood Congress will not go back on its promise, that was contained in a letter and not at all binding on anyone, to fully fund the USPTO during FY 2012. Beyond 2012 who knows what will happen with respect to USPTO funding. We could well be back in a place where fee diversion is alive and well. One has to think that is the broader Congressional plan given that the House and Senate specifically voted down attempts to once and for all put a concrete and unmistakable end to fee diversion.
In any event, the USPTO request for FY 2012 is for $2.7 billion, and the scuttlebutt on Capitol Hill suggests the USPTO will indeed get $2.7 billion. That will significantly assist the Office in making long needed IT upgrades, hiring new patent examiners and authorizing overtime. So look for a lot of positive things to happen relative to the backlog and overall efficiency of the USPTO during FY 2012. Of course, the fight for a permanent end to fee diversion needs to continue!
Over the next few days as you might be tempted to pay fees to save 15% perhaps you should ask your clients whether they want to put their money where there mouth is. We have all advocated for the USPTO to keep 100% of their fees, which is the only common sense outcome. But saving 15% means the USPTO won’t get that money and instead it will go to completely unrelated activities of the federal government. Is saving 15% worth the harm to the USPTO? Not saving money is, of course, counter-intuitive, but is it against your interest? Certainly it would be nice to have that 15% for something else, but if a bubble does occur that will hit the USPTO with increased work without the ability to keep the fees. So they get the work but don’t get the money, which won’t do anything to help the situation at the USPTO.