Today the U.S. patent community sits perilously in the path of an oncoming train. The Leahy-Smith America Invents Act (AIA) Act mandates – but fails to fund – a wholesale conversion of the USPTO from an expert examining agency to one that not only examines patents but also adjudicates patent disputes in ways that promise to be faster and cheaper than patent litigation in our courts.
Without predictable funding, the Congressionally mandated reforms of the AIA will likely turn out like the agency’s “fast track” and Detroit office initiatives: announced, planned, but then delayed by the lack of one essential element – money. Indeed, without predictable funding, the reforms mandated by the AIA will likely result in a greater patent backlog, significant additional delay in finalizing the value of disputed patents, and a confused and discouraged agency workforce, all of which will significantly delay the recovery of our national innovation-based economy.
The coming train wreck would have been avoided if the 95 Senators who voted for ending fee diversion (with the support of every significant stakeholder in the otherwise-divided patent community) had had their way. It can still be avoided at no cost to taxpayers. And it can be avoided quickly, before Thanksgiving’s leftovers are gone, via the Super Committee. Let me explain.
The USPTO is an entirely fee-funded agency. The revenue it collects from fees imposed on inventors and trademark filers is currently deposited in a special USPTO appropriations account in the Treasury. To obtain funding for its operations, the USPTO must request the revenue back from Congressional appropriators. Since the early 1990s, however, more than $1 billion has been diverted from the agency and spent on non-USPTO initiatives. As a result of this diversion, nearly 700,000 patents are waiting for a first review at the USPTO. Hundreds of thousands of patents that could help launch small businesses and create jobs are gathering dust at the USPTO due to the diversion of fees. In the just-ended Fiscal Year 2011, more than $200 million was diverted from USPTO. Section 42 of title 35, United States Code, requires that all fees collected by the Office are to be credited to the Patent and Trademark Office Appropriation Account in the Treasury of the United States. Unfortunately, USPTO has no access to these funds, which have been raided for other purposes.
The Senate went on record, as did the House Judiciary Committee, in supporting the principle that the USPTO could operate more efficiently and productively if the agency had full access to all of its fee-generated revenue. The Senate-passed patent reform bill (S. 23) created a USPTO revolving fund within the Treasury and allowed the agency to keep all of the funds it raises until expended. The revolving fund passed the Senate 95-5. The fund required the Director of the USPTO to submit an annual spending plan as well as an annual year-end report to the House and Senate Appropriations and Judiciary Committees. The House-reported patent reform bill (H.R. 1249) included the revolving fund. But jurisdictional objections from the Chairmen of the House Appropriations Committee and Budget Committee led to the provision’s removal on the House floor.
Many supporters of the AIA supported the revolving fund but did not want to risk complicating or preventing enactment of the bill by entertaining amendments on the Senate floor to either insert the revolving fund or improve the House-passed alternative language. Senate sponsors of the AIA and the revolving fund actively discouraged the consideration of floor amendments to the AIA and opposed an amendment by Senator Tom Coburn to re-insert it. Accordingly, when the AIA was finally enacted it essentially maintained the status quo when it comes to insuring that the USPTO will be funded.
In the meantime, Title 4 of the Budget Control Act of 2011 (BCA) established the Joint Select Committee on Deficit Reduction. The Select Committee – or the so-called “Super Committee” is given broad powers to produce legislation to reduce the deficit by $1.5 trillion over the fiscal years 2012 to 2021. The BCA places no restrictions on the scope of legislation the Super Committee can include in its final legislation other than that the final product must be approved by a majority of the Super Committee’s members. Any approved Select Committee bill must be transmitted to the full House and Senate by December 2, 2011 and voted on by the respective bodies by December 23, 2011. All points of order against the Super Committee’s proposal are waived and the measure cannot be amended. Accordingly, legislation that is made a part of the Super Committee’s proposal stands a very good chance of being enacted.
Standing Committees and individual Members of Congress have been submitting proposals to generate savings or revenues with the Super Committee. To date, there have been party line splits and divisions on most of the major revenue-related measure. Republicans have been focusing on cuts to entitlements and discretionary spending while Democrats have been insistent that any deal include tax increases and other revenue generating proposals. Last week, the talks seemed stalled but, in recent days, the prospects for a deal seem to be improving.
As the Super Committee struggles to find nearly $1.2 trillion in revenue or savings, they should take a serious look at the proposal to give the US Patent and Trademark Office greater control over its budget and fees by creating a revolving fund. At the request of many in the patent community, Senator Jon Kyl – a member of the Super Committee – is proposing that the Super Committee include the revolving fund. The Congressional Budget Office (CBO) has informally indicated that it will score the Kyl provision as saving $700 million over 10 years. By taking the USPTO out of the regular appropriations process, the creation of a revolving fund will take approximately $700 million off budget and help the Super Committee reach their goal. And – besides being a budget saver – the revolving fund is good policy.
Should a deal come together, the adoption of the revolving fund is one area where “modest” savings can be achieved. Given that out year cost-cutting pressures will likely increase pressure on Congress to raid the USPTO’s fees, the creation of a revolving fund for the PTO certainly is “consistent with the goal” of the Select Committee. Insuring that the $1.5 trillion in cuts are not disproportionately borne by inventors or at the expense of the innovation economy’s seed corn arguably justifies inclusion of the revolving fund in the BCA. And $700 million in savings could be one brick in the foundation of a package that makes more significant reforms.
In the end, winning support of a majority of the Members of the Select Committee is the beginning and end of what will be required to include the revolving fund in the Super Committee’s bill. It’s highly unlikely that fee diversion will influence any particular Member of the Select Committee’s vote one way or the other in the final product. So, with unanimous stakeholder support and overwhelming Congressional support on both sides of the aisle, this could be the sort of measure that might make its way into the final package, once a majority of the Select Committee Members becomes convinced to support it.
May I suggest that readers let the Super Committee know their views? The 12 Members of the Super Committee are:
Which is worse, a natural disaster that damages a nation’s economy, or a self-inflicted one of equal magnitude that occurs when an expert community can foresee a “train wreck” coming but does nothing about it? Surely the latter: we can’t just blame it on the weather.