Late this afternoon Teresa Rea, the Acting Under Secretary of Commerce for Intellectual Property and Acting Director of the United States Patent and Trademark Office, sent an e-mail to those who work for the USPTO. The e-mail was simply titled: “A Message from Teresa Stanek Rea.” The message was simple, the USPTO is facing “substantial budgetary uncertainty,” which is due to sequestration.
At this point I don’t know exactly the level of financial crisis at the USPTO, but it doesn’t sound good. The USPTO is a fee generating entity that runs largely on the fees it collects and this year projections have been well above realized revenue. With there already being a deficit, looming sequestration cuts could significantly harm USPTO productivity, which will cause harm to the innovation industry in the United States.
This is particularly alarming given the recent substantial raising of patent related fees for most applicants. How can the USPTO charge more and more for less service? The industry has already been uneasy about these substantial increases in fees, but most were willing to swallow hard as long as it meant a better functioning and faster moving patent process. It certainly doesn’t sound like a better functioning, faster moving patent process is on any relevant horizon at the moment. So the industry faces the prospect of paying more while returning to painfully slow processing of applications. A true nightmare scenario.
In addition to the aforementioned e-mail from Acting Director Rea, another e-mail was recently sent to union members from Robert Budens, President of POPA, the examiner’s union. Budens hypothesizes that there is an unofficial “gag order” placed upon USPTO officials by the White House. Budens has a reputation as a straight-shooter who is liked and well respected. For him to make such an assertion there must be some identifiable rationale on which he is relying. I have always understood Budens to have a good working relationship with USPTO management. The mere fact that he can’t get answers could justifiably raise suspicions. Of course, it may be because USPTO officials themselves don’t have any answers and are scrambling to address budget deficiencies, but you would think that could have been conveyed directly.
Speculation could easily run wild, but I’m not sure what that would serve. This is a breaking story with many moving parts, and based on scare tactics used in the sequestration debate, which were even lampooned by Saturday Night Live, it is difficult to know what is reality and what is made up for political gain. Thus, the best I can do is relay the facts, which means providing you with the two aforementioned e-mails in their entirety for your consideration.
E-mail from Acting Director Rea to USPTO employees, sent shortly before 5pm today:
As many of you are aware, agencies across the Government are coping with a very difficult budget year. While the United States Patent and Trademark Office (USPTO)’s funding comes from a different source than most other agencies—we operate on user fee payments—we are not immune to budgetary pressures. Because of a combination of lower than expected fee collections and sequestration, we have been working to identify potential savings and projects that could be deferred in a way that minimizes the impact to our mission and our employees.
As we moved through the first months of Fiscal Year (FY) 2013, it was clear that our patent fee collections were tracking lower than our plan at the start of the year. While we monitored our collections very closely and the management team continued working to identify potential savings, we also knew that there would be a high degree of variability in our fee collections throughout the year. Further, because of the projected spike in fee collections in advance of the America Invents Act First Inventor to File changes and the new patent fee schedule, which became effective on March 16 and March 19, 2013, respectively, we determined that no significant actions should be taken until after the new fee schedule was in place and we had a better idea where the agency stood from a funding perspective. We have now reached that point, and our revenue continues to track substantially below the reduced budget plan.
In addition to this revenue shortfall, we are also working diligently to evaluate the impact that the sequestration order issued on March 1, 2013, will have on the USPTO. While we do not yet know what the precise impact will be, sequestration will represent a significant additional reduction to our spending plans this year on top of our already reduced revenue estimates.
In light of these factors and the substantial budgetary uncertainty the agency now faces, it is essential that we act now to further reduce spending. I have thus asked the management team to come together to identify immediate and significant spending reductions for the remainder of FY 2013 with a focus on minimizing the impact to our mission and our employees. The management team is taking immediate measures to limit all expenditures, including but not restricted to most hiring, travel, training, and IT modernization projects. (Your managers may even be reaching out to you for ideas on cost savings measures.)
I recognize that these measures do not come without a price, and many of them will place additional burdens on you, your offices, and your ability to carry out the agency’s important mission. While we have a substantial task ahead of us, rest assured that we are doing everything in our power to minimize the impact.
As always, thank you for your continued hard work and dedication in carrying out the mission of the USPTO during these trying times. We will continue to keep you updated as new information becomes available.
Teresa Stanek Rea
Acting Under Secretary of Commerce for Intellectual Property and
Acting Director of the United States Patent and Trademark Office
E-mail sent by Robert Budens to patent examiners on April 16, 2013:
Dear Bargaining Unit Members,
About a week or so ago POPA started hearing rumors that the White House Office of Management and Budget (OMB) was attempting to mess with USPTO funding by requiring that our sequestration hit be taken off of our fee income rather than our appropriated budget level. I also heard that USPTO management had been put under a “gag order” not to discuss these changes until approved by OMB and Commerce. The rumors also suggested that the sequestered fees would not go into our AIA reserve fund for later availability, but would in fact, not be available for USPTO use, i.e., our fees are going to be diverted once again, barely a month after full implementation of the AIA that was supposed to prevent fee diversion!
In discussions with AIPLA, IPO and others, I learned that they had also heard such rumors and that none of us were getting any
information out of USPTO management. To date and despite numerous inquiries from POPA, USPTO management has still not discussed this issue, all but confirming the gag order.
I believe other recent developments have all but confirmed those rumors and I wanted to update you because OMB’s interpretation of the impact of sequestration on the USPTO will have significant impacts.
Today, the OCIO notified its staff of an $80M cut to the OCIO budget. This will result in layoffs of a number of USPTO contractors and significant delays in the development of the Patents-End-To-End project (PE2E) and upgrades to PALM — both critical IT projects. Obviously this is not good news, but I suspect it is evidence that OMB’s sequestration decision is being implemented. And yesterday, you all should have seen the Memorandum from the ADCs regarding changes to overtime in the Examining Corps. Again, more evidence that the rumors are true.
The USPTO’s fee income is currently below projected levels. In other words, we are already operating in a sequester environment by virtue of our reduced fee income. It is incomprehensible to me why the White House would then pile on us by taking such a negative interpretation of sequester on the USPTO. This is about as short sighted as anything I can think of. Our fee income represents filed patent applications that will need to be examined. To now take away those fees while leaving the USPTO with the work to do is counterproductive.
With this new development, POPA can no longer feel confident that there will not be significant negative impacts on our bargaining unit members. I still do not believe that there will be furloughs in the immediate future, but unfortunately, I can’t say that furloughs may not raise their ugly head at some point in ahead. I do believe that this development may well adversely impact hiring, overtime availability, and possibly even bonuses. (Another anti-Federal employee bill in Congress would bar bonuses for Federal employees for FY13). Can you feel the love?
Starting tomorrow, a number of us in POPA will be out of the office for the rest of the week for various meetings at which, I am confident, the USPTO’s budget and OMB’s actions will be a topic of discussion. If we are provided any additional information regarding these issues I will let you know.
Wish I had better news for you.