The ink is hardly dry on the America Invents Act and Congress is already about to take money from the United States Patent and Trademark Office in violation of the promise of Congressman Rogers, who chairs the House Appropriations Committee.
It isn’t exactly a newflash to announce that Washington, D.C. is dysfunctional, anyone paying attention over the past few years has long since come to that conclusion. Thus, it is hardly breaking news to report that Congress is on the verge of passing a Continuing Resolution rather than actually doing their job and passing a budget for fiscal year 2012. Why do today what is required of you to fulfill the responsibilities of your job when you can just kick the can down the road? Of course, by so doing Congress will embark upon a path that will divert some $600 million from the USPTO during FY 2012.
Earlier this year we learned that General Electric (NYSE:GE) paid no taxes for 2010. See G.E.’s Strategies Let It Avoid Taxes Altogether. Yes, the largest corporation in the United States had a very good 2010. They booked over $14 billion in profits, with over $5 billion coming from U.S. operations, yet they paid not a dime in taxes to the Federal Government. To add insult to injury, General Electric was able to claim a tax benefit of $3.2 billion for 2010, making its effective tax rate for 2010 substantially negative.
But General Electric was not the only large U.S. corporation not to pay taxes. According to Citizens for Tax Justice, General Electric had some company. In fact, American Electric Power, Dupont, Verizon, Boeing, Wells Fargo, FedEx and Honeywell all had tax rates between -0.7 percent and -9.2 percent for the stretch between 2008 to 2010. See Study finds many corporations pay tax rate of effectively zero.
On the other hand, the United States Patent and Trademark Office continues to have user funds siphoned off, making the USPTO a much larger taxpayer than the largest U.S. corporations.
Sometimes the problems facing our nation truly are difficult to solve. Reducing the country’s out-of-control budget deficit and fixing our broken public schools systems, for example, each took decades to grow into serious threats to America’s future. And each requires more political vision and national unity to resolve than seem to exist right now.
But other problems are not that difficult to solve, if only our leaders would choose to use some common sense. Take job creation, which is supposed to be the Number 1 policy objective in America right now. The mechanics of job creation are hardly a mystery, after all. We know, for example, that all net new job growth in America comes from startup businesses, not Big Business (see research by the Census Bureau and the Kauffman Foundation). And we also know that the vast majority of these startups need patents to get the funding from investors they need to start hiring people so they can develop their innovative new products and medical treatments for the public (see the Berkeley Patent Survey of Entrepreneurs).
Funding for Fiscal Year 2011 has been a thorny issue for quite a while now. Congress did not pass a Fiscal Year 2011 budget in the Fall of 2010, as they are supposed to do. It is widely believed Congress punted on this responsibility because of the 2010 elections and fear of the electoral response to budget negotiations in the election cycle. That, however, lead to a series of Continuing Resolutions that funded the government on a limited basis. The last Continuing Resolution (or CR) ran out on April 8, 2011, with an 11th hour agreement, which was ultimately passed by Congress and signed into law by President Obama the following week. When the dust had settled the United States Patent and Trademark Office did not fare well at all, with $100 million be diverted from the Patent Office. That lead to the Office today announcing severe austerity measures because they don’t have the funds available to operate as a going concern.
News of Nathan Myhrvold’s Intellectual Ventures bringing a series of lawsuits should have displaced the above the fold headlines regarding the vague financial turmoil currently afflicting the U.S. and World Economy. Whereas one will pass, like kidney stones, with much watery eyed pain and gnashing of teeth, the other is far more insidious and potentially fatal to our collective future as a leading economy. Here’s why:
Just like in the story-line of Independence Day, where the alien death ships slowly but surely positioned themselves over each major city, with the eventual outcome well understood, so too is Intellectual Ventures (I.V.) slowly positioning itself as the patent overlord over many major industry segments. Just like in the movie, the eventual outcome is well understood. To wit: Complete usurpation of the U.S. Patent system. The outcome is a, gigantic tax/toll collector controlling the pulse of innovation in the U.S. or, like the movie, extermination of innovation.
Let’s be perfectly honest, the US patent system has stopped rewarding innovation and has started rewarding those who have the finances and ability to game the system. That is a huge problem and one that needs to be addressed far more quickly than any other problem facing us. I have been saying for years that the manufacturing jobs are not coming back and that we need to focus on those areas where we can grow jobs and the economy, and that space is the innovation space. Innovation is at the core of growth because discoveries lead to inventions which lead to new technologies which lead to the creation of new industry which leads to the creation of high paying jobs. A rising tide lifts all boats and the tide that is going to lift the US economy is the innovation tide, so we need to start focusing on that and putting in place an environment that will allow innovation to thrive. This of course means a functioning patent system that recognizes worthwhile inventions, but it also requires that we put a stop to patent trolling.
Director Kappos explains the USPTO IT systems are "too fragile" to give access to more patent data.
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.
I am in New York City for the next few days for the PLI Patent Bar Review Course. John White and I traveled up from Virginia together yesterday and we did what we so often do — talk patents. A fun life we lead no doubt, but someone has to do it! In any event, increasingly as we were talking about things we have heard from attorneys, retired patent examiners we know and frustrated clients, something that has been occurring to me with more frequency came to mind once again. Is it time for us to seriously consider privatizing the United States Patent Office, or at least turning it into a quasi-governmental body that has autonomy to run as it sees fit? I think the answer is a resounding yes. This is a discussion long over due and I tend to think that objectively reasonable minds at the end of the discussion will come to the conclusion that a Patent Office controlled by Congress has little or no chance of ever fulfilling its Constitutional responsibility again.
Earlier this week Mike Drummond, the Editor in Chief of Inventors Digest, authored an article titled US Senate Votes to Leave Patent Office Underfunded for 2010. In this article Drummond explained that over the weekend, while no one was paying attention, the Senate voted to leave USPTO funding at the same level in 2010 as it was in 2009, which is bad enough because the Patent Office desperately needs more resources in order to tackle the problems left over by the previous regime. Worse, the Senate vote would re-institute fee diversion, which means that if the Patent Office were to collect revenues over and above the amount allocated by Congress those additional fees would not be able to be used by the Patent Office to improve operations, or even for just handling the increased work generated by additional filings. Rather, fees received over and above the allocated amount would be stripped from the Patent Office and diverted into the General Treasury account. That is plain and simple a National Innovation Tax, and it is an enormously bad idea.