The one thing in the Senate version of patent reform that everyone agreed on was the end to fee diversion. The House of Representatives, however, has decided that an end to fee diversion should not be included in patent reform, which is causing a great unease within the industry.
The Senate had struggled with patent reform for years, and in February 2011 they broke through with a carefully crafted balance. The Senate version of patent reform is light on “reform” in any real sense, except for one. The Senate voted to end the practice of diverting fees collected by the Patent and Trademark Office to other, completely unrelated purposes. The House of Representatives, lead by Congressman Hal Rogers (R-KY) who is Chair of the Appropriations Committee, demanded that the USPTO do with the amount of funds appropriators want to give the Office, not the amount of funds collected from users who pay for the Office. This is causing many industry groups to openly withdraw support and fight against patent reform; a remarkable turn of events.
The current version of provisions relating to Patent Office funding are being paraded about by House appropriators as giving the USPTO access to their fees. The simple truth is that the language of the compromise reached does no such thing. The compromise language says:
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…
(emphasis added). So the excess gets put into a separate fund, but the USPTO can still only use those fees to the extent authorized by appropriations Acts. In other words this language changes nothing. The Patent Office still won’t have access to the fees it collects unless the appropriators grant the Patent Office the ability to access and use those funds. Over the last 20 years this status quo that has lead to nearly $1 billion being siphoned away from the Patent and Trademark Office.
Congressman Rogers would have you believe that this language does give the Patent Office control of its own funds, but as anyone can see that is simply not the case. Notwithstanding the plain meaning of the language and what is obviously means, here is what Congressman Rogers said regarding this compromise language in a letter to Speaker Boehner (R-OH) and Majority Leader Cantor (R-VA):
To assure that all fees collected for PTO remain available for PTO services, H.R. 1249 provides that if the actual fees collected by the PTO exceed its appropriate for that fiscal year, the amount would continue to be reserved only for use by the PTO and will be held in a “Patent Trademark Fee Reserve Fund”.
Obviously, Congressman Rogers is not being completely straight forward. The funds that exceed the appropriation to the USPTO would be available for use by the USPTO if and only if that is consistent with grants by appropriators. That is a far cry from saying the USPTO would get to keep 100% of the user fees it receives.
Of course, this would not be the first time that Congressman Rogers was less than completely accurate regarding PTO funding. Indeed, Rogers’ characterization of what H.R. 1249 would mean relative to funding the Patent Office is particularly alarming in light of the fact that Congressman Rogers has not been correct about the issue of Patent Office funding in the past. For example, in 2000 in a debate on the floor of the House, Congressman Rogers stated:
Mr. Chairman, let me correct the gentlewoman’s misunderstanding of that point. The fees that are generated by the Patent Office are not used for any other agency or any other purpose. They remain in that account to be used in succeeding years. We are not siphoning off the Patent Office fees for other expenditures.
Rogers was responding to the alleged misunderstanding of Congresswoman Roybal-Allard, who had just said:
The Patent Office is 100 percent supported by the user fees that are paid by patent and trademark applicants and owners. Since 1992, the Congress has been withholding an increasing portion of these fees…
See 146 Cong. Rec. 12107 at 12134. Simply stated, Congresswoman Roybal-Allard (D-CA) was correct and Congressman Rogers was flat wrong. One has to wonder. The logical conclusion was either Rogers was misinformed or he was being less than truthful. The fact that he has been on the House Appropriations Committee for the last twenty-seven years makes you wonder whether he was misinformed or whether he was just playing fast and loose with facts. Regardless, the reality is that money is routinely siphoned off from the Patent and Trademark Office and used for wholly unrelated purposes.
As telling and worrisome as the inaccurate statement that Congress was not siphoning off funds is Rogers’ statement that funding had been increased and, as a result, the USPTO is “not starving.” This suggests an unhelpful paternalistic approach that views the USPTO, and by necessary implication the stakeholders, as being entitled to receive only what Congressional appropriators allow them to keep. No wonder the U.S. patent system is in such a crisis. A lack of oversight is one thing, but oversight that perpetually creates more and more problems while denying reality in favor of political fantasy borders on malfeasance. This is particularly true when poor oversight has crippled the U.S. innovation agency, which by direct cause also prevents individuals and businesses from receiving the patent assets that could be used to attract investment in any relevant time-frame. The patent backlog prevents the expansion of business and gets in the way of job creation, hardly a noble cause.
In the wake of Congressman Rogers inaccurate denial of fee diversion in 2000, his recent promises that Appropriators will fully fund the Patent Office ring hollow. If appropriators will be keeping that promise to fund the Patent Office then why is there an aversion to putting that promise in writing and enacting the legislation to guarantee it? If Rogers and others are not willing to put the promise into the statute then the promise is worthless, particularly in light of past conduct.
What the House of Representatives is starting to see is that the balance struck by the Senate was quite fragile, indeed far more so than the overwhelming 95-5 vote would suggest. No one got what they wanted, so the battle became about making sure there was nothing truly bad was in the bill, which was largely accomplished. Only those who were against first to file were still really fighting, and even those folks universally agreed with everyone else that the Patent Office should be fully funded and keep 100% of the user fees collected. That spoon full of sugar was enough to make almost everyone swallow hard and accept the change that was being passed off as reform. Remove that sweetener, add prior user rights and modify certain other provisions and now the sweetener is gone and the resulting bill would do harm to a variety of stakeholders.
What is evolving seems to be the beginning of the end. How many politicians are going to continue fighting on a patent issue that won’t get them a single vote? With the debt ceiling looming, more amendments coming and the vote getting pushed back on patent reform in the House, how long will this go on? There are not the votes there presently to pass H.R. 1249 and challenges are coming from all corners, both from Democrats and Republicans.
As I watch what continues to unfold I am reminded of the old saying about the two things you never want to see made: law and sausage. Right about now I can’t imagine that watching sausage being made is nearly as disgusting as watching laws being created. It is truly sad to see everyone in an industry agree on what is needed and to have Congress, most of whom have never worked in the private sector, think they know better.