Lack of Commitment on PTO Funding is Killing Patent Reform

By Gene Quinn
June 22, 2011

Congressman Hal Rogers (R-KY)

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.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 20 Comments comments.

  1. step back June 23, 2011 4:23 am

    Gene,

    Thank you for updating us on what is going on.

    I caught only bits and snippets off of CSPAN.

    It seemed to me to be a strange Kabuki dance in which very few of the performers seemed to know what the show was about. They were just going through the motions as taught to them by some 3-minute, yes-you-can-dance instructor just 30 seconds beforehand.

    What surprised me was one Congressman’s remarks that he (or his staff?) had been reading THE PATENT BLOGS and they had become convinced that this is a replay of the Charlie Brown comic strip where Lucy pretends to secure the football for another kick attempt by poor Charlie while intending to whisk the ball away at the last minute as she always has in the past, and the comic part of it is that Charlie is a sucker for it once again (ha ha).

    Unfortunately, this in-real-life re-enactment is no laughing matter.

    The US Constitution requires that Congress, if it acts at all, must “secure” for inventors, rights that are “exclusive” as to their respective discoveries.

    Putting an inventor’s money in a so-called lock box and saying, “Don’t worry you can trust us once again” is not an act of securing. It is a deja vu all over again, Kabuki reenactment of Charlie Brown, Lucy and the football he’ll never connect with.

  2. step back June 23, 2011 4:26 am

    hi Gene, your spam filter seems to have snatched my comment to the side
    (it had a link to an external image of Lucy snatching the football away from kicker-wannabe, Charlie Brown)

  3. step back June 23, 2011 4:31 am

    Hat tip to IPBiz for the link to this “Floor Action” blog:
    http://thehill.com/blogs/floor-action/house/168023-dems-oppose-weak-patent-fee-diversion-language-in-patent-reform-bill

  4. EG June 23, 2011 7:41 am

    Gene,

    Congress is like an addict when it comes to fee diversion. Having acquired the habit in 1992, they simply can’t kick it, no matter how much they promise they’ll end fee diversion. The only “good” provision in the oxymoronic America Invents Act is Section 22, and with its removal, this piece of legislation is a complete and utter sham. I’ve already, in writing and verbally, “screamed” at my local Congressman (who happens to be the Speaker of the House) to OPPOSE this nonsense precisely because of the proposal to remove Section 22.

  5. David Boundy June 23, 2011 7:53 am

    Compare Rogers’ language today to the language of current statute — all but identical. The bill has no more protection against fee diversion (in the sense of fees not available to the PTO) than current statute.

    No, Gene, the bill isn’t dying because of lack of commitment, but because it’s a dumb bill, a special-interest Christmas tree, and contrary to the interests of the public good.

  6. EG June 23, 2011 8:13 am

    David,

    I thoroughly agree with your assessment of the oxymoronic America Invents Act. This piece of legislation (if you can call it that) is an utter sham.

  7. Selting June 23, 2011 9:06 am

    Great article, Gene. I’m just wondering–where would one find documentation that the fees were siphoned off from the PTO? Is their budget publicly available somewhere?

  8. American Cowboy June 23, 2011 11:12 am

    Let the darned thing die so Congress can focus on cutting spending where it really matters.

  9. Robert K S June 23, 2011 12:08 pm

    It’s going to be much better for America in the long run to continue to have an innovation tax in the form of fee diversion than to implement the many other patent-weakening measures contained in the bill that were bought and paid for by industry interests. This bill would reboot 200 years of patent law and would constitute a major blow to a highly evolved and effective system.

  10. Gene Quinn June 23, 2011 12:50 pm

    David-

    I will disagree with you about why the bill is dying. I don’t disagree that much of the bill is needless, as you say “dumb.” I think many sectors were willing to take the change (not reform) if the USPTO was fully funded. Without the PTO being funded then all the old issues arise and people see the bill what what it really is…. change without reform.

    Cheers.

    -Gene

  11. Gene Quinn June 23, 2011 2:17 pm

    Step-

    It does seem that what is going on in the House is a strange kabuki dance. I think that is an excellent characterization. I also like the Charlie Brown football comparison. If you look at what Lucy does as bait and switch that would be a perfect comparison to the House version of patent reform. While the Senate version was not perfect by a long shot, the House made it far worse and then wanted to pretend that it was identical. Yes, 95% identical but that 5% different was extremely substantive and objectively bad.

    I have serious doubts that patent reform will happen. If the PTO doesn’t get its funding I think this is dead in the water. The question is whether prior user rights will fly if the PTO gets its funding.

    Without PTO funding this bill might as well die in my opinion.

    -Gene

  12. step back June 23, 2011 3:48 pm

    Gene,

    I have a bigger problem with the Constitutionality of Prior User Rights than I do with First-to-File.

    A party who asserts “Prior User Rights” is generally one who has concealed and secreted away certain novel technologies. That means they are not a “Dis-coverer” (one who uncovers for benefit of others that which they have found).

    The US Constitution explicitly reserves exclusive and superior rights to Dis-coverers, to wit:

    To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

    However, Prior User Rights give superior rights (which vitiate the promised “exclusive Right to their respective … Discoveries”) to those who conceal and secret away novel technologies as compared to those who first to Dis-cover or Un-cover for the benefit of promoting the general welfare and promoting the Progress of Science and useful Arts. That smells anti-Constitutional to me.

    Does anyone else sniff the same scent in the air these days?
    Maybe the Kabuki dancing has bedazzled away the common sense of smelling a rotten fish from those who should know better?

  13. Blind Dogma June 23, 2011 4:32 pm

    step back,

    I once again offer the Devil’s Advocate services (Stan is a bit behind on the Kool Aid Flavor Devil’s Firehot Brew) that hint that your concern here for the constitutionality has been offended at least once (and currently).

    You have not responded to the comments 4, 7 and 44 (comment 11 was just for fun) at Gene’s thread:

    http://ipwatchdog.com/2011/06/14/the-constitutional-argument-against-prior-user-rights/

    Once again – I await your thoughts.

  14. step back June 23, 2011 5:57 pm

    BD,

    I checked in on your comment #44 of the above link.

    From a strictly Kool-Aid POV, yes you are right. Congress does not “have to” obey the Constitution. Anyone can choose to not “obey” the laws.

    However, most folk here take it as a pre-supposition that Congress will try to obey the Constitution and that some Congress-critters actually care about doing the right thing. If that’s not true, why bother at all?

  15. Blind Dogma June 24, 2011 10:12 am

    step back,

    I checked in on your comment #44 of the above link.

    Please check in on all the comments – including Ron’s answer and my rebuttal (comment 7).

    No one, it seems, wants to look at the big White Elephant.

  16. Blind Dogma June 28, 2011 9:56 am

    Yet another Full Stop on examining the big White Elephant…

  17. Blind Dogma July 5, 2011 8:39 am

    What are the chances of any pundits picking up the White Elephant Hunt this week?