Sequestration Politics Places USPTO Satellite Offices on Hold

On Friday, July 19, 2013, Acting Director of the United States Patent and Trademark Office Teresa Stanek Rea explained on the Director’s Forum:

Today I want to update you on the progress of our satellite offices in Dallas, Denver, and Silicon Valley, locations we identified in July 2012 as part of an America Invents Act (AIA) mandate. Given current budget constraints under sequestration, our efforts to move into permanent spaces for those three locations will be delayed, but continuing to operate from the temporary spaces and striving to grow our presence in the satellite office locations remains a top agency priority.

The USPTO is getting caught up in the sequestration budget battles despite the fact that the USPTO is fully user funded. As a result the USPTO stands to lose close to $150 million in Fiscal Year 2013, which runs through September 30, 2013.

There is a legislative proposal pending in Congress that would exempt the USPTO from sequestration, which was filed by the Members of Congress that represent Silicon Valley. See PATENT Jobs Act Seeks to Exempt USPTO from Sequestration.  Silicon Valley would be the home to one of the new USPTO satellite offices if the agency had the money to open.

The AIPLA is heavily engaged in this issue. According to AIPLA Executive Director Todd Dickinson, “AIPLA certainly backs the bill and are 100% in support of Congressman Honda’s efforts.”  Congressman Mike Honda (D-San Jose) is the primary point person on the PATENT Jobs Act; he is supported by Congresswoman Zoe Lofgren (D-San Jose) and Congresswoman Anna G. Eshoo (D-Palo Alto) as co-sponsors.

These Representatives from Silicon Valley also spearheaded a joint letter to Congressman Frank Wolf (R-VA) and Congressman Chaka Fattah (D-PA), who are respectively the Chairman and the Ranking Member of the Subcommittee on Commerce, Justice, Science of the House Appropriations Committee. See 17 Members of Congress Push to Exclude USPTO from Sequestration.

Congressman Wolf has not been very receptive thus far. In fact, at a hearing on July 10, 2013, he stated that the USPTO is not telling the truth if they say that they do not have enough money to open the satellite offices. See Subcommittee Hearing Video at 59:30. He also says that his hands are tied and that there is nothing he can do.

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Frankly, it wass disingenuous for the Office of Management and Budget to say that the USPTO is covered by sequestration. See AIPLA Challenges OMB and Substantial Budget Uncertainty. It is further disingenuous for Congressman Wolf to pretend that there is nothing that he can do. Of course there is something that can be done, Congressman Wolf is simply choosing not to do anything.

This USPTO budget episode is all to familiar to those in the patent community. The USPTO has been the petty change piggy-bank of the United States government for a generation. Yes, $2 or $3 billion is real money, but in the face of a nearly $4 trillion budget and when the USPTO is fully funded by user fees it is quite a slap in the face of the industry to say Congress is powerless to allocate 100% of user fees collected by the USPTO.

More troubling is the fact that the USPTO has recently raised its fees across the board and quite significantly. Those in the industry grumbled a bit but ultimately acquiesced provided that the USPTO be allowed to keep the money to invest and re-invest in infrastructure and human resources. The battle was fought as a part of the America Invents Act (AIA) and Senator Coburn wanted to write into law that the USPTO would get to keep and spend 100 cents of every dollar paid by users. The House of Representatives, specifically Congressman Hal Rogers (R-KY) and Congressman Paul Ryan (R-WI) protested. See House Republicans Oppose Adequately Funded Patent Office. Ultimately Rogers promised via a letter that the statutory language would allow the  USPTO to keep the funds it collects. Although a letter is not binding and everyone knew that the House objected to this being law because they had no intention of ever agreeing to this long-term, it is still shocking that the agreement didn’t even last two full years.

While what Congressman Wolf says seems disingenuous, if you read between the lines it seems to me his position has more to do with the Republican philosophy with respect to sequestration in general and not any particular animus toward the Patent Office. Although with sequestration in full gear the Senate is moving on a budget, the Senate did not previously move on a budget for nearly 4 years, which caused the government to operate on a never ending series of Continuing Resolutions, which essentially locked in extremely elevated levels of spending year after year.

With sequestration finally cutting the Republicans don’t seem to be in any rush whatsoever, so the Patent Office which really should be exempt is caught in the cross hairs. Although it is easy to point at Congressman Wolf, a Republican, and say the Republicans are to blame, that would be a mistake. Senator Tom Coburn (R-OK) is a Republican and he fought to fully and fairly fund the USPTO. Furthermore, the reason the USPTO is bound by sequestration is thanks to the interpretation of the Office of Management and Budget. OMB is a part of the Executive Branch, so the President is in no way blameless. He has no trouble ignoring Congress when it suites him (i.e., the health care employer mandate delay) but when an argument could logically be made that the USPTO is not covered by sequestration no such argument was made. Thus, this is less a political issue than it is really bad kabuki theater.

So, for now, the satellite offices are on hold and will remain on that status it seems until there is budget certainty, which unfortunately seems unlikely any time soon.

FY 2014 Budget Rumors

Incidentally, there have been some reports circulating suggesting that suggested there would be an additional budget cuts to the USPTO in FY 2014. The report from BNA explained that President Obama requested $3.071 billion for the USPTO for FY 2014, but that the proposed budget in Congress would fund the USPTO to the tune of $3.024 billion, which would represent a cut of $47 million.

From what I am hearing that is not entirely correct to look at this development as anything unusual, and certainly not a cut.

Every year the United States Patent and Trademark Office makes budget projections and submits a request for funding, which is funneled to Congress through the President’s budget requests. Likewise, the Congressional Budget Office makes budget recommendations, including for the USPTO.  The CBO estimates are independent of the USPTO submitted projections. The CBO budget projections are invariably different, and almost always less than the USPTO projections. The Committee ultimately went with the lower CBO budget estimates, which is what typically happens.