Earlier this month Congressman Gary Palmer (R-AL) and Senator Mike Lee (R-UT) simultaneously introduced the Agency Accountability Act of 2017 (AAA) in both the House of Representatives (HR 850) and the Senate (S. 299), respectively. The AAA is a bill that would direct most fines, fees, and other unappropriated proceeds to the Treasury, making them subject to the appropriations process. Senator Rand Paul (R-KY) is co-sponsoring the S. 299 in the Senate, while there are currently 55 co-sponsors of the HR 850 in the House.
Senator Lee and Congressman Palmer explained that the Agency Accountability Act is designed to re-exert Congressional authority over agencies, which have been spending funds on programs not approved by Congress.
“Over time, Congress has given away their power to raise funds to the executive, allowing federal agencies to collect fines, fees, and other revenues outside of the normal appropriations process,” Senator Lee said. “While a significant portion of these fees and funds are used to offset appropriations, agencies have been known to use some of the fees to self-fund programs that have not necessarily been approved by Congress. This bill is an important step towards increasing transparency, simply by bringing all funds back where they belong – under congressional oversight and authority.”
“For too long Congress has granted federal agencies the authority to collect fines, fees and other revenues outside of their appropriated funds with little to no Congressional oversight on how the monies are spent,” Congressman Palmer explained. “Congress’ power of the purse is exclusive and absolute and we must begin reclaiming our Article I authority. I am proud to team up with my colleague Senator Mike Lee on this important piece of legislation in both the House and Senate. ”
The text of the AAA, which is not long, starts by saying that regardless of any other provision of law, proceeds from agencies shall be deposited in the general fund of the Treasury. The text specifically reads:
Notwithstanding any other provision of law, and consistent with subsection (c), an agency that receives a fee, fine, penalty, or proceeds from a settlement shall deposit such amount in the general fund of the Treasury.
The exception under subsection (c) says that amounts that otherwise must be paid to whistleblowers are exempt from being deposited in the general fund of the Treasury.
Interestingly, only two government entities are exempt from the requirement that proceeds be turned over to the Treasury — the United States Postal Service or the United States Patent and Trademark Office. See Section 2 (e). The USPTO, however, would be required no later than March 1 of each year to submit to Congress a report that describes any fee, fine, penalty, or proceeds from a settlement collected by the Office for the previous fiscal year.
So why would the USPTO be exempted from having its funds deposited in the general fund of the Treasury? Few battles have united the stakeholder community the way fee diversion has, and the last big fight was during the America Invents Act (AIA) in 2011.
The language of the AIA is quite peculiar on the issue of the USPTO keeping the fees it collects, and to some large extent misleading. A quick read suggests that the AIA put an end to fee diversion because the USPTO will be allowed to keep and use 100% of fees collected. The AIA says:
There is established in the Treasury a Patent and Trademark Fee Reserve Fund. 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 in accordance with paragraph (3).
However, 35 U.S.C. 42(c) says that the USPTO can only use the funds to the extent that they have been appropriated. Any funds collected in excess of what has been appropriated goes into the reserve fund. So Congress retained the right to appropriate funds to the USPTO, and there is a promise that the funds held in the reserve fund would only be used for obligations and expenditures by the USPTO. Of course, no prior Congress can bind a future Congress, so the ability for the reserve funds to remain available for use by the USPTO will always remain at the discretion of Congress. Indeed, rumors (at the whisper level) suggest that at least some in Congress would love nothing more than to raid the USPTO reserve fund. So fee diversion has not been ended as much as the industry has achieved an uneasy armistice.
So why is the USPTO specifically excluded from this particular government wide agency fee diversion? That is a very good question. While we might like to think it is because Congress believes it is important for the Office to retain their funds, that sentiment doesn’t really seem to fit the narrative on Capitol Hill. In recent years there have been numerous questions about USPTO management, particularly relating to the computer systems that never seem to improve no matter the investment made. And, of course, there is the history of the Congress raiding the USPTO budget dating back to at least 1992.