H.R. 1249, the America Invents Act, passed the House today with bipartisan support. The Senate passed its version of the bill (S. 23) on March 8th by a vote of 95 to 5.

Representative Mike Michaud (D-ME) voted in favor of the bill saying:

“We need to make it easier for companies to innovate and make things here at home, and this bill does that,” said Michaud. “Although I was disappointed that the bill did not improve the funding structure for the Patent and Trademark Office, I am pleased that provisions were added to make it better for U.S. manufacturing. This bill shows how effective Congress can be when both sides of the aisle work together. I look forward to working in a bipartisan fashion with my colleagues to further advance U.S. manufacturing and see this bill through the conference process with the Senate.”

Rep. Don Manzullo (R-IL) voted against the bill after proposing two amendments to a) totally transform the bill by simplifying it with a plan focused solely on reducing the huge backlog in patent applications, and b) eliminate one section of the bill that gives the Patent & Trademark Office the ability to set its own fees.  Both amendments failed.

“This bill would weaken our strong patent system that has protected American entrepreneurs for centuries from overseas companies trying to pirate their inventions,” Manzullo said. “Any patent reform we undertake should focus on reducing the backlog in patent applications, not dramatically altering the system and giving multinational corporations advantages over American innovators. The last thing we should be doing right now is giving foreign companies an even greater opportunity to take our ideas and our jobs.”

Manzullo also believes the bill is unconstitutional (earlier this month, the Supreme Court reaffirmed that patent rights belong to the inventor) and unnecessarily adds a new post-grant review provision that will further delay and add further litigation to the patent approval process.

The Innovation Alliance voiced its disappointment that the House of Representatives approved legislation that will not end permanently the diversion of user fees from the U.S. Patent and Trademark Office (USPTO):

“Along with many other patent stakeholders across a range of sectors and business models, we believe that the anti-fee diversion provisions approved by an overwhelming vote of 95-5 in the U.S. Senate and a 32-3 vote in the House Judiciary Committee offer the USPTO the reliability and structure it needs to reduce today’s significant backlog of 700,000 patent applications.  Reducing the patent backlog and strengthening the USPTO is essential for driving innovation, job creation, and economic growth.”

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General Debate Statement of the Honorable John Conyers, Jr. in Opposition to H.R. 1249, the America Invents Act

Our Nation’s patent system plays a critical role in the economic health of the United States and global leadership in innovative technology development.

But our patent system has long been in need of comprehensive reform.

Unfortunately, H.R. 1249 – or the misnamed America Invents Act – fails to meet this critical goal for several reasons.

Rep. John Conyers, Jr.

To begin with, the bill essentially will give large banks a special, new bailout at the expense of small inventors and the American taxpayer, and even worse, would do so on a retroactive basis.

The bill’s retroactive impact would constitute a an unconstitutional taking of property according to several highly respected constitutional law experts, including Professors Richard Epstein and Jonathan Massey.

As a result, the federal government would be forced to pay just compensation to the patent holders, which put taxpayers at risk of having to fund billions of dollars in payments.

Another concern is that the legislation undermines the false patent marking statute by retroactively changing the law applicable to pending enforcement actions.

The false marking statute prohibits manufacturers from falsely claiming that a product is or remains patent-protected beyond a 20-year term.

Public Citizen has explained that this provision “would completely remove the incentive to stop intentional false labeling of products as patented.”

Finally, the bill will give patent owners an opportunity to provide corrected or new information to the Patent and Trademark Office that was not previously presented or not accurately presented during the application process.

Currently, patents are unenforceable and invalid if they are fraudulently obtained.

So this new provision will be the equivalent to a “get out of jail free” card for firms that have not been truthful in seeking patent protection.

Not surprisingly, groups like the Generic Pharmaceutical Association recognize the problems this provision presents.

The Association states that the bill “could reward patent holders that knowingly falsify information in their original patent application with the USPTO or intentionally omit material information.”

Finally, H.R. 1249 would — for the first time in more than 220 years — convert the United States from a “first-to-invent” patent system into a European-style “first-to-file” patent system.

As a result, the bill would permit the Patent and Trademark Office to award a patent to the first person who can win a race to the patent office regardless of who is the actual inventor.

This is patently unfair to inventors.

I have supported similar clauses in past bills, but those measures included a grace period before conversion to a first-to-file patent system.  This bill contains no such grace period.

I am also very concerned that the move to first-to-file will favor multinational corporations, which are typically better staffed and funded to file applications.

And, the “first-to-file system” could force U.S. inventors to prematurely disclose their inventions, thus providing Chinese firms and other foreign entities opportunities to unlawfully exploit U.S. inventions overseas where intellectual property enforcement is lax.

It is for these and many other reasons that the bill is opposed by such a broad spectrum of groups, including the American Bar Association, the Patent Office Professional Organization, Innovation Alliance, Public Citizen, Eagle Forum, and others.

Without question, H.R. 1249 will benefit large multinationals at the expense of independent inventors and small businesses.

This bill will harm jobs, harm innovation, and harm our Nation.

Accordingly, I strongly urge my colleagues to vote no.

 

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June 21, 2011

VOTE NO ON H.R. 1249

SPECIAL INTEREST PATENT BILL BENEFITS FOREIGN MULTINATIONAL CORPORATIONS OVER U.S. INVENTORS

Dear Colleague:

Please join us in opposing H.R. 1249.  While we may have different concerns with the legislation, as Members of Congress including two former Chairs of the House Judiciary Committee, a former Chair of the Small Business Committee, and a former Chair of two Science, Space and Technology Subcommittees, we agree that this special interest bill will cost jobs, harm small start-up inventors, and stifle innovation and investment here in the United States.  In addition, the bill would violate the cut-go rules recently adopted by the Republican Majority.

We have just learned, that according to the Congressional Budget Office, the Manager’s Amendment would violate the new cut-go rules.  This is because the base bill is estimated to have a discretionary cost of $446 million over the next five years ($1.1 billion over the next ten years) and, the Manager’s Amendment, by undoing the anti-fee diversion language, eliminates a procedure that would have decreased the budget deficit by $ 717 million over five years.  The net result is that the Manager’s Amendment will leave us with a bill that increases discretionary costs by almost one-half billion dollars over five years.

The following is an effort to itemize the more additional concerns that have been articulated by various groups with respect to the legislation.

Stripping Fees from the USPTO – We oppose Section 22 of the Manager’s Amendment because it codifies the status quo: funding for the USPTO will be at the discretion of the appropriators.  Section 22 of the base bill would have allowed the USPTO to retain all of the fees it collects instead of those funds going to other governmental programs.  It had broad support and was the single issue which united stakeholders in the patent debate.  But the Manager’s Amendment creates a so-called compromise that amounts to little more than a promise to consider giving the USPTO access to the user fees it earns, a promise that has repeatedly been broken in the past.  Other than putting a name on the reserve fund, the substitute language operates in practice just like current law, which has left the USPTO crippled through unpredictability and inability to access its user fees.  H.R. 1249 will increase the size and responsibilities of the USPTO without insuring the agency will have the resources to meet these new challenges.  Innovation Alliance, American Bar Association, the Patent Office Professional Association, and the National Association of Realtors have all written letters stating their opposition to this so-called compromise language in the Manager’s Amendment.

Retroactive Challenge to Financial Business Method Patents – Numerous groups oppose Section 18 of H.R. 1249 because it provides large banks a special, new bailout at the expense of inventors and the American taxpayer, and even worse, would do so on a retroactive basis.  Section 18 establishes an unprecedented review procedure which would provide a “third bite at the apple” to attack a targeted group of financially-related business method patents that previously have been upheld through multiple examination, re-examination, and trial proceedings.  According to Constitutional law expert Jonathan Massey, Section 18 “would create a special class of patents in the financial services field subject to their own distinctive post-grant administrative review. . . It is special interest legislation, pure and simple.”  The provision may well contravene constitutional principles of Separation of Powers, insofar as it permits final judicial determinations of a patent’s validity to be overruled by an executive branch agency.  Section 18, in the view of distinguished Law Professor Richard Epstein, would also constitute an unconstitutional taking of property, thus triggering the Fifth Amendment obligation for the Federal Government to pay just compensation to the patent holders.  This means that U.S. taxpayers would be on the hook for the cost of the financial industry’s patent infringements.

Switching from First to Invent to First-to-File – Several groups oppose H.R. 1249 because they view the change to first-to-file as a dangerous and unconstitutional effort to overturn over 220 years of patent practice.  According to Article 1, Section 8: “The Congress shall have Power . . . [t]o 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.”  Section 3 of the legislation would convert the U.S from a “first-to-invent” patent system to a European-style “first-to-file” patent system.  Groups believe the legislation would effectively set aside the Constitution’s premise that an inventor is awarded a patent.  In its place, the U.S. Business Industry Council (USBIC) contends that “the first person who can win a race to the patent office” is awarded the patent.  The USBIC also contends that the bill’s approach, awarding a patent to the first person to file, as opposed to the first person to invent, “was rejected by the Constitutional Convention and by the First Congress, in which many of the Constitution’s framers sat.  It was specifically rejected by Thomas Jefferson, one of the members of the original patent board.”  Phyllis Schlafly of the Eagle Forum has explained the move to first-to-file “stacks the deck overwhelmingly in favor of large corporations who are better staffed and funded to file applications.”  These groups also argue that moving to a “first-to-file system” will force U.S. inventors to prematurely disclose their inventions, creating the risk that foreign firms, such as China where lax enforcement exists, will unlawfully exploit U.S. inventions overseas.

Genetic Diagnostic Testing Study May Complicate Discussion on Legality of Patenting Human Genes– A broad spectrum of groups oppose Section 27 of the Manager’s Amendment because it requires a study on methods to provide independent, confirming genetic diagnostic test activity where gene patents and exclusive licensing for primary genetic diagnostic tests exist.  The groups fear that any legislation at this time on genetic diagnostic testing has the potential to complicate pending litigation on the legality of patents on human genes.  The American Civil Liberties Union, the American Medical Association, the Breast Cancer Action, the Family Research Council Action, and others oppose Section 27 in the Manager’s Amendment.

Retroactive Elimination of False Marking Cases – A number of groups oppose H.R. 1249 because Section 16 undermines the false marking statute by retroactively changing the law applicable to pending enforcement actions.  Currently, the patent system confers a 20-year monopoly on rights to use of an invention.  The false marking statute enforces that term by prohibiting manufacturers from falsely claiming that a product is or remains patent protected beyond the term.  Public Citizen believes the bill “would completely remove the incentive to stop intentional false labeling of products as patented.  It would stifle innovation and mislead consumers simultaneously by undercutting the enforcement of the false marking law and deceptive product labeling of expired patents.” They believe, based on recent court decisions that have already imposed more restrictive standards concerning present claims, Section 16 would interfere in claims which are before the courts, and that providing a safe harbor for expiring patents compounds the retroactivity problem by insuring that almost all pending litigation will be eliminated.

Supplemental Examination and Patent Fraud – Others oppose H.R. 1249 because it would allow patent owners to provide corrected or new information to the USPTO that was not presented or not accurately presented during the application process.  Under current law, patents are unenforceable and invalid if they are obtained through fraud.  However, Section 12 would afford patent owners with the opportunity to request a supplemental examination of a patent to correct errors or omissions in proceedings before the USPTO.  As a result, the Generic Pharmaceutical Association believes Section 12 “could reward patent holders that knowingly falsify information in their original patent application with the USPTO or intentionally omit material information.”

Expanding Prior User Rights – Several universities and others oppose H.R. 1249 because Section 5 would expand the “prior user rights” defense to all patents.  Under current law, businesses may claim prior user rights as a limited defense against patent infringement when the patent in question involves a method of doing business and another party has invented the new method, but not yet filed a patent application for it.  If that method of doing business is later patented, the prior user is not liable for infringement to the patent holder.  The Wisconsin Alumni Research Foundation contends that “any expansion of prior user rights would shift the constitutional principle of disclosure to a system favoring trade secrecy.  By their very nature, trade secrets limit the dissemination of ideas, isolate scientific progress, and prevent society from sharing benefits that result from public investments in research.”  They believe this provision could create more uncertainty for small innovators and university-related start-up ventures which would have no way of knowing whether an invention might be subject to a manufacturer’s prior user rights.  They also note that Section 5 would deter private investment in early stage innovation while encouraging multinational corporations to increase use of trade secrets, thus undermining the fundamental goals of the U.S. patent system.

Attached is a list of groups which oppose H.R. 1249 or have expressed objections about specific sections of it.  You may also find letters and other materials concerning H.R. 1249 at http://democrats.judiciary.house.gov/issue/correspondence-related-materials-opposing-hr-1249-ldquothe-america-invents-actrdquo.

If you have any questions, please contact Jason Everett, Jason.Everett@mail.house.gov or Norberto Salinas, Norberto.Salinas@mail.house.gov at 225-6906 in Congressman Conyers’ office, Mike Lenn, Michael.Lenn@mail.house.govat 225-5101 in Congressman Sensenbrenner’s office, Phil Eskeland, Phil.Eskeland@mail.house.govat 225-5676 in Congressman Manzullo’s office or Tony DeTora at Tony.DeTora@mail.house.gov, at 225-2415 in Congressman Rohrabacher’s office.

 

Sincerely,

/s/ John Conyers, Jr.
Judiciary Committee Chairman (2007-2011)

/s/ F. James Sensenbrenner, Jr.
Judiciary Committee Chairman (2001-2007)

/s/ Donald Manzullo
Small Business Committee Chairman (2001-2007)

/s/ Dana Rohrabacher
Space and Aeronautics Subcommittee Chairman (1997-2005)
and Environment Subcommittee Chairman (1995-1997)

The following groups have serious concerns about H.R. 1249 or specific sections of the bill:
•U.S. Business and Industry Council
•National Association of Realtors
•Innovation Alliance
•American Bar Association
•ACLU
•Breast Cancer Action
•US-Israel Science & Technology Foundation (Sections 3 and 5)
•Public Citizen (Section 16)
•American Association for Justice (Section 16)
•Joan Claybrook, President Emeritus, Public Citizen
•National Consumers League
•Trading Technologies
•Patent Office Professional Association (POPA)
•Generic Pharmaceutical Association (Section 12)
•Eagle Forum
•Intellectual Ventures (Section 18)
•Data Treasury (Section 18)
•BlueTree Allied Angels
•Huntsville Angel Network
•Private Investors in Entrepreneurial Endeavors
•Institute of Electrical and Electronic Engineers (IEEE-USA)
•Wisconsin Alumni Research Foundation
•Brigham Young University
•University of Kentucky
•Hispanic Leadership Fund
•American Innovators for Patent Reform
•Angel Venture Forum
•National Association of Patent Practitioners (NAPP)
•National Small Business Association
•IPAdvocate.org
•National Association of Seed & Venture Funds
•National Congress of Inventor Organizations
•Inventors Network of the Capital Area
•Professional Inventors Alliance USA
•Public Patent Foundation
•Edwin Meese, III, Former Attorney General of the United States
•Let Freedom Ring
•American Conservative Union
•Southern Baptist Ethics and Religious Liberty Convention
•60 Plus
•Tradition, Family, Property
•Gun Owners of America
•Council for America
•American Civil Rights Union
•Christian Coalition
•Patriotic Veterans, Inc.
•Center for Security Policy
•Family PAC Federal
•Liberty Central
•Americans for Sovereignty
•Association of Christian Schools International
•Conservative Inclusion Coalition
•Oregon Health & Science University
•North Dakota State University
•South Dakota State University
•University of Akron Research Foundation
•University of New Hampshire
•University of New Mexico
•University of Utah
•University of Wyoming
•Utah Valley University
•Weber State University
•WeReadTheConstitution.com
•Family Research Council Action
•Friends of the Earth
•National Women’s Health Network
•Our Bodies Ourselves
•Center for Genetics and Society
•International Center for Technology Assessment
•Southern Baptist Ethics & Religious Liberty Commission
•United Methodist Church-General Board of Church and Society
•American Society for Clinical Pathology
•American Society for Investigational Pathology
•Association for Molecular Pathology
•Association of Pathology Chairs
•College of American Pathologists

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The U.S. Supreme Court granted cert. (for the second time!) in Mayo Collaborative Services v. Prometheus Labs., Inc, Supreme Court No. 10-1150, to consider whether to set limits on when inventors can patent medical diagnostic tests.

Earlier, the judgment was vacated and the case remanded to the U.S. Court of Appeals for the Federal Circuit for further consideration in light of Bilski v. Kappos, 561. The Federal Circuit, reversing the district court, upheld Prometheus’s patent claims covering a means to measure the level of 6-thioguinine (6-TG) and 6-methylmercaptopurine (6-MMP), which indicates that an adjustment in drug dosage may be required at certain metabolite levels.

The patent includes only two active steps, “administering” the drug and then “determining” metabolite levels.  The claim really just explains the correlation between metabolite levels and therapeutic efficacy and “what the inventors claim to have discovered is that particular concentrations of 6-TG and 6-MMP correlate with therapeutic efficacy and toxicity in patients taking AZA drugs.”  The district court decided as a matter of law that the asserted claims were drawn to non-statutory subject matter and as such, unpatentable.

Thankfully, cooler heads appear to have prevailed and the US Court of Appeals for the Federal Circuit has held that methods of treatment claims fall squarely within the realm of patentable subject matter. Prometheus Laboratories, Inc. v. Mayo Collaborative Services (08-1403).   The Supreme Court will review that ruling. The Court heard a case in 2006 that raised similar issues, but dismissed the case without issuing a ruling.

The question presented is:

Whether 35 U.S.C. § 101 is satisfied by a patent claim that covers observed correlations between blood test results and patient health, so that the claim effectively preempts all uses of the naturally occurring correlations, simply because well-known methods used to administer prescription drugs and test blood may involve “transformations” of body chemistry.

This will be an exciting (and tense) time for diagnostic companies after the Supreme Court, without explanation, declined to issue an opinion in Laboratory Corporation of America v. Metabolife Laboratories because the appeal was “improvidently granted.”  Justice Breyer (with Stevens and Souter) dissented.

Several medical associations have argued that patents on such diagnostic methods could impede the practice of medicine and raise the costs of medical treatment.  If that were the standard, all medical patents would be unpatentable.

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The one good feature of the “America Invents Act,” an end to fee diversion, is now removed.  Nothing remaining in the bill justifies the disruption and transition costs. Please ask your representative to vote no, and ask your clients to do the same. The bill is up for final vote on Wednesday (it has already passed the Senate, this is the final major vote), so urgent action is required.

In order to pass the bill through the Senate, Sen. Coburn added language that would permanently end fee diversion. Sen. Coburn’s amendment provided that all fees collected by the Patent Office would be available to the Office, with no possibility of tampering or mischief by Congress.

However, on Friday, House leadership leaked an agreement among Speaker Boehner and several committee chairmen regarding fee diversion, set out below. Note that the agreed language essentially tracks today’s 35 U.S.C. § 42(b) and (c), except it gives a fancy name to the earmarked account that’s been in existence for 19 years. It does not give the Office the right to spend the money it collects. Former staffers for the Congressional appropriations process have confirmed that there is no practical difference—Congress will still be able to take funds raised by the Patent Office, and give the PTO worthless IOU’s in return. IOU’s that the PTO cannot spend. IOU’s that the PTO cannot count on for multi-year planning. IOU’s that are useless for updating the PTO’s IT infrastructure. IOU’s that cannot hire new examiners or raise pay for existing examiners.

Sec. ___. 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 for obligation and expenditure by the Office for the purposes described in Section 42(c) of title 35, United States Code.

Because of the way House procedural rules operate, there is no longer an opportunity to change this or amend it. If the bill passes, fee diversion will continue.

If you haven’t already made up your mind on this bill, this should make it up for you. The proponents have not been able to counter the showings by the folks who create start-ups that this bill takes away the legal machinery that venture capital and other investors need—star-tup formation will fall precipitously, along with the innovation and jobs that they create. Proponents have been unable to give any numbers for cost savings of the bill that even approach the transition costs, let alone create savings after those transition costs are borne. The one thing that united the proponents of the bill was an end to fee diversion, and that’s now gone.

Now it’s up to you. All that’s required for the triumph of evil is for good people to do nothing. But all that’s required to stop this bill is about 3000 phone calls from constituents. Please go to www.house.gov and find your representative’s phone number, and phone today. (Phone. Emails won’t be read in time — the bill is up for a final vote Wednesday.)  Say these words:  “Please vote no on the rule for the patent bill, H.R. 1249, and vote no on final passage.” (“Vote no on the rule” means “don’t allow the bill to come to the floor for a vote.”) The person that answers the phone will not know enough to ask you detailed questions, those 19 words will do the trick. Then call five of your clients and ask them to do the same.

Second, and far less important, please email me PatentProcedure [at] gmail [dot] com, the names of companies (name of company, city and state, name of contact person, and an email address) that would be willing to sign on to a letter stating opposition to the bill of fee diversion is not ended.

Today’s post is by Guest Barista David Boundy, Vice President and Assistant General Counsel for a well-known financial services firm.

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News out of Washington is that the Patent Reform Act is off again.  The main issue of debate appears to be the U.S. Patent and Trademark Office funding provisions in H.R. 1249, “The America Invents Act.”

Section 22 of the Judiciary Committee reported bill allows the USPTO to retain all user fees to use for operations, preventing the fees from being redirected to other non-USPTO purposes.  The news came after a gaggle of modifications were submitted for vote.  See 86 pages of proposed HR 1249 Amendments here!

H.R. 1249, would move the U.S. to a “first-to-file” patent system similar to most of the rest of the developed world.  In contrast, the U.S. system relies on a determination of who invented first.  The bill creates a sort of “first-inventor-to-file” process in which priority will be given to patents that are filed first. However, it also creates a new “derivation” process that will be used to ensure that the first person to file for a patent is also the first inventor.

COPY WRONG: GOP FIGHT DELAYS PATENT BILL — The House Rules Committee postponed a planned Tuesday afternoon markup of legislation that would rewrite patent law because of an unresolved dispute over whether to give the Patent and Trademark Office full control over the money that it raises through fees or continue to require an annual congressional appropriation for its budget. House Majority Leader Eric Cantor’s office says he’s confident the bill will still be up this week, as planned. But it’s a serious enough disagreement that it will require either a “fix” or a change of heart by some of the opponents. Judiciary Committee Chairman Lamar Smith (R-Texas) criticized Speaker John Boehner (R-Ohio) for allowing the floor vote to be postponed during a closed-door session on Monday night, according to Republican sources who spoke to POLITICO’s John Bresnahan. Boehner said “he didn’t agree with how they dealt with fees or funding mechanism,” one of the sources added.

Proponents say PTO should be able to keep all of the funds it raises through fees — rather than worry about appropriators diverting a portion of its income for other programs — in order to address a backlog of pending requests. Opponents worry that taking PTO out of the annual appropriations process will give PTO too much autonomy and too little oversight. The bill would require the director of the office to submit an annual report to the appropriations committees in the House and Senate detailing PTO’s financial plans. Still, it’s a fight that pits authorizers (who would gain authority) against appropriators (who would lose it). Put Boehner in the appropriators’ camp on this one.

If you’re cynical (and I’m not saying I am) then you might be inclined to think that “patent reform” will go on and on as long as campaign contributions keep flowing in.

See the HR1249 Amendment Summaries here.

See the Managers Amendment by Rep. Smith here.

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Over 150 companies, associations, venture capitalists, unions, universities and innovation-focused entities  called on Congress to support keeping the U.S. Patent and Trademark Office funding provisions in H.R. 1249, “The America Invents Act.”

Section 22 of the Judiciary Committee reported bill creates a mandatory revolving fund in the Treasury to retain all user fees collected by the USPTO and to use the funds to run the operations of that agency.  Section 22 is necessary to prevent user fees collected from patent and trademark applications from being redirected to other non-USPTO purposes. Over the last two decades more than $875 million in user fees has been redirected to other governmental purposes in what amounts to a hidden tax on innovation.

The large set of signatories is notable because of its broad diversity. Adding their support for ending fee diversion and supporting the operations of the USPTO include the U.S. Chamber of Commerce, the Business Roundtable, the National Association of Manufacturers, the National Venture Capital Association, the American Association of Universities, the Biotechnology Industry Association, the Financial Services Roundtable, the International Federation of Professional & Technical Engineers, and many others.

Although each of our organizations has varying views on the reforms contained in H.R. 1249, we unanimously support Section 22 and believe that it is the cornerstone of any patent reform legislation. Absent a statutory mechanism to prevent future fee diversion, as we have seen all too often in previous years, the existing and new responsibilities vested in the USPTO will suffer, the ability of the USPTO to plan long-term and build the agency our innovation economy demands will be frustrated, and the job-stifling patent application backlog will continue.

See PTO Fee Diversion Letter here.

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It looks like the Patent Reform Act is no longer a done deal.  Tuesday afternoon, Rep. Harold Rogers (Chairman of the House Appropriations Committee) and Rep. Paul Ryan (Chairman of Budget) wrote a letter to Rep. Lamar Smith (Chairman of the Judiciary) insisting on maintaining the power of these two committees to control the Patent Office’s money received as user fees.

Section 22(c) USPTO Revolving Fund-

    (1) ESTABLISHMENT- There is established in the Treasury of the United States a revolving fund to be known as the `United States Patent and Trademark Office Public Enterprise Fund’. Any amounts in the Fund shall be available for use by the Director without fiscal year limitation.

In the past, Congress has been very fond of fee diversion — that is, diversion of user fees paid to the U.S. Patent and Trademark Office (USPTO) to other non-USPTO purposes.  For many years, Congress “diverted” about 10% of the fees that the USPTO collected into the general treasury of the United States. Since 1992 close to $1 billion in fees have been diverted.

Reps. Rogers and Ryan think that spending money should only be in the purview of Congress:

We strongly oppose this proposed shift of billions in discretionary funding and fee collections to mandatory spending. … Placing PTO spending on mandatory auto-pilot as outlined in H.R. 1249 would also hand the Congressional “power of the purse” — bestowed in the Constitution — to the Obama White House, and essentially eliminate the ability of Congress to perform substantive oversight of the PTO.

With the U.S. national debt currently at about $14,400,000,000,000 (yes, it’s really that many zeros), you could argue that putting Congress in charge of spending hasn’t exactly turned out swell so far.

Judiciary Committee Chairman Smith, Ranking Democrat Conyers, Subcommittee Chairman Goodlatte, Ranking Democrat Watt, and others on the Judiciary Committee have been committed to ending the diversion of user fees, particularly through support for Section 22 of the Act despite calls to remove it or to amend it in ways that would make it ineffective.

Sen. Tom Coburn then sent his own letter to Reps. Rogers and Ryan telling them to suck it:

Section 22 would not hand the “power of the purse” to the Obama Administration, put the PTO on “auto-pilot,” or eliminate the ability of Congress to perform oversight of the PTO. The “power of the purse” does not provide Congress authority over non-taxpayer funds. Although the PTO is subject to the appropriations process, it does not use taxpayer money. Rather, PTO receives fees paid by users who file patent and trademark applications—fees paid by small inventors, companies, and universities to protect their ideas and technology. Those fees are deposited into the general fund at the Treasury, and then PTO must request appropriations. However, when PTO’s fee income is greater than Congressional appropriations, we spend “excess” fees on other general revenue purposes, rather than providing applicants the high quality PTO services for which they paid.

What Now?

Go to www.house.gov to find your Representative’s contact info.  To schedule a meeting, many offices will want you to FAX in a request letter.   Second best is a phone call to your district office (not the D.C. office).   Third best but better than nothing is an email. You can get help with some of these contacts from Reform AIA.

It’s crucial to act now.

 

See the Rogers and Ryan Letter to Cantor here.

See the Coburn Letter to Ryan and Rogers here.

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