House Subcommittee Adopts Bill to End Diversion of PTO Fees

(March 26, 2000) The House CIP Subcommittee reported a bill that requires all fees collected by the U.S. Patent and Trademark Office be used to fund the USPTO. Currently, some fees are diverted to fund other government programs. Critics on the Subcommittee say that this constitutes a hidden tax on intellectual property owners, and impairs the operations of the USPTO.

The House Judiciary Committee's Subcommittee on Courts and Intellectual Property (CIP) approved HR 4034, the Patent and Trademark Office Reauthorization Act, by a unanimous voice vote on Thursday, March 23.

	Rep. Howard Coble (R-NC)

Rep. Howard Coble (R-NC), the Chairman of CIP Subcommittee, and sponsor of the bill, stated that HR 4034 prevents the diversion of fees collected by the U.S. Patent and Trademark Office.

"The bill accomplishes this goal by amending two key provisions of Section 42 of the Patent Act, which prescribe the PTO funding mechanism. First, the requirement in subsection (b) that all agency funds be credited to a special PTO appropriations account is deleted. Instead, such funds are to be credited at a PTO in the Treasury. Second, the requirement in subsection (c) that subjects agency access to, and the expenditure of collected fees, to appropriation, is also deleted. This means that the Commissioner will have the authority to collect all fees, and use them, for agency operations until expended. The appropriators are not involved. This is a necessary bill for reasons that are known by all who serve on our subcommittee."

Rep. Howard Berman (D-CA) gave his "whole hearted support to HR 4034". "This will accomplish objectives that we all support by ensuring that the PTO can retain and use all of the fees that it collects."

"We are already seeing the deleterious effects of inadequate funding in ballooning pendencies for patent and trademark applications, unacceptable lengthy re-examination and administrative proceedings. And perhaps the most disturbingly, the emergence of serious questions about the quality of many patents issued in the software, business method, and genetic areas," said Rep. Berman.

Rep. Zoe Lofgren (D-CA) also briefly spoke in favor of HR 4034.

USPTO Commissioner Todd Dickenson submitted testimony to the Court and Intellectual Property Committee on March 9, 2000 regarding USPTO fees and funding. He stated that "For FY 2001, the President recommended that we be given authority to spend $1,038.7 million of the fee revenues we generate. ... In FY 2001, we expect to process $1,151.6 million in revenues ..."

Rep. Coble also condemned the practice of using patent and trademark fees for purposes other than running the USPTO at this March 9 hearing.

"It pains me that the focus of our hearing, as it has been in the past, will be the continuing diversion of PTO funds from the agency to other government programs. More specifically, by the end of the present fiscal year, the agency will have lost more than a half-billion dollars attributable to diversions, rescissions, and other budgetary sleights-of-hand. It is my further understanding that if the President’s budget is adopted by the appropriators, this figure will grow to nearly $700 million by the end of fiscal year 2001. Our witnesses understand how this harms PTO operations, and ultimately how it can harm that sector of our economy that is dependent on the creativity of inventors. I pledge that our Subcommittee will work in a bipartisan manner with those in the inventor community to do whatever is viable and necessary to reverse this trend."

Kim Muller of the International Trademark Association testified on March 9, calling this practice a "hidden tax on intellectual property owners". Muller added that "[t]hese fiscal practices are already having a detrimental effect on PTO operations."

Ronald Myrick, President of the Intellectual Property Owners Association, also submitted testimony. He stated that "we believe the magnitude of the problem is now such that fee withholding may be crippling the ability of the PTO to provide high quality professional examination and prompt patent and trademark processing."

The subcommittee approved the bill by a unanimous voice vote at its markup session on Thursday afternoon, March 23. Those present for the vote were Howard Coble (R-NC), Howard Berman (D-CA), Mary Bono (R-CA), John Conyers (D-MI), Bob Goodlatte (R-VA), Zoe Lofgren (D-CA), and Robert Wexlar (D-FL).

When Rep. Ed Pease (R-IN) arrived a few minutes later, the subcommittee had a reporting quorum, and proceeded to vote to report the bill to the full Judiciary Committee by a unanimous voice vote.