Patent and Trademark Office
Cash Cow for Other Federal Programs

(March 19, 1998)  The U.S. Patent and Trademark Office, which will bring in $116 million more in user fees than it spends on its operations in FY99, was labeled a cash cow for other federal programs at an oversight hearing today held by the House Subcommittee on Courts and Intellectual Property.

Subcommittee Chairman Rep. Howard Coble (R-NC) criticized the diversion of user fees.  "I don't think that one penny ought to be diverted" ..."they ought to be exclusively used for the purpose collected."  "Serving these users is the whole point of the agency."

PTO Commissioner Bruce A. Lehman, who is a political appointee of Bill Clinton, testified in favor of continuing the diversion, pursuant to the "goal of balancing the budget."

The Subcommittee heard from a panel of witnesses representing intellectual property owners and users:

• David C. Stimson, President, International Trademark Association.
• Michael K. Kirk, Exec. Dir., American Intellectual Property Law Assoc.
• Norman L. Balmer, President, Intellectual Property Owners, and Chief Patent Counsel of Union Carbide Corp.
• Roger N. Coe, Intellectual Property Law Section of the American Bar Assoc., Bayer Corp.

The Subcommittee also heard from two representatives of PTO employee groups:

• Ronald J. Stern, President of the Patent Office Professional Association.
• Robert M. Tobias, President of the National Treasury Employees Union. 

Stimson testified that "everyone in Washington is fighting to get a piece of the pie. In this process, we must not forget that it is this nation's intellectual property which has allowed it to become the world's preeminent economic power.  Accordingly, the USPTO and the money it raises must not be seen as a "cash cow" to be milked by unrelated agencies and programs."

Similarly, according to Balmer: "Fee diversion is a major factor contributing to the current trend toward rising patent pendency, which has risen to 22.7 months.  In 1997, fee diversion forced an almost complete freeze on PTO hiring for most of the fiscal year, despite the fact that patent and trademark filings were continuing to rise steadily and backlogs of unexamined applications were rising."

"The most critical problem" at the PTO "is inadequate funding caused by the diversion of fees for unrelated programs." Kirk.

Making the PTO a Government Corporation

The solution, according to Coble and most of the witnesses, is transforming the PTO into a quasi-independent government corporation.  HR 400, which has passed the House, and S 507, would effect this transformation.   Tobias offered support for this legislation, "to make PTO a government corporation structured like a business and with increased human resource and personnel flexibilities."

PTO Inefficiency

Members of the Subcommittee, also questioned witnesses regarding funding, office space, personnel, caseloads, efficiency, automation, electronic filings, and delays.  Intellectual property owners were more blunt in their criticism.  Stimson stated that the "PTO is broken, but not beyond repair."

Lehman conceded that "it still takes a long time to register a patent or trademark."  The PTO must "hire more patent examiners."  As for the assertion that the PTO was inefficient, and technologically behind the times, he stated that the PTO does not use "vacuum tubes".

Patent Term Restoration

Rep. Ed Bryant (R-TN), who is not a member of the Subcommittee, was allowed to participate.  He  and Rep. James Rogan (R-CA) questioned Lehman regarding the Patent Term Restoration Act.  Lehman stated that "the administration has not fully considered that issue" but that he personally favors such a proposal.   See, HR 811.

Members of the Subcommittee who participated in the hearing included Howard Coble (R-NC), Bob Goodlatte (R-VA), Pease (R-IN),  James Rogan (R-CA), and William Delahunt (D-MA).  Prepared statements will likely get posted at the website of the House Judiciary Committee.