WASHINGTON (Legal Newsline) - Last week, a bipartisan group of U.S. House lawmakers introduced legislation that would allow the U.S. Patent and Trademark Office to retain and use all of the user fees it collects.
The PTO is unique in that, compared to other federal agencies, it operates on fees collected by its users and not on taxpayer dollars.
For years, Congress has diverted about 10 percent of the fees the PTO collects to the U.S. general treasury.
Sponsors of the Innovation Protection Act argue the bill would benefit the patent system by eliminating the fear of diversion.
On Thursday, House Judiciary Committee Ranking Member John Conyers, D-Mich.; Reps. Jim Sensenbrenner, R-Wis.; Jerry Nadler, D-N.Y.; Trent Franks, R-Ariz.; Zoe Lofgren, D-Calif.; Doug Collins, R-Ga.; Ted Deutch, D-Fla.; Dana Rohrabacher, R-Calif; and Hakeem Jeffries, D-N.Y., introduced House Resolution 1832.
The legislation would create a revolving fund that will allow the PTO to retain all of the user-based fees paid by patent and trademark applicants and use the fees to support certain services.
Specifically, the Innovation Protection Act would establish in the general treasury a PTO Public Enterprise Fund to be used as a revolving fund by the office’s director without fiscal year limitation.
The legislation requires to be credited to or deposited in the new fund: (1) appropriations for defraying the costs of PTO activities; (2) fees collected under federal patent and trademark laws; and (3) any unobligated balances remaining in the Patent and Trademark Office Appropriation Account and in the Patent and Trademark Fee Reserve Fund.
This would replace the appropriation account and eliminate the fee reserve fund, and provide a source of permanent funding for the PTO.
“The current funding mechanism for the U.S. PTO has failed the patent system by not preventing the diversion of nearly $150 million in collected user fees in fiscal year 2013 due to the sequester and the estimated $1 billion in fees diverted over the last two decades,” Conyers explained. “In essence, there is a tax on innovation in this country, and this bill would repeal it.
“The permanent funding mechanism this bill creates is essential to encourage innovation and to ensure that our patent system remains the envy of the world.”
In particular, the Public Enterprise Fund would cover: (1) ordinary and reasonable administrative, operating and other expenses incurred by the director for the continued operation of PTO services, programs, activities and duties relating to patents and trademarks; and (2) expenses incurred pursuant to obligations, representations, or other commitments of the PTO.
Under the bill, the fees the PTO collects are to remain available to it until expended.
The legislation also requires the director, on an annual basis, to: (1) report to Congress with operation and spending plans, including financial details and staff levels broken down by each major activity; (2) provide for an independent audit of PTO financial statements; and (3) submit a budget to the President.
Brian Pomper, executive director of the Innovation Alliance, a group made up of research and development-focused companies, said Friday giving the PTO all of the fees it’s paid by patent applicants is the “single most important change” policymakers can make to improve the patent system.
“Over the last 20 years, approximately $1 billion in fees paid by patent applicants has been diverted from its proper use at the U.S. PTO,” he noted. “This unwarranted diversion of fees has resulted in more than 600,000 unexamined patent applications and more than 27 months in the average patent pendency time.
“Ending this tax on innovation is perhaps the one change to the patent law that unites stakeholders from all parts of the innovation ecosystem in the United States.”
Pomper said the alliance would work with Congress to pass the measure “as soon as possible.”
A PTO spokesman declined to comment on the bill.
From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.