Is the End of Fee Diversion Dead in the Leahy-Smith America Invents Act?

David Boundy Thinks So

David Boundy (below) of Cantor Fitzgerald and co-author (with Phillip Furlang) of the forthcoming Patent Prosection (Oxford University Press) has been at the forefront of several important patent issues in the past decade, including notably the USPTO's ill-advised "claims and continuation" rules instituted by the Dudas Administration and blocked by Judge Cacheris' decision that the Office had exceeded its authority under 35 U.S.C. § 2(b).  He has also commented on the proposed Leahy-Smith America Invents Act, and today has the following message to the patent community.

House Insists on Its Prerogative of Fee Diversion

By David Boundy

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 startups that this bill takes away the legal machinery that venture capital and other investors need -- startup 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.  (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 importantly, please email me PatentProcedure [at] gmail.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.

One aspect of the current PTO situation (the backlog, concerns about "quality" and others) where there has been the greatest agreement among the several categories of stakeholders across all technology areas (who don't agree on much else) is that the practice of Congressional appropriators to raid PTO coffers to fund other government programs has been responsible for the Office's performance deficiencies.  If the patent "reform" enacted by Congress fails to address this issue (by putting limits on the practice if not including an outright ban), then patent reform will have little of the changes that formed the basis for the reform movement over the past decade.  More importantly, such a bill will not do the one thing its promoters have promised:  promote innovation to stimulate the economy.  This solution is no solution at all.

Comments

[EG]

David,

Congress is like an addict when it comes to fee diversion. Having acquired the habit in 1992, they simply can't kick it, no matter how much they promise they'll end fee diversion. As you correctly state, the only "good" provision in the oxymoronic America Invents Act is Section 22, and with its removal, this piece of legislation is a complete and utter sham. BTW, I've already, in writing and verbally, "screamed" at my local Congressman (who happens to be the Speaker) to OPPOSE this nonsense precisely because of the proposal to remove Section 22.

[Stan E. Delo]

Excellent article David, and I certainly hope many will take heed and take action to block this treacherous 1249 bill. I would like to add that e-mails to Congress will be useless in this case because it is way too late for them, you need to Call your Congressperson. Thanks to Kevin and Donald for posting this article.

Stan-

[6]

Meh, idk, at least it is progress towards not having it. Not every problem can be solved all in one go.

And, maybe the fund won't remain at 0$, and if so, then the office can use it the bill says.

Btw, the creation of a rainy day fund rather than ending fee diversion entirely isn't some huge to do.

[David Hoffman]

"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."

Evil? Really? Let's not exaggerate -- you'll have more credibility.

And where did you come up with the magic number of 3000 constituent phone calls?

[TJ]

Think it's not good vs. evil? What about the bill's removal of language that guards against deceptive intention? See Page 123, lines 9-11, 18-19, page 124, lines 3-5, 11-12, page 125, lines 2-3, 13-14, page 126, lines 21-22. A bill that promotes deceptive intention is evil.