Several sources are have reported that H.R. 1249, which is the House version of the patent reform bill (S. 23) passed 93-3 by the Senate in March, will be coming up for a floor vote as early as this week. Although no one should rationally expect smooth sailing for any bill, passage of the bill by the House seemed likely when the House Judiciary Committee reported it out favorably on a non-partisan 32-2 vote just a month ago.
However, the bill appears to be heading straight into a couple of major storms.
The first tempest swirls around the change from a “first to invent” to “first inventor to file” system. Fifty-two members of the House have asked the House Rules committee to schedule at least 20 minutes for debate on the constitutionality of the first inventor to file provisions in the bill. Others members believe that it disadvantages small businesses and independent inventors.
Opponents of the change argue, among other things, that, for small businesses, the decision to seek a patent is a substantial expense, and that small businesses will be forced to spend that money earlier to avoid losing rights, and to make that decision before there is sufficient opportunity to raise money or to test the waters by trying to sell the invention. Those questioning the constitutionality of the proposed new law argue that granting the patent to anyone other than the earliest true inventor exceeds the power given to the Federal government under the constitution for establishing a patent system.
The second tempest involves a provision that ends “fee diversion.” Ending fee-diversion might actually be the most important part of the bill. It would likely have the most immediate and positive impact on all participants in the patent system, big and small.Fee diversion refers to the practice of appropriating to the Patent and Trademark Office (PTO) each year an amount less than the fees it collects.
Most seem to agree that ending fee diversion is necessary in order for the PTO to work through its huge backlog of patent applications, improve examination, reduce pendency time, upgrade its infrastructure, and handle additional responsibilities it is being given under H.R. 1249 and S. 23. Those supporting the bills generally believe that the long time it takes to obtain a patent discourages investment in new technology and products, and that improperly granted patents impose unnecessary expenses and inefficiencies on the system and those being sued for infringement of these patents.
Under Section 22 of both H.R. 1249 and S. 23, fees collected by the Patent and Trademark Office (PTO) would be deposited into a special, revolving fund. The PTO would be permitted to withdraw at any time all amounts deposited to cover “ordinary and reasonable” expenses incurred in the administration and operation of the PTO. Coupled with the Director of the PTO being given fee setting authority, the expectation is that the PTO would be able to collect sufficient funds for enabling it to correct its problems and meet all of its responsibilities.
Nevertheless, several important members of the House have expressed “strong” opposition to Section 22, arguing that the fund in effect, creates mandatory spending for the USPTO and “undermines” congressional oversight of the PTO by removing the “power of the purse.” The chairs of the House Appropriations and the House Budget Committees, each a Republican, have requested the bill’s sponsor, Lamar Smith, who is a Republican and the chair of the House Judiciary Committee, to delete the section or amend it to provide for greater oversight, prior to consideration of the bill on the House floor. They voiced concerns that “putting PTO funding on autopilot” would be “a move in exactly the wrong direction, given the new Republican majority’s commitment to restraining spending, improving accountability and transparency, and reducing the nation’s unparalleled deficits and debt.”
The chair of the Appropriations committee, joined by other members of the committee, also asked the Majority Leader of the House to delay the bills consideration on the floor until Section 22 is deleted or modified to give greater oversight.
The bill already requires an annual audit and report to Congress. Thus, the opposition seems to be more about politics and retaining the ability to divert fees than retaining oversight. The sponsor of the bill is a Republican. Almost all of the Republicans in the Senate voted to pass a corresponding bill in the Senate (S. 23) containing the same provision. Most of the Republicans on the House Judiciary Committee voted to report the bill favorably last month. The bill is actually one of the few pieces of legislation that has almost bi-partisan support. Everyone has touted the bill as being good for American business.
No one can argue that dealing with the mounting debt of the Federal government is one of the most important issues facing the United States. Personally, I am also very concerned with uncontrolled spending. However, everyone seems to agree that functioning of the PTO must be addressed — that it is important to the long-term success of our technology-based businesses, and thus also to the nation. Because the Congress has done such a poor job over the last 10 to 15 years in overseeing the PTO, I think that we have no choice but to give the PTO the authority to collect fees from its users (not from anyone else) and spend all of those fees as reasonably necessary to ensure proper functioning of the PTO.
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