Patent Reform: House Passes America Invents Act 304-117

Congressman Lamar Smith (R-TX)

At approximately 5:50pm the United States House of Representatives passed H.R. 1249, which is known as the America Invents Act, by a vote of 304-117.  This bill differs from the Senate version of patent reform, S. 23, so there will be no bill going to the desk of President Obama just yet.  There are important differences between the two bills, chief among them is funding for the United States Patent and Trademark Office.  The bill passed by the Senate put an end to the practice of fee diversion, which occurs when the Congress appropriates the USPTO less than they collect in fees.  The excess in the fees collected from users of the USPTO then go to the federal government as general revenues and are used for purposes other than the operation of the United States Patent and Trademark Office.

Prior to passage in the House, Senator Tom Coburn (R-OK), who was the champion in the Senate of the provisions that would end the practice of fee diversion, issued the following press release:

“For too long tomorrow’s inventions have been stymied by today’s incompetence in government.  It is outrageous for Congress to take fees paid by Americans for a specific service and spend those dollars on other programs.  Since 1992, Congress has pilfered nearly $1 billion in user fees dedicated to the Patent and Trademark Office and spent those dollars elsewhere.  As a result, we have 700,000 patents waiting for a first review that, if approved, could help get our economy moving again,” Dr. Coburn said.

“The Senate voted to end this egregious practice by a margin of 95 to 5 when it passed legislation this March that included an amendment I offered to end fee diversion once and for all.  The House, unfortunately, decided to water down this language and allow the Appropriations Committee to control this account.  Unfortunately, the Appropriations Committee has a poor record of managing such accounts responsibly and honestly in this area and others.  For instance, the Appropriations Committee has stolen billions from the Crime Victims’ Fund and other funds,” Dr. Coburn said.  “There is no reason to believe they won’t continue to do the same with the patent account.”

Indeed, now the fight will go back to the Senate where Senators will be asked to swallow the changes adopted by the House of Representatives, which seems unlikely.  Senator Patrick Leahy (D-VT) and Congressman Lamar Smith (R-TX), who are the respective champions of the bills in the two chambers will likely want to find compromise language that can pass both the House and the Senate.  I have been told that a formal Conference on the bill is unlikely, which would mean that the Senate would need to hammer out language acceptable to the Senate while also being acceptable to the House.

Already interest groups are lining up to vow to fight on.  One particular interest group, the Innovation Alliance, continues to fight the good fight with many others on the issue of fee diversion.  Innovation Alliance Executive Director Brian Pomper released the following statement today shortly after the U.S. House of Representative’s vote on H.R. 1249, the America Invents Act:

“The Innovation Alliance is disappointed that the House of Representatives has approved legislation that will not end permanently the diversion of user fees from the U.S. Patent and Trademark Office (USPTO).

“Along with many other patent stakeholders across a range of sectors and business models, we believe that the anti-fee diversion provisions approved by an overwhelming vote of 95-5 in the U.S. Senate and a 32-3 vote in the House Judiciary Committee offer the USPTO the reliability and structure it needs to reduce today’s significant backlog of 700,000 patent applications.  Reducing the patent backlog and strengthening the USPTO is essential for driving innovation, job creation, and economic growth.

“We will continue to work with lawmakers and other stakeholders to ensure that any patent bill that becomes law ends fee diversion permanently.”

I expect there will be many more interest groups that protest the removal of provisions that would end fee diversion once and for all.

Meanwhile, David Kappos, Under Secretary of Commerce for Intellectual Property and the Director of the United States Patent and Trademark Office, issued the following statement upon passage of the America Invents Act in the House of Representatives:

I want to congratulate the House of Representatives for passing the Leahy-Smith America Invents Act today, and to again thank Judiciary Chairman Smith, Subcommittee Chairman Goodlatte and Ranking Member Watt, as well as the House Leadership, for their stewardship of this critical legislation.

The effort to reform our nation’s patent laws began a decade ago, and House passage today brings patent reform a significant step closer to becoming law. This bi-partisan legislation will transform our patent system, enhance our Nation’s competitiveness and promote economic growth and job creation.

We are encouraged by the statements of so many Members of Congress calling for the USPTO to have full access to all of its fee collections. We are particularly thankful to Chairman Rogers for his commitment to ensure that the USPTO has full access to its fees when fee collections exceed Congress’ annual appropriation for USPTO. Full funding of the USPTO is necessary for the USPTO to successfully implement this legislation and to more effectively perform its core mission.

We are hopeful that this critical legislation can move expeditiously toward final passage and enactment.

Kappos seems far more optimistic than many, perhaps being constrained by the position and negotiating position of the Obama Administration.  Most observers are not at all thankful for the role of Congressman Hal Rogers (R-KY).  See Lack of Commitment to PTO Funding.  It was Rogers who protested the end to fee diversion and inserted language instead that does not guarantee the USPTO will be able to access 100 percent of the user fees it receives.  The USPTO will still only be able to access that percentage of user fees that are given to them through appropriations Acts.  That is the way business is conducted presently; it changes nothing.  Worse, the appropriators in the House of Representatives are responsible for siphoning off nearly $1 billion over the last 20 years.  So a promise in a letter not to divert fees rings hollow given past actions and the reality that the legislation does not require an end to fee diversion.  Simply stated, a promise from Rogers means nothing if the House was not willing to put it into binding form in the form of passed legislation.

Frankly, it seems unlikely to me that the Senate would accept the removal of provisions that will end fee diversion, and I have even more difficulty believing the Senate will accept across the board prior user rights.  Of course, little has been predictable in the process of patent reform so far over the past 6 years.  In truth, the only thing predictable about patent reform efforts is that the process has been, and likely will remain, unpredictable.