Patent Reform Back to Senate After Labor Day

Senate Majority Leader Harry Reid (D-NV)

Yesterday Senate Majority Leader Harry Reid (D-NV) filed cloture on the motion to proceed to H.R.1249, the Patent Reform bill passed  by the House of Representatives by a vote of 304 – 117 on June 23, 2011.  By unanimous consent, the cloture vote for H.R. 1249 will occur on Tuesday, September 6, 2011.

What is cloture?  Cloture is the only procedure by which the Senate can vote to place a time limit on consideration of a bill or other matter, and thereby overcome a filibuster. Under the cloture rule (Rule XXII), the Senate may limit consideration of a pending matter to 30 additional hours, but only by vote of three-fifths of the full Senate, normally 60 votes.  Without 60 votes cloture fails and debate continues.  Unfortunately for those who would like to see patent reform derailed, the fact that there was unanimous consent in the Senate for a cloture vote almost certainly suggests that there will be at least 60 votes to end debate on H.R. 1249, which will bring it to a vote, likely sometime later in the week of September 6.

The handwriting is on the wall.  It does not appear as if there is an appetite in the Senate for a fight, which means that the Senate will capitulate to the House view of patent reform, which made the Senate version, S. 23, substantially worse.

Let’s be honest.  This is NOT patent reform, it is patent change.  The ONLY thing that could in any way be characterized as patent reform is the so-called Coburn Amendment, which was part of what passed the Senate by a vote of 95-5, and which would have given the United States Patent and Trademark Office access to 100% of the fees they collect for services promised.  The House removed that language, making the USPTO continue to get its funding at the pleasure of appropriators.  So the USPTO will get to keep 100% of the fees they collect provided that is not inconsistent with appropriations bills.  Not inconsistent?  This is the same place where we have been, which has lead $800 million siphoned off from the USPTO since 1992.

For those who are skeptical, here is what former Congressional Budget Office Director Douglas Holtz-Eakin had to say about fee diversion in a letter he sent to Senator Reid and Senator Mitch McConnell (R-KY):

The United States Patent and Trademark Office (USPTO) is entirely funded by user fees. At present USPTO has significant financial needs to address shortfalls in serving its users, and both H.R. 1249 and S. 23 greatly expand the responsibilities of the agency. In these circumstances, it is not surprising that analysts, USPTO stakeholders, and policymakers have expressed a desire to ensure that any such fees not be siphoned off to general revenue. That is, the agency should at least be authorized to spend all of the fees that it collects, subject to Congressional oversight.

H.R. 1249’s anti-fee diversion language would not guarantee that fees paid by USPTO users would be dedicated for use by USPTO. In short, the USPTO would not be authorized to spend the fees it collects nor does the measure ensure that fees will not be diverted elsewhere. Although H.R. 1249 sets up a Patent and Trademark Fee Reserve Fund at the Treasury Department, the Reserve Fund would not hold actual monies, but would simply hold IOUs. As with other “Reserve” and “Trust” funds in the Federal Government, the funds could used for general government spending. USPTO would not have access to the “excess fees” deposited into the Fund apart from the annual Congressional appropriations process. Hence, despite the budgetary aparatus, there would be no effective difference from current law.

As you are aware, the current appropriateions law has allowed Congress to divert more than $800 million of user fees paid to the USPTO to other general revenue purposes. The establishment of the Patent and Trademark Fee Reserve Fund in H.R. 1249 would be ineffective in stopping the diversion of fees from USPTO.

In comparison, the Senate bill creates a USPTO Public Enterprise Fund at the Treasury Department, which would receive all fees paid to the USPTO and which would be available to USPTO when needed. The funds would not be funneled through the Congressional appropriations process and would, therefore, not be exposed to the threat of being diverted to general government spending.

In other words, all the Senate would have to do is demand what they rightfully added to S. 23.  Capitulation to the House will continue to allow for siphoning off of user fees.

I must be a wild-eyed optimist because the capitulation of the Senate, although I have been hearing that was likely for weeks, still surprises me.  It surprises me because of the near sibling-like rivalry between the House and Senate, and the fact that the House bill is a bad bill.  It also surprises me because after carefully watching what transpired in the Senate to get S. 23 passed, I don’t think H.R. 1249 would have passed the Senate back in February when the Senate went first.  Nearly up to the last minute I was hearing from multiple, reliable and knowledgeable sources that there would be no end to fee diversion in S. 23.  Then all of the sudden it appeared — because without the addition the bill wasn’t likely to pass.  That was the enormous spoon full of sugar that let the medicine go down.  So the 95-5 vote in the Senate seemed misleading given the delicate compromised reached to assure passage.  Up until fee diversion was necessary as a sweetener I kept hearing that Senators were saying: “Government money is government money.”  So the fact that the Patent Office is a fee for service enterprise obviously was escaping senior leaders in the Senate, but not Senator Tom Coburn (R-OK) who rallied support for an end to fee diversion.

The capitulation of the Senate also surprises me a little because immediately prior to passage in the House, Senator Coburn, 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.”

This seemed to suggest Senator Coburn was posturing for a fight when H.R. 1249 bounced back to the Senate.  That, however, does not seem as if it will transpire.

The inclusion of prior user rights in H.R. 1249 is very bad for the patent system, and the only thing that would have been “reform,” namely the adequate funding of the USPTO, has been removed.  Patent reform just shouldn’t be passed without the USPTO keeping 100% of the fees it collects so it can actually deliver the services it promises in a timely manner.  Without an end to fee diversion what remains is either bad or neutral, so if I were in Congress I wouldn’t vote for the bill, but it seems as if the train has left the station.

Government money is NOT government money, it is OUR money.  The United States government acts as if they decide what money we are allowed to keep.  Taxes are our payment to the government from a portion of OUR money.  We pay to enable a government to do for us what we cannot do for ourselves.  Government does not control our individual finances, although they seem to think they do.  The fact that Congress thinks they can confiscate user fees and direct them to whatever purpose they want while the USPTO is bled dry is beyond appalling.  Government money is NOT government money, and the fact that any elected official could have the view, much less articulate that view, demonstrates why our economy and country are in the position we find ourselves.


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Join the Discussion

13 comments so far.

  • [Avatar for patent enforcement]
    patent enforcement
    August 9, 2011 01:16 pm

    Patent reform without an end to fee diversion is useless. Period. No, wait, it’s worse than useless — House provisions such as the prior user rights nonsense and post-grant measures could certainly tip a patent reform bill toward the balance of “doing more harm than good” … IF such bill does not include a complete stop to the practice of fee diversion. I mean, good Lord, didn’t President Obama even mention the importance of ending fee diversion during his latest major (post-debt-ceiling) public address (thank you, Mr. President, for bringing up patents again!)? I mean, what exactly is it going to have to take to make our legislature behave in a mature and rational manner (a leading and loaded question, I know)??

  • [Avatar for Blind Dogma]
    Blind Dogma
    August 4, 2011 01:13 pm

    I have written and called all of my Congressmen and Senators, patiently explained the travesty unfolding.

    My calls seem to pale to the other voice$ speaking in the same ears.

  • [Avatar for ben ford]
    ben ford
    August 4, 2011 10:44 am

    “The handwriting is on the wall”

    So it seems. If you read the small print you will also see that as a result small firms and inventors will switch to protecting their inventions by trade secret. Those inventions that cannot be protected by trade secret will die with them. Clearly when you read the bill large firms that wrote it are thinking that way too. As they previously only patented defensively and small firms will no longer be patenting, large firms will seldom patent as well. It looks like patent attorneys will be a dieing breed. If you don’t like the sound of this, I suggest you call and meet with your Senators and try to derail the bill. You have 1 month. If you fail, your profession will wither like riverboat pilots with the advent of the railroads.

  • [Avatar for Steve M]
    Steve M
    August 4, 2011 10:40 am

    Legislative charlatans and moral midgets.

    Unroll some more rolls of red tape, ’cause we’re all soon going to find ourselves wrapped up in it.

    Shame on those who vote for this innovation-crippling, job-killing bill.


  • [Avatar for Ron Hilton]
    Ron Hilton
    August 4, 2011 10:27 am

    We’re losing the PR war. Instead of the sympathetic figure of the garage inventor as portrayed in the recent film “Flash of Genius” whose invention was ripped off by the big, bad corporation, we have the image of the “troll” threatening popular products like Blackberries, iPhones, etc.

  • [Avatar for Hank Nothhaft]
    Hank Nothhaft
    August 4, 2011 09:29 am

    Based on my own recent visits to a number of Senators’ staffs in Washington, I completely agree with Gene’s assessment. The lack of accountability and deference to what the leadership wants rather than what is “good” legislation and what is “good for the country” was breathtaking, even in these times of dysfunction in Washington.

    Where’s the outrage? There isn’t the least bit of concern in accepting HR 1249. The increased mandates on the USPTO coupled with the almost guaranteed diversion of funds after a few quarters, or perhaps even months, means the USPTO will continue to perform at third world levels. The Senate should be ashamed and embarrassed. Instead they will pass this turkey and claim, with a somber and straight face, that it is the solution to unemployment in America.

    This is a great opportunity squandered. With creating jobs supposedly a top priority in Congress, this was one of the few opportunities for Congress to actually put something systemically effective into place instead of the usual let’s look good while serving our own self or special interests.

    This just puts an exclamation point on the bi-partisan stupidity in Washington DC that is undermining the American Dream and hollowing out the middle class in America.

  • [Avatar for MBT]
    August 4, 2011 09:05 am

    Patent Leather – I think the freeze is still on. They always have that notice up.

  • [Avatar for step back]
    step back
    August 4, 2011 07:07 am

    Foolish do as foolish are.

  • [Avatar for patent leather]
    patent leather
    August 3, 2011 03:39 pm

    Not ending fee diversion will really spell disaster for the USPTO. Many cockamamie schemes have been proposed for ending the backlog (e.g., John Doll’s claims and continuation rules, ahem) but there’s really no realistic way other than hiring another 1-2 thousand more examiners and waiting a couple years for them to be fully trained and functional. In this way in 5 years the backlog could be mostly eliminated.

    Although on the USPTO site they say they are hiring new examiners. I thought the USPTO had a budget freeze until further notice. Did something happen?

  • [Avatar for EG]
    August 3, 2011 03:23 pm

    To all:

    There’s always hope that a “legistative dog” will eat this utter sham before it’s enacted. A miracle could always happen (I wax lyrical).

  • [Avatar for Concerned Inventor]
    Concerned Inventor
    August 3, 2011 03:02 pm

    Does anyone think that the Senate will have the foresight to address the changes Ret. Judge Michel wants? See the post:

    The banks should be so happy that they should drop the interest rate we are all paying on our below market value homes!!! It looks like they have publicly bought the Senate. Too bad that too few have that much power.

  • [Avatar for American Cowboy]
    American Cowboy
    August 3, 2011 02:26 pm

    Well, if this legislation passes, it will only add to the pile of eBay, MedImmune, KSR, etc. that is killing the patent system and the United States.

    Maybe it is time to go back to school and learn how to be a nurse.

  • [Avatar for Joe Jefferis]
    Joe Jefferis
    August 3, 2011 11:59 am

    Please contact your Senators and Representative to ask them how this pending legislation will impact the recently announced cheap hydrogen from plain water technology:

    These noble scientists deserve expedited treatment and special consideration both in the House and Senate. The too big to fail plan to suppress this technology has been going on long enough.

    Stop Senator Reid from passing this legislation without getting the details of this disruptive technology into the disinfectant of USA daylight. Don’t let Senator Reid change all the patent laws before these scientists have perfected their interest, rights, and protections.