With last week’s passage of the Consolidated and Further Continuing Appropriations Act (H.R. 2112), the USPTO finally has its spending authority set through the end of the current fiscal year, September 30, 2012. The bottom line is that the USPTO can spend up to $2.7 billion, assuming it collects that much in “fees and surcharges.”
The America Invents Act included two separate fee provisions with early effective dates. A 15% surcharge on many USPTO fees took effect on September 26, 2011. Next, a surcharge on patent applications that are not filed electronically will take effect on November 15, 2011.
One of the first provisions of the Leahy-Smith America Invents Act to take effect was the 15% surcharge on most USPTO user fees that the USPTO started collecting on September 26, 2011. As I wrote previously, the USPTO has not been able to spend any of the extra fees collected in the last few days of the fiscal year that ended September 30, 2011, and will not be able to spend any of the additional fees it is collecting now unless and until Congress increases its appropriations.
Last week, the Intellectual Property Owners Association (IPO) published numbers that drive home the extent of the fee diversion problem, and illustrate how patent reform is exacerbating the situation. Before patent reform was enacted, the USPTO had been on track to lose $70 to $100 million. However, because so many patent applicants paid fees “early” to avoid the new surcharge, the USPTO ended up collecting over $200 million more than it was authorized to spend. That means patent and trademark applicants paid over $200 million in fees that, instead of going to fund USPTO functions, went into the United States treasury’s general fund.
As of September 26, 2011, applicants can seek fee-based prioritized examination under the USPTO’s Track I program. The September 23, 2011 Federal Register Notice sets forth the details of the program, which is largely identical to that previously set to take effect May 4, 2011, although the basic fee is higher. The USPTO decided not to implement the program in May because funding limitations required it to revise its hiring plans, and it did not believe that it could meet the Track I pendency goals with its current resources. While the USPTO’s funding situation has not improved, Track I is being offered now, in accordance with provisions of the Leahy-Smith America Invents Act.
The enactment of the Leahy-Smith America Invents Act on September 16, 2011 means that a 15% surcharge on most patent office fees will take effect on September 26, 2011. (The USPTO has published the new fee schedule on its Leahy-Smith America Invents Act Implementation website). But, with no new appropriations, the USPTO will not be permitted to spend this money. Rather, it will go into the U.S. treasury’s general fund, further compounding the problem of fee diversion.
Although patent reform places significant new demands on the USPTO, there is talk of funding the USPTO under another “continuing resolution” for the new fiscal year that begins October 1, 2011. If the USPTO is not permitted to spend all of the (higher) fees it collects, it may be forced to pull resources from examination in order to meet the new statutory mandates.
The net effect of higher USPTO fees, increased demands on the USPTO, and a static or reduced USPTO budget will be a new tax on patent applicants–hardly the job-creating, innovation-promoting patent reform that we were promised.
On April 22, 2011, USPTO Director Kappos announced the impact of the budget reductions embodied in the fiscal year 2011 budget that finally was enacted on April 15, 2011. (Fiscal year 2011 runs through September 30, 2011). The budget gives the USPTO the authority to spend only $2.09 billion, which is about $100 million less than its projected fee collections.
Applicants facing USPTO deadlines over the next few days should not assume that the USPTO will be closed in the event of a federal government shutdown. Quite to the contrary, Director Kappos has informed USPTO personnel that the USPTO will remain open, at least in the near term.
The Director’s message also indicates that, even in the event of a longer shutdown, at least some USPTO personnel will continue to work “to accept new applications and maintain IT infrastructure.” Thus, Applicants should not assume that any deadlines will be extended or waived.
A Message from Director David Kappos
As you know, the Administration is working diligently with Congress to ensure that the federal government remains open and continues to do its work on behalf of the American people. However, I wanted to personally inform you that even in the event of a government shutdown on April 9, 2011, the United States Patent and Trademark Office will remain open and continue to operate as usual, for a fixed period, with all USPTO staff continuing to work and being paid.
Because the USPTO maintains sufficient funding not linked to the current fiscal year, the USPTO can and will stay open for business. We have enough available reserves to remain in operation for six business days and intend to do so. During that time we will continue to process the patent and trademark applications that drive our country’s innovative economy. Should a shutdown continue longer than the six-day period, a small staff will continue to work to accept new applications and maintain IT infrastructure, among other functions.
I know this news may prompt some additional questions. As soon as any new information comes to light, we will make sure to inform you thoroughly and promptly. Your respective business unit managers will also be reaching out to you to provide further clarification if needed.
Thank you for your hard work and your continued public service.
The USPTO issued a press release with the same information:
USPTO Prepares for Possible Government Shutdown
In the event of a government shutdown on April 9, 2011, the United States Patent and Trademark Office will remain open and continue to operate as usual for a period of six business days – through Monday, April 18, 2011 — because the USPTO has enough available reserves, not linked to the current fiscal year, to remain in operation until then. Should a shutdown occur and continue longer than the six-day period, we anticipate that limited staff will be able to continue to work to accept new electronic applications and maintain IT infrastructure, among other functions. More information will be posted on this website as it becomes available. Thank you.
As Congress continues to debate the federal budget, patent stakeholders are justifiably concerned that Direct Kappos’ efforts to improve the U.S. patent examination process, enhance patent quality, and reduce the backlog of unexamined applications will be thwarted by inadequate funding. Indeed, if Congress continues to divert hundreds of millions of the USPTO’s user fees to the general fund, any vision of an innovation-driven, patent-backed growth in the U.S. economy will quickly fade away.