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.

Track I Stopped Before It Started

Facing the reality of not being able to spend any of the $4000 per application fee it would have collected, the USPTO has decided not to implement fee-based prioritized examination (Track I), which was going to be available as of May 4, 2011.

Applicants interested in prioritized examination should consider whether their applications qualify for other programs, such as the Accelerated Examination, Patent Prosecution Highway, or Green Technology programs. An overview of these programs can be found in this article.

Other Initiatives Cut Back

As outlined on Director Kappos’ blog, the USPTO also is taking the following steps to reduce spending:

  • Plans for opening the first satellite office in Detroit, as well as consideration of other possible satellite office locations, are postponed
  • Hiring—both for new positions and backfills—is frozen
  • IT projects will be scaled back
  • Funding for Patent Cooperation Treaty (PCT) outsourcing will be substantially reduced
  • Employee training will be reduced to only mandatory training
  • All overtime is suspended

Director Kappos clarified that the budget and operations for Trademarks are “unaffected.”

Devastating Impact?

The popular press if full of stories about the devastating impact the fiscal year 2011 budget will have on social programs funded or supported by the federal government. While patent issues may not rise to that level of urgency, the impact of these budget restrictions should not be given short shrift, particularly when we keep in mind that the USPTO is funded by applicant fees, not taxes. In slashing the USPTO’s spending authority, Congress is siphoning off $100 million in fees that applicants pay to the USPTO, essentially robbing Peter to pay Paul.

The above list of cut-backs drives home the impact that these budget restrictions will have on examiner morale and examiner retention (with the elimination of overtime), examination quality (with the reduction of training), and the application backlog and prosecution delays (with the hiring freeze). USPTO operations have suffered the affects of fee diversion for years, but the current spending reductions come at a critical time for the USPTO, and are going to undermine its ongoing efforts to effect real improvements.

The current patent reform legislation pending in the U.S. House of Representatives effectively would put an end to fee diversion. The House Judiciary Committee voted in favor of the House bill (H.R. 1249) on April 14, 2011, and it may be up for a full vote when Congress returns in May. If this law becomes a reality, the USPTO will be in a better position to carry out much needed improvements which will help it meet its strategic objectives and strengthen the U.S. patent system.