House panel votes to stop diversion of patent fees

A House committee on Wednesday voted to end congressional appropriators' annual practice of redirecting Patent and Trademark Office revenues to other government purposes.

The bill, H.R. 2791, is similar to one the House passed in the last Congress. The Senate failed to clear the measure but included language in fiscal 2005 legislation that temporarily suspended patent-fee diversion for two years. The current bill would end the practice permanently.

Despite repeated pleas for more money to help PTO cope with the higher volume and complexity of patent applications in recent years, Senate appropriators in a conference report last year expressed skepticism that the office really needs the money.

"Time is money," Texas Republican Lamar Smith, said Wednesday during the House Judiciary Committee discussion of the legislation. "If the Patent and Trademark Office can't get patents out in time, the inventors are the losers."

Smith, the chairman of Judiciary's Courts, the Internet and Intellectual Property Subcommittee, noted that if the office does not receive a boost in funding, the time that PTO takes to approve patent applications could increase from about two years to as much as eight. Such a backlog could threaten the livelihood of entrepreneurs, he said.

He added that PTO's plan from a couple of years ago to streamline and improve the office's operations depends on ending fee diversion.

The bill, sponsored by Judiciary Chairman James Sensenbrenner, R-Wis., enjoys bipartisan support. During the committee hearing, Zoe Lofgren, D-Calif., echoed Smith's comments. She noted that to date, more than $700 million has been diverted from PTO and called that diversion "a tax on innovation."

Lofgren said the bill would remove "incentives for appropriators to divert the fees" by directing PTO to refund patent applicants' fees if the money is not used to fund PTO projects.

The bill also would require the PTO director to study the effect of the office's fee structure on the ability of inventors to file applications. And it would specify that commercial contractors PTO hires for work toward approving patent applications be U.S. citizens and not have financial interests in the applications.

Sen. Norm Coleman, R-Minn., also has sponsored a bill, S. 1020, to permanently end fee diversion. It would take a different approach by directing PTO to reduce its fees when revenues exceed the amount appropriated to the office for a given fiscal year.