USPTO Funding Secured Through March 2013

by Dennis Crouch

The USPTO does not receive any funding from general taxation sources. Rather, the agency is fully funded by the fees paid by patent applicants and patent owners.  Unfortunately, this link between fees and USPTO spending is based upon tradition and the usual approach rather than any actual requirement that the fee revenue be available for office expenditures.  The result is that Congress maintains the USPTO purse strings. 

In a bipartisan vote, the Senate recently passed the Continuing Appropriations Resolution, 2013.[1] That resolution was necessary because fiscal year 2013 begins October 1, 2012 and executive agency spending had only been appropriated through fiscal year 2012. 

The continuing resolution is a six-month gap filler and allows the USPTO and many other federal agencies to continue to spend money at the rate set for fiscal year 2012.

President Obama had asked for a increase in USPTO appropriations and that particular issue would likely receive bipartisan support.[2] The problem for the USPTO is that it is continually swept up as a small part of the contentious budget debate that often results in across-the-board solutions.  One reason for this is that federal budget accounting counts USPTO revenue as government revenue and USPTO spending as government spending. Thus, cuts in USPTO spending are in-fact budget cuts.[3]

Taking a step back, why shouldn’t some portion of the USPTO revenue be used for general government spending, i.e., deficit reduction or market infrastructure expenditures?  In particular, how is taking 10% from the USPTO worse increasing income, payroll, or business profit taxes – especially since a significant number of patent owners are foreign entities that pay no other federal taxes.  USPTO maintenance fees (renewal fees) are essentially property taxes – perhaps they should be treated as such.

 

36 thoughts on “USPTO Funding Secured Through March 2013

  1. I am not one inclined to resort to even quasi-profanity, but this is pure, unadulterated BS. An applicant is entitled by law to a patent if the applicant meets all of the substantive requirements specified by law. Your comment seems to be little more than an attempt at rationalizing the blatant financial “rape” of applicants, and it continues long after the USPTO has ceased to perform any further work on the application and its issuance.

    Compare the fee requirements for trademarks with those for patents, and then feel free to come back explaining why patents are treated so differently. The same can be said for copyright registrations.

    It is bad enough that this “rape” permeates the process, but the use of the finacial “fruits” resulting from this “rape” to fund activities having zero relevance to the process adds insult to injury.

  2. This is encouraging news. Maybe now the office will be able to afford air conditioning again. They need to go ahead and put Chick-fil-A back on the list of TM Expo exhibitors for next month as well.

  3. Increase the budgeted number>/I>”

    Lol. Maybe you did not recognize the point that the budgeted number is on the wrong side of the ledger when it comes to the deficit. Putting in a line item would actually be damaging.

  4. It used to be that the patent system was based upon “quid pro quo”. With the onset of PAYG, in morphed into applicants providing both…and more (think of maintenance fees, for example).

    No one has ever explained to me in any sort of an even marginally convincing fashion why applicants should be forced to bear all costs associated with a system that serves both the applicants and the public.

  5. When are we going to start charging criminals and civil litigants other than patentees their actual costs?

    Access to the courts (as opposed to a showdown at high noon) is a basic tenant of the American system. I like it that way.

  6. “I would use some of the money to provide better and more frequent training programs for business method/software examiners — not only in the law ”

    If you trained them in the law then there would be no business method/software AU’s left because practically all of it would get 101′d and whatever remained would just be absorbed into other AU’s that deal with real inventions.

  7. Good ol Reagan. Although I cannot imagine that the taxpayers paid all that much for the running of their PTO pre-1980. The volume of applications alone suggests that barely any money would be required.

  8. Increase the budgeted number (maybe give out some bonuses/raises or whatever) and wallah, increase away!

    Who knows, maybe we put in a line item for a donation to the US treasury.

  9. I wouldn’t stop there. I would use some of the money to provide better and more frequent training programs for business method/software examiners — not only in the law but also in the technologies.

    And some of the money to decrease the pendencies in these technologies by hiring more qualified examiners.

  10. Dennis, if the prior art database and classification system were updated especially in the software and business method technologies, many fewer marginal patents would be granted and would be used to threaten or sue others. The economy (and the courts) would thereby become much more efficient.

  11. Separate issue: “The continuing resolution is a six-month gap filler and allows the USPTO and many other federal agencies to continue to spend money at the rate set for fiscal year 2012.

    Given the mandates from the AIA. Isn’t there some serious repercussions on Office spending if said spending must reflect the budget from fiscal 2012?

  12. Anyone see any issues with making poor people or other disadvantaged people pay for their use of the courts?

    Can’t pay? What then?

    Prof. Crouch, with all due respect, you are missing a key public policy driver in your desire – see the post by IANAE – the courts are precisely the type of government expenditure NOT to be tied to property.

  13. that they can feel free to jack up any ol time

    Expressly not 6 – not even under the expanded powers of the AIA wherein the total in the aggregate must still reach a budgeted number (on other words, if they jack these up, something else must come down).

  14. Before 1980, taxpayers greatly subsidized patent applicants. The Reagan administration put a stop to that, insisting that patent applicants and owners fully fund the PTO.

    So in 2012, we have come 180 degrees from the 1970′s and now ask patent owners to subsidize the general taxpayers.

    What used to be heaven shall henceforth be called hell, and vice versa.

  15. I agree that you have identified a good use of fees. But what about paying for patentee's use of the courts and for the US IP Czar so that taxpayers don't have to subsidize those efforts.

  16. Astute readers will note that I (dat real 6) use “www.hello.com” not “aol.com”.

    In any event, “are essentially property taxes – perhaps they should be treated as such.”

    I agree D, and they’re property taxes that they can feel free to jack up any ol time.

  17. The maintenance fees should be used to upgrade and maintain the Patent Office’s infrastructure, such as its classification system and its prior art database.

  18. If the actual per-cost on maintenance fees were in play, the tie to “property tax” would be laughable.

    More laughable than the concept of paying a fee to cover the cost of collecting the fee?

  19. essentially property tax

    Also, in the default from the re-distribution policy, the Office has a per-cost polciy (notwithstanding the change afforded by the AIA).

    If the actual per-cost on maintenance fees were in play, the tie to “property tax” would be laughable.

  20. What about the ones that don’t have the explosive growth you envision? The rates for maintenance fees that you’re opening the door to are prohibitive.

  21. My point here is perhaps that Americans also bristle at the idea of income taxes being used paying to pay for someone else’s lunch

    I bristle at the idea of the courts being only for taxpayers and property owners. The purpose of taxes is to spread out the costs of various public services and provide those services to everybody. As public services go, enforcement of duly obtained rights is kind of a big one. Anybody doing business of any kind in the US should have access to the means of enforcing his rights.

    What of the innovative foreign pharmaceutical company that, let’s face it, only expects to have any revenue because of patent enforcement? What of the foreign investor who wishes to fund a patent-protected business or bid on a portfolio of US patents? Or will we finally come up with a workable definition of “troll”, and exclude them specifically from the court system?

    USPTO maintenance fees (renewal fees) are essentially property taxes – perhaps they should be treated as such.

    Maintenance fees are part of a larger fee structure, and are essentially a partial deferral and slight redistribution of the cost of search and examination. They could just as easily be recalculated and charged on filing, but we consider it good policy to let some of the patent applicants get rich before paying them. Think of it as a sort of alumni fund.

  22. Interesting. anon, don’t foreign owners of real property in your community pay property tax?

    At least one of the government-provided things that makes a patent a valuable asset is the legal system that stands behind it and behind any license agreement involving it. It’s not a crazy idea to suggest that patentees should help pay for it.

  23. Just a response to this – my suggestion above is more pointedly directed to maintenance fees.  By the time these are due in any significant amount (2nd & 3rd fees), the entity will no longer be a startup. Rather, it will either be a viable business operation or else a bankrupt operation. 

  24. The non-US patent owners have equal rights to use the US patent system.  And, that system is supported by a wide range of infrastructure (including the US courts) that are paid-for by income taxes. My point here is perhaps that Americans also bristle at the idea of income taxes being used paying to pay for someone else's lunch — especially if that someone else is a non-US business entity whose expected revenue source is US patent enforcement. 

    That said, my suggestion in the post is really intended as a provocateur rather than any policy proposal.

  25. Relying startups to fund the govn’t is not a viable solution. Tax them when they make money, not when they’re trying to get a business started. The policy proposed above makes no sense whatsoever.

  26. especially since a significant number of patent owners are foreign entities that pay no other federal taxes.

    I would think that any American involved in the legal system would bristle at the notion of taxation without representation, much less push for an innovation tax.

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