Fee-Retention Unlikely: The Senate and House of Representatives have each passed patent reform measures, and the two bills are remarkably similar. The arguably greatest difference between the two is that the Senate Bill (S. 23) includes a substantial guarantee that the USPTO will be able to actually spend the money that it collects in user-fees. The House Bill (H.R. 1249) does not include that guarantee. At this point, it appears most likely that the House Bill will be accepted in the Senate and that the PTO will be left without any budgetary protections from the congressional appropriations process.
Revenue is Revenue: Without the statutory limit, federal appropriators do not care that the USPTO is fee-funded and not taxpayer-funded. Rather, patent office fees, corporate income taxes, capital gains taxes, and personal income taxes all go into the same category of “government revenue” that can then be allocated as Congress and the President see fit.
Prior Cuts: In April 2011, a mid-year appropriations bill stripped approximately $100 million of USPTO collected fees and diverted that money to other federal programs – an approximate 10% cut in funding for the remainder of FY2011.
More Cuts on their Way?: As FY2012 approaches, it is likely that the USPTO will again feel the pinch from the most recent debt ceiling compromise and the resulting Budget Control Act of 2011. The new statute does not identify where cuts will occur, but does indicate that $21 billion will be cut from the FY2012 budget (that begins October 1, 2011) with additional cuts coming as early as December 2011. In all likelihood, some of the cuts will come from the USPTO.
Cutting from a Larger Pie: The silver lining for the USPTO is that the FY2012 budget proposed by President Obama includes a $600 million increase in spending for the USPTO – raising the budget to $2.7 billion. A 10% cut by appropriators from the budgeted amount would still leave the PTO with a $300 million increase from FY2011. It is not clear, however, that the appropriations process will use the budget proposal as the baseline.
Spending its Fees: Although Congress does not normally allow the USPTO to spend all of the fees that it collects, the USPTO is generally bound to never spend more than it collects. In other words, the PTO’s actual spending is bound by the amount that it collects in fees. The only way that the agency will be able to collect its budgeted $2.7 billion is through significant fee increases. Currently, the PTO does not generally have the authority to increase fees. However, the House Bill does provide the PTO with authority to set fees in order to meet its budgeted spending.