By Kevin E. Noonan —

The AMA, ACLU, and some of their friends oppose the (Leahy-Smith) America Invents Act, and their reasons may not surprise you.

In separate letters Wednesday to Rep. Lamar Smith, Chairman of the House Judiciary Committee and Rep. John Conyers, the Ranking Member, both the American Civil Liberties Union (ACLU) and the American Medical Association (AMA) opposed H.R. 1249.  While on first blush the basis of their opposition may be surprising (Rep. Debbie Wasserman Schultz's (D-FL) amendment contained as Section 27 of the Manager's Amendment that mandates the availability of "second opinion" genetic diagnostic testing), both groups have much bigger goals and aims than protecting the rights of Americans to a "second opinion."  Despite the propaganda used by both groups (they even had Morley Safer believing it) of the importance of such "second opinions," what these groups are really after is a ban on human (or all) gene patenting.  Whatever the flaws in the proposed "second opinion" amendment (see "Manager's Amendment (and Others) to H.R. 1249 — Second Opinions in Genetic Diagnostic Testing"), the gene patenting ban pursued by both groups, most recently in the Association of Molecular Pathology v. U.S. Patent and Trademark Office case, is an even worse prescription for the future of genetic diagnostics and other applications of genetic technology.

The ACLU's letter (also addressed to Rep. David Dreier, Chair, and Rep. Louise Slaughter, Ranking Member, of the House Rules Committee), from Laura W. Murphy, Director, Washington Legislative Office and Michael W. Macleod-Ball, Chief Legislative and Policy Counsel, raises as one basis for its opposition the specter that passage of H.R. 1249 containing Section 27 would indicate to courts Congressional approval of human gene patenting.  This argument ignores the reality that Rep. Xavier Becerra (D-CA) has been introducing bills to do just that for several years, none of which has ever even come to a vote in committee.  It also ignores 30 years of USPTO practice granting such patents in the face of political pressure not to do so; in this the ACLU may not be faulted, since the Department of Justice also has amnesia on this topic, so much so that Acting Solicitor General Kaytal argued to the Federal Circuit that the DOJ's position did not represent a sea change in policy (see "AMP v. USPTO: Oral Argument at the Federal Circuit").

The ACLU's letter does a remarkable job in misstating the holding of the Diamond v. Chakrabarty case, changing what the Court actually said, that "laws of nature, physical phenomena, and abstract ideas" are not patent eligible, to read "natural phenomena, products of nature and laws of nature," thus bringing "products of nature" within the patent-ineligible ambit.  And it cites in support its signal victory before Judge Sweet, and in a footnote noting the Department of Justice's "about face" on the issue in (honestly, only partial) support of their position.  The remainder of the letter contains characteristic inapt correlations between the number of Americans suffering from Alzheimer's disease, muscular dystrophy, and various cancers, and the purported "inhibitions on research, treatment, and scientific progress" occasioned by gene patenting, none of which has any empirical basis (and, indeed, the evidence is to the contrary, including the more than 8,000 scientific research papers on the BRCA genes since the patents invalidated by Judge Sweet were granted).

The "real solution," according to the ACLU and its supporters, would be to "allow hospitals and laboratories to develop and offer testing in the first instance," despite the evidence that no one has done so for the overwhelming (~80%) number of genes not patented.  Finally, the ACLU makes sure the Members know that they have God, and many constituents, on their side, citing "patients and their advocates, health providers, scientific organizations, environmental activists and Christian organizations" as their supporters in opposing the bill.  Those groups include Breast Cancer Action, the Center for Genetics and Society, Family Research Council Action, Friends of the Earth, International Center for Technology Assessment, National Women's Health Network, Our Bodies Ourselves, Southern Baptist Ethics and Religious Liberty Commission, and the United Methodist Church — General Board of Church and Society.  In their letter (attached to the ACLU's letter), is reiterated the ACLU's position, that "patents on human genes present a barrier to second opinion genetic testing" because they "stop[] those labs from examining, testing, and working with patented genes."  (Of course, the scientific evidence shows that the only thing gene patent holders stop is others charging for these services, but that goes unmentioned.)  The remainder of the letter repeats most of the inaccuracies in the ACLU's letter, including the mis-citation to the Chakrabarty holding (in a passage taken almost word-for-word from the ALCU's letter), and including allegations of a rash of other ills from permitting gene patents (littered with phrases like "ownership and sole control over the fundamental building blocks of life" and "monopolistic gene patent holders").

Not wishing to burn any political bridges, the AMA's letter (from Executive Vice President and CEO Michael D. Maves, M.D., M.B.A.) terms Rep. Wasserman's amendment "well-intentioned by flawed," but nonetheless repeats the ACLU's accusation that passage of the amendment "may be misconstrued as authorizing, implicitly, the issuance of patents on human genes."  The group goes on to render an incorrect legal opinion ("[g]enes are products of nature and have never been patent eligible") and falls into the Judge Sweet error (that patenting genes involves restrictions on the genetic information per se).  The letter accurately states that the weakness of the proposed provision is that it is "marked by numerous exceptions" (since an outright ban would be easier to administer) and "would not establish a well-defined pathway for non-patent holders to follow in order to avoid lawsuits."  Dr. Maves also asserts as a possible negative consequence that the provisions could "undermine the ability of physicians to provide optimal care for patients, and further inhibit the development of quality diagnostic tests and access to those tests by physicians and patients."  While undoubtedly his (and his organization's) views, few of its members are involved with "the development of quality diagnostic tests" and, as consumers, like most Americans are most concerned with obtaining the best possible test at the lowest possible cost.  It is hard to criticize Dr. Maves on this score but the facts are that such tests are not so easily developed that intellectual property protection does not influence investment.  And with patents, the public gets the benefits of fixed terms and perpetual freedom to use after patent expiry, something also unmentioned in Dr. Maves' letter; the alternatives are not as favorable to "the development of quality diagnostic tests."

Although it is hard to support Section 27 (and opposition from the ACLU and AMA are not legitimate bases for such support), the provision itself (as with much of H.R. 1249 and its companion S.23) illustrates again how little the operation of the patent system is understood or appreciated even by those who cry the loudest about the need for innovation.  For all its flaws (and for all they have been exaggerated by interests who want to eat their innovation cake and have it, too), the system was an important part of the resurgence of the American economy that resulted in a budget surplus at the end of the last century (however wantonly squandered).  If indeed innovation is the only way for a return to prosperity, attacking the patent system for short-term, nearsighted gain (political or otherwise) is not the smart thing to do.  It's time for Congress to wake up to that reality.

By Kevin E. Noonan —

The patent community continues to wait for Rep. Lamar Smith (R-TX) to convince his brethren on the Appropriations Committee that the provisions of H.R. 1249 (formerly the "America Invents Act," now the "Leahy-Smith America Invents Act") that would put an end to patent fee diversion do not offend the Separation of Powers clause or the appropriators prerogatives, and thus that the bill should come to the House floor.  In the meantime, as part of the Manager's Amendment released by Rep. Smith, there is a provision that intends to codify the Weldon Amendment and prevent the patenting of human beings.

New Section 30 of the bill as amended is direct and to the point, providing a statutory prohibition against any claim "directed to or encompassing a human organism":

Sec. 30.  LIMITATION ON ISSUANCE OF PATENTS

(a)  LIMITATION. – Notwithstanding any other provision of law, no patent may issue on a claim directed to or encompassing a human organism.

(b)  EFFECTIVE DATE. –

(1)  IN GENERAL. – Subsection (a) shall apply to any application for patent that is pending on, or filed on or after, the date of enactment of this Act

(2)  PRIOR APPLICATIONS. – Subsection (a) shall not affect the validity of any patent issued on an application to which paragraph (1) does not apply.

The impetus behind this amendment is apparently the same as the animus for the bill exhibited by House appropriators:  a fear that prohibiting USPTO fee diversion will release the Office from the financial strictures Congress has been able to impose as a way to influence patent policy.  One of these strictures is the Weldon Amendment, named for Rep. Dave Weldon (R-FL) (at left) and included in appropriations bills regarding the USPTO since 2003.  The language in Section 30 of the patent bill tracks the "human organism" language in the Weldon Amendment.  It may be recalled that several years ago Jeremy Rifkin filed a patent application (U.S. Patent Application Publication No. US 2003/0079240) on a human/animal chimera in an attempt to force the Patent Office to address the issue ("Human Animal Chimera Patent Challenge").

The USPTO has taken the position that the prohibitions in the Weldon amendment are precisely in line with its own policies and practices, as illustrated by a November 20, 2003 letter from USPTO Director Rogan to the late Sen. Ted Stevens, Chairman of the Senate Appropriations Committee at that time.  Rep. Weldon himself has said, during colloquy with Rep. Obey regarding the Manager's Amendment to the 2003 Appropriations bill, that the amendment would not interfere with any existing patents on human genes or stem cells.

Regarding the current patent "reform" bill, the scope of the prohibition appears to be limited to precisely those claims that the Patent Office has refused to patent (see M.P.E.P § 2105).  This provision reads (in pertinent part):

If the broadest reasonable interpretation of the claimed invention as a whole encompasses a human being, then a rejection under 35 U.S.C. 101 must be made indicating that the claimed invention is directed to nonstatutory subject matter.  Furthermore, the claimed invention must be examined with regard to all issues pertinent to patentability, and any applicable rejections under 35 U.S.C. 102, 103, or 112 must also be made.

In their previous incarnation as an appropriations rider, these provisions were intended to exclude (i.e., not preclude patentability of):

1.  any chemical compound or composition, whether obtained from animals or human beings or produced synthetically, and whether identical to or distinct from a chemical structure as found in an animal or human being, including but not limited to nucleic acids, polypeptides, proteins, antibodies and hormones;

2.  cells, tissue, organs or other bodily components produced through human intervention, whether obtained from animals, human beings, or other sources; including but not limited to stem cells, stem cell derived tissues, stem cell lines, and viable synthetic organs;

3.  methods for creating, modifying, or treating human organisms, including but not limited to methods for creating embryos through in vitro fertilization, methods of somatic cell nuclear transfer, medical or genetic therapies, methods for enhancing fertility, and methods for implanting embryos;

4.  a nonhuman organism incorporating one or more genes taken from a human organism, including but not limited to a transgenic plant or animal, or animal models used for scientific research.

Presumably, the mere codification of 8-year-old appropriations language in the Patent Act itself does not signal a change in Congressional intent.  At any rate, cognoscenti will recognize that the 13th Amendment, which prohibits an ownership interest in a human being, should be sufficient to prevent patenting of human beings on Constitutional grounds and that the amendment to H.R. 1249 (as well as the Weldon Amendment to appropriations bills past and present) are not necessary.  The polarizing effects of a generation of abortion and anti-abortion debate and legislation makes inclusion of these provisions perhaps a political necessity; provided this Pandora remains firmly in a box limited to banning patenting of human beings (and written to ensure that no court will be able to expand the scope of the prohibition), inclusion of the provision would appear to raise no significant negative effect on protecting biotechnology inventions.

Analysis of additional portions of the Manager's Amendment, as well as other amendments, will be provided in future posts.

    By Donald Zuhn —

H.R. 1249 Vote Delayed by Fee Diversion Debate

On Tuesday, the Intellectual Property Owners Association (IPO) reported that the House Rules Committee meeting to determine how the floor debate on H.R. 1249 would be conducted, originally scheduled for that day, had been postponed.  Today, the IPO reported that the Rules Committee would meet after the fee diversion debate has been resolved.  The report also indicated that 37 amendments had been filed with the Rules Committee, and that the IPO "would strongly oppose" amendments that would strike the first-to-file and anti-fee diversion provisions from the bill.

BIO Supports Manager's Amendment

On Tuesday, Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood sent a letter to House Judiciary Committee Chairman Lamar Smith (R-TX), expressing BIO's "strong support" for the Manager's Amendment to H.R. 1249 that Chairman Smith offered on Monday.  Mr. Greenwood indicated that BIO had a "strong desire to see this bill, as amended, passed by the House," and would thereafter work with the Chairman "to ensure that any final product is perfected."  He noted that BIO was "pleased that the Manager's Amendment to the bill has resolved many of the remaining concerns for the life sciences industry," and would "once and for all, end the diversion of fees collected by the U.S. Patent and Trademark Office (PTO), increase the objectivity of our patent system, and increase patent quality."

Innovation Alliance Opposes H.R. 1249 Without Anti-Fee Diversion Provisions

Last week, the Innovation Alliance released a statement indicating that the group would "vigorously oppose" H.R. 1249 if efforts to strip the anti-fee diversion provisions contained in Section 22 of the bill proved to be successful.  Such efforts came to light following the release of a letter Rep. Harold Rogers (R-KY), the Chairman of the House Committee on Appropriations, and Rep. Paul Ryan (R-WI), the Chairman of the House Committee on the Budget, sent to Chairman Smith, seeking the deletion or modification of Section 22 (see "Patent Reform News Briefs," June 7, 2011).  Referring to that section, the Innovation Alliance declared that "no legislative change would have greater impact on improving innovation and creating jobs in the United States than ending the possibility of fee diversion forever."  The group contended that absent the funding provision, the Patent Office "would be woefully ill-equipped" to handle "the variety of new resource-intensive responsibilities and procedures the America Invents Act assigns to the USPTO."  The Innovation Alliance stated that the group "would have no choice but to vigorously oppose the America Invents Act without Section 22 or other similarly effective anti-fee diversion provisions, and it would aggressively court other stakeholders likewise to oppose the bill."

150 Patent Stakeholders Support USPTO Funding Provisions of H.R 1249

On Monday, a collection of 150 patent stakeholders sent a letter to Speaker of the House John Boehner (R-AL) and House Minority Leader Nancy Pelosi (D-CA), expressing their "unified support for Section 22 of H.R. 1249, 'The America Invents Act.'"  The letter's signatories included Allergan, Inc., Amylin Pharmaceuticals, Inc., BayBio, BIO, California Healthcare Institute (CHI), Cephalon, Eli Lilly and Company, Gen-Probe Inc., GlaxoSmithKline, Hoffman-La Roche Inc., Innovation Alliance, Iowa Biotech Association, Johnson & Johnson, Millennium Pharmaceuticals, National Venture Capital Association (NVCA), Neodyne Biosciences, Inc., Novartis, Novozymes, Patent Office Professional Association (POPA), Pfizer, Syngenta, Washington Biotechnology & Biomedical Association, and a number of universities.

The letter describes Section 22 as "a simple and straightforward provision that creates a mandatory revolving fund in the Treasury to consistently capture all user fees collected by the U.S. Patent and Trademark Office ("USPTO") and to allow for their expenditure for no other purpose than funding the USPTO."  The signatories contend that "[a]s a practical matter, the agency is raising through user fees every dollar it spends and should not be treated as an agency that is merely spending tax dollars."  The letter concludes that "[a]bsent a statutory mechanism to prevent future fee diversion, as we have seen all too often in previous years, the existing and new responsibilities vested in the USPTO will suffer, the ability of the USPTO to plan long-term and build the agency our innovation economy demands will be frustrated, and the job-stifling patent application backlog will continue."

USBIC: H.R. 1249 Has "Constitutional Problems"

On Friday, the U.S. Business and Industry Council (USBIC), a 2,000-member organization of smaller manufacturers and small-entity inventors, sent a letter to House leadership requesting that H.R. 1249 not be brought to the House floor for a vote.  Contending that the bill was "rife with constitutional and other serious problems," the USBIC asked Speaker of the House John Boehner (R-AL) "to derail this runaway Big Bank, Big Tech, and Big Multinational patent 'reform' locomotive before it does irreparable harm to the Constitution, legislative process, and America’s small-entity innovators, the main source of job creation in our economy."  With regard to the bill's constitutional problems, the letter noted that "[i]t has long been USBIC's position that several sections of the patent legislation are unconstitutional, including Section 2, which changes the United States from its historical first-to-invent system to a European first-to-file system, Section 18, which allows a USPTO review of already issued and re-examined business-method patents, and Section 22 which delegates Congress's appropriations authority to the Executive Branch."  The letter states that "[n]ow that the bill is close to final passage, Members of Congress and outside organizations are beginning to do their due diligence and are realizing that the bill flouts the Constitution."  The group contends that "[t]he bill does not hang together without the unconstitutional Section 22, because it would place substantial new responsibilities on the USPTO without providing the resources to undertake them."

By Kevin E. Noonan —

The question of when H.R. 1249 (formerly the "America Invents Act," now the "Leahy-Smith America Invents Act") will get to a floor vote in the House apparently depends on whether Rep. Lamar Smith (R-TX) can convince his brethren on the Appropriations Committee that the provisions that would put an end to patent fee diversion do not offend the Separation of Powers clause or the appropriators prerogatives.  In the meantime, Rep. Smith has released another Manager's Amendment to the bill; in addition, there are almost 40 other amendments to the bill that have been submitted for consideration.  This post focuses on one of two new provisions contained in the Manager's Amendment that have particular relevance to biotech and pharma patenting.

This provision relates to a statutory guarantee that recipients of a patented diagnostic method are entitled to a "second opinion."  These provisions are contained in new section 27 of the bill, which reads as follows:

Sec. 27.  PERMITTING SECOND OPINIONS IN CERTAIN GENETIC DIAGNOSTIC TESTING

(a)  IN GENERAL. – Section 287 of title 35, United States Code, is amended by adding at the end the following:

(d)(1)  With respect to a genetic diagnostic test provider's performance of, or offering to perform, a confirming genetic diagnostic test activity that constitutes infringement of a patent under section 271(a) or (b) of this title, the provisions of section 281, 283, 284 and 285 of this title shall not apply against the genetic diagnostic test provider with respect to such confirming genetic diagnostic test activity.

    (2)  For the purposes of this subsection:

(A)  The term "confirming genetic diagnostic test activity" –

(i)  means the performance of a patented genetic diagnostic test, by a genetic diagnostic test provider, on an individual solely for the purpose of providing the individual with an independent confirmation of results obtained from another test provider's prior performance of the test on the individual, where such prior test was performed by, or under license from, the owner of the patent that is infringed by the acts specified in paragraph (1), and where independent confirmation of the prior test is not available from another test provider under a license from the patent owner; but

(ii)  does not include –

(I)  the performance of a patented genetic diagnostic test on an individual for the purpose of monitoring or reconfirming the individual's medical or genetic status over time, for therapeutic treatment selection or determining responsiveness to treatment, and for other purposes that require repeated genetic diagnostic testing of the individual;

(II)  the use of a patented machine or article of manufacture in violation of such patent;

(III)  the use of a patented composition of matter that is commercially available to the genetic diagnostic test provider; and

(IV)  the practice of a patented process other than the process of testing claimed in the patent owner's patent referred to in paragraph (I).

(B)  The term "genetic diagnostic test provider" means any person or entity that performs a confirming genetic diagnostic test activity, and includes a clinical laboratory or other health care entity at which, on behalf of which, or in association with which the confirming genetic diagnostic test activity is conducted, such as a nursing home, hospital, university, medical school, health maintenance organization, group medical practice, or medical clinic.

(C)  The term "patented genetic diagnostic test" means a patented diagnostic method that is specific to the detection of a mutation or a pattern of mutations of one or more particular genes in an individual, as well as the use of a patented composition of matter, or the practice of a patented use of a composition of matter, where such composition of matter is specific to and necessary for the practice of the diagnostic method and is not commercially available to the genetic diagnostic test provider.  When performed in the course of a confirming genetic diagnostic test activity, such term is not limited to the particular embodiments of the patented diagnostic method or composition of matter that were practiced by or under the authority of the patent owner in providing the prior generic diagnostic test.

(D)  The term "independent confirmation" is not limited to the replication of the results of a prior genetic diagnostic test, and includes providing the individual with information that is not otherwise available from the provider of such prior test and that affirms, clarifies, disproves, corroborates, or otherwise aids the individual in interpreting the results of such prior test, including in instance where such results were inconclusive.

    (3)  The infringer shall have the burden of establishing the limitation on remedies under paragraph (1), including the production of contemporaneous documentary evidence proving, or tending to prove, that the diagnostic test activity meets the definition of a confirming diagnostic test activity under paragraph (2)(A) at the time the confirming diagnostic test activity was performed.

(b)  EFFECTIVE DATE. – The amendment made by subsection (a) shall take effect on the date of the enactment of this Act and shall apply to confirming diagnostic test activity performed on or after such date.

It will be recalled that Rep. Debbie Wasserman Schultz (D-FL) delivered an impassioned and emotional call for these provisions during debate in April in the Judiciary Committee when the bill was passed out of committee and readied for a vote of the entire House (see "House Judiciary Committee Approves H.R. 1249").  Then, Rep. Wasserman Schultz tearfully withdrew her amendment that would have exempted from infringement a "genetic diagnostic tester's performance of a confirming generic diagnostic test activity" that would otherwise constitute infringement under §§ 271(a) or (b).  Now the amendment is back, and it presents a host of interesting possibilities.

For example, amended § 287(d)(2)(A)(i) provides the exemption from patent infringement liability for confirming genetic diagnostic test activity where "independent confirmation of the prior test is not available from another test provider under a license from the patent owner."  Thus, this provision and the exemption provided can be defeated merely by the patent owner licensing at least one other laboratory to perform "confirming genetic diagnostic tests"; there is no provision that such a "second opinion" test must be at a cost less than the cost of the patentee's test.  Similarly, amended § 287(d)(2)(A)(ii)(II) and (III) provides that the exemption does not apply to "the use of a patented machine or article of manufacture in violation of such patent"; "the use of a patented composition of matter that is commercially available to the genetic diagnostic test provider"; or "the practice of a patented process other than the process of testing claimed in the patent owner's patent referred to in paragraph (I)."  It is not difficult to envision patented articles of manufacture used in diagnostic testing, or "commercially available" compositions that fall under a "label license" from the provider or other restriction, or that use an independently patented process.  The limitation of a "patented genetic diagnostic test" to "a patented diagnostic method that is specific to the detection of a mutation or a pattern of mutations of one or more particular genes in an individual" under amended § 287(d)(2)(C) does not encompass changes in gene expression, rather than mutation, that can be used for diagnostic purposes.  And inclusion of  results other than "the replication of the results of a prior genetic diagnostic test" in the definition of "independent confirmation" in amended § 287(d)(2)(D), and particularly "information that is not otherwise available from the provider of such prior test" suggests that performance of a second, independently developed (and perhaps patented) test might be exempted under these provisions.

In addition to the poor policy practice of picking out specific patents for preferential (mis)treatment, these provisions and their effective date raise takings issues, since they permit patent infringement to go uncompensated.  In view of the widespread predictions of the economic importance of genetic diagnostic testing over the next 20 years, compensation for this taking could be significant.

Analysis of additional portions of the Manager's Amendment, as well as other amendments, will be provided in future posts.

By Donald Zuhn —

H.R. 1249 Could Reach House Floor This Week

In today's IPO Daily News, the Intellectual Property Owners Association (IPO) reported that House members are preparing for possible debate and a vote on H.R. 1249 "as early as this week."  According to the IPO report, the House has scheduled H.R. 1249 for possible consideration on Wednesday or Thursday, and the House Rules Committee will be meeting on Tuesday to determine how the floor debate on the bill will be conducted.  The IPO also reported that any amendments to the bill had to be offered by 7:00 pm today, and that possible amendments included amendments to remove the first-to-file provision from the bill, delete or modify the special procedure for challenging business method patents, and delete everything except the USPTO funding provision.

IPO Sends Letter to House Leadership in Support of USPTO Funding Provision

Last week, the Intellectual Property Owners Association (IPO) sent a letter to Speaker of the House John Boehner (R-OH) and House Minority Leader Nancy Pelosi (D-CA) noting that the group "strongly supports Section 22 of H.R. 1249, the America Invents Act, which would fully fund the U.S. Patent and Trademark Office (USPTO)."  The letter, which was signed by IPO Executive Director Herbert Wamsley (at right), argues that "[f]unding the USPTO at a level equal to fee collections, as would be required by Section 22 of H.R. 1249, is critically important to innovation, job creation, and the health of the U.S. economy."  The letter notes that the IPO has "carefully documented" the amount of user fees that the USPTO has collected over the past 20 years, but has not been allowed to use, and has determined that "[s]ince 1991, taking into account the latest estimated revenues for FY 2011, the USPTO will have collected but not been able to use nearly $900 million in user fees."  The IPO letter argues that the diverted user fees are "a tax on innovation," and concludes that "retention of Section 22 is essential."  The group notes, in fact, that it "would support a new amendment to increase user fees by 15 percent."

House Judiciary Chair Responds to Rogers-Ryan Letter

In a letter sent on June 6 to Rep. Lamar Smith (R-TX), the Chairman of the House Committee on the Judiciary, Rep. Harold Rogers (R-KY), the Chairman of the House Committee on Appropriations, and Rep. Paul Ryan (R-WI), the Chairman of the House Committee on the Budget, raised concerns regarding the USPTO funding provision of the legislation (see "Patent Reform News Briefs," June 7, 2011).  Rep. Smith (at right) wasted little time in responding to the letter from his fellow Republicans, sending a response the next day.  In that response, Rep. Smith asserted that "[s]ection 22 of H.R. 1249 is an important component of the bill and should be preserved," and provided several reasons for retaining the provision.

First, he notes that the user fees collected by the USPTO do not constitute "true tax revenues derived from the General Treasury."  Instead, "[t]he USPTO is completely funded by user fees imposed on inventors and trademark filers — not the taxpayers," and "[i]t's entirely reasonable for these men and women to expect that the fees they pay should remain within the agency to recover the costs of its operations."  Rep. Smith also notes that "an estimated $874 million [has been] 'diverted' from agency coffers since 1991."

The letter next indicates that the USPTO funding provision "will not put the USPTO on auto-pilot," but rather, "would actually promote accountability and transparency, creating more channels for oversight than currently exist."  Rep. Smith explains that the funding provision requires the Office to submit an annual "look-back" report to Congress and a "forward-looking annual spending plan" to the House and Senate Committees on Appropriations.

Rep. Smith concludes the letter by declaring that "[a]t a time of economic stress and high unemployment, the USPTO is an untapped resource for job creation," adding that "a well-functioning and -resourced USPTO that reviews applications in a timely manner and issues quality patents can only lead to greater innovation and higher-paying jobs."

Senator Coburn Responds to Rogers-Ryan Letter

Senator Tom Coburn (R-OK) (at right) also sent a letter to Representatives Rogers and Ryan, urging them to reconsider their position on Section 22, which Sen. Coburn contends "does not conflict with the ability to remain committed to restraining spending, improving accountability, and reducing the debt."  Sen. Coburn explains that under this provision of the bill "Congress would not have the ability to divert user fees to other general revenue purposes, and the PTO would remain accountable to Congress."  The letter argues that "[s]ection 22 would not hand the 'power of the purse' to the Obama Administration, put the PTO on 'auto-pilot,' or eliminate the ability of Congress to perform oversight of the PTO," as Rep. Rogers and Ryan contended in their own letter (see "Patent Reform News Briefs," June 7, 2011).  Sen. Coburn concludes by stating that "[w]e cannot have true patent reform without ending fee diversion and providing the PTO with a permanent, consistent source of funding."

Letter from Four Representatives Seeks "No" Vote on H.R. 1249

In a letter sent out earlier today, Representatives John Conyers, Jr. (D-MI), Donald Manzullo (R-IL), F. James Sensenbrenner, Jr. (R-WI), and Marcy Kaptur (D-OH) asked other members of the House to join them "in opposing H.R. 1249, patent legislation that would favor large multinational corporations over U.S. inventors."  Although the four legislators indicated that they had "different concerns with the legislation," they "agree[d] that this special interest bill will cost jobs and harm small start-up inventors."

The letter discusses five issues that have been raised by various groups about the bill, including that: (1) "it provides large banks a special, new bailout at the expense of inventors and the American taxpayer, and even worse, does so on a retroactive basis" by establishing "an unprecedented review procedure which would provide a 'third bite at the apple' to attack a targeted group of financially-related business method patents that previously have been upheld through multiple examination, re-examination, and trial proceedings"; (2) it contains a first-to-file provision that several groups view as "a dangerous and unconstitutional effort to overturn over 220 years of patent practice"; (3) it "undermines the false marking statute by retroactively changing the law applicable to pending enforcement actions"; (4) it "would allow patent owners to provide corrected or new information to the Patent Office that was not presented or not accurately presented during the application process"; and (5) it expands the "prior user rights" defense, thereby "creat[ing] more uncertainty for small innovators and university-related start-up ventures which would have no way of knowing whether an invention might be subject to a manufacturer's prior user rights."

The letter concludes by listing 55 groups that "have serious concerns about H.R. 1249 or specific sections of the reported bill."