By Donald Zuhn —

BIO Reaffirms Support for H.R. 1249

In a statement released earlier today, the Biotechnology Industry Organization (BIO) reaffirmed its support for H.R. 1249 and urged the House to pass the bill this week.  BIO President and CEO Jim Greenwood noted that the organization was "pleased that Judiciary Committee Chairman Lamar Smith (R-TX) and Appropriations Committee Chairman Harold Rogers (R-KY) have reached agreement on U.S. Patent and Trademark Office (PTO) funding and that the appropriators are committed to ensuring that the PTO will retain the entirety of the fees it collects from inventors."

Patent Reform Coalition Also Reaffirms Support for H.R. 1249

Like BIO, the Coalition for 21st Century Patent Reform issued a statement today reaffirming its support for moving H.R. 1249 to the House floor this week for a vote.  Although the group noted that it "preferred Section 22 of H. R. 1249, as reported by the Judiciary Committee, addressing the diversion of fees paid by users of USPTO services," the Coalition "decided to support the USPTO funding agreement that, if fully implemented, is intended to provide the Office with full access to the fees paid by inventors."  The group indicated that it "will be vigilant as the full implementation of the commitments made under the agreement is completed."

Innovation Alliance Reiterates Opposition to House Bill

In a follow-up to a statement the group released on Monday, the Innovation Alliance reiterated that in view of changes to the bill's USPTO funding provisions, the group "has no choice but to vigorously oppose the version of the America Invents Act scheduled to be considered by the full House of Representatives [on Wednesday]."  In today's statement, the Innovation Alliance noted that it had "consistently said that it would oppose any patent bill that does not end permanently the diversion of user fees from the U.S. Patent and Trademark Office," and that "[u]nfortunately, we have come to that point" with the current version of the bill.

In defending its position, the group explained that:

The compromise language released yesterday does not end fee diversion permanently and enable USPTO to plan predictably and on a sustainable basis.  In fact, it requires the USPTO to continue to rely upon the appropriators to have access to and use of all the application and other user fees it earns.  Any future appropriations bill could easily divert USPTO funds to other uses.  As a result, it will be difficult if not impossible for USPTO to make multi-year plans, to hire and retain personnel, and to improve operations and information technology, all of which are critical to decrease the substantial backlog of pending patent applications.

"While appropriators have promised not to divert the fees USPTO collects," the group suggested that "current and future budget pressures will only increase, and future appropriators may not feel as constrained from diverting USPTO fees to other uses."  The Innovation Alliance contended that "[w]ithout a permanent end to fee diversion and USPTO's guaranteed access to collected fees — such as was contained in the Senate-passed bill and Section 22 of the bill as approved by the House Judiciary Committee — the America Invents Act is an unfunded mandate on an important agency that is already overburdened and under-resourced."

AIPR Urges Adoption of Conyers/Sensenbrenner/Manzullo Amendment

The American Innovators for Patent Reform (AIPR) announced its support earlier today for an amendment to H.R. 1249 that was introduced by Representatives John Conyers, Jr. (D-MI), James Sensenbrenner, Jr. (R-WI), and Don Manzullo (R-IL) on June 13, 2011, and which would strike the entire bill except for sections 2 (Definitions), 22 (Patent and Trademark Office funding), and 31 (Budgetary effects).  According to the group's statement, "[t]he amendment would end fee division and establish full funding for the U.S. Patent and Trademark Office (USPTO), enabling the agency to keep all fees it collects."  The statement "urges all members of the House to vote in favor of the amendment when H.R. 1249 comes to the floor for a vote, probably this week."  AIPR President Alexander Poltorak asserted that "[d]iverting fees that the Patent Office collects from inventors and patent applicants is nothing short of a tax on innovation," adding that "[p]ermanently ending fee diversion should be a core feature of any patent reform."  The AIPR concluded today's statement by urging supporters of the amendment to contact their Representatives immediately.

Six Organizations Add Support to Conyers/Sensenbrenner/Manzullo Amendment

In a joint letter sent to all House members, six organizations representing small businesses, start-up entrepreneurs, independent inventors, and technical professionals urged lawmakers to adopt the Conyers/Sensenbrenner/Manzullo amendment, that the coalition contended "will stop the diversion of patent user fee revenue to other governmental uses."  The six organizations signing onto the letter were IEEE-USA, National Congress of Inventor Organizations, IP Advocate, National Small Business Association, National Association of Patent Practitioners, and the Professional Inventors Alliance USA.  The letter states that by removing most sections of H.R. 1249, the amendment "would eliminate many harmful provisions in the bill that, if enacted, would cause innovation disruption and create legal uncertainty for many years to come."  One of the "harmful provisions" highlighted in the letter is Section 10, which the coalition contends "would otherwise grant the PTO broad authority to set fees based on no guidance or policy constraints except the PTO’s opaque and unknown interpretations of 'aggregate costs'."  The letter also asserts that H.R. 1249 contains "a major legal flaw which indicates lack of adequate forethought in drafting and amending this bill."  In particular, the letter explains that:

Owing to substantial spread in examination timing across examiner workgroups at PTO, a later-filed application can be issued well before an earlier-filed prior-art application reaches an examiner’s desk for examination.  With no effective legal recourse available to the first-filer of the pending application for removing the later-filed issued patent, the second-filer would end up with a valid patent, solely due to PTO administrative delay variations.  This result is in direct contradiction to H.R. 1249’s stated purpose of awarding patents to the first-inventor-to-file.

Four Representatives Seek "No" Vote on H.R. 1249

Last week, Representatives John Conyers, Jr. (D-MI), Donald Manzullo (R-IL), F. James Sensenbrenner, Jr. (R-WI), and Marcy Kaptur (D-OH) circulated a letter to their colleagues, asking other House members to join them "in opposing H.R. 1249, patent legislation that would favor large multinational corporations over U.S. inventors" (see "Patent Reform News Briefs," June 13, 2011).  Today, Representatives Conyers (at right), Sensenbrenner, and Manzullo, joined this time by Rep. Dana Rohrabacher (R-CA), distributed a similar letter once again asking their colleagues to vote "no" on H.R. 1249.  While noting that the three legislators "may have different concerns with the legislation," the letter's authors state that "as Members of Congress including two former Chairs of the House Judiciary Committee, a former Chair of the Small Business Committee, and a former Chair of two Science, Space and Technology Subcommittees, we agree that this special interest bill will cost jobs, harm small start-up inventors, and stifle innovation and investment here in the United States."  In addition, the letter indicates that:

[A]ccording to the Congressional Budget Office, the Manager's Amendment would violate the new cut-go rules [recently adopted by the Republican Majority].  This is because the base bill is estimated to have a discretionary cost of $446 million over the next five years ($1.1 billion over the next ten years) and, the Manager's Amendment, by undoing the anti-fee diversion language, eliminates a procedure that would have decreased the budget deficit by $ 717 million over five years.  The net result is that the Manager's Amendment will leave us with a bill that increases discretionary costs by almost one-half billion dollars over five years.

As in last week's letter, the group itemizes "additional concerns" with the bill, including: (1) Section 22 of the latest Manager's Amendment, which "codifies the status quo: funding for the USPTO will be at the discretion of the appropriators"; (2) Section 18, which "provides large banks a special, new bailout at the expense of inventors and the American taxpayer, and even worse, would do so on a retroactive basis"; (3) the change from a first-to-invent to first-to-file system, which some groups believe is "a dangerous and unconstitutional effort to overturn over 220 years of patent practice"; (4) Section 27 of the latest Manager's Amendment, which "requires a study on methods to provide independent, confirming genetic diagnostic test activity where gene patents and exclusive licensing for primary genetic diagnostic tests exist," and therefore, "has the potential to complicate pending litigation on the legality of patents on human genes"; and (5) Section 16, which "undermines the false marking statute by retroactively changing the law applicable to pending enforcement actions."

The letter concludes by providing a link to a list of letters and statements from groups opposing H.R. 1249 that have been posted on a webpage on the Democrats' House Committee on the Judiciary website.

By Donald Zuhn —

H.R. 1249 Floor Debate to Take Place Later This Week?

In today's IPO Daily News, the Intellectual Property Owners Association (IPO) reported that floor debate of the House version of the "America Invents Act" (H.R. 1249) is now scheduled to take place "on Wednesday or later in the week."  The House Rules Committee, which was scheduled to meet last week to discuss the parameters for floor debate of the bill, has announced that it will meet tomorrow at 5:00 pm to determine how the floor debate will proceed.  The delay was due to a disagreement between some House members over the USPTO funding provisions of H.R. 1249.  This disagreement appears to have been resolved late last week (see "Is the End of Fee Diversion Dead in the Leahy-Smith America Invents Act?").

Midwest Representatives Write in Support of H.R. 1249

Last week, Representatives Joe Donnelly (D-IN) (at right) and Dan Boren (D-OK) (below) distributed a letter in which they urge their colleagues in the House to support passage of H.R. 1249.  The pair note that "[f]or decades, America's economic prowess has been secured through a reliable and efficient patent system," but argue that "[i]ncreasingly,  . . . existing patent laws have not [been] able to keep up with the pace of 21st Century technological developments or our foreign competitors."

Citing the USPTO's 700,000 application backlog, the letter explains that the Office "lack[s] the resources and funding to process patent applications in a timely and efficient manner," and declares that after six years of effort, Congress has finally reached a "bipartisan agreement on a patent reform bill that updates our patent laws in a balanced and fair manner and gives the USPTO the tools and funding it needs to support all inventors."  The letter also characterizes the U.S. "first to invent" patent system as being "cumbersome and inefficient, making it more difficult for innovators to gain patents while at the same time providing little benefit to those challenging a patent."  According to the pair, the backlog and first to invent system "hinder[] our ability to remain competitive with the rest of the world and create jobs here at home."

Innovation Alliance Vigorously Opposes H.R. 1249 in View of Altered USPTO Funding Provisions

Today, the Innovation Alliance released a short statement in which the group (which represents innovators, patent owners, and stakeholders from a diverse range of industries) noted that it was "greatly disappointed by reports that some in the House of Representatives have chosen to remove language from Section 22 that would have permanently ended fee diversion."  According to the group, the new language in the bill "amounts to a promise to end fee diversion in the future, a promise that has repeatedly been broken in the past."  The Innovation Alliance added that it was "very concerned that USPTO will continue to earn significantly more fees than the funds it is allocated, and Congress will continue to impose the tax on innovation that fee diversion represents."  As a result, the group said it "ha[d] no choice but to vigorously oppose the America Invents Act," and it promised to "work with our allies both on and off the Hill to ensure that any patent bill that becomes law ends fee diversion permanently."

ABA Urges Chairman Smith to Reject Changes to USPTO Funding Provisions

In a letter sent to House Judiciary Chairman Lamar Smith (R-TX) today, the American Bar Association (ABA) stated that the group "considers the funding mechanism provided by section 22 with its revolving fund to be an indispensible component of any patent reform measure, one that is essential for the Office to conduct effective and efficient financial planning and business operations."  With respect to the compromise worked out between proponents of H.R. 1249 and the House Appropriations Committee, the ABA declared that "the language proposed to replace section 22 would destroy this essential component of H.R. 1249."  The ABA urged Chairman Smith "to reject this proposed substitute for section 22," and recommended that "these differences be resolved through the regular order, under the process for amendment that the Rules Committee has announced," which the ABA argued was "the appropriate and fair way to resolve these differences.'

NAR Predicates Support for H.R. 1249 on Retention of USPTO Funding Provisions

In a letter distributed to House members today, the National Association of REALTORS (NAR) noted that while it supported H.R. 1249, this support was "predicated upon the retention of important anti-fee diversion provisions contained in section 22 of the bill."  The industry group, which represents a variety of real estate industry professionals, "believes it is critically important that the U.S. Patent Trademark Office have access to all user fees paid to the agency by patent and trademark applicants."  Without the funding provisions of section 22, the NAR expects that "delays in processing patent applications will continue to undermine American innovation and stymie the nation’s economy."

David Boundy Thinks So

David Boundy (below) of Cantor Fitzgerald and co-author (with Phillip Furlang) of the forthcoming Patent Prosection (Oxford University Press) has been at the forefront of several important patent issues in the past decade, including notably the USPTO's ill-advised "claims and continuation" rules instituted by the Dudas Administration and blocked by Judge Cacheris' decision that the Office had exceeded its authority under 35 U.S.C. § 2(b).  He has also commented on the proposed Leahy-Smith America Invents Act, and today has the following message to the patent community.

House Insists on Its Prerogative of Fee Diversion

By David Boundy

The one good feature of the "America Invents Act," an end to fee diversion, is now removed.  Nothing remaining in the bill justifies the disruption and transition costs.  Please ask your representative to vote no, and ask your clients to do the same.  The bill is up for final vote on Wednesday (it has already passed the Senate, this is the final major vote), so urgent action is required.

In order to pass the bill through the Senate, Sen. Coburn added language that would permanently end fee diversion.  Sen. Coburn's amendment provided that all fees collected by the Patent Office would be available to the Office, with no possibility of tampering or mischief by Congress.

However, on Friday, House leadership leaked an agreement among Speaker Boehner and several committee chairmen regarding fee diversion, set out below.  Note that the agreed language essentially tracks today's 35 U.S.C. § 42(b) and (c), except it gives a fancy name to the earmarked account that's been in existence for 19 years.  It does not give the Office the right to spend the money it collects.  Former staffers for the Congressional appropriations process have confirmed that there is no practical difference — Congress will still be able to take funds raised by the Patent Office, and give the PTO worthless IOU's in return.  IOU's that the PTO cannot spend.  IOU's that the PTO cannot count on for multi-year planning.  IOU's that are useless for updating the PTO's IT infrastructure.  IOU's that cannot hire new examiners or raise pay for existing examiners.

Sec. ___.  There is established in the Treasury a Patent and Trademark Fee Reserve Fund.  If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund.  To the extent and in the amounts provided in appropriations Acts, amounts in the Fund shall be made available until expended for obligation and expenditure by the Office for the purposes described in Section 42(c) of title 35, United States Code.

Because of the way House procedural rules operate, there is no longer an opportunity to change this or amend it.  If the bill passes, fee diversion will continue.

If you haven't already made up your mind on this bill, this should make it up for you.  The proponents have not been able to counter the showings by the folks who create startups that this bill takes away the legal machinery that venture capital and other investors need — startup formation will fall precipitously, along with the innovation and jobs that they create.  Proponents have been unable to give any numbers for cost savings of the bill that even approach the transition costs, let alone create savings after those transition costs are borne.  The one thing that united the proponents of the bill was an end to fee diversion, and that's now gone.

Now it's up to you.  All that's required for the triumph of evil is for good people to do nothing.  But all that's required to stop this bill is about 3000 phone calls from constituents.  Please go to www.house.gov and find your representative's phone number, and phone today.  (The bill is up for a final vote Wednesday.)  Say these words: "Please vote no on the rule for the patent bill, H.R. 1249, and vote no on final passage."  ("Vote no on the rule" means "don't allow the bill to come to the floor for a vote.")  The person that answers the phone will not know enough to ask you detailed questions, those 19 words will do the trick.  Then call five of your clients and ask them to do the same.

Second, and far less importantly, please email me PatentProcedure [at] gmail.com, the names of companies (name of company, city and state, name of contact person, and an email address) that would be willing to sign on to a letter stating opposition to the bill of fee diversion is not ended.

One aspect of the current PTO situation (the backlog, concerns about "quality" and others) where there has been the greatest agreement among the several categories of stakeholders across all technology areas (who don't agree on much else) is that the practice of Congressional appropriators to raid PTO coffers to fund other government programs has been responsible for the Office's performance deficiencies.  If the patent "reform" enacted by Congress fails to address this issue (by putting limits on the practice if not including an outright ban), then patent reform will have little of the changes that formed the basis for the reform movement over the past decade.  More importantly, such a bill will not do the one thing its promoters have promised:  promote innovation to stimulate the economy.  This solution is no solution at all.