Legislative Update

“Full Funding” Bills for PTO Advance in Congress

Both the House and the Senate have recently acted favorably on appropriations bills that would provide a substantial increase in PTO funding, with all user fee collections to be made available to the Office.

On June 16, the House of Representatives passed H.R. 2862, the Science, Departments of State, Justice, and Commerce, and Related Agencies Appropriation, 2006. The bill would provide funding for the USPTO in fiscal year 2006, which begins October 1, 2005. The bill calls for funding of $1,703,300,000 for the PTO. This is $159 million above the current year funding, and equals the amount requested by the Administration. Based on expected user fee collections, no diversion would take place in FY 06.

H.R. 2795 also continues restrictions enacted in last year’s funding bill, including the Weldon amendment barring patents on human organisms, a prohibition on PTO employees accepting reimbursement for travel expenses to attend private sector meetings, and both ceilings and floors on hiring in various components of the PTO.

On June 26, the Senate Appropriations Committee favorably reported H.R. 2862, the House passed bill, with amendments. The Senate Committee approved the same level of funding for the PTO as the House, $1,703,000,000.

House IP Subcommittee Approves Permanent
PTO Fee Increases, Ban on Diversion

On June 28, the Subcommittee on Courts, the Internet, and Intellectual Property favorably reported H.R. 2791, the “United States Patent and Trademark Fee Modernization Act of 2005.”

H.R. 2791 contains PTO fee increases and provisions designed to prevent diversion of PTO user fees that are identical to those in H.R. 1561 in the 108 th Congress. H.R. 1561 passed the House in March 2004, but stalled in the Senate when Senate appropriators objected to the anti-diversion provisions. The fee increases, but not the anti-diversion provisions, were then added to the Consolidated Appropriations Act, 2005 and enacted in December 2004, but set to expire after two years, when fee would revert to the 2004 levels.

If enacted, H.R. 2791 would make these fee increases permanent and would provide a statutory disincentive for Congress to divert PTO user fee collections by requiring that fees collected be returned to persons who paid the fees to the extent the total collections exceed annual appropriations for the PTO.

Enactment of the anti-diversion language of H.R. 2791 would have no practical effect so long as appropriators voluntarily make available all user fee collections for PTO use, as they have recently done. However, as indicated in the court case reported below, Congress has the power to resume its practice of user fee diversion at any time. A statutory ban or disincentive such as that provided in H.R. 2791 could provide a strong deterrent to such resumption.

Claims Court Upholds Congressional Authority
to Divert PTO User Fees

In granting the government’s motion for summary judgment, Judge Futey ruled that Congress has broad discretion under the Necessary and Proper Clause of the Constitution to determine what actions promote the progress of the useful arts. He found that the system of fees and funding chosen by Congress constitutes a rational exercise of that power.