Obama's $2.95 Billion FY 2013 PTO Budget Matches Agency's Estimated Fee Collections

Access practice tools, as well as industry leading news, customizable alerts, dockets, and primary content, including a comprehensive collection of case law, dockets, and regulations. Leverage...

By Tony Dutra  

President Barack Obama's budget for fiscal year 2013 announced Feb. 13 would allow the Patent and Trademark Office to keep all of the $2.95 billion the agency expects to collect in application and maintenance fees.

The figure represents a $250 million, 9 percent increase over FY 2012 spending. Despite the PTO's self-funded status, legislators bent on slashing federal spending are known for questioning funding increases for the agency.

Though one might expect a similar challenge to the PTO's projected FY 2013 budget in an election year, the recent passage of the America Invents Act, and the promises made during its final debate to let the PTO spend what it collects, may give the agency a one-year exemption from the budget cutters' knives.

In fact, to emphasize the AIA impact, Acting Deputy Commerce Secretary Rebecca Blank, in a conference call, said that the increase in the PTO's budget “reflects provisions of the America Invents Act.”

Few Mentions of PTO in FY 2013 Budget

The government's goals for the PTO were prominently mentioned in the president's budget a year ago, when the government was pushing for passage of the AIA.

In the current budget, however, only two sentences from the main budget document are directed to the agency's activities, in the section on “Investing in Our Future.”

“The Budget proposes to give the U.S. Patent and Trademark Office (USPTO) full access to its fee collections and strengthen USPTO's efforts to improve the speed and quality of patent examinations through reforms authorized by the America Invents Act,” according to the president. “This will provide USPTO with more than $2.9 billion in resources in 2013.”

The proposed funding increase over last year's budget would allow the agency to “continue on its path to accelerate patent processing and improve patent quality,” according to the descriptive section specific to the Department of Commerce.

Even with the “Investing in our Future” reference to the PTO, another intellectual property issue received equal billing. “The Budget also supports strengthened intellectual property enforcement domestically and overseas as set out in the Intellectual Property Enforcement Coordinator's Joint Strategic Plan required by Prioritizing Resources and Organization for Intellectual Property Act of 2008 (Pro-IP),” it said. No detailed information is provided in the budget related to the IPEC's office.

The president published a 510-page “Analytical Perspectives” document along with the budget, describing the budget in terms of certain policy goals. Again, the PTO is barely mentioned—and indeed, it is misnamed.

The one relevant reference is a defense of the budget increase. After noting in much more detail the president's desired spending increases for security agencies, the budget document states:


2013 increases in nonsecurity agencies are narrowly focused and are frequently supported by congressionally-authorized fees, not taxpayer dollars. Increased receipts from fees support timely commercialization of innovative technologies through faster and higher-quality patent reviews at the Patent and Trade Office of DOC, ….

Limited Details Provided

Details on the budget are in the “Appendices” section. The relevant text and charts are provided at http://pub.bna.com/ptcj/PresidentsBudget2013forPTO.pdf.

The patent side of the PTO is budgeted to grow by $300 million, or 13 percent, while the trademark collections/spending are projected to increase 5 percent, from $259 million to $273 million.

The patent total includes $247 million as part of the 15 percent “patent fee surcharge” authorized under the AIA. The difference is likely to be irrelevant in the future, as the PTO has proposed a new pricing structure, also AIA-authorized, that essentially makes the surcharge permanent (see story in this issue).

The appendix cites the following uses of the patent funds collected—which are identical to the uses specified in last year's budget:

• the PTO's “aggressive patent pendency reduction agenda to reduce overall pendency and backlog over the next three years;”

• its efforts to “continue to reengineer its quality management program;”

• improvements to its information technology infrastructure; and

• “improve[ments in] intellectual property protections worldwide.”

The carryover unobligated balance—operating reserves—of $239 million is also budgeted.

Full time equivalent personnel at the PTO was estimated at 10,507 as of the end of FY 2012, and is budgeted to grow to 12,212 by Sept. 30, 2013, a 16 percent increase. The agency has announced its intention to hire at least 1,500 new examiners and 100 new administrative patent judges.

Will Last Year Be Repeated?

The PTO's access to its funds during 2012 rolled with the sentiment in Congress, and with an election this year, questions as to its fully funded status may be repeated.

The president's FY 2012 budget called for the agency to collect and spend over $2.7 billion, and PTO Director David J. Kappos presented that request to the House Appropriations Committee's Subcommittee on Commerce, Justice, Science, and Related Agencies last March. It was clear at that meeting that some lawmakers did not believe that the PTO is exempt from budget cutting even though it is self-funded.

Indeed, the agency did not have access to its FY 2011 funds, as Congress was particularly late that year with authorizations. A continuing resolution authorized by Congress called for withholding about $85 million to $100 million from the agency, and Kappos announced spending cuts last April.

Then came the AIA debate, with appropriators seeking to maintain control over the PTO's expenditures, while Judiciary Committee members in both houses fought to end so-called “fee diversion” and take the PTO out of the appropriations cycle. The House appropriators won, but only after making promises that they would not stand in the way of release of funds collected by the PTO.

However, when the continuing resolution was approved in late September, Congress kept the PTO at spending levels even below its fee collections. It was well known that the PTO was seeking an “anomaly” to the CR to have full access to its funds, but Congress did not cooperate.

In the end, though, Congress approved Nov. 17 “minibus” appropriations legislation that included funding for the PTO matching its projected FY 2012 fee collections.

Will AIA Mechanisms Work?

The AIA's mechanism for keeping any funds collected by the agency in excess of the $2.95 billion in collections anticipated is the “Patent and Trademark Fee Reserve Fund”

The president's 2013 budget is clear that reserve fund collections “shall remain available until expended.”

It further states that, “notwithstanding any other provision of law, all fees and surcharges assessed and collected by USPTO are available for USPTO only pursuant to section 42(c) of title 35, United States Code, as amended by section 22 of the Leahy-Smith America Invents Act (Public Law 112-29).”

Given the appropriators' promises and the clear text of the statute, FY 2013 should not be a repeat of the prior year.

However, going forward, the failure of the “super committee”—the Joint Select Committee on Deficit Reduction—to come up with deficit reductions over 10 years acceptable to Congress is supposed to trigger an automatic $1.2 trillion in across-the-board reductions in funding to all government agencies, beginning in 2013.

It seems unlikely the PTO would escape a reduction at that time, given Congress's rejection of the 2011 anomaly request. The PTO's 2015 objectives for reducing the backlog and decreasing patent application pendency would clearly be in jeopardy.

For More Information

Relevant Appendix text at http://pub.bna.com/ptcj/PresidentsBudget2013forPTO.pdf

Full budget at http://www.gpo.gov/fdsys/

PTO's 2010-2015 Strategic Plan is at http://www.uspto.gov/about/stratplan/USPTO_2010-2015_Strategic_Plan.pdf

The budget also calls for a 6 percent increase in salaries and expenses for the Federal Circuit, to $34,328,000.


Request Intellectual Property on Bloomberg Law