PTO's FY 2012 Budget Becomes Law; Access to All Collected Fees Still in Doubt

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By Tony Dutra

Congress approved Nov. 17 a “minibus” appropriations legislation that includes funding for the Patent and Trademark Office matching its projected fee collections. President Obama signed the legislation, H.R. 2112, into law Nov. 18.

The PTO's funding level had been set at its FY 2011 annual rate of about $2.1 billion by the earlier continuing resolution authorizing government spending through Nov. 18. H.R. 2112 raises funding for the agency to its FY 2012 level of about $2.7 billion, almost a 30 percent increase.

However, the legislation changed the mechanism for PTO access to fees related to the 15 percent surcharge and Track I expedited patent examination. According to the America Invents Act, those fees were supposed to be available to the agency without fiscal year limitation, outside the appropriations process. The revised legislation puts the fees under the same restrictions as all other collections.

Still to come is the impact of a possible failure by the “super committee” in Congress on deficit reduction, which would trigger cuts in 2013 that would likely include the PTO. Agency Director David J. Kappos has previously described spending in 2013 as “critical” to the PTO's backlog and pendency reduction goals.

CJS Spending Down, But PTO Budget Matches Fees

H.R. 2112 enables FY 2012 appropriations in three of the 12 government spending areas usually covered by omnibus bills—hence the nickname “minibus.”

The budget related to the appropriations for “Commerce, Justice, Science”—Agriculture and Transportation and Housing and Urban Development are the other two—was $491 billion below the FY 2011 spending level and $4.9 billion below the president's request for the current year, but the bill set PTO appropriations to match the agency's expected fee collections from patent applicants and patent owners.

It was reported out of the Senate Appropriations Committee's Sept. 15 by a 29-1 vote. An equivalent bill was reported out of the House Appropriations Committee July 20. A joint committee of members of the Senate and House Appropriations Committees moved the bill forward Nov. 14.

Since the CR expired Nov. 18 for the rest of the government, another CR was added onto H.R. 2112 extending FY 2011 level funding for other agencies through Dec. 16.

The House vote Nov. 17 was 298-121, with a majority of each party in favor. The Senate approved the measure by a vote of 70-30, with only Republicans voting against it.

AIA Changes Mechanisms for Funding PTO

Each year, the PTO estimates its collections and seeks a matching spending budget. Congress typically grants that request through the annual appropriations process. During the year, the fees collected are deposited into the Patent and Trademark Office Appropriation Account, and the funds are appropriated and returned to the PTO to meet its expenses.

Section 22 of the America Invents Act (H.R. 1249, Pub. L. No. 112-29) also created a Patent and Trademark Fee Reserve Fund for fee collections in any fiscal year that exceed the amount appropriated to the agency for that fiscal year. The AIA required that the reserve fund be available only to the agency, but the mechanism for the PTO to get access to the funds was to be determined separately.

H.R. 2112 fills in the gap for PTO access to the funds:

That the Director of USPTO shall submit a spending plan to the Committees on Appropriations of the House of Representatives and the Senate for any amounts made available by the preceding proviso and such spending plan shall be treated as a reprogramming under section 505 of this Act and shall not be available for obligation or expenditure except in compliance with the procedures set forth in that section.

Reprogramming requests are typically granted by appropriations committees, thus releasing the funds for an agency's spending. However, there is no guarantee that the funds will be released.

AIA Exempted Fast Track, Surcharge; Congress Ignores

Funds received from both the fast-track fee and the surcharge, authorized by Section 11 of the AIA, in subsections (h) and (i), respectively, were to be treated differently from other PTO income. They were to be put in the Appropriation Account and “remain available until expended.”

That is, about $277 million of the total $2.7 billion budget—the amount that the PTO estimates that it will receive in FY 2012 from the surcharge and fast-track fees—would not be placed in or count toward the excess to be placed in the Reserve Fund.

However, the PTO-related text in the joint committee report on H.R. 2112 as passed Nov. 17 lacked specific references to the fast-track and surcharge funds. Instead it stated that “all fees and surcharges assessed and collected by USPTO” will be available only via the initial appropriation or as dictated by AIA Section 22—i.e., the Reserve Fund mechanism.

Should the PTO collect less than $2.7 billion in FY 2012, the final PTO funding measure's departure from the AIA's apparent approach would be moot, as no fees will be placed in the Reserve Fund.

The PTO did not respond to BNA's request for that agency's understanding as to how surcharge and fast-track fees will be treated.

PTO Funding Still a Concern

However, the patent community still has cause for concern that the PTO will not be allowed to use all the fees it collects, whether the Reserve Fund comes into play or not.

During the debate in the Senate on the AIA, references were made to promises by House appropriators 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.

Of greater concern is what will happen should the super committee—formally the Joint Select Committee on Deficit Reduction—fail to come up with deficit reductions over 10 years acceptable to Congress. That would 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 anomaly request. Though the potential cuts are at least a year away, the PTO's 2015 objectives for reducing the backlog and decreasing patent application pendency would clearly be in jeopardy.

When Kappos presented the PTO budget to House appropriators in March (44 PTD, 3/7/11), he described a projected cash surplus at the end of FY 2012 as “absolutely required going into fiscal year 2013.” He pointed to building up production capacity through examiner hiring and training and said, “2013 will be a very critical year for us” in terms of meeting the production goals.

H.R. 2112 on PTO funding at  


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