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When President Bush’s proposed budget for fiscal 2005 came out Monday, patent attorneys were cheered by one line: The U.S. Patent and Trademark Office is slated to keep all the fees it raises next year. If adopted by Congress, the proposal would eliminate — for one year — the diversion of money from PTO coffers to pay for other federal programs. The practice has gone on since the agency became fully fee-funded in fiscal 1991. Since then more than $650 million has been diverted from the agency, preventing it from hiring sorely needed patent examiners. Congress initially acted alone in diverting PTO fees, but since 1998 every presidential budget has targeted some sum for diversion. Bush’s proposal was not unexpected. Commerce Secretary Donald Evans testified before Congress last year that his department would work toward keeping PTO revenue within the agency. “The administration has delivered on its promise,” PTO Acting Director Jon Dudas said in a press release. “American innovators have long fought for an end to fee diversion.” While the patent bar welcomes the move from the White House, no one is celebrating yet. The House and Senate appropriations committees must approve Bush’s proposal, and they have long ignored pleas to end diversion. And the budget proposal only deals with diversion for the coming year. “It’s not a permanent end; it’s an end for this budget, which is a good start,” said former PTO Director Q. Todd Dickinson. “That’s why I’m cautiously optimistic.” Under the president’s proposed budget the PTO would keep the $1.53 billion in fees that it is projected to raise next year. By comparison, the president requested $1.4 billion for fiscal 2004, and Congress gave the agency $1.2 billion. The budget document, released by the Office of Management and Budget, says the PTO funding would enable the agency to hire 900 new patent examiners and make investments to process patents electronically. In addition, it says the agency would be able to complete review of patent applications in an average of 26.9 months by 2009, which is about the same amount of time as it currently takes. PTO spokeswoman Brigid Quinn said that without the money, by 2009 it would take the agency nearly four years to process a patent application. The PTO had planned to reduce patent pendancy to 18 months, under a five-year strategic plan put forth by former PTO Director James Rogan in June 2002. But the time reduction was tied to punitive fees the agency planned to implement to dissuade applicants from certain activities, such as filing applications with excessive claims. Heeding opposition from the patent community, the agency did not impose these fees. “We were not able to do that,” Quinn said. “So we are holding the line” in patent review time. The $1.53 billion budget is contingent on Congress adopting a PTO fee bill that increases user fees by 15 to 25 percent. If that measure, H.R. 1561, does not pass, the agency projects it will raise $1.3 billion. The bill also contains a provision that would permanently eliminate fee diversion. “Which is why it hasn’t passed,” said Dickinson, a partner at Howrey Simon Arnold & White. “So far, the appropriations committee and Congress have said no.”

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