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For officials at the U.S. Patent and Trademark Office, it has become something of an annual ritual to complain that Congress is stealing their money. But what was once petty thievery is starting to look more like grand larceny. Under the FY 2001 Commerce, Justice, State, and Judiciary appropriations bill, the agency, which expects to rake in $1.2 billion in fees this year, stands to lose a whopping $295 million as lawmakers skim the money for unrelated programs. That’s almost three times more than Congress withheld last year. Both PTO officials and users are up in arms at the prospect, forecasting dire cutbacks and a nosedive in service if the bill, scheduled for a full floor vote in the House as early as this week, becomes law. With patent and trademark applications soaring and the agency already facing criticism for quality control and inefficiency, supporters of the PTO say the loss of money will cause long-term damage. “In other areas, Congress is very sensitive to the needs of e-commerce, biotech, and high-tech. But here, they don’t seem to understand that patents are protecting the investments of those very same industries that say they are trying to help,” says Herbert Wamsley, executive director of the D.C.-based Intellectual Property Owners Association. “The PTO is getting its share of criticism for things like issuing low-quality business method patents. If Congress is concerned about addressing that issue, they need to be giving the PTO more resources, not less.” But Dan DuBray, communications director for Harold Rogers, R-Ky., chairman of the Appropriations Subcommittee on Commerce, Justice, State, the Judiciary, and Related Agencies, doesn’t agree. He notes that the PTO’s proposed 2001 budget is actually slightly up over FY 2000, thanks to an adjustment for inflation that bumps agency funding to $905 million. Not only that, but because of strict balanced budget requirements, the PTO is one of the few agencies to be so lucky. PTO defenders respond that the agency ought to be allowed to keep all the money it collects in patent and trademark fees, rather than having greater and greater chunks “withheld” every year. Furthermore, they say, the $905 million earmarked for the agency doesn’t begin to keep pace with the PTO’s growth. Patent filings are up 12 percent over last year and trademarks are up 40 percent, reports PTO Director Q. Todd Dickinson. The agency employs over 6,200 people to handle 600,000 patent and trademark applications each year. “Our fee revenues relate directly to the work we do. We do not ‘have a surplus’ or ‘make a profit,’” Dickinson wrote in a June 9 letter to House Judiciary Courts and Intellectual Property Subcommittee members Howard Coble, R-N.C., and Howard Berman, D-Calif., both of whom have been sympathetic to the PTO’s plight. “The proposed [budget] would seriously impair our ability to effectively manage our operations and provide our customers with the quality products and services they expect and deserve.” In the letter, Dickinson describes cuts that the current budget would necessitate, including a hiring freeze resulting in hundreds of vacancies, elimination of overtime, delays of 30 to 50 percent in the issuance of patents and trademarks, and the elimination of new automated filing and quality review programs. PTO users say they have no objection to paying the full cost of obtaining, maintaining, and enforcing their intellectual property rights. But why, they ask, should they have to subsidize other programs? “The appropriations process is nothing short of a crippling tax on innovation,” says Oblon, Spivak, McClelland, Maier & Neustadt partner Gregory Maier, chairman of the American Bar Association’s Intellectual Property Section. Maier notes that money being raided represents 25 percent of the fees paid by inventors, ostensibly to support the PTO. “People have the right to get from the government the services they pay for,” he says. “We have a patent system to reward inventors, but the Appropriations Committee is saying, ‘No, no, no. We’re going to take some of their money.’” LOSING THE SURCHARGE PTO fee diversions began in FY 1992, when Congress withheld $8 million in patent surcharge fees. The next year it was $12 million, then $15 million, climbing to $92 million by 1998, the year lawmakers’ patent surcharge authority expired. With the surcharge gone, the new strategy for taking PTO money has been to cap the amount the agency can spend each year. Lawmakers are then free to apply revenue in excess of the cap to other government programs. At the end of the year, the PTO is supposed to get the withheld money back. But in reality, the money has already been spent, applied to initiatives popular with voters such as Justice Department crime fighting, drug enforcement, and immigration programs, according to a budget analysis by the Intellectual Property Owners Association. The import of withholding PTO money is not so much for the cash itself, at least not this year, when the Congressional Budget Office forecasts a $200 billion surplus. It has more to do with the strict balanced budget cap over the entire Commerce-Justice-State appropriation. In order to increase funding for one agency or program within an appropriations bill, you’ve got to decrease it somewhere else. If PTO money is withheld, it doesn’t count against the fee cap and frees up the equivalent sum to be spent somewhere else. “It’s a never-ending cycle, and the money out there gets bigger and bigger,” says Jon Kent, Washington representative for the International Trademark Association. “The committee is faced with an extraordinarily low budget allocation. It looks out there and sees an agency that has gotten some bad press about its decision to move to new quarters. The Hill thinks the agency is rolling in dough. The truth is, this agency was hurting before the president submitted his budget request.” President Clinton proposed withholding $113 million from the PTO, the same as last year. The Appropriations Committee upped that amount to $295 million, assuming the PTO processes the number of patent and trademark applications it estimates for the upcoming year. But some members of the committee believe that the PTO will bring in less revenue than the agency projects, meaning the eventual withholding would end up closer to $167 million. Either way, the amount withheld is record-breaking, and the prospect has set off alarms throughout the IP bar, as various organizations have issued e-mail alerts and grass-roots calls to action. “We can’t just sit there and be ignored forever and ever,” says Michael Kirk, executive director of the American Intellectual Property Law Association, who has been working with Coble on a possible floor amendment that would allow the PTO to recoup some of the money. “We need to be put on the radar of every member. This is not a partisan issue. This is an issue of politics vs. common sense.” Maier of the ABA Intellectual Property Section says the strategy now is to frame the issue as a question of supporting high-tech — and hopefully solicit support from prominent CEOs as well. “Our belief is that intellectual property is the foundation of the enormous growth we’re experiencing, and that the high-tech industry is dependent on the timely issuance of patents,” he says. “Congress seems to be ignoring that in its budget deliberations. … We have to mount as loud and as active a campaign as we can, to show them they can’t keep doing this.”

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