By Nicholas P. Godici

Executive Advisor, Birch, Stewart, Kolasch & Birch LLP

As the 111th Congress considers patent reform, one of the fundamental problems facing our lawmakers is how to adequately fund the USPTO. The problem can be crystallized by referring to a single sentence in the final 2010 appropriations bill passed by Congress; "The decision to rely solely on fee income has removed USPTO from the safety net of the appropriations process and has placed it at the mercy of the economy; it has allowed USPTO to build a boom time infrastructure that it cannot support in an economic downturn."

The 2009 and 2010 budget cycle is a case study in confirming the Appropriators' statement. In 2009, Congress appropriated $2.01B to the USPTO provided that amount was collected in user fees. With a growing backlog of unexamined patent applications and Information Technology (IT) systems in serious need of repair, the USPTO began hiring patent examiners and working to improve IT systems under the assumption that the fee collections would materialize. Additionally, the previous several years were a "boom time" in terms of increasing fee income and full access to that income. The USPTO was able to build up the patent examining staff from roughly 3,500 examiners in 2005 to over 6,000 examiners in 2008 in an attempt to reduce the backlog of applications. Obviously this increase in staffing caused a substantial increase in expenditures (examiner's salaries). This was the "boom time" infrastructure referred to by Congress.

Then the 2009 economic downturn hit. Corporate IP budgets were frozen or cut and hard choices had to be made. Industry had to decide whether to file fewer new applications or let some applications in their patent portfolio lapse by not paying maintenance fees. This economic downturn, coupled with the reduced allowance rate and smaller base on which maintenance fees were due, caused a $136 million shortfall in collections in 2009.

The users of the patent system are willing to fund a healthy, well-run USPTO through user fees, provided the services paid for can be delivered and the fees are not diverted away from USPTO use. Let's not allow the patent system to suffer from inadequate funding when it can easily be self-supporting. We must find a way to allow industry to support the patent system that rewards them for research, investment and innovation.

To learn more about the impact of funding shortages at the USPTO, download the full article