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(Not So Much of a) Happy New Year For The USPTO

By Peter Zura

While patent practitioners look for signs of hope and support for an improved USPTO in 2010, Congress is making clear that they won't be doing any favors for the agency this year.  John Schmid of the Milwaukee Journal Sentinel published a report last week claiming that Congress has withdrawn $100M in funds from the Office at the last minute during budget negotiations on December 9.

Congress bases its annual funding decisions on agency estimates on what it expects to collect. For fiscal 2010, the Patent Office initially believed the economic slump would depress fee income, which it projected at $1.887 billion. But the volume of applications unexpectedly increased in the fiscal first quarter, which began Oct. 1, making it likely that the agency could collect at least another $100 million in the current year.

The Patent Office requested a provision that would have allowed the agency to spend up to an additional $100 million, assuming 2010 collections reached an appropriate level; the provision was inserted into early budget drafts. However, it was quietly stripped out at the last minute, the Patent Office said.

"We were expecting a $100 million cushion in the budget, and we were disappointed that it was taken out," an agency spokesman said.

Interestingly, none of the congressional sources for the story were willing to identify which lawmaker or legislative aide was directly responsible for the decision.

This move appeared to be a form of punishment for the USPTO, and particularly to the fee-funded nature of the agency.   In related documents, the congressional budgetary conference noted that

A confluence of factors in fiscal year 2009, including depressed revenues, continuing declines in the patent allowance rate, recent court decisions, and the absence of inflation has highlighted major, unacceptable deficiencies in USPTO's budget formulation and execution processes. USPTO's financial situation in fiscal year 2009, while anomalous, may be repeated again. 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. Complicating and contributing to this situation is the fact that USPTO's budget formulation process does not reflect the agency's resource requirements for the relevant fiscal year. Fiscal year 2010 will likely present a new and more daunting set of financial challenges for the agency and achievement of key performance measures will likely continue to decline.

The conferees note that although USPTO is a fee-funded agency, USPTO's budget development process should not be markedly different from other Federal agencies, at least initially. Yet today, the USPTO is unable to produce a clear and concise statement of resources needed to operate independent of the agency's estimate of projected revenues. Whatever advantages the current funding arrangement confers to the agency and its constituencies, the current state of budget formulation, execution and management at the USPTO cannot continue.

Read John Schmid, "Congress deals funding blow to Patent Office" (link)

Read excerpts from congressional budget documents pertaining to the USPTO here (link)

See also IAM Blog, "Bleak times at the USPTO make big fee hikes more likely" (link)

John Farmer, Richmond-Times Dispatch, "Leading-Edge Law: Congress made patent situation worse" (link)

Full post as published by Two-Seventy-One Patent Blog on January 04, 2010 (boomark / email).