Congressional Budget Office: Patent bill cost exceeds expected revenue

Legislation making sweeping changes in patent law that is slated for Senate debate in the coming weeks would increase federal spending by $26.9 billion and boost revenue by $25.5 billion over a nine-year period beginning in 2009, according to a CBO analysis released late last week.

The legislation sponsored by Senate Judiciary Chairman Patrick Leahy, D-Vt., would alter the rule that prioritizes the award of a patent from the "first to invent" to the first inventor to file; increase the Patent and Trademark Office's authority to collect and spend fees; and institute a number of litigation-related changes. A sizable shift on the federal balance sheet would result from language to make permanent the PTO's authority over money collected from patent and trademark applications, CBO said. Compliance costs could be $200 million annually starting in 2009, with most of the financial burden falling on the private sector, officials said.

In recent years, appropriators have let the agency keep the money instead of diverting it to unrelated projects. Proponents of codifying that fee plan argue that a permanent funding stream would give the PTO more certainty in longer-term budgeting. A spokesman for Sen. Tom Coburn, R-Okla., who offered the amendment, said Tuesdau the change "is a long overdue policy correction that will save taxpayers millions of dollars."

CBO flagged another section of the bill that would eliminate remedies certain patent holders currently have with respect to financial institutions whose use of a "check collection system" constitutes patent infringement. That language could cost the government $1 billion if it were sued by patent holders over the issue, the report said.

Andrew Barbour, vice president for government relations at the Financial Services Roundtable, said a number of sections will change before the bill reaches the Senate floor and "what CBO is scoring may not be the operative language of the day." Leahy and his cosponsors will work with budget analysts to eliminate their concerns, he said.

Mark Isakowitz, spokesman for a group of firms that back the legislation, said the cost estimate "does not have an effect on the core agenda items right now." Those include proposals for changing the standard for calculating damages in infringement cases and challenging patents after they are granted.

A report on the companion House bill was transmitted shortly before the legislation was passed there in September. The House bill did not contain provisions to change fee collection, to eliminate remedies for certain patent holders or to let PTO accept certain late filings, said CBO, which projected the House bill would have a net cost of $11 billion over a four-year period ending in 2012.

"In the wake of enactment of the economic stimulus package, Congress needs to ask whether it's prudent to impose additional costs and burdens on business and taxpayers," said Manus Cooney, a lobbyist for companies that oppose the current version of the legislation. The study "tells us we have a good bit of work still ahead of us but we are ready to do whatever it takes to try to achieve consensus," he said.

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