Industry discouraged by plans for Patent and Trademark Office budget

At a time when many technology companies are encouraging a movement to modernize the Patent and Trademark Office (PTO), the reality of the fiscal 2004 budget could force significant agency cutbacks.

The omnibus appropriations bill that the House passed on Dec.8 would allocate $1.22 billion to the agency, which would not even cover increases for inflation over the $1.17 billion for fiscal year 2003. It also would be $180 million less than necessary to cover the agency's modernization plan, PTO Director James Rogan said in an Oct. 31 letter to Rep. Frank Wolf, R-Va., chairman of House Appropriations subcommittee that oversees funding for the agency.

The agency also paid $44 million to move its headquarters from Arlington, Va., to a five-building complex in nearby Alexandria. Patent examiners began moving into the first building Dec. 2.

Rogan's announcement on Dec. 8 that he will resign on Jan. 9 to finish his autobiography only adds to sense of budgetary panic expressed by some people in the patent community. PTO Deputy Director Jonathan Dudas is expected to become acting director when Rogan leaves.

"I look forward to Jon [Dudas] taking the reins, but he is going to find himself in exactly the same crisis situation" that faced Rogan, said Mike Kirk, executive director of the American Intellectual Property Law Association. Kirk said the message from Congress was: "We want you to fix it, but we are not going to give you the money to do it."

Many technology and business groups are disappointed that Congress has spurned their willingness to pay higher patent fees in exchange for letting PTO keep all such revenue. The additional fees would fund more examiners hired under Rogan's 21st-century strategic plan.

Nearly 100 companies and 28 associations recently urged House Speaker Dennis Hastert, R-Ill., to schedule a floor vote on a bill, H.R. 1561, that would take the PTO "off budget," meaning that it would be funded outside the normal appropriations process. Appropriators oppose the idea.

"The reality is that the appropriators are cutting back further on the funding than where the PTO has been," Kirk said, "which means that implementation of the plan is just a dream. It isn't going to happen."

Other businesses that back the measure are speaking out more aggressively about how "the PTO is buckling from insufficient funding," said Senior Vice President of Technology and Manufacturing at IBM Nicholas Donofrio. He called the long-term practice of diverting patent fees a form of taxation on innovation.

In a recent article, Donofrio said IBM, the country's leading patent holder, is willing to pay an extra $15 million-plus "if it leads to higher quality patents and a better system of patent review."

In a Dec. 9 interview about his resignation, Rogan said PTO has done as much reform as it can under its current budget. Regarding fee diversion, he said: "That ball is in Congress' court. We were hoping that it would have gotten included in the omnibus. I am pretty optimistic that when they come back they will accept a compromise."