Patently Offensive: Fee Diversion and Its Effect on the Intellectual Property Economy

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The Honorable Howard Coble Chairman, subcommittee on Courts, the Internet and Intellectual Property Committee on the Judiciary U.S. House of Representatives

What Is Fee Diversion, and Why Should a CEO Be Concerned?

Patents, and intellectual property in general, have been part of American jurisprudence and our national economy since the founding of the Republic. George Washington signed a patent bill early in his first term as president, and Abraham Lincoln (himself a patent owner) was quoted as saying that the patent system "added the fuel of interest to the fire of genius." But, for the most part, this subject matter--dry and arcane, the province of engineers armed with law degrees--has never inspired great interest for the public. In fact, I am hard-pressed to identify two words that are better suited to induce sleep in the average lay person than "patent law".

My good-natured jab at patent lawyers notwithstanding, Lincoln got it right, as he so often did. The founding fathers were prescient enough to understand that for the young nation to survive, its economy had to flourish. This is why our Constitution (Article I, Section 8) actually includes provisions authorizing Congress to protect patent owners and their rights. More than 200 years and 6.0 million patents later, the economy and the country are the better for it. Our patent laws have enabled individuals and businesses to produce marvelous inventions that touch us in ways that we take for granted, but that enhance the quality of our lives on a daily basis. For that matter, patents are the very life's blood of certain industries, as any biotech executive will acknowledge. Try raising a half-billion dollars in capital to bring a cancer treatment to market without patent protection for the underlying work.

Unfortunately, the U.S. Patent and Trademark Office (PTO) is currently providing inadequate service to individuals and businesses. Innovators must obtain prompt and reasonable evaluations from the PTO on whether they can acquire patents if they are to make sound business decisions. The PTO is now taking more than 25 months from filing to process a patent application to a patent, and the latest projections show it will take an average of 38.6 months by 2006. I am fearful that the agency simply does not have the resources to provide quality patents, especially in such emerging areas as biotechnology and business methods. In addition, the PTO has been unable to adopt the latest information technology that could allow it to provide better service to the public and more efficient patent and trademark processing.

If one accepts my point--that patents are vital to the sustenance of our economy--then I hope another point begins to resonate more forcefully within industry ranks. Since 1992, the U.S. Congress, with the participation of each administration, has steadily diverted money from the PTO to other programs. This practice imposes an unfair tax on inventors, because unlike most federal programs, the PTO does not receive a stipend from the General Treasury. Instead, it raises all of the revenue needed to operate through the collection of user fees imposed on inventors who file for patent protection and businesses that file for trademark registration. In addition, the diversion of revenue from PTO to other programs only inhibits the expeditious issuance of patents and occasionally compromises the actual quality of some patents granted, thereby subjecting them to challenge in legal and administrative settings.

The bottom line is that time is money in the patent world; and with more money, the PTO can issue quality patents faster, which means more investment, more jobs, and greater wealth for American industry. The same is true for trademarks. When businesses develop new products or new brand names for existing products, early federal registration of the name, logo, or symbol is necessary to protect rights and avoid expensive litigation. …