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Patent and trademark fees : hearing before the Subcommittee on Intellectual Property and Judicial Administration of the Committee on the Judiciary, House of Representatives, One Hundred Third Congress, first session, May 5, 1993 online

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04 / d V



PATENT AND TRADEMARK FEES



HEARING

BEFORE THE

SUBCOMMITTEE ON INTELLECTUAL PROPERTY
AND JUDICIAL ADMINISTRATION

OF THE

COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

FIRST SESSION



MAY 5, 1993



Serial No. 22




_^fc:i^vr:



^., ix t*



ZOuJ



Printed for the use of the C



^n^tTlNPUBLiCllBf-ARY

\ r^^l^^'-ucm nnnilMENTS DEPAnTMEWT

ee on the Judiciary



74-871



U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1994



For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Otfice. Washington, DC 20402
ISBN 0-16-043916-7



PATENT AND TRADEMARK FEES



HEARING

BEFORE THE

SUBCOMMITTEE ON INTELLECTUAL PROPERTY
AND JUDICIAL ADMINISTRATION

OF THE

COMMITTEE ON THE JUDICIAKY
HOUSE OP REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

FIRST SESSION



MAY 5, 1993



Serial No. 22




,iVb



t - ., ^\ u ' i-o%,s



O^"!!)!;! PUBLIC LIBrARY



I GOVfeHijf^^itNT nnniJMENTS DEPARTMENT!

Printed for the use of the COTmntlee on'tRe Judiciary



74-871



U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1994



For sale by the U.S. Government Printing Office
Superintendent of Documents. Congressional Sales Office. Washington, DC 20402
ISBN 0-16-043916-7



COMMITTEE ON THE JUDICIARY



JACK BROOKS,

DON EDWARDS, CaUfomia
JOHN CONYERS, Jr., Michigan
ROMANO L. MAZZOLI, Kentucky
WILLIAM J. HUGHES, New Jersey
MIKE SYNAR, Oklahoma
PATRICIA SCHROEDER, Colorado
DAN GLICKMAN, Kansas
BARNEY FRANK, Massachusetts
CHARLES E. SCHUMER, New York
HOWARD L. BERMAN, CaUfomia
RICK BOUCHER, Virginia
JOHN BRYANT, Texas
GEORGE E. SANGMEISTER, Ilhnois
CRAIG A. WASHINGTON, Texas
JACK REED, Rhode Island
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
DAVID MANN, Ohio
MELVIN L. WATT, North Carolina
XAVIER BECERRA, California



Texas, Chairman

HAMILTON FISH, Jr., New York
CARLOS J. MOORHEAD, Cahfomia
HENRY J. HYDE, IlUnois
F. JAMES SENSENBRENNER, Jr.,

Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
STEVEN SCHIFF, New Mexico
JIM RAMSTAD, Minnesota
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB INGLIS, South CaroUna
BOB GOODLATTE, Virginia



Jonathan R. Yarowsky, General Counsel

Robert H. Brink, Deputy General Counsel

Alan F. Coffey, Jr., Minority Chief Counsel



Subcommittee on Intellectual Property and Judicial Administration

WILLIAM J. HUGHES, New Jersey, Chairman
DON EDWARDS, CaUfomia CARLOS J. MOORHEAD, California

JOHN CONYERS, Jr., Michigan HOWARD COBLE, North CaroUna

ROMANO L. MAZZOLI, Kentucky HAMILTON FISH, Jr., New York

MIKE SYNAR, Oklahoma F. JAMES SENSENBRENNER, Jr.,

BARNEY FRANK, Massachusetts Wisconsin

HOWARD L. BERMAN, CaUfomia BILL McCOLLUM, Florida

JACK REED, Rhode Island STEVEN SCHIFF, New Mexico

XAVIER BECERRA, California

Hayden W. Gregory, Counsel
Edward O'Connell, Assistant Counsel
William F. Patry, Assistant C'nuniu>l , ^



Jarilyn Dupont, Assistant Counsel

Thomas E. Mooney, Mi/iority Counsel

Joseph V. Wolfe, Minority Counsel



•A.



CONTENTS



HEARING DATE

Page

May 5, 1993 1

TITLE VII, SECTION 7001 OF BILL

Title VII of the Omnibus Budget Reconciliation Act of 1993 (extension of
patent fees surcharge until fiscal year 1998) 3

OPENING STATEMENT

Hughes, Hon. William J., a Representative in Congress from the State of
New Jersey, and chairman. Subcommittee on Intellectual Property and
Judicial Administration 1

WITNESSES

Kirk, Michael K, Acting Assistant Secretary and Acting Commissioner of
Patents and Trademarks, U.S. Department of Commerce 4

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Kirk, Michael K, Acting Assistant Secretary and Acting Commissioner of
Patents and Trademarks, U.S. Department of Commerce: Prepared state-
ment 7

Reed, Hon. Jack, a Representative in Congress from the State of Rhode

Island: Prepared statement 4

APPENDIXES

Appendix 1. — Letter from Jack C. Goldstein, section chair. Section of Patent,
Trademark and Copyright Law, American Bar Association, to Hon. William
J. Hughes, chairman. Subcommittee on Intellectual Property and Judicial
Administration, May 4, 1993 17

Appendix 2. — Letter from Roger S. Smith, president, Intellectual Property
Owners, to Hon. William J. Hughes, chairman. May 4, 1993 19

(III)



PATENT AND TRADEMARK FEES



WEDNESDAY, MAY 5, 1993

House of Representatives,
Subcommittee on Intellectual Property

AND Judicial Administration,
Committee on the Judiciary,

Washington, DC.

The subcommittee met, pursuant to notice, at 11:50 a.m., in room
2237, Raybum House Office Building, Hon. William J. Hughes
(chairman of the subcommittee) presiding.

Present: Representatives William J. Hughes and Jack Reed.

Also present: Hayden W. Gregory, counsel; Jarilyn Dupont, as-
sistant counsel; Phyllis Henderson, secretary; Thomas Mooney, mi-
nority counsel; and Joseph Wolfe, minority counsel.

OPENING STATEMENT OF CHAIRMAN HUGHES

Mr. Hughes. The Subcommittee on Intellectual Property and Ju-
dicial Administration will come to order.

We will now hear testimony on legislation which will extend the
surcharge on patent fees first implemented in fiscal year 1991 until
fiscal year 1998. After this short hearing, we will then proceed to
mark up on the legislation with high expectation that we will prob-
alaly have to recess and meet after the first vote on the floor today
to try to conclude the markup.

This hearing and markup are necessary in order to assist in the
completion of the budget reconciliation i process. The budget reso-
lution passed by Congress in March anticipated budget savings
from the Judiciary Committee through fiscal year 1998 in the
amount of $345 million. The savings were expected to be effective
through the continuation of the surcharge on patent fees from fis-
cal year 1998. The surcharge is currently scheduled to end in fiscal
year 1995.

The legislation provides for the extension of the surcharge
through fiscal year 1998. The amounts expected to be collected
through the surcharge are $111 million in fiscal year 1996, $115
million in fiscal year 1997, and $119 million in fiscal year 1998.
Again, the total amount of savings for purposes of budget scoring
is $345 million.

While I would really prefer to take a different approach to the
fee structure of the Patent and Trademark Office, the budget proc-



iThe subcommittee held this hearing in accordance with the requirements of the budget proc-
ess. Subsequent to this hearing, H.R. 2264, the Omnibus Budget Reconciliation Act of 1993, was
introduced on May 25, 1993. Title VII of this act falls under the legislative jurisdiction of this
subcommittee.

(1)



ess really leaves us very little choice at this time. I am very much
aware of the intellectual property community's opposition to the
surcharge and appreciate the nature of the opposition.

Indeed, I might say that I am very S3rnipathetic to their point of
view. Many view this as an extra tax on creativity which does noth-
ing to encourage the competitiveness of the Nation. I want to as-
sure the members of the subcommittee and others that the sur-
charge and the patent fees assessed by the Patent and Trademark
Office are subjects which will be revisited by this subcommittee in
the years ahead.

[Title VII, Section 7001: Patent and Trademark Fees of the Om-
nibus Budget Reconciliation Act of 1993, follows:]



1 TITLE VII— COMMITTEE ON THE

2 JUDICIARY

3 SEC. 7001. PATENT AND TRADEMARK FEES.

4 Section 10101 of the Omnibus Budget Reconciliation

5 Act of 1990 (35 U.S.C. 41 note) is amended—

6 (1) in subsection (a) by striking "1995" and in-

7 serting"1998";

8 (2) in subsection (b)(2) by striking "1995" and

9 inserting "1998"; and

10 (3) in subsection (c) —

11 (A) by striking "through 1995" and insert-

12 ing "through 1998"; and

13 (B) by adding at the end the follo%ving:

14 "(6) $111,000,000 in fiscal year 1996.

15 "(7) $115,000,000 in fiscal year 1997.

16 "(8) $119,000,000 in fiscal year 1998.".



Mr. Hughes. At this time, I would like to move to the only wit-
ness we have today, Michael Kirk, the Acting Assistant Secretary
and Acting Commissioner of Patents and Trademarks.

Mr. Reed would like to insert an opening statement for the
record, and without objection that will be so ordered.

[The prepared statement of Mr. Reed follows:]

Prepared Statement of Hon. Jack Reed, a Representative in Congress From

THE State of Rhode Island

Mr. Chairman, I would like to take this opportunity to express my concern for
the impact of the extension of the patent fee surcharge upon small inventors.

I have been contacted by a number of my constituents who have designed a vari-
ety of individual inventions. My constituents feel that the continuation of these fees
places an unfair financial burden on inventors who wish to patent their ideas. As
you know, the Patent and Trademark Office is a fee-funded organization. My con-
stituents feel that they are being asked to "contribute" to deficit reduction in a dis-
proportionate manner.

While I recognize the need to investigate methods of decreasing our nation's defi-
cit, I am concerned that this continuation of surcharge fees will discourage the cre-
ativity and ingenuity of individual inventors. In this era of economic competitive-
ness, I believe that we must encourage the innovations of our citizens and facilitate
their efforts to obtain a patent for their work.

Thank you, Mr. Chairman.

Mr. Hughes. Michael Kirk, our witness, is, as I indicated, the
Acting Secretary and Acting Commissioner of Patents and Trade-
marks, and has been since February 15, 1993.

He had had a long and illustrious career at the Patent and
Trademark Office. He has been a principal U.S. negotiator for
trade-related intellectual property rights issues in the Uruguay
Round of the GATT talks. He is also the Assistant Commissioner
for External Affairs at the PTO. In this position, he has been re-
sponsible for legislative matters.

Mr. Kirk received his bachelor of science in electrical engineering
from the Citadel in 1959 and his juris doctor in law in 1965 from
the Georgetown University Law Center. In 1969, he added a mas-
ter of public administration from Indiana University.

While we had worked with Mike for a number of years, this is
his first opportunity to testify, I think, and I appreciate his attend-
ance today.

We welcome you to the subcommittee, we have your statement
which, without objection, will be made a part of the record, and we
hope you can summarize for us.

STATEMENT OF MICHAEL K. KIRK, ACTING ASSISTANT SEC-
RETARY AND ACTING COMMISSIONER OF PATENTS AND
TRADEMARKS, U.S. DEPARTMENT OF COMMERCE

Mr. KiRK. Thank you, Mr. Chairman. I appreciate the oppor-
tunity to be here today.

The issue of funding of the U.S. Patent and Trademark Office
has been one of the most controversial, technically difficult and
time-consuming issues that we face. The issues before the sub-
committee today are no different. To put the issues into perspec-
tive, I would like to provide some background, if I might.

In 1990, the U.S. Patent and Trademark Office was funded
through a mixture of user fees and taxpayer revenues. At the budg-
et summit of 1990, however, representatives of the legislative and
executive branches of the Government agreed to replace taxpayer



support for our activities with increased user fees. In addition,
these representatives agreed to methods for keeping track of the ef-
fects of their proposals on debt reduction, and for keeping track of
how spending under their new proposals would affect the deficit.

These tracking methods are referred to as scoring. When develop-
ing the scoring rules, many of the unique features of the funding
regimes used by some agencies, including the U.S. Patent and
Trademark Office, were not taken into account.

The budget summit agreement was incorporated in a concurrent
resolution. As a result, the committees on the Judiciary were in-
structed by the Committees on the Budget to report legislation that
would increase the fees charged by the U.S. Patent and Trademark
Office to cover the amounts that were expected at that time to
come from taxpayer revenues.

The proposal was estimated to save taxpayers $495 million over
a 5-year period. The result was section 10101 of the Omnibus
Budget Reconciliation Act, or OBRA, as we call it. Under this sec-
tion, the Commissioner is required to establish a surcharge on all
fees under subsections 41 (a) and (b) of title 35 to collect target
amounts that are specified in ORBA for fiscal year 1991 through
1995.

Overgeneralizing, these target amounts are rough estimates of
what would have been the taxpayers' contributions to operating the
Office during this period. Revenues from the surcharge were to be
placed in a special account within the U.S. Treasury, and by the
terms of the act made available only to the U.S. Patent and Trade-
mark Office. The funds in this surcharge account are available only
to the Office to the extent provided in appropriation acts.

In fiscal year 1991, the Committees on Appropriations rec-
ommended that the full amount of the surcharge be made available
to the Office. In 1992, however, authority to spend $8.1 million of
the total amount that we collected was withheld. In fiscal year
1993, authority to spend $12.3 million of the total amount that we
collected of the surcharge was also withheld.

The requirements of section 10101 of OBRA will expire by their
own terms at the end of fiscal year 1995. President Clinton in his
message entitled "A Vision of Change for America" proposed that
patent fee increases required by OBRA be extended permanently.
The proposal was to raise the standard fee to incorporate the sur-
charge, and allow the standard fee to fully cover operational cost.
It was estimated that such an extension would save the taxpayers
$111 million in fiscal year 1996, $115 milUon in 1997, and $120
milHon in 1998.

However, the administration, in its revised budget submission
that came to the Congress in April — to the Committees on Budg-
et — after the reconciliation targets has been approved by the Con-
gress in both bodies, proposed to make the Office fully funded by
fees, and to allow section 10101 of OBRA to expire. To accomplish
this, the amounts of the fees listed in subsections 41 (a) and (b) of
the Patent Code would be reset at a level which would include
amounts equal to the surcharges imposed by OBRA. These new
base fees charged patent applicants and owners would be at the
level presently represented by the combination of the current base
fees and surcharge fees. These new fees would be permanent.



6

There would be no sunset provision, and they would be adjustable
to reflect fluctuations in the Consumer Price Index.

If the proposal were implemented, all of the fees collected from
patent applicants and owners could be used to finance operations
of the U.S. Patent and Trademark Office. It is for this reason that
we prefer this approach. Furthermore, the additional problems and
expenses related to maintaining the surcharge fund would be elimi-
nated.

However, the administration recognizes that the instructions in
the conference agreement on the budget resolution require the
Committee on the Judiciary to reduce outlays by $345 million in
fiscal years 1996 through 1998. For this reason, the administration
would not object to a simple extension of section 10101 of the Om-
nibus Budget Reconciliation Act.

Mr. Chairman, that concludes my prepared statement, and I
would be happy to answer any questions.

Mr. Hughes. Thank you, Mr. Kirk.

[The prepared statement of Mr. Kirk follows:]



Statement of

MICHAEL K. KIRK

ACTING ASSISTANT SECRETARY

AND ACTING COMMISSIONER OF PATENTS AND TRADEMARKS

before the
SUBCOMMITTEE ON INTELLECTUAL PROPERTY

AND JUDICIAL ADMINISTRATION

COMMITTEE ON THE JUDICIARY

UNITED STATES HOUSE OF REPRESENTATIVES

May 5, 1993



Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to appear today before the Subcommittaft, Since the late
1970s, the issue of the funding for the U.S. Patent and Trademark Office has been one of the
most controversial, technically difficult, and time-consuming issues we face. The issues
before the Committee today are no different. To put the issues in perspective, however, I
would like to provide some background for the Subcommittee.



8

Backgmund

In 1990, the U.S. Patent and Trademark Office was funded through a mixture of user fees
and taxpayer revenues. As a result of the Budget Summit of 1990, however, representatives
from the Legislative and Executive Branches of Government agreed, as part of a package of
Government-wide user fee initiatives, to replace taxpayer support for our activities with
additional user fees. In addition to proposing other substantive cost reductions throughout
the Government, these representatives agreed to methods for keeping track of the effects of
these proposals on debt reduction and for keeping track of how spending for new proposals
would affect the deficit. These tracking methods are referred to as "scoring". It was
impossible when developing the "scoring" rules to take into account at the time many of the
peculiarities or unique features of the funding regimes used by some agencies inducing the
U.S. Patent and Trademark Office.

The Budget Summit agreement was incorporated in a concurrent resolution. As a result, the
Committees on the Judiciary were instructed by the Committees on the Budget to report
legislation that would increase fees charged by the U.S. Patent and Trademark Office to
cover the amounts that were expected at the time to come from taxpayer revenues. This
proposal was estimated to save the taxpayers over $495,000,000 during a five-year period.
The result was section 10101 of the Omnibus Budget Reconciliation Act of 1990 (Public Law
101-508).



Section 10101 of the Omnibus Budget Reconciliation Act"

Under this section, the Commissioner is required to establish a surcharge on all fees
enumerated in subsections 41(a) and (b) of title 35^ to collect target amounts that were
specified in subsection (c) in fiscal years 1991 through 1995. Overgeneralizing, these target
amounts are rough estimates of what would have been the taxpayers' contributions to
operating the Office during this period. Revenues from the surcharge were to be placed in a
special account within the U.S. Treasury and, by the terms of the Act, "available only to the
Patent and Trademark Office." The funds in this surcharge account are only available to the
Office " to the extent provided in appropriations Acts ...."

In fiscal year 1991, the Committees on Appropriations recommended that the full amount of
the surcharge account be made available to the Office. In 1992, however, authority to spend
$8,106,000 of the total amount collected was withheld. Similarly in 1993, authority to spend
$12,328,000 of the total surcharge collection was withheld. These amounts, now in excess
of $20,000,000, are available only to the U.S. Patent and Trademark Office and remain in a
special Treasury account until appropriated to the Office.



' Section 10101 was amended by Public Law 102-204. A copy of the current provision is appended.
For purposes of this testimony, the differences between the original and amended versions are not material.

^ The fees enumerated in these subsections include most of the significant fees associated with the
patent process, e.g., filing, issue, and maintenance fees.



10

Fiscal Yean 1996 Through 1998

Requirements of section 10101 of the Omnibus Budget Reconciliation Act will expire by their
own terms at the end of fiscal year 1995. President Clinton in his message " A Vision of
Change for America " proposed that the patent fee increases required by the Omnibus Budget
Reconciliation be extended permanently. The proposal was to raise "the standard fee to
incorporate the surcharge and allow[s] the standard fee to fully cover patent operation costs
...." It was estimated that such an extension would save the taxpayers $111,000,000 in fiscal
year 1996, $115,000,000 in fiscal year 1997, and $120,000,000 in fiscal year 1998.

However, the Administration, in its revised budget submission in April to the Committees on
the Budget after the reconciliation targets had been approved by the Congress, proposed to
make the Office fully funded by fees and to allow section 10101 of the Act to expire. To
accomplish this, the amounts of the fees listed in subsections 41(a) and (b) would be reset at
a level that would include amounts equal to the surcharges imposed by section 10101 of the
Act. These new base fees charged to patent applicants and owners would be at the level
presently represented by the combination of the current base and surcharge fees. The new
fees would be permanent. That is, there would be no "sunset" provision. They would be
adjustable to reflect fluctuations in the Consumer Price Index and will be considered
"offsetting" collections.



11



If this proposal were implemented, all of the fees collected from patent applicants and
owners could be used to finance the operations of the U.S. Patent and Trademark Office. It
is for this reason as well as our concerns and those of the patent community arising from
failure to make all of the fees collected available to the U.S. Patent and Trademark Office,
that we prefer the approach that we outlined. Furthermore, the additional problems and
expenses related to maintaining the surcharge fund would be eliminated.

However, the Administration recognizes that the instructions in the conference agreement on
the budget resolution require the Committee on the Judiciary to reduce outlays by
$345,000,000 in fiscal years 1996 through 1998. For this reason, the Administration would
not object to a "simple" extension of section 10101 of the Omnibus Budget Reconciliation
Act of 1990.



12



Omnibus Budget Reconciliation Act (Public Law 101-508, as amended by subsection 2(b)
of Public Law 102-204), Subtitle B - Patent and Trademark Office User Fees, Section
10101. Patent and Trademark Office User Fees

(a) SURCHARGES. - There shall be a surcharge, during fiscal years 1991 through
1995, on all fees authorized by subsections (a) and (b) of section 41 of title 35, United States
Code, in order to ensure that the amounts specified in subsection (c) are collected.

(b) USE OF SURCHARGES. - Notwithstanding section 3302 of title 31, United
States Code, beginning in fiscal year 1991, all surcharges collected by the Patent and
Trademark Office -

(1) in fiscal year 1991 -

(A) shall be credited to a separate account established in the Treasury
and ascribed to the Patent and Trademark Office in the Department of
Commerce as offsetting receipts, and

(B) $91,0(X),(XX) shall be available only to the Patent and Trademark
Office, to the extent provided in appropriation Acts, and the additional
surcharge receipts, totalling $18,807,000, shall be available only to the Patent
and Trademark Office without appropriation, for all authorized activities and
operations of the office, including all direct and indirect costs of services
provided by the office,

(2) in fiscal year 1992 through 1995 -

(A) shall be credited to a separate account established in the Treasury
and ascribed to the Patent and Trademark Office in the Department of
Commerce as offsetting receipts, and

(B) shall be available only to the Patent and Trademark Office, to the
extent provided in appropriations Acts, for all authorized activities and
operations of the office, including all direct and indirect costs of services
provided by the office, and

(3) shall remain available until expended.

(c) ESTABLISHMENT OF SURCHARGES. - In fiscal years 1991 through 1995, the
Commissioner of Patents and Trademarks shall establish surcharges under subsection (a),
subject to the provision of section 553 of title 5, United States Code, in order to ensure that
the following amounts, but not more than the following amounts, of patent and trademark
user fees are collected:

(1) $109,807,000 in fiscal year 1991.

(2) $95,000,000 in fiscal year 1992.



13



(3) $99,000,000 in fiscal year 1993.

(4) $103,000,000 in fiscal year 1994.

(5) $107,000,000 in fiscal year 1995.

(d) REPEAL. - Section 105(a) of Public Law 100-703 (102 Stat. 4675) is repealed.

(e) REPORT OF FEES. - The Commissioner of Patents and Trademarks shall study
the structure of all fees collected by the Patent and Trademark Office and, not later than


1

Online LibraryUnited States. Congress. House. Committee on the JPatent and trademark fees : hearing before the Subcommittee on Intellectual Property and Judicial Administration of the Committee on the Judiciary, House of Representatives, One Hundred Third Congress, first session, May 5, 1993 → online text (page 1 of 2)