Final Hurdle for Patent Reform Bill

September 7, 2011

The U.S. Senate is set to consider the America Invents Act this week. Senate Majority Leader Harry M. Reid (D-Nev.) filed cloture on the motion to proceed to H.R. 1249 on Aug. 2; and, on Tuesday, the Senate invoked cloture on this motion to proceed.

NSBA remains opposed to the America Invents Act, believing that its provisions on post-grant patent challenges and its effective elimination of the American grace period would put innovative small firms and startup businesses at greater risk than the current system and would result in a U.S. patent system strongly titled in favor of large incumbent corporations.

The coast is not entirely clear for the American Invents Act, however. The Senate version of the America Invents Act (S. 23), which was approved in March, would create a U.S. Patent and Trademark Office (USPTO) Revolving Fund to ensure that all the fees collected by the agency remained under the agency’s control until they were expended.

The manager’s amendment of the legislation that the U.S. House of Representatives approved, in late June, altered this approach. Instead, H.R. 1249 would allow the agency to keep the fees it collects in a Reserve Fund that would be released to it only “[t]o the extent and in the amounts provided in appropriations Acts.”

Previously, Reps. Paul Ryan (R-Wis.), chair of the House Committee on the Budget, and Harold Rogers (R-Ky.), chair of the House Committee on Appropriations, had expressed their objections to the provisions in the Senate bill that would have allowed the USPTO to collect and spend the fees it collects without going through the appropriations process.

They wrote: “We strongly oppose this proposed shift of billions in discretionary funding and fee collections to mandatory spending. Putting USPTO funding on auto-pilot is a move in exactly the wrong direction, given the new Republican majority’s commitment to restraining spending, improving accountability and transparency, and reducing the nation’s unparalleled deficits and debt.”

Industry’s reaction to the House approach to USPTO fee diversion has been largely negative. In a July 12 letter to Senate leaders, Douglas Holz-Eakin, president of the American Action Forum and a former director of the Congressional Budget Office, wrote: “H.R. 1249’s anti-fee-diversion language would not guarantee that fees paid by users would be dedicated for use by the [USPTO]. In short, the [USPTO] would not be authorized to spend the fees it collects, nor does the measure ensure that fees will not be diverted elsewhere.”

The House approach also has not been embraced by Sen. Tom Coburn (R-Okla.), whom is expected to offer an amendment that would restore the Senate provisions taking the USPTO funding out of the appropriations process. At this time, it is not clear that Coburn could garner sufficient support for this amendment, however, given that the House has been clear in its strident opposition to such a mechanism. Coburn has pledged to “do everything in [his] power to slow the bill,” if his amendment fails.

The America Invents Act (formerly the Patent Reform Act) was introduced Jan. 25, 2011 by Sens. Patrick Leahy (D-Vt.), chair of the Committee on the Judiciary, Chuck Grassley (R-Iowa), ranking member of the Committee on the Judiciary, and Orrin Hatch (R-Utah).

The administration of President Barack Obama has issued an official Statement of Administration Policy in support of the legislation.

Please click here for more information on NSBA’s position on the America Invents Act.

Please click here to urge your senators to vote against this legislation.