3M’s patent fees frozen in Congress’ budget fight

  • Article by: SUSAN DECKER , Bloomberg News
  • Updated: July 30, 2013 - 6:22 AM

Millions of dollars were supposed to go to the patent office – but they’re not.

 

– Google Inc. and 3M Co. are among the top patent-holding companies that agreed two years ago to pay higher fees if Congress let the U.S. Patent and Trademark Office use the funds to address a work backlog and improve application scrutiny.

Congress instead held back as much as $148 million in fees due to automatic federal spending cuts under a process known as sequestration — and the companies are crying foul.

“We were willing to pay those and thought it was an investment that needed to be made in the patent office,” said Kevin Rhodes, chief intellectual property counsel for 3M, the Maplewood-based maker of Scotch tape, Ace bandages and boat wax. “All we asked in return was that all the fees be used to pay for the services we paid for.”

The patent office, with a $2.9 billion fiscal 2013 budget funded by user fees, has had to scale back plans to update its computer system, stop most hiring and delay moving into new permanent regional offices in Dallas, Denver and Silicon Valley.

Companies paying 15 percent higher fees have been lobbying the White House and Congress, saying the patent office should be immune from the forced U.S. cuts because it isn’t tax-supported. Withholding patent office funding, they say, could stifle innovation by lengthening the average 18-month wait for ­completion of an application’s first review and imperiling a new post-grant ­reappraisal process, causing more disputes to end up in court.

Congress passed legislation in 2011 that changed how patent applications are handled from the moment they enter the Alexandria, Va.-based agency and added new review processes for patents already issued.

At the center was a provision allowing the patent office to set its own rates and have greater control over its money. The goal was to end Congress’ diversion of about $1 billion in patent fees into the general treasury even after a 1990 law required the agency to support itself. The rate increases were intended to help the office, known as the PTO, get back on track.

President Obama and members of Congress are seeking to limit certain litigation practices of firms that buy up patents and then accuse large numbers of companies of infringement.

Many of those patents are the types that companies such as Mountain View, Calif.-based Google say were wrongly issued by a patent office overwhelmed during and after the dot-com boom of the late 1990s.

Hiring held back

New procedures were created in the legislation to review patents already issued, which meant hiring 60 administrative law judges for the year ending Sept. 30. Only 18 have been hired so far, with another 16 in the pipeline, said Todd Elmer, the patent office’s chief communications officer.

“Quality starts by staffing and resourcing the patent office,” said Horacio Gutierrez, deputy general counsel of Microsoft Corp., based in Redmond, Wash.

Microsoft, which typically ranks in the top 10 recipients of U.S. patents each year, pays “tens of millions more each year” in higher patent fees, he said.

Without the fixes to the patent system, that amounts to “a tax increase that is not going to result in the improvement of patent quality,” Gutierrez said.

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