Richard Lloyd

A group of IP advocacy groups, industry bodies and companies have written to President Trump to highlight the impact of the ongoing government hiring freeze on the USPTO and, more broadly, on US innovation.

In one of his first actions after taking office, the President announced a 90-day freeze across the federal government while the new administration determines what sort of size workforce it wants. With Trump possessing a Republican’s zeal for doing away with regulation and government excess, we can assume that even if he lifts the freeze, there’s hardly going to be a hiring bonanza. That has naturally led to concerns about the long-term impact on the PTO at a time when the agency is in an ongoing effort to bring down patent pendency, expending considerable time and money to improve patent quality and facing growing competition on the world stage from patent offices in Europe and Asia. With fee diversion meaning that the office doesn’t hang onto all of the money that it brings in, the matter of resources and the PTO is never far from the agenda.   

The letter, which includes the Innovation Alliance, LES, IEEE-USA, the Medical Device Manufacturers Association (MDMA), the National Venture Capital Association (NVCA) and InterDigital among the signatories, claims that if the hiring freeze continues American inventors “would essentially be paying a tax that doesn’t contribute to the operations of the USPTO but is diverted to general government spending”. The risk, according to the letter, is that by not being able to hire new examiners the gains the agency has made on reducing patent pendency will be reversed. In a clear bid to play up a rivalry that Trump is all too aware of, it alleges that this is playing into the hands of China and its voracious patenting efforts.

Thanks to a recent Freedom of Information Act request from Gizmodo we know that the PTO currently has 290 vacancies. That list includes numerous senior positions including chief of staff, six patent examiners and one administrative patent judge. That’s a significant number of jobs yet to be filled but in the last Patent Public Advisory Committee (PPAC) meeting in early March acting PTO CFO Frank Murphy made it clear that the agency did not think that the freeze would have a meaningful impact in the short term (you can see the minutes from the meeting here). That is in part because it hired a number of patent examiners before the freeze went into effect and has planned on making the remaining additions to the examination corps later in the year.

But there’s a bigger picture here, which the letter is clearly trying to get out in front of under the new administration. The budget for the federal government that President Trump has proposed, features swingeing cuts across most departments with Commerce, the PTO’s home, due to see a cut of 16%. It’s not clear yet if that kind of reduction will apply to the PTO, but according to a DC-based lobbyist who had a hand in the letter, the message to the White House is that deep cuts would have severe ramifications for the economy and would effectively represent a heightened form of fee diversion.

That is a very sore topic in the US patent community. Between 2010 and 2014, as the letter points out, just over $400 million in user fees was diverted from the PTO. Given that the agency’s annual budget is over $3 billion, should it be hit with a 16% cut, it could see a reduction of well over $400 million in one fell swoop. It seems inevitable that changes will be made to the budget before it passes Congress, but key patent groups are clearly drawing a line in the sand over future resourcing of the PTO.

As the PTO continues to steward a patent system that is clouded with uncertainty in areas such as patent eligible subject matter, a large budget cut could have a dramatic impact on the US patent system. Even if they are at odds over the rights and wrongs of patent reform or the implications of a particular court decision, most interested parties agree that fee diversion, let alone a deep cut in resources, should be stopped.   

The one bright spot, according to the lobbyist, is that new Commerce Secretary Wilbur Ross, “really understands the patent system”. As IP Watchdog reported recently, Ross has been busy interviewing prospective candidates for the position of USPTO Director with former Johnson & Johnson IP executive Phil Johnson and former Federal Circuit Chief Judge Randall Rader both still in the running. With the budget clouds gathering over Washington DC, whoever is appointed faces perhaps the most daunting task in IP.