[Congressional Record Volume 160, Number 42 (Thursday, March 13, 2014)]
[Senate]
[Pages S1658-S1661]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself, Mr. Coburn, Ms. Klobuchar, and 
        Mr. Flake):
  S. 2146. A bill to establish a United States Patent and Trademark 
Office Innovation Promotion Fund, and for other purposes; to the 
Committee on the Judiciary.
  Mrs. FEINSTEIN. Mr. President, I rise today to protect and secure the 
user fees paid by America's inventors and businesses to the Patent and 
Trademark Office, and to stabilize that Office's funding, by 
introducing the Patent Fee Integrity Act. I want to thank my co-
sponsors on this bill, Senators Coburn, Klobuchar, and Flake.
  Throughout most of its history, taxpayers supported the operations of 
the Patent and Trademark Office, or PTO, through appropriations from 
general funds. However, in 1990, Congress established a 69 percent user 
fee ``surcharge,'' so that the PTO became funded entirely through fees 
paid by its users, the American inventors who make our country the 
world's technological leader.
  Unfortunately, almost immediately, Congress began using the funds 
that inventors paid to protect their inventions for other purposes. In 
1992, $8.1

[[Page S1659]]

million in user fees were diverted. In 1993, $12.3 million was 
diverted. In 1994, $14.7 million. So it continued, growing each year, 
until what started as a trickle became a flood in 1998, with $199 
million in PTO user fees diverted.
  PTO user fees continued to be diverted in most of the following 
years, at varying levels. In fiscal year 2011, as Congress was 
finishing its work on major patent reform, a new fee diversion record 
was set, a staggering $209 million in user fees diverted from the PTO 
that year.
  Meanwhile, at the same time that these fees were being taken away, 
the length of time that it took to get a patent out of the Patent 
Office steadily increased. In fiscal year 1991, average patent pendency 
was 18.2 months. By fiscal year 1999, it had increased to 25 months. By 
fiscal year 2010, average patent pendency had increased all the way to 
35.3 months.
  These are not just numbers. This is innovation being stifled from 
being brought to market. The longer it takes to get a patent approved, 
the longer a new invention, a potential technological breakthrough, 
sits on the shelf, gathering dust instead of spurring job growth and 
scientific and economic progress.
  Ultimately, this dulls our country's competitive edge in the global 
economy. America's record of innovation is the envy of the world; it 
has provided us a marked competitive edge over the decades and even 
centuries. When we stifle the progress of our innovation within the 
PTO, we lose some of this competitive advantage, and the jobs and other 
economic benefits that accompany it.
  Obviously, there is a direct relationship between fee diversion and 
patent pendency. The more fees that are diverted away from the PTO, the 
fewer patent examiners they can hire, the more patents each examiner 
has to process, and the longer it takes them to get to any individual 
patent--a longer patent pendency.
  But it is not just the time that it takes to get a patent that is 
hurt by diversion of resources. The quality of the patents issued is 
harmed as well.
  As members of this body know, the Senate Judiciary Committee is 
actively considering legislation to address abuses of the patent 
system, and the House of Representatives passed its own legislation on 
the subject by a strong bipartisan vote of 325-91.
  A variety of businesses all over the country are being sued and 
subjected to letters demanding payment, often based on very 
questionable patents that should never have been issued by the Patent 
Office in the first place.
  Businesses and lawyers have asserted patents for, by way of example: 
Scanning and e-mailing a document; completing a purchase on a website 
with one click, as opposed to multiple clicks; and e-mailing a press 
release, something that I think it's safe to say that every member of 
this body does many times each month.
  When there aren't enough patent examiners to give patent applications 
sufficient attention, bad patents get issued.
  As the President and CEO of the Internet Association, which 
represents leading Internet companies like Amazon, eBay, Expedia, 
Facebook, Hotels.com, Netflix, Twitter, and Yahoo!, puts it: ``the 
Patent Fee Integrity Act . . . would provide the Patent and Trademark 
Office with adequate funding and resources to improve overall patent 
quality. Improving patent quality is an essential step in improving the 
entire patent ecosystem by shutting off the supply of low-quality 
patents that fuel litigation by patent trolls.'' The Coalition for 
Patent Fairness, which includes such major companies as Blackberry, 
Cisco, Dell, Google, Oracle, and Verizon, notes that ``When patent 
quality suffers, innovation throughout America's economy is stymied, 
and patent trolls are able to prosper.''
  To make sure the Patent and Trademark Office has the resources it 
needs to issue patents in a timely manner and to improve patent 
quality, in 2011, in the Leahy-Smith America Invents Act, we gave the 
PTO the authority to increase its user fees.
  Some of us fought at that time to end the practice of fee diversion, 
led by my co-sponsor Senator Coburn, to make sure that the users got 
the full benefit of their increased fees. Unfortunately, our colleagues 
on the other side of the Capitol watered down the language that the 
Senate passed to accomplish this purpose.
  One of the sponsors defended that language when it came back to the 
Senate, arguing that the bill ``creates a PTO reserve fund for any fees 
collected above the appropriated amounts in a given year--so that only 
the PTO will have access to these fees.''
  I warned then that the House's changes provided no assurance that 
that is what would actually happen.
  So what happened? Well, the PTO went ahead and raised its fees, as 
expected.
  Did it get to keep all those new fees?
  Unfortunately, the government wasted little time in diverting the new 
fees. In fiscal year 2013, $121 million in PTO user fees were diverted, 
due to sequestration. This pushed the total of PTO user fees diverted 
since PTO was made self-sufficient in 1990 to over $1 billion, $171 
million, to be exact.
  Requiring the payment of higher patent fees which are then used for 
general government purposes really amounts to a tax on innovation which 
is the last thing we should be burdening in today's technology-driven 
economy.
  The fact that this latest round of fee diversion occurred through 
sequestration provides another reason why the legislation we are 
introducing today is needed. PTO never should have been subject to 
sequestration in the first place. As I have described, it is not 
supported at all by taxpayer funds--it is completely funded by user 
fees. These users pay for a service when they send in their fees: the 
timely consideration and processing of their patent or trademark 
application or renewal. They are entitled to have the benefit of what 
they paid for. These funds should not be sequestered, to pay for other 
government services, for which there is a deficit. The PTO does not 
contribute at all to the deficit, and that has been the case for more 
than 20 years.
  As a result of PTO's budgetary shortfall, in which sequestration 
played a significant part: information technology modernization was 
scaled back significantly; the process of opening new PTO satellite 
offices, called for in the America Invents Act, was frozen; hiring of 
most support personnel was stopped; and travel and training was 
virtually eliminated.
  Last fall brought another unfortunate budgetary disruption: the 
shutdown of the federal government. Fortunately, the PTO was able to 
keep operating for that limited time, with the balances it had in its 
account. However, had the shutdown continued, PTO, too, would have been 
forced to close up--despite the fact that it collects fees that make it 
self-sustaining.
  There is no good reason why PTO should be subject to sequestration 
and shutdown. As the Business Software Alliance states in their 
supporting letter, ``This bill would ensure the USPTO can continue 
conducting self-funded operations that produce tremendous economic and 
social value for the United States.''
  The Patent Fee Integrity Act strikes current language that makes PTO 
subject to the appropriations process, which has been the principal 
avenue through which its funding has been diverted, and ensures that it 
can keep its funding. However, we also include measures to maintain 
accountability for the agency; the bill: requires the PTO Director to 
submit an annual report and operations plan to Congress; requires the 
PTO Director to submit an annual spending plan to the Appropriations 
Committees; and requires an annual independent financial audit.
  This bill is supported across the width and breadth of the patent 
user community. It is endorsed by: Bayer Corporation; Biocom; The 
Biotechnology Industry Organization; BSA, The Software Alliance; The 
Coalition for Patent Fairness; The Coalition for 21st Century Patent 
Reform, which represents a broad group of nearly 50 global corporations 
who employ hundreds of thousands of Americans in a variety of sectors, 
including 3M, Caterpillar, General Electric, General Mills, Procter & 
Gamble, Johnson & Johnson, Medtronic, and Northrop Grumman; Fallbrook 
Technologies; The Innovation Alliance, which includes innovative small, 
medium, and large businesses, including Dolby Laboratories and 
QUALCOMM; the Intellectual Property Owners Association, which

[[Page S1660]]

represents more than 200 companies and 12,000 individuals in the U.S. 
who own intellectual property; The Internet Association; Mattel; Motor 
& Equipment Manufacturers Association; National Association of 
Manufacturers; Pharmaceutical Research and Manufacturers of America; 
and Xerox.
  Many of these groups disagree vehemently with each other about patent 
reform. However, they all come together to unite in support of the bill 
we are introducing today, the Patent Fee Integrity Act.
  BSA, The Software Alliance aptly observes, ``with their funds 
constantly under attack, the USPTO faces an endless and unnecessary 
challenge to provide the services for which American innovators have 
already paid. The Patent Fee Integrity Act will help the USPTO continue 
to increase patent quality, provide critical, time-sensitive services, 
and guarantee continuity of its operations independent of continually-
shifting political considerations.''
  I urge my colleagues to join us in supporting this critical bill. As 
the Coalition for 21st Century Patent Reform and others observed in the 
letter they sent to me in support of this bill: ``Your legislation 
would empower the USPTO to fully support America's innovators without 
adding a single penny to the deficit.''
  Mr. President, I ask unanimous consent that letters of support be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                    BSA/The Software Alliance,

                                   Washington, DC, March 13, 2013.
     Hon. Dianne Feinstein,
     U.S. Senate,
     Washington, DC.
       Dear Senator Feinstein: On behalf of BSA/The Software 
     Alliance and its members, which are among the world's most 
     innovative companies, I write to express strong support for 
     the Patent Fee Integrity Act, which would remove the US 
     Patent and Trademark Office (USPTO) from the congressional 
     appropriations process. This bill would ensure the USPTO can 
     continue conducting self-funded operations that produce 
     tremendous economic and social value for the United States.
       The USPTO plays an indispensable role in sparking the 
     growth of America's economy by protecting intellectual 
     property (IP) and promoting innovation. Over the last two 
     decades, however, the federal government has withheld, 
     diverted, or sequestered more than $1 billion in USPTO user 
     fee collections. This bill recognizes that with their funds 
     constantly under attack, the USPTO faces an endless and 
     unnecessary challenge to provide the services for which 
     American innovators have already paid.
       The Patent Fee Integrity Act will help the USPTO continue 
     to increase patent quality, provide critical, time-sensitive 
     services, and guarantee continuity of its operations 
     independent of continually-shifting political considerations. 
     Moreover, it will protect against reducing the USPTO's 
     operating capacity at a time when it needs to expand to 
     enable American businesses to bring new innovations to 
     market.
       We commend you for your leadership in introducing the 
     Patent Fee Integrity Act and look forward to working with you 
     and others to ensure it garners the broad bipartisan support 
     it deserves.
           Sincerely,
                                              Victoria A. Espinel,
     President and CEO.
                                  ____

                                                   March 13, 2014.
     Hon. Dianne Feinstein,
     U.S. Senate, Washington, DC.
       Dear Senator Feinstein: We commend you for introducing the 
     Patent Fee Integrity Act and we offer our full support.
       America's economic future depends on our continued ability 
     to innovate and commercialize new products and processes. 
     American businesses are among the most dynamic and innovative 
     in the world. We develop the technology that creates jobs and 
     stimulates our economy. Our nation's universities partner 
     with business to conduct the ground-breaking research, as 
     well as educate the creative people, that fuel the innovative 
     dynamism of the business sector. Such investment is not 
     without risk, which is why the Patent Fee Integrity Act has 
     never been more critical.
       U.S. innovators rely on patents to protect their investment 
     in the research and development of breakthrough innovations 
     such as manufacturing and product technologies and life-
     saving drugs. Valid and enforceable patent rights are 
     essential in this process and enable the United States to 
     maintain its competitive edge. An adequately funded United 
     States Patent and Trademark Office (USPTO) is vital in 
     ensuring that high quality patent rights are promptly 
     granted. Yet, the precarious funding situation of the USPTO 
     makes the realization of this essential mission impossible.
       Over the last two decades, the government has withheld, 
     diverted, or sequestered hundreds of millions of USPTO user 
     fee dollars. With uncertain and insufficient funding, the 
     USPTO faces an endless and unnecessary challenge in providing 
     the services for which American innovators have requested and 
     paid. The Patent Fee Integrity Act would end this problem by 
     removing the USPTO from the Congressional appropriations 
     process and allow all of its user fees to fund its 
     operations. Your legislation would empower the USPTO to fully 
     support America's innovators without adding a single penny to 
     the deficit.
       Our innovation based economy demands a fully-funded USPTO. 
     The USPTO needs predictability and certainty in its budgeting 
     so that it can provide the patent protection needed champion 
     America's innovators. We support quick passage of the Patent 
     Fee Integrity Act.

       American Intellectual Property Law Association (AIPLA); 
     Bayer Corporation; Biocom; Biotechnology Industry 
     Organization (BIO): Boston Scientific Corporation; Bristol-
     Myers Squibb Company; Caterpillar Inc.; Corning Incorporated; 
     The Cummins Allison Corporation; Cummins Inc.; DuPont; Eli 
     Lilly and Company; Greatbatch, Inc.; IBM Corporation; 
     Illinois Tool Works (ITW); International Test Solutions Inc.; 
     Johnson & Johnson; Leggett & Platt; The Manitowoc Company, 
     Inc.; Mattel, Inc.; Motor & Equipment Manufacturers 
     Association; National Association of Manufacturers (NAM); 
     Pharmaceutical Research and Manufacturers of America; PPG 
     Industries, Inc.; The Procter & Gamble Company; Smiths Group; 
     United Technologies Corporation; Xerox Zimme.
                                  ____

                                                     Coalition for


                                               Patent Fairness

                                   Washington, DC, March 13, 2014.
     Statement on the Patent Fee Integrity Act,

       The Coaliton for Patent Fairness (CPF) thanks Senator 
     Dianne Feinstein (D-CA) for introducing the Patent Fee 
     Integrity Act.
       As patent holders, CPF members recognize the importance of 
     an adequately funded U.S. Patent and Trademark Office (PTO). 
     We applaud Senator Feinstein for taking steps to ensure that 
     the PTO has the resources it needs to fulfill its essential 
     mission and to maintain patent quality.
       Improving patent quality is a vital piece of the patent 
     puzzle. When patent quality suffers, innovation throughout 
     America's economy is stymied, and patent trolls are able to 
     prosper. Quite clearly, patent reviews conducted today will 
     have a lasting impact in the future; by helping to establish 
     adequate funding of the PTO, the Patent Fee Integrity Act 
     will support innovation.
       The U.S. patent system plays an important role in helping 
     America's economy flourish, and abuses of that system pose a 
     significant threat to innovation and economic growth. We 
     thank Senator Feinstein for her leadership and will continue 
     to work with her and her colleagues toward the passage of 
     patent litigation reform.
                                  ____



                                       Fallbrook Technologies,

                                   Cedar Park, TX, March 13, 2014.
     Hon. Dianne Feinstein,
     U.S. Senate,
     Washington, DC.
       Dear Senator Feinstein: As CEO of an emerging technology 
     company with roots in California, I write to enthusiastically 
     endorse your effort to introduce patent legislation that is 
     critically important to America's innovation ecosystem and 
     the U.S. economy, the Patent Fee Integrity Act. Although 
     Fallbrook Technologies cautions the Senate to tread extremely 
     cautiously with other proposed patent legislation, the Patent 
     Fee Integrity Act represents the only patent reform bill 
     which advances the one issue that unifies intellectual 
     property stakeholders across the innovation spectrum and thus 
     should be advanced by the Senate without delay.
       Fallbrook is an emerging manufacturing and technology 
     development company dedicated to improving the flexibility of 
     power transmission within a wide variety of mechanical 
     devices. Currently, Fallbrook is located in Texas, but we 
     have California ties as our technology was invented in 
     Fallbrook, California, a large number of our investors are in 
     California and some key employees currently reside in San 
     Diego. Our core technology is the patented and award-winning 
     NuVinci' continuously variable planetary (CVP) 
     transmission system. Fallbrook's NuVinci CVP technology is a 
     standard component on more than 60 major bicycle brands 
     throughout Europe, and can improve the performance and 
     efficiency of products that use a transmission, such as 
     automobiles, agricultural equipment, light electric vehicles, 
     outdoor power equipment and wind turbines. Fallbrook employs 
     over 130 people in the U.S. (as of the date of this letter), 
     including about 30 of the best engineers in the transmission 
     sector. We currently hold over 600 patents and pending 
     applications worldwide and are working with our key 
     automotive licensees to bring gas-saving vehicles to the 
     marketplace.
       As you are aware, for more than a decade, American 
     innovators like Fallbrook have had our U.S. Patent and 
     Trademark Office user fees diverted by Congress for other 
     purposes. Essentially, such fee diversion has worked as an 
     innovation tax which slows the technology development process 
     and hinders job creation. The Patent Fee Integrity Act will 
     repeal this innovation tax and is long overdue. Full USPTO 
     funding will provide the USPTO the resources it needs to 
     improve patent quality while Congress determines whether 
     further actions may be needed to improve the patent system.

[[Page S1661]]

       We applaud you and your bipartisan cosponsors for 
     introducing the bill and stand ready to assist you in any way 
     necessary.
           Sincerely,
                                                    William Klehm,
     Chairman and CEO.
                                  ____



                                          Innovation Alliance,

                                                   March 13, 2014.
     Hon. Dianne Feinstein,
     U.S Senate,
     Washington, DC.
       Dear Senator Feinstein: The Innovation Alliance, a 
     coalition of research and development-focused companies, 
     thanks you and your cosponsors for introducing the Patent Fee 
     Integrity Act, which will put an end to fee diversion once 
     and for all. We have long maintained that ending fee 
     diversion, and thereby giving the U.S. Patent & Trademark 
     Office (``USPTO'') all of the fees it is paid by patent 
     applicants, is the single most important change policymakers 
     can make to improve the U.S. patent system.
       Over the last 20 years, approximately $1 billion in fees 
     paid by patent applicants has been diverted from its proper 
     use at the USPTO. This unwarranted diversion of fees has 
     resulted in more than 600,000 unexamined patent applications 
     and more than 28 months in the average patent pendency time. 
     Ending this tax on innovation is perhaps the one change to 
     the patent law that unites stakeholders from all parts of the 
     innovation ecosystem in the United States.
       The Innovation Alliance thanks you for your leadership on 
     this critically important issue for the patent system. We 
     look forward to working with you and your cosponsors to pass 
     the Patent Fee Integrity Act into law as soon as possible.
           Sincerely,
                                                     Brian Pomper,
     Executive Director.
                                  ____

                                             Intellectual Property


                                           Owners Association,

                                   Washington, DC, March 12, 2014.
     Hon. Dianne Feinstein,
     U.S. Senate, Hart Senate Office Building, Washington, DC.
       Dear Senator Feinstein: Intellectual Property Owners 
     Association (IPO) writes to express its strong support for 
     the Patent Fee Integrity Act, to provide for the permanent 
     funding of the United States Patent and Trademark Office 
     (USPTO).
       IPO is a trade association representing companies and 
     individuals in all industries and fields of technology who 
     own or are interested in intellectual property rights. IPO's 
     membership includes more than 200 companies and more than 
     12,500 individuals who are involved in the association either 
     through their companies or as inventor, author, law firm, or 
     attorney members. Our members all agree that the United 
     States needs a fully-funded USPTO to keep our nation 
     competitive, encourage innovation and create new jobs.
       Over the last two decades the government has withheld, 
     diverted or sequestered about $1 billion in USPTO user fee 
     collections. Removing the USPTO from the congressional 
     appropriations process is the most promising approach we know 
     for stopping the hemorrhaging of USPTO fees. We hope the 
     Senate will move ahead with the bill as soon as possible.
       Thank you for your help in securing full, permanent funding 
     for the USPTO. We stand ready to assist in any way we can.
           Sincerely,
                                               Herbert C. Wamsley,
     Executive Director.
                                  ____

                                         The Internet Association,
                                   Washington, DC, March 13, 2014.

   Statement of Michael Beckerman, President and CEO of the Internet 
  Association, on Senator Feinstein's Introduction of the Patent Fee 
                             Integrity Act

       The Internet Association commends Senator Feinstein's 
     introduction of the Patent Fee Integrity Act, which would 
     provide the Patent and Trademark Office with adequate funding 
     and resources to improve overall patent quality. Improving 
     patent quality is an essential step in improving the entire 
     patent ecosystem by shutting off the supply of low-quality 
     patents that fuel litigation by patent trolls. That is why 
     The Internet Association also supports an expanded review of 
     the covered business method patent program to eliminate 
     patents that never been granted in the first instance. An 
     expanded review program, coupled with strong fee shifting and 
     discovery provisions, make up the necessary components of a 
     meaningful response to the patent troll epidemic. We look 
     forward to working with Senator Feinstein and Members of the 
     Senate Judiciary Committee as they prepare to address these 
     important issues in the coming weeks.


                     About The Internet Association

       The Internet Association, the unified voice of the Internet 
     economy, represents the interests of the leading Internet 
     companies including Airbnb, Amazon, AOL, eBay, Expedia, 
     Facebook, Gilt, Google, IAC, Linkedln, Lyft, Monster 
     Worldwide, Netflix, Practice Fusion, Rackspace, reddit, 
     Salesforce.com, SurveyMonkey, TripAdvisor, Twitter, Uber 
     Technologies, Inc., Yelp, Yahoo!, and Zynga. The Internet 
     Association is dedicated to advancing public policy solutions 
     to strengthen and protect Internet freedom, foster innovation 
     and economic growth, and empower users. http://
www.internetassociation.org.

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