[House Report 108-431]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-431

======================================================================



 
  PROVIDING FOR CONSIDERATION OF H.R. 1561, UNITED STATES PATENT AND 
                TRADEMARK FEE MODERNIZATION ACT OF 2003

                                _______
                                

   March 2, 2004.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

    Mr. Linder, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 547]

    The Committee on Rules, having had under consideration 
House Resolution 547, by a record vote of 8 to 1, reports the 
same to the House with the recommendation that the resolution 
be adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for consideration of H.R. 1561, the 
United States Patent and Trademark Fee Modernization Act of 
2003, under a structured rule. The rule provides one hour of 
general debate equally divided and controlled by the chairman 
and ranking minority member of the Committee on the Judiciary.
    The rule provides that the amendment in the nature of a 
substitute recommended by the Committee on the Judiciary now 
printed in the bill shall be considered as an original bill for 
the purpose of amendment, and shall be considered as read. The 
rule waives all points of order against the Committee amendment 
in the nature of a substitute.
    The rule makes in order only those amendments to the 
Committee amendment in the nature of a substitute which are 
printed in this report, and provides that those amendments may 
be offered only in the order printed in this report, may be 
offered only by a Member designated in this report, shall be 
considered as read, shall be debatable for the time specified 
in this report equally divided and controlled by the proponent 
and an opponent, shall not be subject to amendment, and shall 
not be subject to a demand for division of the question in the 
House or in the Committee of the Whole. The rule waives all 
points of order against the amendments printed in this report.
    Finally, the rule provides one motion to recommit with or 
without instructions.

                            COMMITTEE VOTES

    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

Rules Committee record vote No. 223

    Date: March 2, 2004.
    Measure: H.R. 1561, U.S. Patent and Trademark Fee 
Modernization Act of 2003.
    Motion by: Mr. Linder.
    Summary of motion: To report the resolution.
    Results: Agreed to 8 to 1.
    Vote by Members: Linder--Yea; Pryce--Yea; Diaz-Balart--Yea; 
Hastings (WA)--Yea; Myrick--Yea; Sessions--Yea; McGovern--Yea; 
Hastings (FL)--Nay; Dreier--Yea.

           SUMMARY OF AMENDMENTS MADE IN ORDER UNDER THE RULE

    (Summaries derived from information provided by amendment 
sponsors.)
    1. Sensenbrenner: The amendment creates a ``refund'' 
program to eliminate the potential incentive for diverting PTO 
revenue to non-PTO programs. If fee collections in a given 
fiscal year exceed the amount appropriated to the agency, the 
excess or overage shall be deposited in a PTO ``Reserve Fund.'' 
At the end of the fiscal year the Director determines if there 
are sufficient funds to make payments to persons who paid fees 
during that year. The Director is empowered to determine which 
recipients qualify and in what amounts, except that the 
payments in aggregate must equal the amount of revenue in the 
Reserve Fund during that fiscal year, less the cost of 
administering the program. The amendment changes the basic 
effective date from October 1, 2003, to October 1, 2004, or the 
date of enactment, whichever is later.
    Under existing law, the Director may raise most fees based 
on the CPI. The amendment supplements this authority by 
allowing the Director to raise fees based on the CPI for `` 
processing, services, or materials relating to patents not 
specified'' in the fee schedule. Recovery of these 
administrative costs will help the agency with its funding 
shortfall.
    The bill as reported contains a pilot program to determine 
the efficacy of allowing commercial entities to perform the 
search function, thereby relieving the agency of the burden and 
freeing up examiners to do other work. The amendment specifies 
that participation in the pilot program will be restricted to 
American businesses and American citizens.
    The amendment limits the Director's discretion to prescribe 
the search fee for commercial entities. For the first three 
years, he may not establish a fee in excess of $500 (or less in 
some cases) and for the next three years this figure may not 
increase by more than 20% annually.
    Finally, in furtherance of the ongoing modernization 
efforts at PTO, the Director shall reduce the filing fee for 
any small entity, independent inventor, or nonprofit 
organization by 75% provided those so qualified file their 
applications electronically. (20 minutes)
    2. Manzullo: The amendment: (1) establishes an inflation-
adjusted freeze on all fees for micro-entities defined as firms 
or independent inventors with up to 15 employees and net worth 
not exceeding $2 million (without regard to bona fide pensions 
and similar retirement accounts); (2) makes the traditional 
small entity 50% discount under Patent Law applicable to search 
fees for intermediate small entities defined as having between 
16 and 500 employees and a net worth not exceeding $7 million; 
this category also establishes a cap on outsourced patent 
search fees at $500, equal to the cap established by the bill 
on search fees performed by the PTO in-house; and (3) includes 
a certification requirement, in addition to the certification 
on each PTO application as to small entity fee eligibility, 
preventing large entities from qualifying for the small entity 
discount illegitimately. (20 minutes)
    3. Jackson-Lee: Requires that a substantial number of the 
outsource contracts be awarded to: (1) American businesses, and 
(2) small, minority-owned businesses, or businesses owned by 
women. (20 minutes)

            TEXT OF AMENDMENTS MADE IN ORDER UNDER THE RULE

   1. An Amendment To Be Offered by Representative Sensenbrenner of 
          Wisconsin, or His Designee, Debatable for 20 Minutes

  Strike section 5 and insert the following:

SEC. 5. PATENT AND TRADEMARK FUNDING.

  Section 42(c) of title 35, United States Code, is amended--
          (1) by striking ``(c)'' and inserting ``(c)(1)''; and
          (2) by adding at the end the following new paragraph:
  ``(2) There is established in the Treasury a Patent and 
Trademark Fee Reserve Fund. If fee collections by the Patent 
and Trademark Office for a fiscal year exceed the amount 
appropriated to the Office for that fiscal year, fees collected 
in excess of the appropriated amount shall be deposited in the 
Patent and Trademark Fee Reserve Fund. After the end of each 
fiscal year, the Director shall make a finding as to whether 
the fees collected for that fiscal year exceed the amount 
appropriated to the Patent and Trademark Office for that fiscal 
year. If the amount collected exceeds the amount appropriated, 
the Director shall, if the Director determines that there are 
sufficient funds in the Reserve Fund, make payments from the 
Reserve Fund to persons who paid patent or trademark fees 
during that fiscal year. The Director shall by regulation 
determine which persons receive such payments and the amount of 
such payments, except that such payments in the aggregate shall 
equal the amount of funds deposited in the Reserve Fund during 
that fiscal year, less the cost of administering the provisions 
of this paragraph.''.
  In section 6(a), strike ``Except as'' and all that follows 
through the end of the sentence and insert ``Except as 
otherwise provided in this Act and this section, this Act and 
the amendments made by this Act shall take effect on October 1, 
2004, or on the date of the enactment of this Act, whichever 
occurs later.''.
  Page 12, strike lines 17 through 20 and insert the following:
  (d) Adjustments.--
          (1) In general.--Section 41(f) of title 35, United 
        States Code, shall apply to the fees established under 
        the amendments made by this section, beginning in 
        fiscal year 2005.
          (2) Conforming amendment.--Effective October 1, 2004, 
        section 41(f) of title 35, United States Code, is 
        amended by striking ``(a) and (b)'' and inserting 
        ``(a), (b), and (d)''.
  Page 11, add the following after line 24:
          ``(F) If the requirements of subparagraph (E) are 
        met, the Director shall require that any search by a 
        qualified search authority that is a commercial entity 
        is conducted in the United States by persons that--
                  ``(i) if individuals, are United States 
                citizens; and
                  ``(ii) if business concerns, are organized 
                under the laws of the United States or any 
                State and employ United States citizens to 
                perform the searches.
  Page 12, insert the following after line 16 and redesignate 
the succeeding subsections accordingly:
  (d) Fees for Small Entities.--Section 41(h) of title 35, 
United States Code, is amended--
          (1) in paragraph (1), by striking ``Fees'' and 
        inserting ``Subject to paragraph (3), fees''; and
          (2) by adding at the end the following new paragraph:
  ``(3) The fee charged under subsection (a)(1)(A) shall be 
reduced by 75 percent with respect to its application to any 
entity to which paragraph (1) applies, if the application is 
filed by electronic means as prescribed by the Director.''.
  Page 8, line 3, add the following after the period: ``For the 
3-year period beginning on October 1, 2004, the fee for a 
search by a qualified search authority of a patent application 
described in clause (i), (iv), or (v) of subparagraph (B) may 
not exceed $500, of a patent application described in clause 
(ii) of subparagraph (B) may not exceed $100, and of a patent 
application described in clause (iii) of subparagraph (B) may 
not exceed $300. The Director may not increase any such fee by 
more than 20 percent in each of the next 3 1-year periods.''.
                              ----------                              


 2. An Amendment To Be Offered by Representative Manzullo of Illinois, 
               or His Designee, Debatable for 20 Minutes

  Page 12, insert the following after line 16 and redesignate 
the succeeding subsections accordingly:
  (d) Fees for Small Entities.--Section 41(h) of title 35, 
United States Code, is amended by adding at the end the 
following new paragraphs:
  ``(3)(A) The fees and surcharges in effect on February 10, 
2004, under paragraphs (1) and (2) for entities described in 
subparagraph (D) shall remain in effect for such entities after 
that date, subject to subparagraph (B). The fees charged under 
subsection (d) shall be reduced by 50 percent for entities 
described in subparagraph (D), and shall remain in effect for 
such entities after that date, subject to subparagraph (B).
  ``(B) A fee or surcharge to which subparagraph (A) applies 
may be adjusted on October 1, 2009, and on October 1 of each 
5th year thereafter, to reflect any fluctuations during the 
preceding 5-year period in the Consumer Price Index, as 
determined by the Secretary of Commerce. Changes of less than 1 
percent may be ignored.
  ``(C) No fee or surcharge under this section may be imposed 
on any entity described in subparagraph (D) after February 10, 
2004, for any purpose other than the purposes for which fees 
and surcharges under this section are in effect with respect to 
such entity on that date.
  ``(D) An entity is described in this subparagraph if it is--
          ``(i) an individual whose net worth does not exceed 
        $2,000,000 (calculated by subtracting personal 
        liabilities from personal assets, without regard to 
        pension, 401(k), or similar retirement accounts); or
          ``(ii) an owner of an unincorporated business, or any 
        partnership, corporation, association, unit of local 
        government, or organization, the net worth of which 
        does not exceed $2,000,000 (calculated by subtracting 
        the liabilities of the entity from its assets, without 
        regard to pension, 401(k), or similar retirement 
        accounts), and which has no more than 15 employees.
  ``(4)(A) With respect to any entity described in subparagraph 
(B), the fees under subsections (a), (b), and (d) shall be 
reduced by 50 percent, and not more than $500 may be charged 
for a search by a qualified search authority of a patent 
application by such an entity.
  ``(B) An entity is described in this subparagraph if it is 
not covered by paragraph (3)(D) and is--
          ``(i) an individual whose net worth does not exceed 
        $7,000,000 (calculated by subtracting personal 
        liabilities from personal assets); or
          ``(ii) an owner of an unincorporated business, or any 
        partnership, corporation, association, unit of local 
        government, or organization, the net worth of which 
        does not exceed $7,000,000 (calculated by subtracting 
        the liabilities of the entity from its assets), and 
        which has no more than 500 employees.
  ``(5) Paragraph (3) or (4) applies to an entity only if the 
entity certifies to the Director its eligibility under such 
paragraph.
  ``(6) Paragraphs (1) and (2) apply to entities described in 
paragraph (1) that are not covered by paragraph (3)(D) or 
(4)(B).''.
                              ----------                              


 3. An Amendment To Be Offered by Representative Jackson-Lee of Texas, 
               or Her Designee, Debatable for 20 Minutes

  Page 11, add the following after line 24:
          ``(F) If the requirements of subparagraph (E) are 
        met, the Director shall ensure that a substantial 
        number of searches by qualified search authorities that 
        are commercial entities are conducted by persons that--
                  ``(i) if individuals, are United States 
                citizens; and
                  ``(ii) if business concerns, are organized 
                under the laws of the United States or any 
                State, or are small business concerns, 
                minority-owned business concerns, or business 
                concerns that are owned by women.

                                
