PTO Should be Exempt From Sequestration

Earlier this week, the American Intellectual Property Law Association (AIPLA) sent a letter to the Director of the Office of Management and Budget (OMB) arguing that the PTO should be exempt from sequestration that is affecting the federal government.

As noted previously, the PTO is facing another budget crisis due to cuts in its funding from sequestration.  This is despite the fact that the PTO relies on no tax revenue, but is funded by user fees.

In its letter, the AIPLA argues that this distinction should exempt the PTO from these budget cuts.  During negotiation for passage of the America Invents Act, the understanding by all parties that any fees collected in excess of the congressional appropriation would be placed in a reserve fund and that only the PTO would have access to the fees.  The budget cuts due to sequestration undermine this understanding and result in a return to fee diversion.

The AIPLA continues in the letter that AIA implementation is at an early and critical stage.  Benefits are just starting to be seen with additional hiring and new procedure implementation.  In other words, this is a particularly bad time for the Administration to begin taking fees away from the agency.  The AIA provided the agency with the authority to set its own fees; sequestration severely undermines that authority.

The AIPLA argues that the sequestration statute does not apply to the PTO because PTO fees are not taxes that the government collects as part of its sovereign power, but are instead business-like transactions with the public.  The public is not required to pay PTO fees as they are taxes.  Rather, PTO fees are paid with the understanding that the PTO will provide examination services.  Thus, sequestration does not apply to such fees.

Finally, even if sequestration applies to the PTO, the sequestered fees should be placed in the reserve fund for use by the PTO and not into the general coffers of the federal government.  Again, the understanding and agreement of all parties was that the AIA would end fee diversion as practiced on the PTO for the last 20 years.


When will we learn?  The removal of the specific language to end fee diversion from the AIA should have been a strong signal that this would happen.  “Trust me” does not work when dealing with congress or the federal government.

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3 Responses to “PTO Should be Exempt From Sequestration”

  1. Grady George Says:

    This has angered the patent community. The patent office and Capitol Hill have been fighting for years over whether the agency should be allowed to keep all the money that it collects for patent applications and other fees.

  2. What’s Next for Patent Trolls? | INVENTIVE STEP Says:

    […] to continue its current reform efforts and to perform these public services.  Congress needs to end fee diversion for good before this will […]

  3. Bill Introduced to End Fee Diversion | INVENTIVE STEP Says:

    […] told PTO users to “trust me” there will be no more fee diversion.  If that were so, the PTO would not have been subject to sequestration cuts and would not have been in danger of closing during the government shut down, as users continued to […]

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