By Lisa Seachrist

Washington Editor

WASHINGTON - For the past decade the U.S. Patent and Trademark Office has served as a cash cow of sorts as Congress sought to allocate limited operating funds to various government agencies. Because PTO survives on user fees paid by patent and trademark applicants, Congress has routinely skimmed a little of that money for unrelated programs.

This year, however, the House Appropriations Committee has passed a measure that would move 25 percent, or $295 million, of the user fees to the budgets of the Commerce, State, Judiciary and Justice departments. The bill, H.R. 4690, could come to the House floor for a vote as early as today.

"We understand the situation Congress is in trying to satisfy a lot of competing interests with limited funds," said Herbert Wamsley, executive director of the Washington-based Intellectual Property Owners Association. "But PTO really needs to be a fully funded agency. Its needs are especially important to the national economy. We shouldn't be taxing innovation, which is exactly what this is doing."

The irony of the situation is just two months ago PTO stakeholders had banded together to restore the $113 million of PTO fees President Clinton had proposed to divert for other uses. Now, those same groups find themselves trying to limit the diversion of funds to what the president originally proposed. (See BioWorld Today, April 17, 2000, p. 1.)

"We're supporting a floor amendment that will be offered by Rep. Howard Coble (R-N.C.) that will take the level of diversion [back to the president's proposal]," said David Peyton, director of technology policy for the National Manufacturers Association. "This still isn't good. It's a damage control exercise, but we understand we aren't going to restore all of the funds."

While Coble intends to offer the floor amendment when the bill comes up for a vote, it won't be easy to pass. Any amendment increasing the fees PTO is permitted to keep must cut an equal amount from other Commerce/Justice/State programs in order to stay within congressionally imposed spending caps.

"This is going to be an uphill battle," Wamsley said. "I suspect we will be fighting it well into September."

Peyton said applicants supposedly paying the fees in order for PTO to conduct its reviews have a legitimate beef with any diversion of the funds to subsidize other programs. But, more important to Peyton is the basic fact the diversions hurt the agency. PTO applicants don't constitute the only group concerned with the issue. PTO officials themselves have urged Congress to restore funding.

At Coble's request, PTO Director Todd Dickinson detailed in a letter the damage the House's proposal could inflict on his agency. Dickinson noted the importance of intellectual property had increased exponentially in the past decade. He also pointed out patent and trademark filings this year alone had increased by 12 percent for patents and a whopping 40 percent for trademarks.

"All of our revenues, projected to be $1.2 billion in fiscal year 2001, are paid as fees by the knowledge-based, high-tech leaders and individual entrepreneurs who rely on us to help them flourish in this economy," Dickinson said in his letter. "We are no burden to the American taxpayer. Moreover, we use activity-based cost management principles. Our fee revenues relate directly to the work we do. We do not have a surplus or make a profit."

Dickinson said if the proposed budget were approved, it would "seriously impair our ability to effectively manage our operations and provide our customers with the quality products and services they expect and deserve." He stated the agency would need to freeze hiring, resulting in hundreds of vacancies and the elimination of overtime, which would severely impact PTO's ability to retain employees.

A shortage of examiners would ultimately lead to fewer patents and trademarks being issued. In addition, E-Government initiatives to conduct business electronically and customer service programs would be reduced, if not entirely eliminated.

"This is an excessive, damaging action to the PTO," said Chuck Ludlam, vice president for government relations for the Biotechnology Industry Organization (BIO). "It is the worst message to send to the high-tech community. It would seem the last thing they would want to do is undercut one of the pillars of economic growth in this country. Obviously, we can't believe Congress would do something this dumb."

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