Letter to U.S. Patent & Trademark Office - Stop Unfair Innovation Tax

Letter

As a co-chair of the U.S. House Caucus on Innovation and Entrepreneurship, U.S. Representative Gary Peters is leading bipartisan efforts to address an unfair innovation tax that is exacerbating the nation's patent backlog. Peters is raising concern in Washington that the USPTO has been erroneously subject to sequester cuts, resulting in additional delays to hiring more examiners and opening new offices to address the national patent backlog.

The U.S. Patent & Trademark Office (USPTO) is funded by patent-user fees and not taxpayer dollars, which should exempt it from sequester cuts. The Office of Management and Budget (OMB), however, has not treated USPTO like other fee-driven entities like the Library of Congress Copyright office. Instead, OMB has applied sequester cuts - slashing between $120-130 million from the USPTO fee-driven budget and making the patent backlog even worse. In effect, cutting USPTO's budget essentially levels an unfair tax on entrepreneurs by not applying patent fees to fully fund the USPTO. Peters, along with bipartisan co-chairs of the House Caucus on Innovation and Entrepreneurship, Reps. Jared Polis (D-Colorado), Vern Buchanan (R-Florida), and Darrell Issa (R- California) are spearheading efforts to stop OMB from continuing to erroneously administer sequester cuts to the USPTO budget and therefore tax innovation.

"Michigan is the birthplace of innovation and our middle class, and taxing innovation contradicts who we are as a state and as a nation," Peters said. "Now, more than ever, we look to our entrepreneurs, start-ups, and innovation leaders to drive our economy forward and create a strong future and a middle class that's tougher and more resilient than ever. We must stop this wrong-headed tax burden on our innovators and work together to reduce the patent backlog -- not make it worse."

The U.S. Patent & Trademark Office (USPTO) has a backlog of more than 500,000 patent applications, creating an average delay of three years for Michigan entrepreneurs to secure a patent. With the undue burden of sequester cuts to USPTO, however, the backlog has grown even worse. Peters, along with the House Caucus on Innovation and Entrepreneurship, are urging colleagues to join their effort to petition OMB to exempt USPTO from sequester cuts on the same grounds as the Copyright Office of the Library of Congress. In a letter they are circulating in Washington this week, Peters and Caucus co-chairs urge Congress to join him in standing up for our nation's entrepreneurs and innovators.

"We ask you to join us in writing OMB to urge that they reconsider this decision, stop the sequestration of USPTO user fees, and help our nation's innovators get their products to market faster," the letter reads. A full copy of the letter follows.

As the co-chairs of the House Caucus on Innovation and Entrepreneurship, we are focused on finding practical solutions to help our nation's startups and small businesses grow, innovate, and create jobs. Success in the global economy depends more and more on intellectual property (IP). Over 55 million Americans are employed in IP-intensive industries, and these industries account for 38% of total U.S. GDP.

Patents are the lifeblood of our innovation economy; trying to sell an unpatented invention is like trying to sell a house without having the deed. This is why it is critical that the U.S. Patent and Trademark Office (USPTO) have the capacity to approve applications in a timely manner. Currently, the USPTO has a backlog of over 500,000 applications, down from over 700,000 just a few years ago. Even with this significant progress, it still takes upwards of three years on average to secure a patent.

Unfortunately, sequestration will make this problem worse. In response to the sequestration of an estimated $120-130 million in patent user fee collections in the last fiscal year, the agency was forced to delay hiring new examiners, delay opening and fully staffing new satellite offices, and put off critical improvements to IT.

These funds that are being diverted by sequestration are not taxpayer dollars; they are user fees paid by inventors applying for patents. The USPTO is fully funded by user fees and uses no taxpayer money. Diverting these funds is effectively a tax on innovation. It is also inconsistent with OMB's decision to exempt other voluntary payments and fees from sequestration, such as those collected by the Copyright Office of the Library of Congress.

This is why we ask you to join us in writing OMB to urge that they reconsider this decision, stop the sequestration of USPTO user fees, and help our nation's innovators get their products to market faster.

Sincerely,

Gary C. Peters
Member of Congress

Vern Buchanan
Member of Congress

Jared Polis
Member of Congress

Darrell E. Issa
Member of Congress