Patent Baristas

According to the Congressional Budget Office, the increase in direct spending under Patent Reform Act of 2009 (S.515) would total $3 million over the 2010-2019 period.

The report was ordered by the Senate Judiciary Committee:

SUMMARY

Under current law, PTO is authorized to collect a variety of fees for the services it performs. The fee rates are set in statute, and the amounts collected are available to offset the cost of PTO’s operations. The bill would permanently set higher fee rates for certain actions and authorize PTO to set or adjust fees periodically. S. 515 also would authorize PTO to establish fees to offset most of the costs associated with new procedures it must follow when presented with a challenge to the validity of a patent.

Subject to appropriation of the necessary amounts, CBO estimates that implementing S. 515 would have a net discretionary cost of $3 million in 2010, and would reduce discretionary spending by $173 million over the 2010-2014 period. CBO estimates that enacting S. 515 also would increase direct spending by about $3 million over the 2010-2019 period; the bill would have no effect on revenues.

BASIS OF ESTIMATE

S. 515 would change the basis that PTO uses to award patents. Under current law, where two or more persons independently develop identical or similar patents at approximately the same time, the patent is awarded to the first inventor established through the examination process. S. 515 would direct PTO, under the same circumstances, to award the patent to the inventor whose application has the earliest filing date. The bill also would establish a new procedure (post-grant opposition) to challenge the validity of a patent and would authorize PTO to collect fees to offset much of the costs associated with that process.

Based on information from PTO, CBO expects that the volume of requests for reconsideration of patents already granted (inter partes reexaminations) would increase as a result of changes S. 515 would make to the reexamination process.

Inter Partes Reexaminations. Under current law, an individual may question the validity of an awarded patent through an inter partes reexamination, which allows both the challenger and the patent-holder to participate in the proceedings by submitting arguments and filing appeals.

There is no time limit on raising an inter partes challenge, however, such challenges may only be brought against patent applications filed after a certain date. S. 515 would expand the universe of awarded patents that could be challenged through this proceeding; as a result, CBO expects that the number of inter partes reexaminations would increase. Further, the bill would require the inter partes proceedings to be conducted by an  Based on information from PTO, CBO expects that around 80 additional employees would ultimately be necessary to handle an increase in patent challenges. We estimate that implementing the changes to the inter partes reexamination procedures would cost about $9 million in 2011 to hire and train additional staff and $68 million over the 2010-2014 period. PTO is authorized to collect fees that would offset a portion of the costs of conducting those examinations.

Post-grant Opposition Procedures. S. 515 would authorize PTO to create a new procedure to review the validity of patents already awarded. This opportunity for such a post-grant review generally would be available within 12 months of the date the patent was issued, and would take place in a court-like proceeding in which both the challenger and the owner of the patent would develop and present information regarding the validity of an awarded patent. The bill would authorize PTO to collect fees to offset the cost of this new process.

Based on information from PTO, CBO expects that the volume of requests for post-grant reviews would grow each year once regulations defining the process are complete. CBO estimates that implementing this new process would cost $2 million in 2011 and $24 million over the 2010-2014 period, which would be offset by fee collections starting in 2011. The cost would be higher in the early years because we expect that the agency would incur expenses to establish the system before cases would be presented for review.

See the entire CBO Report on s. 515 here.