By Audrey Millemann

It finally happened. A patent applicant sued the federal government for diverting millions of dollars to the general fund. Surprise! The plaintiff lost.

For years (14 to be exact), funds from the Patent and Trademark Office obtained from the payment of patent fees by the public have been diverted to reduce the federal deficit. Patent applicants and commentators alike have been complaining that the monies paid to the PTO should be used by the PTO to provide better service to its customers. For example, if the PTO hired more and better qualified examiners, there would be fewer errors and mistakes, and the process would be speedier.

Miguel Figueroa, the inventor of a soldering device, filed a patent application in 2001. He received a patent, relatively quickly, in 2002. In 2001, he filed a class action against the United States in the United States Court of Federal Claims under the Tucker Act, 28 U.S.C. ��1491. Figueroa claimed that Congress’ diversion of the PTO’s funds was unconstitutional under the Intellectual Property Clause of the Constitution and constituted an unlawful taking and illegal tax. The complaint sought return of the funds to the PTO or to the class.

The court issued its decision in Figueroa v. United States, No. 01-457C, on June 28, 2005. The court dismissed the plaintiff’s claims for unlawful taking and illegal tax, but denied the Government’s motion to dismiss the first claim on the grounds that the plaintiff had stated a claim for an illegal exaction. The court indicated that it would analyze the issue of whether the diversion of monies for non-patent purposes was necessary and proper to promote the progress of the useful arts, but would defer to Congress. Both sides moved for summary judgment.

The court determined the following facts. The PTO has been self-supporting since 1991, with all of its funding coming from users. In 1990, however, Congress passed a statute requiring the PTO to deposit all fees it received into a particular account, over which Congress had control, and through which Congress would appropriate funds back to the PTO for its operations. The court further found that from 1991 through 2004, the PTO collected $11.1 billion in patent and trademark fees and that PTO operations for that period cost $10.6 billion. Of the $554.1 million excess, Congress diverted $422.5 million to other purposes.

The plaintiff argued that Congress’ diversion of PTO fees was unconstitutional and an illegal exaction as not rationally related to promoting the progress of the useful arts. In the plaintiff’s view (and probably the view of everyone else who uses the PTO’s services), most inventors simply should not have to pay for costs unrelated to obtaining patents. According to the plaintiff, the lengthy time required to obtain a patent and other problems with the PTO are directly attributable to the PTO’s lack of funds.

The Government argued that Congress has power over the PTO funds under the Necessary and Proper Clause and the Commerce Clause. The Government attempted to argue that no permanent diversion had occurred, because each year Congress decides how much money to appropriate to the PTO. The heart of the Government’s argument, however, was that it has the power to manage the PTO under Article I. The Constitution does not require the PTO to exist; therefore, Congress can fund the PTO as it sees fit.

The court held that for purposes of summary judgment, it would assume that Congress’ diversions of PTO funds were both permanent and substantial. The court emphasized that Congress had broad discretion in implementing the Intellectual Property Clause, and that the court is limited in determining whether Congress had exceeded its powers under Article I. The court held that the test was “whether the measure complained of is a rational exercise of the legislative authority under the Intellectual Property Clause.” Plaintiff agreed that the rational basis test was the applicable test. Under this test, the law is presumed valid and the plaintiff has the burden of proving that the law is irrational.

The court held that the plaintiff had not met its burden of showing that “USPTO appropriations legislation is neither appropriate nor plainly adapted to achieve the legitimate constitutional objective of promoting the useful arts, i.e., that the legislation was not rationally related or was inappropriate to the end in view.” The court found that the cases the plaintiff had cited were not supportive of his position and he had relied primarily on policy arguments. According to the court, policy decisions are the realm of Congress and the courts must defer.

Despite acknowledging that “plaintiff may well be correct that the current patent fee regime is misguided and creates the wrong incentives”, the court concluded by suggesting that we should all be grateful for Congress’ “generous” funding of the PTO and for the 2 million patents the PTO has issued over the last 14 years. Oh well, it was worth a try.