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When Creators' Worlds Collide
by Drew Clark
Although patents and copyrights are grounded in the same clause in the Constitution, for more than a century they have been governed by largely separate legal worlds. Those long-parallel tracks of jurisprudence now may cross in a court case with outsized implications for the government's patent policy.
The case, Miguel Figueroa v. U.S., concerns the practice, begun in 1991 of diverting fees paid by inventors from the budget of the Patent and Trademark Office (PTO) to other federal projects. The technology industry and the business community generally have criticized the practice, but the White House Office of Management and Budget (OMB) and congressional appropriators continue it anyway.
Two weeks ago, a collection of 78 companies and 20 associations increased the pressure to keep patent fees in the PTO budget. In a letter to OMB Director Mitch Daniels, they pledged their support for patent-fee increases proposed by the PTO -- but only if the Bush administration and Congress end the "diversion of fees to unrelated government programs."
Fee Fight: Picking The Best Forum
Spearheaded by the Intellectual Property Owners Association (IPO), which represents large patent holders, the effort includes technology companies like Apple, Hewlett-Packard, IBM, Intel and Microsoft. Technology industry groups like AeA, the Computer Technology Industry Association, the Information Technology Association of America, the National Association of Manufacturers (NAM) and the Software and Information Industry Association also joined the cause.
The lobbying has put patent officials in the middle of the debate. PTO chief James Rogan currently is attempting to solicit support for an ambitious restructuring dubbed the "Strategic 21st Century Plan," and it calls for fee increases of more than 19 percent. But PTO is also still part of the administration and must support its legal positions and budget decisions.
"We are very happy to have our user community in such solid support of the strategic plan," PTO spokeswoman Brigid Quinn said of the business group's letter.
Even business groups dead-set against fee diversion are loath to make legal arguments. They want nothing to do with the Figueroa case. IPO Executive Director Herb Wamsley said his organization has no position on the case. "We are using a different route than litigation; we are trying to persuade the administration and the Congress to stop the fee diversion."
"Not only have we not been close to it, we have been as far away as we can," NAM Technology Director David Peyton said. "It is certainly a novel case, and I honestly don't know" what its outcome will be.
A Constitutional Issue?
Brought by Puerto Rican inventor Miguel Figueroa, the class-action lawsuit largely is supported by small inventors who also are seeking to overturn the fee-diversion practice. Attorney Heath Hoglund argues that the $1 billion in fee diversion over the past 11 years -- including $600 million over the past six years -- has starved the patent office of resources it needs to evaluate patents in a timely fashion. Pendency, or the time it takes to issue patents, is currently 24 months and is expected to rise to 36 months by 2006, according to the patent office.
"A patent plays a critical role in the commercialization of an invention and the delay operates to limit those efforts," Hoglund wrote in his initial brief, filed in August 2001 in the U.S. Court of Federal Claims, which hears lawsuits for claims filed against the government. "The delay harms every person who files a patent application and is particularly harmful to high-technology industries because they must rely upon the patent system to protect new innovations."
But unlike the business groups that call fee diversion bad policy, Figueroa and Hoglund take the argument a step further in arguing that it is unconstitutional. They point to the language of Article I, Section 8: "Congress shall have power ... to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries." Because fee diversion does not promote the progress of science and the useful arts, it cannot be constitutional, the foes of the practice argue.
Hoglund also argued that fee diversion is unconstitutional because it constitutes an unjust "taking" of property contrary to the Fifth Amendment and a direct tax that violates conditions established in Article I, Section 9.
After hearing oral arguments in the case on Nov. 14, Judge Bohdan Futey said from the bench that he is prepared to grant the government's motion to dismiss those claims in the case. But instead of dismissing it, he said he would delay that decision because of "the possible implications" of another case involving copyright law.
The Intellectual Property Intersection
Futey was referring to Eldred v. Ashcroft, a case argued before the Supreme Court in October. Brought by Eric Eldred, a New Hampshire hobbyist who uses the Internet to publish books no longer protected by copyrights, the case challenges Congress' power to extend all copyrights for 20 years, as it did in a 1998 act. The law lengthened protection to 70 years beyond the life of creators, or 95 years for works copyrighted by corporations.
Represented by Stanford University law professor Lawrence Lessig, Eldred argued that the same section of the Constitution that grants Congress the power to create patents and copyrights also restricts the manner in which they can tinker with the system they have established. Lessig argued that 1998 copyright law was a corporate giveaway that cannot be squared with "promot[ing] the progress of science and useful arts."
But while most intellectual property holders challenged that argument -- holding that Congress can do whatever it pleases with copyrights -- in the Figueroa case patent holders are wielding the progress argument against the government. "What we respectfully submit they may not do is increase patent fees to offset unrelated budgetary spending," Hoglund said in oral arguments.
Echoing Solicitor General Theodore Olson's argument in Eldred that Congress' power under the copyright clause is unlimited, Justice Department attorney Brian Mizoguchi said the same is true for patent law. "Congress is free to set" patent fees where it will, he said. "When Congress has decided to act in this regard, it is not really for the courts to second guess or question whether that fee should be where it is, whether some of it goes to the general treasury, whether anyone believes what Congress has done is wise or foolish."
Hoglund argues, however, that he benefits no matter what the Supreme Court decides in the Eldred case. "If the Supreme Court rules that the retroactive term extension is unconstitutional, that would help us by opening the door wide to review Congress' patent fees under whatever standard they articulate," he said in an interview. If, on the other hand, the high court permits the term extension, Hoglund can point to the government's chief argument in defending the 1998 law: historical precedent.
"That's our argument," Hoglund told Futey in court. "Our argument is that the longstanding historical practice of Congress is to promote the progress of science and useful arts by exhibiting an enormous reluctance to increase patent fees."
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