The American Intellectual Property Law Association (AIPLA) appreciates the opportunity to submit its views on the request for appropriations for the Patent and Trademark Office (PTO) contained in the President's Budget for Fiscal Year 2000.

The AIPLA is a nearly 10,000 member, national bar association constituted primarily of lawyers in private and corporate practice, in government service, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright and unfair competition law, as well as other fields of law affecting intellectual property. Our members represent both owners and users of intellectual property.

The members of the AIPLA interact with the PTO on behalf of their clients on a daily basis to obtain patents and trademark registrations. We want, and our clients need, a properly funded, smoothly functioning PTO to provide high quality patents and trademark registrations in a timely manner. Therefore, the adequate funding of the PTO to enable it to perform its critical functions for American business is of paramount importance.

The Budget for Fiscal Year 2000 anticipates that the PTO will collect $946 million in fees in FY 2000 based upon the projected workloads and the level of existing patent and

trademark fees. (The level of statutory patent fees was lowered by a total of $50 million just last November by the U.S. Patent and Trademark Office Reauthorization Act, Fiscal Year 1999 (Public Law 105-358).) In addition, it is requested that the PTO receive $116 million in fees collected in FY 1999. Of this total amount of funding, $1.062 billion, it is proposed that the PTO only receive $902 million for its operations, and that $160 million be carried-over and earmarked for the PTO for FY 2001. Finally, it is proposed that the Commissioner impose a surcharge on fees to collect an additional $20 million to pay for certain post-retirement health and life insurance benefits of PTO employees.

It is the proposed imposition of yet another surcharge -- barely four months after the sunsetting of the surcharge created by the Omnibus Budget Reconciliation Act (OBRA) of 1990 -- that we strongly oppose. As this Subcommittee is well aware, the OBRA surcharge led to a situation where more than $300 million of the fees paid by patent applicants and patentees were used to support government functions totally unrelated to the activities of the PTO. The proposal in the President's Budget to create another surcharge -- at a time when the PTO will collect $160 million in user fees which it cannot spend -- strikes us as another situation where applicants for patents and trademark registrations could easily find themselves paying fees which will be used to fund other, unrelated government programs.

We note that the PTO is the only fee-supported agency of the U.S. Government singled out for this obligation of paying post-retirement benefits with its user fees. The President has not sought to establish a similar surcharge for paying post-retirement benefits with the fees collected by the Federal Communications Commission, the Securities and Exchange Commission, or the Federal Trade Commission. Despite efforts by Administration representatives to distinguish the circumstances of the PTO from these other similarly situated fee-funded agencies, the final justification is simply that the PTO is a prospective Performance Based Organization and this surcharge initiative is a "pilot."

It is because of this and past inequitable treatment of PTO users that the AIPLA would welcome and support the establishment of a funding mechanism where all of the fees paid by patent and trademark applicants are used exclusively to support the costs associated with operating the PTO. Our principal concern has been and remains that the PTO be adequately funded to provide the services and products paid for and needed by its customers. We are well aware of the unrealistically stringent caps on the discretionary funds in the federal budget which most Appropriations Subcommittee Chairmen doubt can be maintained (Washington Post, page A4, April 6, 1999), however, such political points should not be made at the expense of patent and trademark applicants. To be very clear about this point, the AIPLA does not wish to return to an era where PTO customers pay fees in excess of the costs of operation thereby creating an irresistible target for diversion to fund other programs.

The AIPLA would not object to the use of fees paid by patent and trademark applicants to pay for the post-retirement benefits of PTO employees. Indeed, such responsibility would be in keeping with a funding system where all user fees were retained and used solely to support the PTO. However, we strongly oppose doing so through the establishment of a surcharge in a year where the PTO will have a $160 million surplus. This is why we supported Chairman Coble's bill, H.R. 1225, the "United States Patent and Trademark Office Reauthorization Act, Fiscal Year 2000" in testimony before the House Judiciary Subcommittee on Courts and Intellectual Property last month. This measure would specifically deny authorization for the Commissioner to impose a surcharge to collect fees to pay for post-retirement benefits of PTO employees. With a surplus of $160 million, there is simply no justification for such a surcharge. The costs of the benefits should be paid in FY 2000 from the $160 million surplus. Should the PTO need to raise additional revenue in the future to fund its operations, pay for post-retirement benefits, or pay for the cost of relocation to new facilities, that need can be addressed at that time on the basis of the fee revenue then being collected.

Finally, one word of caution. As stated previously, the AIPLA is very desirous of the PTO being adequately funded to perform its mission. Assuming the PTO is not authorized, as contemplated by H.R. 1225, to impose a surcharge on patent and trademark fees to raise an extra $20 million, the Administration could conceivably mount an effort to fund the post-retirement benefits by reducing the PTO's operating budget by $20 million. We would strongly urge this Subcommittee to reject any such effort, just as we urged

Chairman Coble in our testimony last month to amend H.R. 1225 to totally block the transfer of any funds from the PTO to pay for such health and life insurance benefits should an effort materialize in the appropriations process to take the $20 million from the PTO's requested $902 million operating budget. As long as the PTO is running a $160 million surplus, there is no justification for reducing the PTO's operating budget to pay the post-retirement benefits.

We appreciate the opportunity to offer our views on the PTO's appropriations request and would be happy to help with the Subcommittee in any way that we can.