[PIUG List] Congressional Budget Office Cost Estimate of Impact of Senate Version of Patent Reform Act

CONGRESSIONAL BUDGET OFFICE
COST ESTIMATE
February 15, 2008
S. 1145
Patent Reform Act of 2007
As reported by the Senate Committee on the Judiciary on January 24, 2008



Pages 9-10 contain the following paragraphs relating to estimated costs of
complying with unfunded mandates imposed on patent applicants by the Patent=
 Reform
Act of 2007.

>>>
INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT
S. 1145 would impose intergovernmental and private-sector mandates, as defi=
ned in UMRA,
on certain patent applicants, patent holders, and generic drug manufacturer=
s. Based on
information from PTO, CBO estimates that the cost of complying with those m=
andates would
exceed the threshold for private-sector mandates established in UMRA ($136 =
million in
2008, adjusted annually for inflation) in each of the first five years the =
mandate is in effect.
{emphasis added rwz}



Mandates That Apply to Both Public and Private Entities
S. 1145 would impose both intergovernmental and private-sector mandates on =
certain patent
applicants by compelling them to follow new requirements and pay fees.
Reports and Analyses. The bill would require PTO to establish regulations t=
o require
patent applicants to submit search reports, analyses, and other information=
. (Micro-entities,
as defined in the bill, would be exempt from those requirements.) According=
 to PTO, the
cost for applicants to research and provide such information would total $5=
,000 to $10,000
per search report. While there are more than 200,000 patent applications ea=
ch year, some
applicants already provide similar information in their applications. CBO e=
stimates that the
cost to private-sector entities of complying with the mandate would substan=
tially exceed the
annual threshold. We estimate that the costs to public entities-primarily u=
niversities-
would range from $30 million to $60 million annually over the next five yea=
rs.<<<
{emphasis added rwz}



The PTO estimates the cost of compliance with the "Quality Submissions" pri=
or art searching and
patentability analyses at $5,000-10,000/application. Given the PTO's pr=
eviously proposed search guidelines
for their Examination Support Document, applicable to applications exceedi=
ng more than 25 total claims or more than 5 independent claims,
the PTO's cost estimate seems preposterously low. Element by element =
prior art searches, searches of likely combinations of elements, then
identifying the relevant sections of all the prior art retrieved, arguing h=
ow one's application is still patentable over that prior art,
will add greatly to the extent and cost of prior art searching, including t=
he added costs of obtaining copies of all pertinent open
literature identified during the searches. The analysis of and distingui=
shing inventions against the prior art will surely add hours
of lawyers' time to the process, generally at hourly rates exceeding $150/h=
our, often far more.

So even by the PTO's estimate, $5000-10,000/application, those new mandated=
 expenses may well equal the usual preparation and prosecution
costs for a not overly complicated US patent application. Given that ma=
ny attorneys have estimated the costs of preparation of an
Examination Support Document at $20,000-30,000, the PTO cost estimate is su=
spiciously low. Given that the Senate version of the Patent Reform Act
gives the PTO broad rule making authority consonant with implementing their=
 proposed Claims and Continuations Rules, Search Guidelines, Annotated IDS =
Rules, etc., it doesn't seem a great leap of faith to imagine this PTO adm=
inistration seeking "Quality Submissions" on all US patent applications.
If half of current applications required Quality Submissions, at $10,000 ea=
ch, 200,000 x $10,000 = $2,000,000,000. If all 400,000 applications
required Quality Submissions, then the unfunded mandate could equal, likely=
 exceed $4,000,000,000.

How disengenous for the Congressional Budget Office, acting on limited, car=
efully selected information from the PTO, to soft peddle the
unfunded mandate cost to "substantially exceed the annual threshold" of $1=
36,000,000 for FY2008. Patent applicants may be asked
to shoulder an unfunded mandate that could exceed $10 billion annually, pre=
suming $20,000/Quality Submission is a more accurate
cost estimate.

All of that economic damage contained in a Bill that leading Chinese IP ex=
perts characterized essentially as an "infringers bill of rights,"
seems more likely to undermine American patents than to strengthen them. =
    This appears more like Patent Deform than Reform!

Roy Zimmermann
Medtronic




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Received on Tue Feb 19 2008 - 23:34:33