During the August 20, 2015, Patent Public Advisory Committee (PPAC) meeting, USPTO Director Michelle Lee first announced what was known as the shared services initiative. Today, “shared services” has been re-branded “enterprise services,” but the initiative remains the same.
In 2015, Lee explained the shared services initiative by saying that agencies falling under the Department of Commerce would utilize shared services for human resources, information technology and procurement functions. The fear then, however, was that the USPTO’s user fees would be used to pay for the IT and other needs of other Commerce agencies when those funds are supposed to be used only for the operation of the USPTO. See AIPLA letter to Secretary Pritzker and Under Secretary Lee. That is precisely what is happening now, only worse.
The new reality today is that the USPTO is paying for shared services that are simply not shared. According to Frank Murphy, Acting Chief Financial Officer, who recently spoke at a PPAC public meeting, the USPTO will not be using the services because the USPTO systems are superior to the shared services being created. The USPTO is still, nonetheless, paying for the creation of these services.
“The PTO position has been and remains that we have independent authority over our administrative operations and if it makes sense for us to avail ourselves of those services we would like to do so, but we don’t want to have that as a mandatory because we actually have… improved our IT services, our HR services, our contracting services, so we are already performing at a higher standard than many of the agencies that would benefit from shared services, or enterprise services. That said, we also want the ability to opt-in in the future if we see that the service levels have improved or the cost has come down so we can get the bigger bang for the dollar. With that, we have agreed to help with the stand up cost of the enterprise services center so we are paying a pro rata share, a fair share, for the stand up of the enterprise services center, but not for the operational or transactional cost, because we are not participating in that.”
Bernie Knight, former USPTO General Counsel and current PPAC member, asked whether he heard Murphy correctly, that the USPTO is essentially going to pursue shared services on a “cafeteria basis which services we want to participate in, but we are still paying a pro rata share of the overall cost to set up the enterprise operation.” According to Murphy, when you built that cafeteria, if you did not participate in the stand up of the facility, then you’d be getting the benefit of what other people spent for free if you were to later enter the cafeteria to purchase something. That may be true, but what is fair or reasonable and what are legal are two different things.
Knight then asked Murphy how much money the USPTO has paid to Commerce. Murphy explained that the USPTO paid the Department of Commerce $6 million in appropriated funds (i.e., user fees) in 2016 and will pay another $13 million in 2017.
“From my perspective there is $20 million of user fees going toward a Commerce Department initiative that may never benefit the patent, copyright and trademark systems,” Knight said. “As an individual member of the PPAC, I don’t mind saying that I question the appropriateness of that $20 million payment.”
Knight’s concern almost certainly centers around 35 USC 42(c)(3)(A), which was enacted as part of the AIA and says: “Any fees that are collected under this title, and any surcharges on such fees, may only be used for expenses of the Office relating to the processing of patent applications and for other activities, services, and materials relating to patents and to cover a proportionate share of the administrative costs of the Office.”
If the USPTO will not use shared (or enterprise) services, it would seem that these payments from the USPTO to the Commerce Department represent a clear and direct violation of 35 USC 42(c)(3).