State of Innovation

Patents and Innovation Economics

Patent Office Fees an Unconstitutional Tax

Congressman Paul Ryan[1] and Congressman Hal Rogers’ argument that ending Patent Office fee diversion is a sham.  The Congressmen point to Article 1, Section 9, Clause 7, which states:

No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time

Does this clause support Ryan and Rogers point of view?  The definition of appropriations is an act of a legislature authorizing money to be paid from the treasury for a specified use.  The America Invents Act is an appropriation made by law for a specific use.  So, their argument fails on its face.  Ryan and Rogers further state that the America Invents Act moves billions of dollars of discretionary funding to mandatory funding.  The only logical conclusion of Rogers’ and Ryan’s statement is that Patent Office fees are a tax.  A tax is defined as a sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc.  Patents are personal property[2].  So, if Ryan and Rogers believe that the money received by the Patent Office is nothing but general funds for the Treasury, which only a Washington insider could support this absurd point of view, then Patent Office fees are an Unconstitutional tax as I will explain below.[3]


Patent Office Fees an Unconstitutional Tax

The Constitution has two sections that apply to how Congress can tax the people.  Article 1, section 9, clause 4 states:

No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.

This clause was modified, but not repealed by the 16th Amendment which states:

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

When these two sections are read together it is clear that Congress cannot establish direct taxes, except income taxes, without apportionment or enumeration.  What is a direct tax?  The definition of a direct tax according to Wikipedia is in the general sense, a tax paid directly to the government by the persons (juristic or natural) on whom it is imposed.  In terms of the U.S. Constitution this means a tax on property “by reason of its ownership”.  The United States Court of Appeals for the District of Columbia Circuit has stated: “Only three taxes are definitely known to be direct: (1) a capitation [ . . . ], (2) a tax upon real property, and (3) a tax upon personal property.”[4]  Patent Office fees are a sum of money demanded by a government for its support or for specific facilities or services, levied upon property (i.e., inventions/patents).  This is a direct tax in the Constitutional sense because it is a tax on personal property.  (Patents are personal property see 35 USC 261)  It is thus clear that Patent Office fees, if they are a source of discretionary funds, are a direct tax on the people and they clearly are not apportioned among the several states and are levied without regard to any census or enumeration.

The Ryan/Roger’s Constitutional argument does not withstand even the most simple scrutiny.  Fee Diversion is clearly Unconstitutional and amounts to fraud and theft on the part of Congress from inventors.  Where are our so-called Constitutional scholars?










[1] The Heritage Foundation is also pushing this argument.

[2] 35 USC 261

[3] The correct analysis of Patent Office fees is that they are held in trust by Congress, since the Patent Office is completely self funded.  For more information see America Invents Act Will Not End Fee Diversion – Paul Ryan Thinks Stealing From Inventors is A-OK

[4] Opinion on rehearing, July 3, 2007, p. 20, Murphy v. Internal Revenue Service and United States, case no. 05-5139, United States Court of Appeals for the District ojjhhjnawazish ali khan mughalf Columbia Circuit, 2007-2 U.S. Tax Cas. (CCH) paragr. 50,531 (D.C. Cir. 2007) (dicta)

June 15, 2011 Posted by | Patents | , , , , , | 5 Comments

The Myth of the Sole Inventor: A Socialist Diatribe by Professor Mark A Lemley

The Myth of the Sole Inventor, By Mark A. Lemley, Stanford Law School

Professor Mark A Lemley has written a paper suggesting that sole inventors and individual genius does not exist.  Mr. Lemley teaches patent law and intellectual property law at Stanford University.  However, Mr. Lemley is not a patent attorney, does not have a technical background and as his paper proves has not understanding of technology.  Mr. Lemley’s idea of collectivist invention ignores three basic facts:

1) Groups of people are made up of individuals.

2) Every individual has to think for themselves – you cannot think for someone else, which is a source of frustration for every parent (child).

3) Throughout history the rate of invention was very slow until we introduced property rights for inventions (patents).

Lemley purposely downplays Edison’s achievement.  The fact is that Edison created the first high resistance, long lasting, incandescent light bulb.  This was a huge achievement that made electrical lighting commercially feasible.  Many “experts” with Ph.D.s from the most prestigious universities at the time said electrical lighting was impossible commercially.  Lemley also has his history wrong.  Swan was the most important inventor of the light bulb, before Edison.  He mentions Man and Sawyer, who I find no reference to in any history of the incandescent light bulb.  Lemley appears to have no regard for facts.  His analysis of the Wright brother’s achievements is similarly sloppy and just plain wrong.

Lemley’s argument that great inventions are created by multiple people simultaneously has been examined by numerous scholars and found to be incorrect.  For instance, see Jacob Schmookler and his ground breaking book, Invention and Economic Growth, which examined this issue.  People like Lemley attempt to smear together multiple inventions as being the same invention.  For instance, they see Swan’s light bulb and Edison’s light bulb as simultaneous inventions of the light bulb.  Lemley may have made this mistake because he does not have the technical background necessary to understand the issues surrounding the invention of the light bulb.  However, I suspect that Lemley is not interested in the truth, he is interested in pushing a political theory of collectivist invention.  If Lemley’s ideas held any water at all, then you would expect either: 1) the USSR/North Korea should have been one of the greatest sources of inventions in the history of the World, and/or 2) the greatest population centers would be the biggest creators of new technology.  The facts are that neither are true.  The first is self evident.  The second appears to be true until the creation of property rights for inventions.  When England and the U.S. create an effective property rights system for inventors almost all significant inventions for the Industrial Revolution are invented in the U.S. and England, even though their populations are much smaller than France, China, India, etc.

Lemley is pushing an old worn out socialist idea that individuals do not matter only the collective.  This paper is not novel and its thesis has been proven false over and over again.  But socialists do not believe in an objective reality.

The paper is an example of the intellectual and moral bankruptcy of many of our academic institutions.

The Myth of the Sole Inventor, By Mark A. Lemley, Stanford Law School

June 15, 2011 Posted by | -Philosophy, Patents | , , , , , , , | 5 Comments

America Invents Act Pulled From Floor

According to a Congressional aid who has been keeping me informed on the America Invents (not) Act (H.R. 1249) the Bill has been pulled from the floor this week and will not be voted on.  They are uncertain now when the Bill will be voted on.  I consider this good news.

June 15, 2011 Posted by | Patents | , , | 1 Comment