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This clause was modified, but not repealed by the 16th Amendment which states: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


  1. Inventors are treated as second class citizens (sub-humans) on many fronts.

    What about the so-called “maintenance fees”?

    The USPTO performs no service whatsoever to allegedly “maintain” a patent after it has been issued.
    Yet they extort patent owners by saying, pay up or else. The “or else” is a government “taking” without just compensation. You had a patent. Now you don’t. We the government, took it back. Tough noggins.

    Bottom line: Inventors are treated as second class citizens without rights under the equal protection clause.

    Comment by step back | June 16, 2011 | Reply

    • Agreed. Also, it is also a back-handed way of having a “working requirement” which the US has historically rejected. For non-patent attorneys, a working requirement states that the inventor must practice the invention within a certain period of time in that country, or lose their patent rights.

      Comment by dbhalling | June 17, 2011 | Reply

  2. ……….Posted by Kristen Cichocki at September 9 2007 04 18 PM……….USPTO and United Kingdom Intellectual Property Office to Pilot Patent Prosecution Highway 04Sep2007 …PRESS RELEASE Contact Brigid Quinn or Ruth Nyblod 571 272-8400 or or .September 4 2007.USPTO and United Kingdom Intellectual Property Office to Pilot Patent Prosecution Highway Fast-track examination trial program will enhance quality and efficiency ..The Commerce Departments U.S. Patent and Trademark Office USPTO and the United Kingdom Intellectual Property Office UK IPO today announced that they are now accepting applications for participation in a pilot Patent Prosecution Highway project established between the two offices.

    Comment by business review | June 19, 2011 | Reply

  3. If the Appropriations Committee succeeds in stripping the fee diversion provisions from the patent reform bill, then it’s doubtful the bill will ever pass; the patent reform bill without the fee diversion provisions would do more harm than good, anyway.

    Comment by patent litigation | June 20, 2011 | Reply

    • Other than ending fee diversion, what do you consider good about the patent reform bill?

      Comment by dbhalling | June 21, 2011 | Reply

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