State of Innovation

Patents and Innovation Economics

Paul Ryan: Good or Bad for Patents, Tech Startups and the Economy

Congressman Paul Ryan has been selected as the vice presidential running mate of Mitt Romney.  Many in the Republican Party have hailed him as true advocate of free market principles.  Unfortunately, his voting record is much more conventional than we have been led to believe.

Congressman Ryan voted for the America Invents Act (AIA).  This Act was laden with crony capitalist gifts for Wall Street, Big Pharma, and large corporations at the expense of startups and individual inventors.  The Act was widely criticized as being unconstitutional.  This was more than enough reason to vote against the AIA, but Paul Ryan led the charge to gut the only redeeming feature of the Act – namely ending fee diversion.  When I called Congressman Ryan’s office to ask why they were doing this, they responded that it was important to balancing the budget.  REALLY, in a $3 trillion federal budget the $100M or so you are stealing from inventors is going to make the difference?  This is less than 0.1% of the federal budget.  This is less than we give to Egypt or the UN or any number of other extra-Constitutional spending.

I pointed out that the PTO was a self funded agency, meaning no tax dollars are used to fund its operation.  Diverting the money of inventors and using it for another purpose is conversion (stealing).  Their response was how is this any different than putting the fee you pay to enter a National Park going into the general treasury?  There are a number of differences.  First, when I pay a fee to enter a National Park, I immediately get the service I paid for.  In the case of patents, inventors have to routinely wait from three to ten years to get the service they paid for.   Second, National Parks were created with federal funds, but inventions are created with private funds.  Even the Patent Office was created with private funds, since it is a self funded agency and always has been.  If a private company or an attorney did what the federal government does with patent fees it would charged with fraud and conversion.  This attitude that the federal government is above the law is exactly what is wrong with our country Mr. Ryan.

Ryan is bad for patents

Congressman Ryan voted for Sarbanes Oxley.  SOX has made it impossible for startups to go public, which has made it very difficult for startups to raise money.  Historically, most of the growth and job creation of startups occurs after they go public.  The Kaufman Foundation has shown that all net new jobs since 1972 have been created by startups.  To the best of my knowledge, Congressman Ryan has not said he is in favor of repealing SOX.  This means he is bad for technology startups and bad for job creation.

Ryan is bad for startup funding

Paul Ryan is widely praised for coming up with a plan to reduce our budget deficit.  Since government spending crowds out money that could be used to fund startups, this is good.  As part of this proposal he has a plan to rein in entitlements, such as medicare, medicaid and social security.  In spite of this, Congressman Ryan voted for medicare part D.  The question is which Paul Ryan will show up if he becomes VP.

Ryan also voted for TARP, for the bailout of GM and Chrysler, for the economic stimulus of 2008 and 2009, and for extending unemployment benefits to 59 weeks.

Ryan deserves credit for advancing a fairly realistic plan to reduce the budget deficit, but even this plan does too little to cut the deficit.  It’s goal is to reduce federal spending to 20% of GDP in about four years.  It is unlikely that we have four years before we are hit with massive inflation, which will more than double our interest payments on our debt and break our budget.  In addition, his voting record shows that he is unlikely to have the backbone to follow through with even this weak proposal.

Ryan is not a fiscal Conservative

Ryan has put forth a moderate plan to rationalize our tax system.  It does not go far enough, but it is his most pro-growth proposal.

The Problem with Supply Side Proponents

Supply side proponents (SSP) such as Larry Kudlow are ecstatic with the choice of Paul Ryan.  The problem with SSPs is that they do not understand that the only way to continually increase real per capita income is to continually increase our level of technology.  This means we need to eliminate the barriers to the capital markets for technology startups.  This means we need a well functioning system of property rights for inventions.  It also means we need to reduce the tax burden on startups, reduce their regulatory burden, legal risks, and accounting rules biased against them.  But Paul Ryan does not seem to understand this and neither do most supply siders.  As a result, it is unlikely that Paul Ryan and Mitt Romney will be able to put  the US on a sustainable path to growth.

Paul Ryan will be better than Obama or Biden

Unfortunately, this is damning him with faint praise.  Don’t be surprised if Paul Ryan turns into a Bush disappointment instead of a Ronald Reagan.   (Note I hope I am wrong and have to eat my words)

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August 15, 2012 Posted by | -Economics, Innovation, News, Patents | , , , , , , | 3 Comments

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 https://hallingblog.com/2011/06/08/america-invents-act-will-not-end-fee-diversion-paul-ryan-advocates-theft-of-inventors-fees/

[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

America Invents Act Will Not End Fee Diversion – Paul Ryan Thinks Stealing From Inventors is A-OK

According to the Wall Street Journal, “two powerful House Republicans, Rep. Hal Rogers (R., Ky.), chairman of the Appropriations Committee, and Rep. Paul Ryan (R., Wis.), chairman of the Budget Committee, called this week for changes in the legislation that would restrict the patent office’s ability to keep its own fees.”  Ending fee diversion was the only positive part of the America Invents (Not) Act, HR 1249, S. 23).  Representatives Rogers and Ryan should be condemned for this action.  Congress is in the position of trustee of the Patent Office funds and if Congress were subject to Sarbanes Oxley Mr. Ryan & Mr. Rogers would be in jail today along with the rest of Congress.  This makes the America Invents Act a complete farce.  Ending fee diversion was always a little bit is not red herring as the next Congress could always just change this law.

When the government creates laws that do not apply to the government, just private citizens, this is the essences of tyranny.  Rep. Ryan who is suppose to be a fiscal conservative and watching out for taxpayer dollars, is advocating the theft of inventor fees.  If that is what the Tea Party and Paul Ryan consider being fiscally conservative, then it is clear that everyone in Washington believes that you have no right to the money you earn.

June 8, 2011 Posted by | -Law, Patents | , , , , , , , , , , , , | 2 Comments