Figueroa v. U.S.
| Decision Date | 11 October 2006 |
| Docket Number | No. 05-5144.,05-5144. |
| Parties | Miguel FIGUEROA, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Federal Circuit |
Heath W. Hoglund, Hoglund & Pamias, P.S.C., of San Juan, PR, and Robert H. Rines, Rines & Rines, of Concord, NH, argued for plaintiff-appellant.
Brian A. Mizoguchi, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney General, and David M. Cohen, Director. Of counsel on the brief was Michael B. Briskin, Associate Counsel, United States Patent and Trademark Office, of Arlington, VA.
Before NEWMAN, DYK, and PROST, Circuit Judges.
This is a suit for a refund of patent fees alleged to have been unlawfully exacted. The appellant, Miguel Figueroa ("Figueroa"), contends that the statutory patent fees imposed on him in 2001 and 2002 for filing his patent application and issuing his patent violated art. I, § 8, cl. 8 of the United States Constitution (the "Patent Clause"), because the statute was designed to generate revenue to fund federal programs other than the United States Patent and Trademark Office ("PTO"). Figueroa also contends that the fees constituted an impermissible direct tax in violation of art. I, §§ 2 & 9, cl. 4 (the "Direct Tax Clauses"). The Court of Federal Claims granted summary judgment for the United States on the first claim and dismissed the second. We affirm.
The principal issue in this appeal is whether Congress may constitutionally impose patent fees in an amount above what is used to fund the PTO. The pertinent facts are not in dispute.
Congress has imposed fees on the grant of patent rights since the first Patent Act in 1790. Under the 1790 Act, patent fees totaled roughly $5. 1 Stat. 109, 112 (1790). Patent fees did not total more than $100 until 1965, when Congress increased the statutory patent application fee to $65 and the statutory patent issuance fee to a minimum of $112. Pub.L. No. 89-83, 79 Stat. 259 (1965).1 In 1980, Congress for the first time required periodic patent maintenance fees. Pub.L. No. 96-517, § 2, 94 Stat. 3015 (1980). The 1980 legislation established "the Patent and Trademark Office Appropriation Account" in the treasury and required that all patent fee revenues be credited to that account. Id. That account continues in existence to this day.
In 1982, Congress set the patent application fee at $300, the patent issuance fee at $500, and the patent maintenance fees at $400 due three years and six months after issuance, $800 due seven years and six months after issuance, and $1,200 due eleven years and six months after issuance. Pub.L. No. 97-247, § 3(a)-(b), 96 Stat. 317, 317-18 (1982).
In the Omnibus Budget Reconciliation Act of 1990 ("OBRA"), Congress imposed a sixty-nine percent surcharge on top of both patent application and issuance fees. Pub.L. No. 101-508 § 10101(a), 104 Stat. 1388, 1388A-391 (1990). The surcharge expired at the end of fiscal year ("FY") 1998. Pub.L. No. 103-66, § 8001, 107 Stat. 312, 402 (1993).
For FY 1999 Congress increased the statutory patent application fee to $760, increased the statutory patent issuance fee to $1,210, and increased patent maintenance fees to $940, $1,900, and $2,910 due at the previously established time intervals. Pub.L. No. 105-358, § 3(a)-(b), 112 Stat. 3272, 3273-74 (1998). For FY 2000 Congress set patent application, issuance, and maintenance fees at their current levels: $690 for the application fee, $1,210 for the issuance fee, and $830, $1,900, and $2,910, respectively, for the maintenance fees. Pub.L. No. 106-113, § 4202, 112 Stat. 1501, 1501A-554 (1999). The patent fee structure is set forth in 35 U.S.C. § 41 (2000).2
Failure to pay application or issuance fees is treated as an abandonment of the application, 35 U.S.C. §§ 111(a)(4), 151 (2000); failure to pay required maintenance fees results in expiration of the patent, 35 U.S.C. § 41(b).
The heart of this case concerns Congress's decision not to appropriate all of the fees collected to fund PTO operations. Between FY 1991 and FY 1999 Congress in its appropriations bills had made patent fee revenue (with the exception of surcharge revenue) "available [to the PTO] until expended." See, e.g., Pub.L. No. 108-199, 118 Stat. 3 (2004).3 Beginning in FY 1999, Congress limited the amount of patent fee revenue the PTO was authorized to spend. See, e.g., Pub.L. No. 105-358, § 3(b), 112 Stat. 3272, 3273-74 (1998). As a result, some patent fee revenue was not available to the PTO. Figueroa refers to Congress's withholdings of patent fee revenue as "diversions" of that revenue.
Also beginning in FY 1999 Congress enacted a series of "rescissions" of PTO authority to spend revenues from patent fees and redirected the revenue to other purposes.4 Congress rescinded roughly $71 million in FY 1999 for use in deficit reduction, Pub.L. No. 105-277, 112 Stat. 2681 (1998), roughly $1 million in FY 1999 to offset subsidies to the steel, coal, and oil industries, Pub.L. No. 106-51, § 202, 113 Stat. 258 (1999), roughly $3 million in FY 2000 to offset spending on a variety of federal programs, Pub.L. No. 106-113, Appx. E § 301(a), 113 Stat. 1501, 1501A-303 (1999), and roughly $1 million in FY 2002 to offset appropriations for homeland security programs, Pub.L. No. 107-206 § 1403(a), 116 Stat. 820, 898 (2002).
Between FY 1991 and FY 2004, the PTO collected roughly $11.1 billion in total fee revenue (including surcharge revenue) while its operational costs only totaled around $10.6 billion, for a surplus of approximately $545.1 million. The Court of Federal Claims found that from FY 1992 to the present, at least $422.5 million in patent fee revenue has been directed to non-PTO spending.
Figueroa alleges that the following table represents the total amounts of diverted and rescinded patent fees for FYs 1999 through 2004 (numbers are in millions):
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Total Patent Total Patent Net Patent Additional Total Patent
Fee Fee Fees Patent Fee Fees Diverted
Fiscal Year Receipts Appropriations Unavailable Rescissions and Rescinded
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1999 $ 887 $ 853 $ 34 $72 $106
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2000 $1,006 $ 886 $120 $ 3 $123
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2001 $1,085 $1,039 $ 46 - $ 46
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2002 $1,145 $1,121 $ 24 $ 1 $ 25
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2003 $1,194 $1,182 $ 12 - $ 12
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2004 $1,321 $1,223 $ 99 - $ 99
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Since FY 1991, PTO operations have been funded entirely by fee revenue. However, PTO employee benefits, including pensions, health insurance, and life insurance, which are administered by the Office of Personnel Management ("OPM"), have been funded from the general treasury.5
Figueroa filed a patent application on February 27, 2001, and paid the statutory application fees. On August 7, 2001, he filed a complaint in the Court of Federal Claims, seeking to recover the fees paid, as well as declaratory and injunctive relief barring future allegedly illegal exactions of patent fees.6 He alleged that the fees established by the patent fee statute exceeded Congress's power under the Patent Clause, constituted an unapportioned direct tax on intellectual property in contravention of the Direct Tax Clauses, and constituted a Taking under the Fifth Amendment. He argued that, as a consequence of Congress's allegedly unlawful diversions and rescissions of patent surcharge and patent fee revenue, the PTO now is underfunded to the point that it cannot keep up with the volume of patent applications. Figueroa subsequently paid the patent issuance fee, and on November 26, 2002, was issued United States Patent No. 6,484,923. The parties and the Court of Federal Claims treated Figueroa's complaint as seeking recovery of the issuance fee as well the application fee.
The government moved to dismiss Figueroa's claims pursuant to Rules of the Court of Federal Claims 12(b)(1) and 12(b)(6). The court (Judge Bohdan A. Futey) held that Figueroa had standing but dismissed Figueroa's Direct Tax claim for failure to state a claim pursuant to Rule 12(b)(6), concluding that the patent fees were a condition for obtaining an intellectual property right rather than a tax on existing property. The court also rejected Figueroa's takings claim, relying on our holding in Commonwealth Edison Co. v. United States, 271 F.3d 1327, 1329 (Fed. Cir.2001) (en banc), that "the Takings Clause does not apply to legislation requiring the payment of money." The court denied the government's motion to dismiss Figueroa's Patent Clause claim, construing it as a claim for an illegal exaction over which it had jurisdiction under the Tucker Act, 28 U.S.C. § 1491 (2000). Figueroa and the government then filed cross-motions for summary judgment on the Patent Clause claim. Figueroa argued that the Clause required that Congress's imposition of patent...
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