As US Government Shutdown Continues, Effects On IP System Grow 09/10/2013 by Steven Seidenberg for Intellectual Property Watch 1 Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Steven Seidenberg is a freelance reporter and attorney who has been covering intellectual property developments in the US for more than 20 years. He is based in the greater New York City area and may be reached at firstname.lastname@example.org. The US government shutdown is now in its second week, causing more and more of the country’s intellectual property regime to grind to a halt. The shutdown’s effects also are rippling overseas, hindering US efforts to negotiate two major international trade deals containing significant IP provisions. The US government’s new fiscal year began on 1 October, but Congress has been unable to agree on a bill funding the federal government. As a result, all nonessential government services have been shut down. The US International Trade Commission has closed its doors, preventing the agency from investigating any allegations that imported goods infringe US patents. This stops a fast and efficient way for patentees to protect themselves from infringing imports which gives accused infringers a respite. “These [USITC] actions move very quickly, so this gives alleged infringers more time to get their legal defences together. That could be a major advantage in some cases,” said Charles Gorenstein, a partner in the Virginia office of Birch, Stewart, Kolasch & Birch, a law firm specialising in IP. The Federal Trade Commission has ceased operating. This puts on hold the agency’s investigation of how patent assertion entities (sometimes called “patent trolls”) are affecting innovation, competition, and the economy. The delay is likely to favour patent assertion entities, as the FTC is expected to call for new measures to rein in these businesses. The US Copyright Office is closed. Copyright registrations can still be filed online, but these registrations will not be processed until the office reopens. The Office of the US Trade Representative has furloughed much of its staff, forcing the US to postpone negotiations on a major international trade agreement. The Transatlantic Trade and Investment Partnership aims to create a free trade zone between the US and the European Union, and it contains important provisions on IP protections. Talks on this proposed agreement were scheduled for this week, but the meeting in Brussels was cancelled because the government shutdown prevented officials of the US Trade Representative’s office from attending. The shutdown also hindered progress on another major international free trade agreement, the Trans-Pacific Partnership. This agreement is intended to create a free trade zone between 12 countries on both sides of the Pacific Ocean: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. This agreement is also expected to contain tough provisions on protecting IP. Leaders of these 12 countries were supposed to continue negotiating the terms of this agreement on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit recently held in Bali, Indonesia. Those negotiations accomplished relatively little, however, because President Barack Obama cancelled his trip to Bali. He remained in the US to work on ending the government shutdown. As a result, it now appears that the terms of the Trans-Pacific Partnership will not be finalised by the end of the year, as many had anticipated. Mostly Open for Business The federal courts (including the Federal Circuit, which is sometimes called the nation’s “patent court”) are operating despite the shutdown. They have a budget surplus from last fiscal year that will pay for 10 days of normal operations. Around mid-October, some staff will have to be furloughed, but since the courts provide an “essential” government service, they will continue to hear cases. The courts may operate less efficiently, but they still will operate. US Immigration and Customs Enforcement is responsible for, among other things, keeping counterfeit and infringing goods from entering the country. Approximately 80 percent of this agency’s personnel are deemed “essential” and will continue working despite the shutdown, according to agency’s 2013 contingency plan [pdf]. The US Department of State has been largely unaffected by the shutdown, because it has unspent funds from last fiscal year and because many of its operations are funded by multi-year budget appropriations. The agency has stated that “Consular operations domestically and overseas will remain 100 percent operational as long as there are sufficient fees to support operations.” Thus, State Department officials around the world continue to work on IP-related matters. It is unclear, however, when the agency will start to run out of funds and what specific cutbacks the agency would then make. The US Patent and Trademark Office remains open – for now – and is continuing most of its normal operations. The agency is providing online access to electronic files, but it cannot comply with requests for paper files because those files are housed in a facility operated by the General Services Administration, which has been closed by the shutdown. The USPTO also cancelled its 18th annual Independent Inventors Conference, but will try to reschedule that after the government shutdown has ended. The USPTO is able to stay open thanks to funds it had left over from last fiscal year. These reserve fee collections will allow the agency to continue its normal operations for approximately four weeks, the USPTO has stated on its website. If the agency runs out of money before the government shutdown is over, the USPTO would largely shut down. “[A] very small staff would continue to work to accept new applications and maintain IT infrastructure, among other functions,” the USPTO declared. For instance, in order to prevent patentees and trademark owners from losing their rights, the USPTO’s electronic filing and payments systems will continue operating, according to page 78 of the US Department of Commerce’s shutdown plan [pdf]. In theory, the government shutdown shouldn’t create any funding problem for the USPTO. The agency is completely funded by user fees; it does not need to receive any money from Congress. The USPTO is even profitable. It regularly takes in more money than it spends. But Congress has refused to allow the USPTO to keep its user fees and operate as a self-funded entity. In order to maintain maximum control over the agency, Congress has declared that the fees collected by the USPTO are considered general government revenues and that the USPTO’s expenses must be paid as part of a congressionally-approved budget. If there is no budget, as is currently the case, the USPTO is not allowed to spend any of the new fees it is collecting. It must shut down, despite the fact that it is collecting more than enough money to continue operating. A New Hope At the moment, there is little indication that the government shutdown will end soon. Republicans in Congress continue to insist that any bill to fund the government must also defund or delay implementation of the Affordable Care Act, often called “Obamacare.” That law, which makes major changes in the country’s healthcare system and enables millions of Americans to obtain health insurance, is President Obama’s most important legislative achievement. President Obama and Congressional Democrats are adamantly rejecting the Republicans’ efforts to tie a funding bill to cuts in Obamacare. In a press conference on 8 October, the President characterised the Republicans’ strategy as “hostage-taking” that held the US government for “ransom” unless the Republicans got everything they wanted. The President and the Democrats have flatly refused to negotiate any changes in Obamacare until after Congress passes a clean bill funding the government. Meanwhile, a more serious problem looms. Congress needs to pass a bill increasing the federal government’s debt limit, thus allowing the US government to borrow additional money. If such a bill isn’t passed by 17 October, the United States will have insufficient funds to meet all its obligations, according to Secretary of the Treasury, Jacob Lew. Such a government default could have a huge, detrimental effect on the world’s economy and financial system, many experts fear. But Republicans are tying any increase in the debt limit to cuts in government spending (which are anathema to Democrats) and to getting a satisfactory bill on funding the government. President Obama and the Democrats have decried this as “extortion” and have declared they will not negotiate on government spending or Obamacare until after the debt ceiling has been raised and the federal government funded. Both sides seem entrenched in their positions, but in the past few days, there are a few, faint indications that some Republicans are shifting their positions. Instead of demanding that Obamacare be gutted, these politicians are calling for cuts in federal spending. That may not be seem like much movement, but it may be a beginning. Perhaps the impasse in Washington will end before worse damage occurs to the US and the world. For the moment, however, Democrats and Republicans remain far from settling their disputes over the budget and debt limit. Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related Steven Seidenberg may be reached at email@example.com."As US Government Shutdown Continues, Effects On IP System Grow" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.