Order Code RS20906
Updated March 4, 2002
CRS Report for Congress
Received through the CRS Web
U.S. Patent and Trademark Office
Appropriations Process: A Brief Explanation
Wendy H. Schacht
Specialist in Science and Technology
Resources, Science, and Industry Division
Summary
The United States Patent and Trademark Office (USPTO) is funded by fees
collected from customers. However, appropriation measures limit USPTO use of all fees
accumulated within a fiscal year. Critics of this approach argue that because agency
operations are supported by payments for services, all fees are necessary to fund these
services in the year they are provided. Some experts claim that a portion of the patent
and trademark collections are being used to offset the cost of other, non-related
programs. Proponents of current funding methods maintain that the fees appropriated
back to the USPTO are sufficient to cover the agency’s operating budget.
Background and Analysis
Traditionally, the United States Patent and Trademark Office (USPTO) was funded
through annual appropriations legislation. In 1982, the fees charged to customers for the
application and maintenance of patents and trademarks were increased significantly to pay
the costs associated with the administration of such activities. Funds generated by the fees
were considered “offsetting collections” and provided to the USPTO on a dollar-for-dollar
basis through the appropriations process. Additional appropriations, above the fees
collected, were made to support other operating costs.
The Patent and Trademark Office became fully fee funded as a result of P.L. 101-508,
the Omnibus Reconciliation Act (OBRA) of 1990, as amended by P.L. 103-66. The intent
of the legislation was to reduce the deficit; one aspect of this approach was to increase the
fees charged customers of the USPTO to cover the full operating needs of the institution.
A “surcharge”of approximately 69% was added to the fees the Office had statutory
authority to collect. These additional receipts were sent to a special fund in the Treasury
established under the budget agreement. The funds collected through the surcharge were
considered “offsetting receipts” and were defined as offsets to mandatory spending.
However, the spending of those receipts was controlled by the appropriation acts,
considered discretionary funding, and counted against the caps under which the
Appropriations Committee operated. The money generated through the basic fee structure
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continued to be designated as “offsetting collections” and also subject to spending limits
placed on the Appropriations Committee. During the 8 years the OBRA provisions were
in effect, it has been estimated that the USPTO collected $234 million more in fees than
the budget authority afforded to the Office.1 Another estimate suggests that between
FY1991 and FY1998, the USPTO collected $338 million more in discretionary and
mandatory receipts than the Office had the authority to spend.2
The surcharge provision expired at the end of FY1998. In response, Congress
increased the statutory level of the fees to cover the operations of the USPTO (P.L. 105358). Currently, all funds raised by fees are considered “offsetting collections” and are
counted against caps placed upon the appropriators. According to recent appropriations
language, the budget authority provided to the USPTO comes from a portion of the funds
collected in the current fiscal year plus funds carried over from previous fiscal years. Until
FY2001, the carry-over was created when the annual appropriations legislation established
a “ceiling” and limited the amount of current year collections the Patent and Trademark
Office could spend. Additional funds were not to be expended until subsequent fiscal
years. However, in FY2001, this latter provision was eliminated. Fees generated above
the ceiling may be used by appropriators to offset programs not related to the operations
of the USPTO. The budget authority provided the USPTO has been less than the total
amount of fees collected within each fiscal year.
Proponents of this approach to funding the USPTO claim that despite the ceilings
imposed on spending current year fee collections, when combined with fees carried over
from previous years, the Office is provided with sufficient appropriations to operate.
However, many in the community that pay the fees to maintain and administer intellectual
property disagree with this assessment. Critics argue that, over time, a significant portion
of the fees collected are not returned to the USPTO due to the ceilings established by the
appropriations process and the inability of the Office to use the fees on a dollar-for-dollar
basis. They maintain that all fees are necessary to cover actual, time-dependent activities
at the USPTO and that by withholding funds, the efficient and effective operation of the
Office is diminished.
Advocates of current funding practice see it as a means to provide necessary support
for other programs in the relevant budget category given budget scoring and the caps
placed upon the Committee on Appropriations (Commerce, Justice, State, the Judiciary,
and Related Agencies Subcommittee). For example, during House debate on the FY2001
appropriations bill (H.R. 4690), several Members argued that funding for the Bureau of
the Census, the Department of Commerce Bureau of Economic Analysis, and/or the
Department of State Educational and Cultural Exchange program (among others) would
have to be cut significantly in order to permit the USPTO to use all fees collected given
the 302(b) allocations provided to the Subcommittee.
1
Michael K. Kirk, Executive Director, American Intellectual Property Law Association.
Testimony before the House Committee on the Judiciary, Subcommittee on Courts and Intellectual
Property, March 9, 2000.
2
Estimate based on the Presidential Budget Appendices for FY1991 through FY2000..
U.S. Patent and Trademark Office
Appropriations Process: A Brief Explanation
Wendy H. Schacht
Specialist in Science and Technology Policy
May 27, 2009
Congressional Research Service
7-5700
www.crs.gov
RS20906
CRS Report for Congress
Prepared for Members and Committees of Congress
.
U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
Summary
The U.S. Patent and Trademark Office (USPTO) examines and approves applications for patents
on claimed inventions and administers the registration of trademarks. It also assists other federal
departments and agencies to protect American intellectual property in the international
marketplace. The USPTO is funded by user fees paid by customers that are designated as
“offsetting collections” and subject to spending limits established by the Committee on
Appropriations.
Until recently, appropriation measures limited USPTO use of all fees accumulated within a fiscal
year. Critics of this approach argued that because agency operations are supported by payments
for services, all fees were necessary to fund these services in the year they were provided. Some
experts claimed that a portion of the patent and trademark collections were being used to offset
the cost of other, non-related programs. Proponents of limiting use of funds collected maintained
that the fees appropriated back to the USPTO were sufficient to cover the agency’s operating
budget.
Congressional Research Service
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
Contents
The USPTO Appropriations Process............................................................................................1
Background ..........................................................................................................................1
Current Practice ....................................................................................................................2
Issues..........................................................................................................................................2
Contacts
Author Contact Information ........................................................................................................3
Congressional Research Service
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
The USPTO Appropriations Process
The U.S. Patent and Trademark Office (USPTO) examines and approves applications for patents
on claimed inventions and administers the registration of trademarks. It also assists other federal
departments and agencies to protect American intellectual property in the international
marketplace. The USPTO is funded by user fees paid by customers that are designated as
“offsetting collections” and subject to spending limits established by the Committee on
Appropriations.
Background
Traditionally, the United States Patent and Trademark Office was funded through annual
appropriations legislation. In 1980, P.L. 96-517 created within the U.S. Treasury a “Patent and
Trademark Office Appropriations Account” and mandated that all fees collected be credited to
this account (which remains in effect today). Subsequently, in 1982, the fees charged to customers
for the application and maintenance of patents and trademarks were increased significantly to pay
the costs associated with the administration of such activities. Funds generated by the fees were
considered “offsetting collections” and made available to the USPTO on a dollar-for-dollar basis
through the congressional appropriations process. Additional direct appropriations, above the fees
collected, were made to support other operating costs.
The Patent and Trademark Office became fully fee funded as a result of P.L. 101-508, the
Omnibus Reconciliation Act (OBRA) of 1990, as amended. The intent of the legislation was to
reduce the deficit; one aspect of this effort was to increase the fees charged customers of the
USPTO to cover the full operating needs of the institution. At the same time, a “surcharge” of
approximately 69% was added to the fees the Office had the statutory authority to collect. These
additional receipts were deposited in a special fund in the Treasury established under the budget
agreement.
The funds collected through the surcharge were considered “offsetting receipts” and were defined
as offsets to mandatory spending. However, the use of these receipts was controlled by the
appropriation acts; the receipts were considered discretionary funding, and counted against the
caps under which the Appropriations Committee operated. The funds generated through the basic
fee structure continued to be designated as “offsetting collections” and also subject to spending
limits placed on the Appropriations Committee.
The surcharge provision expired at the end of FY1998. It has been estimated that during the eight
years that the OBRA provisions were in effect, the USPTO collected $234 million more in fees
than the budget authority afforded to the Office. 1 Another estimate suggested that between
FY1991 and FY1998, the USPTO collected $338 million more in discretionary and mandatory
receipts than the Office had the authority to spend.2
1
Michael K. Kirk, Executive Director, American Intellectual Property Law Association. Testimony before the House
Committee on the Judiciary, Subcommittee on Courts and Intellectual Property, March 9, 2000.
2
Estimate based on the Presidential Budget Appendices for FY1991 through FY2000.
Congressional Research Service
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
Subsequent to the expiration of the surcharge, several times Congress increased the statutory level
of the fees charged by the USPTO. Until FY2001, the budget authority provided to the USPTO
came from a portion of the funds collected in the current fiscal year plus funds carried over from
previous fiscal years. The carry-over was created when the annual appropriations legislation
established a “ceiling” and limited the amount of current year collections the U.S. Patent and
Trademark Office could spend. Additional funds were not to be expended until subsequent fiscal
years. However, in FY2001, this latter provision was eliminated.
Current Practice
Currently, all funds raised by fees are considered “offsetting collections” and are counted against
caps placed upon the appropriators. If appropriators choose to provide the USPTO with the
budget authority to spend less than the estimated fiscal year fee collection, the excess may be
used to offset programs not related to the operations of the USPTO. Between FY1999 and
FY2004, the budget authority provided the USPTO was less than the total amount of fees
collected within each fiscal year. During this time period, it has been estimated that $406 million
in fees collected were not available for use by the USPTO.3
Since FY2005, the Office has been provided the budget authority to spend all fees collected.
Issues
Beginning in 1990, appropriations measures have, at times, limited the ability of the U.S. Patent
and Trademark Office to use the full amount of fees collected in each fiscal year. Although over
the past several years the Office has been given the budget authority to spend all collected fees,
this issue remains an area of controversy. Proponents of the current approach to funding the
USPTO claim that despite the ability of the appropriators to impose limits on spending current
year fee collections, the Office is provided with sufficient financial support to operate. Advocates
of the existing USPTO appropriations structure see it as a means to provide necessary support for
other programs in the relevant budget category given budget scoring and the caps placed upon the
Committee on Appropriations.
However, many in the community that pay the fees to maintain and administer intellectual
property disagree with this assessment. Critics argue that, over time, a significant portion of the
fees collected have not been returned to the USPTO due to the ceilings established by the
appropriations process and the inability of the Office to use the fees on a dollar-for-dollar basis.
They maintain that all fees are necessary to cover actual, time-dependent activities at the USPTO
and that the ability of the appropriators to limit funds diminishes the efficient and effective
operation of the Office.
3
Intellectual Property Owners Association, 6/27/2007, available at http://www.ipo.org/AM/Template.cfm?Section=
Search&Template=/CM/ContentDisplay.cfm&ContentID=15484 and U.S. Court of Appeals, Federal Circuit. Miguel
Figueroa V. United States, October 11, 2006, 466 F.3d 1023.
Congressional Research Service
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
Author Contact Information
Wendy H. Schacht
Specialist in Science and Technology Policy
wschacht@crs.loc.gov, 7-7066
Congressional Research Service
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