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U.S. Patent and Trademark Office
Appropriations Process: A Brief Explanation
Wendy H. Schacht
Specialist in Science and Technology Policy
May 27, 2009January 6, 2011
Congressional Research Service
7-5700
www.crs.gov
RS20906
CRS Report for Congress
Prepared for Members and Committees of Congress
c11173008
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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
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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 primarily with taxpayer
revenues 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,
Congress significantly increased the fees charged to customers
for the application and
maintenance of patents and trademarks were increased significantly to pay
to pay the costs associated with the administration of such activities.
activities. (Note that fee levels were and are established by Congress.) Funds generated by the
fees were
considered “offsetting collections” and made available to the USPTO on a dollar-for-dollarfordollar basis
through the congressional appropriations process. Additional direct appropriations
from taxpayer revenues, 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 collectedThrough the appropriations process, the USPTO must be provided the budget authority to spend
collected fees. Funds generated through the surcharge were considered “offsetting receipts” and
were defined
as offsets to mandatory spending. However, theThe 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. While OBRA was in force, the ability of
the USPTO to utilize all fees generated during any given fiscal year was limited by appropriation
legislation that did not allocate the these revenues on a dollar-for-dollar basis. Critics argued that
those fees not appropriated to the USPTO were used to fund other, non-related programs under
the purview of the appropriators. It has been estimated that during the eight years in which OBRA
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
FY1991 and FY1998,
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.
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
the USPTO collected $338 million more in discretionary and mandatory receipts than the Office
had the authority to spend.2
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 subsequentfollowing fiscal
years. However, in FY2001, this latter provision was eliminated.
Current Practice
The Patent and Trademark Office estimates the amount of fees expected to be generated each
fiscal year. 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
fees generated within each fiscal year. During this time period, it has been estimated that $406 million
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.
However, one analysis argues that, in total, the USPTO was not permitted to use $680 million in
fees generated between FY1990 and FY2004.4 An additional study found that during this time
frame, $747.8 million in fees were “diverted” from the Patent and Trademark Office and used to
fund unrelated programs.5
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
2
Estimate based on the Presidential Budget Appendices for FY1991 through FY2000.
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.
4
Gerald J. Mossinghoff and Stephen G. Kunin, “Improving the Effectiveness of the U.S. Patent and Trademark
Office,” Science Progress, Fall-Winter 2008/2009, 75, available at http://www.scienceprogress.org/wp-content/
uploads/2009/01/issue2/mossinghoff_kunin.pdf.
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Intellectual Property Owners Association, 6/27/2007, available at http://www.ipo.org/AM/Template.cfm?Section=
Search&Template=/CM/ContentDisplay.cfm&ContentID=15484.
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
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.
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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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