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U.S. Patent and Trademark Office
Appropriations Process: A Brief Explanation
Wendy H. Schacht
Specialist in Science and Technology Policy
June 18, 2013
Congressional Research Service
7-5700
www.crs.gov
RS20906
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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 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 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.
P.L. 112-29, the Leahy-Smith America Invents Act, keeps the use of fees collected within the
congressional appropriations process, but requires that fees generated above the budget authority
provided by the Committee on Appropriations be placed in a separate fund within the Department
of the Treasury. While use of these “excess” funds still remain under the control of the
appropriators, they may only be used for the work of the USPTO.
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
Contents
The USPTO Appropriations Process ............................................................................................... 1
Background................................................................................................................................ 1
Leahy-Smith America Invents Act ................................................................................................... 2
Issues................................................................................................................................................ 3
Contacts
Author Contact Information............................................................................................................. 4
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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. Subsequently, in 1982, Congress significantly increased the
fees charged to customers for the application and maintenance of patents and trademarks to pay
the costs associated with the administration of such activities. (Note that fee levels were
established by Congress.) 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 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.
Through 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. 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. While OBRA was in force, the ability of
the USPTO to use all fees generated during any given fiscal year was limited by appropriation
legislation that did not allocate 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
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,
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.
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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 following fiscal
years. However, in FY2001, this latter provision was eliminated.
All funds raised by fees were considered “offsetting collections” and counted against caps placed
upon the appropriators. If appropriators chose to provide the USPTO with the budget authority to
spend less than the estimated fiscal year fee collection, the excess was permitted to 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 generated 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
Various calculations have been made of the total amount of fees generated that were withheld
from use by the USPTO since the office became fully fee funded. 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 While the
office was provided the budget authority to spend all fees collected between FY2005 and
FY2009, the Intellectual Property Owners Association estimates that $260.7 million in fees
collected were not made available to the USPTO in FY2010 and FY2011.6
Leahy-Smith America Invents Act
P.L. 112-29, the Leahy-Smith America Invents Act, makes several changes to the handling of fees
generated by the USPTO. Under the new statute, the use of fees generated is still subject to the
appropriations process whereby Congress provides the budget authority for the USPTO to spend
these fees. However, to address the issue of fees withheld from the office in the past, the America
Invents Act creates within the Treasury a “Patent and Trademark Fee Reserve Fund” into which
fee collections above that “appropriated by the Office for that fiscal year” will be placed. These
2 Estimate based on the Presidential Budget Appendices for FY1991 through FY2000.
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.
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.
5 Intellectual Property Owners Association, 6/27/2007, available at http://www.ipo.org/AM/Template.cfm?Section=
Search&Template=/CM/ContentDisplay.cfm&ContentID=15484.
6 Intellectual Property Owners Association, 10/7/2011, available at http://www.ipo.org/AM/Template.cfm?Section=
Home&Template=/CM/ContentDisplay.cfm&ContentID=31116.
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
funds will be available to the USPTO “to the extent and in the amounts provided in
appropriations Acts” and may only be used for the work of the USPTO.
In addition, the new law grants the USPTO authority “to set or adjust by rule any fee established
or charged by the Office” under certain provisions of the patent and trademark laws. This appears
to provide the USPTO with greater flexibility to adjust its fee schedule absent congressional
intervention. The act requires that “patent and trademark fee amounts are in the aggregate set to
recover the estimated cost to the Office for processing, activities, services and materials relating
to patents and trademarks, respectively, including proportionate shares of the administrative costs
of the Office.”
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. Even when the
office was given the budget authority to spend all fees, the issue remained an area of controversy.
Proponents of the withholding approach to funding the USPTO claimed that despite the ability of
the appropriators to impose limits on spending current year fee collections, the office was
provided with sufficient financial support to operate. Advocates of this appropriations structure
saw it as a means to provide necessary funding 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 disagreed with this assessment. Critics argued that, over time, a significant portion of the
fees collected were 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 claimed that all fees were necessary to cover actual, time-dependent activities at the USPTO
and that the ability of the appropriators to limit funds severely diminished the efficient and
effective operation of the office.
Under the America Invents Act, the budget authority to use fees collected by the USPTO remains
within the congressional appropriations process. Fees generated above the amount provided in the
appropriations legislation are to be put into a special fund and are restricted to use solely by the
Patent and Trademark Office. However, the office must still obtain congressional authority to use
these “excess” funds. It remains to be seen how this new approach addresses the issues associated
with the operations of the USPTO and the use of those fees collected within a given fiscal year.
An additional issue has arisen in regard to the FY2013 sequestration of fees paid to the USPTO.
According to the Office of Management and Budget (OMB), the fees collected are not considered
“voluntary payments” and are therefore subject to sequestration.7 However, others disagree with
this assessment. In a letter to the Director of OMB, the American Intellectual Property Law
Association stated:
7 See CRS Report R42050, Budget “Sequestration” and Selected Program Exemptions and Special Rules, coordinated
by Karen Spar.
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U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation
we have serious doubts that the USPTO is lawfully subject to sequestration in the first place
because it is funded through fee collections, not through government spending. Section 255
of the Balanced Budget and Emergency Deficit Control Act of 1985 (“BBEDCA”) (2 U.S.C.
905) provides a list of exemptions from sequestration including “[a]ctivities financed by
voluntary payments to the Government for goods or services to be provided for such
payments.” 2 U.S.C. 905(g)(1)(a). A plain reading of the statute suggests that this exemption
should apply to the fees collected by the USPTO since they are from voluntary users in
exchange for patent and trademark examination and review.8
Similar concerns have been expressed by other organizations including the American Bar
Association which stated in another letter to the Director of OMB that the “unique funding
mechanism for the USPTO” lends itself to the congressional mandated exemptions from
sequestration for “activities financed by voluntary payments to the Government for goods or
services to be provided for such payments.”
Author Contact Information
Wendy H. Schacht
Specialist in Science and Technology Policy
wschacht@crs.loc.gov, 7-7066
8 American Intellectual Property Law Association, May 21, 2013 letter to The Honorable Sylvia Mathews Burwell,
Director, Office of Management and Budget, available at http://www.aipla.org/advocacy/executive/Documents/
AIPLA%20Letter%20to%20OMB%20re%20USPTO%20Funding%20-%205-21-13.pdf.
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