Patent and Trademark Office

Under the Omnibus Budget Reconciliation Act of 1990, the Patent and Trademark Office (PTO) in the Department of Commerce must in the future recover essentially all of its patent costs through patent user fees. This change means that a 50-percent subsidy for patent fees enjoyed by small-entity users of PTO services will be shifted from annual appropriations to large-entity users of PTO services. To achieve a fairer distribution of fees, PTO has proposed reducing the subsidy for small entities beginning in fiscal year 1992. In this briefing report, GAO provides information on four alternative approaches to the PTO proposal to reduce the 50-percent subsidy and presents the views of senior patent attorneys and technology transfer officials at 10 federal laboratories with the most active patent and licensing programs.

GAO found that: (1) PTO has proposed to reduce the subsidy to small entities by retaining the 50-percent subsidy for fees associated with filing a patent application, while eliminating the subsidy for fees associated with issuing and maintaining a patent; (2) PTO projects that, in FY 1992 and FY 1993, it will need a total of $778 million in patent fee revenues to support rising patent system costs; (3) PTO projects that revenue under its current fee structure would total $703 million, resulting in a $75-million shortfall which could be provided by increases in small-entity fees; (4) under the required 69-percent surcharge on patent fees, small entities would pay almost the same fees, overall as large entities to obtain and maintain protection for a patent's 17-year life; (5) because independent inventors account for 72 percent of the small-entity applicants, they would be adversely affected by the reduction of the patent fee subsidy and would be less likely to have the resources to pay the higher fees; (6) if the 50-percent subsidy were limited to independent inventors and nonprofit organizations, the fees paid by both large and small entities would be lower than if the current 50-percent subsidy were retained; (7) if the small-entity subsidy were reduced from 50 percent to 25 percent, small entities, which filed about 34 percent of the patent applications in FY 1990, would contribute about 24 percent of patent revenues; and (8) the Navy has been experiencing a greater adverse impact than other federal agencies since higher fees have come at a time when its budget has been reduced.