Financial Highlights: Earned Revenue

The USPTO’s earned revenue is derived from the fees collected for patent and trademark products and services. Fee collections are recognized as earned revenue when the activities to complete the work associated with the fee are completed. The following table presents the earned revenue for the past four years.

Earned Revenue *(Dollars in Millions)*
	FY 2002	FY 2003	FY 2004	FY 2005
Patent	$ 910.1	$1,004.5	$1,092.5	$1,197.8
Percentage Change in Patent Earned Revenue	5.9%	10.4%	8.8%	9.6%

Trademark	151.3	157.8	146.5	175.0
Percentage Change in Trademark Earned Revenue	(16.5)%	4.3%	(7.2)%	19.5%

Total Earned Revenue	$1,061.4	$1,162.3	$1,239.0	$1,372.8
Percentage Change in Earned Revenue	2.0%	9.5%	6.6%	10.8%

Earned revenue totaled $1,372.8 million for FY 2005, an increase of $133.8 million, or 10.8 percent, over FY 2004 earned revenue of $1,239.0 million. Of revenue earned during FY 2005, $327.5 million related to fee collections that were deferred for revenue recognition in prior fiscal years, $418.8 million related to maintenance fees collected during FY 2005, which were considered earned immediately, $621.0 million related to work performed for fees collected during FY 2005, and $5.5 million that were not fee-related.

Patent

Traditionally, the major components of earned revenue derived from patent operations are maintenance fees, filing fees, and issue fees. These fees account for over 80 percent of total patent income. The chart on the right depicts the relationship among the most significant patent fee types.

Patent maintenance fees are the largest source of earned revenue by fee type. As these are recognized immediately as earned revenue, any fluctuations in the rates of renewal have a significant impact on the total earned revenue of the USPTO. To some extent, renewals recoup costs incurred during the initial patent process. As shown below, the renewal rates for all three stages of maintenance fees have been increasing modestly over the last four years and the trend indicates that this growth pattern will continue.

Patent Renewal Rates
Patent Renewal Rates ¹	FY 2002	FY 2003	FY 2004	FY 2005 ²
Note 1: the First Stage refers to the end of the 3rd year after the initial patent is issued; the Second Stage refers to the end of the 7th year after the initial patent is issued; and the Third Stage refers to the end of the 11th year after the initial patent is issued. For example, in FY 2005, 83.1 percent of the patents issued three years ago were renewed, 65.4 percent of the patents issued seven years ago were renewed, and 45.1 percent of the patents issued 11 years ago were renewed. (back to text) Note 2: Preliminary data. (back to text)
First Stage	85.1%	86.8%	91.9%	83.1%
Second Stage	59.5%	61.1%	65.7%	65.4%
Third Stage	38.4%	42.9%	43.8%	45.0%

Earned filing fee revenue increased from $289.1 million in FY 2004 to $344.9 million in FY 2005, with the number of applications increasing from 378,984 to 409,532 over the same period, increases of 19.3 percent and 8.1 percent, respectively. The FY 2006 President’s Budget Request projects an increase of 5.5 percent in patent applications filed beginning in FY 2006 and extending through FY 2010, which will contribute to the continued growth in earned fee revenue.

Earned issue fee revenue decreased from $242.2 million in FY 2004 to $235.9 million in FY 2005, with the number of patents issued decreasing from 187,170 to 165,485 over the same period, decreases of 2.6 percent and 11.6 percent, respectively. The number of patents issued in FY 2005 temporarily decreased resulting from an enhanced emphasis on quality and a reduction in patent allowance rates. The FY 2006 President’s Budget Request projects that patents issued will increase an average of 10.9 percent each fiscal year through FY 2010.

Trademark

Trademark fees are comprised of application filing, renewal services, and Trademark Trial and Appeal Board fees. Additional fees are charged for intent-to-use filed applications, as additional requirements must be met for registration. The chart on the right depicts the relationship among the most significant trademark fee types.

Trademark application fee revenue increased from $73.7 million in FY 2004 to $101.5 million in FY 2005, with the number of applications increasing from 298,489 to 323,501 over the same period, increases of 37.7 percent and 8.4 percent, respectively. The FY 2006 President’s Budget Request projects that trademark applications filed will continue to increase, which will contribute to the continued growth in earned fee revenue.

Trademark registration can be a recurring source of revenue. To some extent, renewal fees recoup costs incurred during the initial examination process. As shown below, the renewal rates for trademarks have remained fairly stable over the last four years, indicating continued earned revenue from this source. Further, in the FY 2006 President’s Budget Request, earned revenue from trademark renewals is expected to continue in the future.

Trademark Renewal Rates
Trademark Renewal Rates ¹	FY 2002	FY 2003	FY 2004	FY 2004
Note 1: the renewals occur every 10th year for trademarks registered after November 15, 1989. For trademarks issued or renewed before November 15, 1989, renewal will occur after the 20th year and the renewal will be for a ten-year period. For example, 23.3 percent of the trademarks granted ten and 20 years ago were renewed. (back to text)
Renewals	29.7%	29.6%	28.7%	23.3%

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Last Modified: 11/5/2009 7:26:22 PM