Note 15. Commitments and Contingencies

Commitments

In addition to the future lease commitments discussed in Note 8, the USPTO is obligated for the purchase of goods and services that have been ordered, but not yet received. Total undelivered orders for all of the USPTO’s activities were $423,310 thousand and $281,995 thousand as of September 30, 2006 and 2005, respectively. Of these amounts, $418,995 thousand and $273,635 thousand, respectively, were unpaid.

Contingencies

The USPTO is a party to various routine administrative proceedings, legal actions, and claims brought by or against it, including threatened or pending litigation involving labor relations claims, some of which may ultimately result in settlements or decisions against the federal government.

One grievance has been decided by arbitration where the employee has been reinstated and is being awarded backpay. Although the final liability is unknown, a reserve of $250 thousand has been setup. As of September 30, 2006, management expects it is reasonably possible that approximately $67,821 thousand may be owed for awards or damages involving labor relations claims. In addition, a potential class action suit outcome is considered reasonably possible, but a range of outcomes cannot be determined.

Additionally, the USPTO may be required to make reimbursements to the Judgment Fund. For the years ended September 30, 2006 and 2005, there were no payments made on behalf of the USPTO from the Judgment Fund.

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