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Friday Oct 07, 2011

Explanation of Financial Reforms Contained in the AIA

From: Michelle Picard, Senior Advisor for Financial Management and Head of the AIA Financial Working Group

A financially stable USPTO provides the necessary foundation for the reforms authorized by the America Invents Act (AIA) and for successfully carrying out the agency’s mission.  One of the strategic objectives outlined in the USPTO’s 2010-2015 Strategic Plan challenges the agency to achieve a sustainable funding model for operations.  The AIA takes major strides in helping us reach this goal.  The AIA also provides several other financial benefits to the USPTO and the public.  As head of the AIA Financial Working Group, I’d like to take the opportunity to outline the financial reforms established in the AIA.

Several of the AIA’s financial changes are straight forward and have either been implemented or will be in place soon.  First, effective September 26, 2011, a 15 percent interim surcharge was applied to most patent fees.  A full listing of the fees affected by the surcharge can be found at:  http://www.uspto.gov/aia_implementation/15_Percent_Surcharge_Fee_Changes.pdf.  This interim surcharge is a bridge to provide the agency with financial resources until the agency sets fees by exercising its fee-setting authority, which I will explain further below.  These financial resources are critical for the USPTO to continue making progress towards reducing the backlog of unexamined patent applications and patent pendency while improving information technology and implementing the many reforms called for in the AIA.

Second, effective as of October 1, 2011, all patent and trademark fees collected in excess of the amount Congress authorizes the USPTO to spend (appropriates) annually will be deposited into a Patent and Trademark Fee Reserve Fund maintained at the Department of Treasury.  As long as the additional authority to spend the fees deposited in this fund is provided for in annual appropriations acts, the USPTO will have access to spend all of the patent and trademark fees it collects.  While final fiscal year (FY) 2012 appropriations are forthcoming, both the House and Senate appropriations bills have contained language granting this authority, and we at the USPTO are optimistic that this language will be included in our final appropriation for the year.  With this funding authority, we’ll be off to a good start, financially.

Third, effective November 15, 2011, the AIA provides for an additional $400 fee ($200 for small entities) to be paid for each application for an original patent that is not filed electronically.  This provision does not apply to design, plant, and provisional applications.  Once collected by the USPTO, this fee must be deposited in the general fund at the Department of Treasury (and not the Reserve Fund) and is not available to the USPTO for spending.  Thus, it might be thought of as the single “exception” to the Reserve Fund. 

Fourth, effective September 16, 2011, the USPTO is authorized to set or adjust by rule all patent and trademark fees established, authorized, or charged under 35 U.S.C. and the Trademark Act of 1946 (15 U.S.C. 1051 et seq.), respectively.  The agency intends to exercise it new fee setting authority via notice-and-comment rulemaking over the coming months.  Also, when fees are set, the aggregate revenue from the patent fees may only recover the aggregate estimated cost of the patent operations, including administrative costs to the USPTO.  Likewise, the aggregate revenue from the trademark fees may only recover the aggregate estimated cost of the trademark operations, also including administrative costs to the USPTO. 

Work towards formulating a new fee structure has begun.  Internally, USPTO’s Offices of the Chief Financial Officer and Chief Economist have been working closely with the Patent organization to assess the current fee structure and weigh various options for the future.  This is an extremely complex process, which involves internal cost analysis, workload analysis,
multi-year budget planning, economic analysis, and public policy considerations, among other considerations.  We strive for this process to be as inclusive as possible, and we plan to make the most of the knowledge and expertise of the Patent Public Advisory Committee (PPAC) and the public.  If you have suggestions about how the patent fees might be redesigned to improve the process or the intellectual property system, please go to http://www.uspto.gov/aia_implementation/comments.jsp and click on the “Fee Setting Authority” rulemaking item to share your ideas.

Lastly, effective September 16, 2011, the AIA introduces a new definition and segment of applicants – micro entities—that qualify for a 75 percent discount on fees. (The AIA continues to provide a 50 percent small entity discount under 35 U.S. C. § 41(h)(1)).  The micro entity discount on a given fee will not, however, apply until that fee is set or adjusted by the USPTO using the fee setting authority discussed above. 

In closing, the USPTO will continue to keep our stakeholders informed of updates on the fee-setting process.  I also urge that you share your insights on fee setting now – early in the time – so that we can consider them in our initial planning.

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