RESULTS OF OPERATIONS
The USPTO incurred a net cost of $51.2
million in FY 2005, a decrease of $48.4 million, or 48.6 percent, from
the net cost in FY 2002 of $99.6 million.
Typically, the USPTO gross cost of operations for a fiscal year exceeds
the total obligations incurred in that same fiscal year. This is due to
including the costs of non-budgetary items, such as depreciation expense
and imputed costs. However, in FY 2005, the gross cost of operations was
less than obligations incurred. This difference is partly due to a change
in the method to recognize the cost of post-employment benefits. In past
years, the USPTO recognized an imputed financing source and corresponding
expense to represent its share of the cost to the federal government of
providing pension and post-retirement health and life insurance benefits
to all eligible USPTO employees. This year, the USPTO is now using fees
to fund the cost of post-retirement benefits, resulting in increased obligations.
Another contributing factor is the focus on our primary goal of issuing
high quality patents, which temporarily decreased the number of patents
issued. This reduced the requirement for printing costs that were planned
for and obligated in FY 2005.
Due to the increase in pendency, the time it takes to process a patent
or trademark, the USPTO has been recognizing a steadily increasing deferred
revenue liability for fees received prior to the revenue being earned.
From FY 2002 through FY 2005, unearned patent fees increased 48.1 percent,
with a 24.6 percent increase from FY 2004. In FY 2005, for each month
of patent pendency to first action, deferred revenue for patents increased
approximately $5.7 million per pendency month, with a corresponding decrease
in earned revenue. From FY 2002 through FY 2005, unearned trademark fees
increased $43.0 million, primarily due to an improvement in the methodology
used to calculate trademark deferred revenue, which was implemented in
FY 2004. The USPTO has an aggressive goal of hiring 1,000 new employees
each fiscal year through FY 2011, as well as implementing new operating
practices to reduce the backlog of unprocessed applications and reduce
pendency.
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