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Collage showing images with one-word descriptors from the U S P T O Fiscal Year 2009 Performance and Accountability Report cover that reinforces the report’s tagline of Today’s Challenges – Tomorrow’s Solutions.
Performance and Accountability Report Fiscal Year 2009
Management's Discussion and Analysis

Table of Contents | Management | Financial | Auditor | IG | Other

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 table below presents the earned revenue for the past five years.

Earned Revenue (Dollars in Millions)
  FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Patent $1,197.8 $1,384.2 $1,507.0 $1,625.0 $1,697.4
Percentage Change in Patent Earned Revenue    9.6%    15.6%     8.9%     7.8%     4.5%
Trademark    175.0    210.2    228.7    237.2    229.7
Percentage Change in Trademark Earned Revenue    19.5%    20.1%     8.8%     3.7%   (3.2)%
Total Earned Revenue
single underline$1,372.8
double underline
single underline$1,594.4
double underline
single underline$1,735.7
double underline
single underline$1,862.2
double underline
single underline$1,927.1
double underline
Percentage Change in Earned Revenue    10.8%    16.1%     8.9%     7.3%     3.5%

Earned revenue totaled $1,927.1 million for FY 2009, an increase of $64.9 million, or 3.5 percent, over FY 2008 earned revenue of $1,862.2 million. Of revenue earned during FY 2009, $454.3 million related to fee collections that were deferred for revenue recognition in prior fiscal years, $546.7 million related to maintenance fees collected during FY 2009, which were considered earned immediately, $920.7 million related to work performed for fees collected during FY 2009, and $5.4 million were not fee-related.

For fees collected and earned during FY 2009, there was an increase of $49.6 million over these same fees earned during FY 2008. This increase can primarily be attributed to $2.4 million in fees considered earned immediately, $5.7 million in earned patent filing fees, $34.4 million in earned patent issue fees, $13.3 million in PCT international fees, offset by a decrease of $6.3 million in patent appeal fees.

Patent

 Pie chart summarizing patent revenue by fee type for fiscal year 2009.D

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

Patent maintenance fees are the largest source of earned revenue by fee type. During FY 2009, maintenance fees collected decreased $15.1 million, or 2.7 percent, from FY 2008. As they 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 decreased this year. The renewal rates are expected to rebound as the economy rebounds.

Patent Renewal Rates
Patent Renewal RatesRead Footnote 11 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
First Stage 83.1% 93.1% 90.1% 83.1% 80.3%
Second Stage 65.4% 69.2% 71.4% 73.7% 63.5%
Third Stage 45.0% 44.4% 48.5% 49.2% 45.4%

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 2009, 80.3 percent of the patents issued three years ago were renewed, 63.5 percent of the patents issued seven years ago were renewed, and 45.4 percent of the patents issued 11 years ago were renewed. (back to text)

Application fee revenue earned upon filing decreased from $99.8 million in FY 2008 to $95.2 million in FY 2009, with the number of applications decreasing from 496,886 to 485,500 over the same period, decreases of 4.6 percent and 2.3 percent, respectively. The FY 2010 President’s Budget projects a gradual increase in patent applications filed beginning in FY 2011 and extending through FY 2014, which will contribute to a renewed growth in earned fee revenue.

Earned issue fee revenue increased from $262.3 million in FY 2008 to $292.7 million in FY 2009, with the number of patents issued increasing from 182,556 to 190,121 over the same period, an increase of 11.6 percent and 4.1 percent, respectively. The FY 2010 President’s Budget projects that patents issued will increase an average of 5.8 percent each fiscal year through FY 2014.

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 following chart depicts the relationship among the most significant trademark fee types.

 Pie chart summarizing trademark revenue by fee type for fiscal year 2009.D
  

Earned revenue for trademark applications decreased from $131.3 million in FY 2008 to $126.0 million in FY 2009, with the number of trademarks registered decreasing from 274,250 to 241,637 over the same period, a decrease of 4.0 percent and 11.9 percent, respectively. The FY 2010 President’s Budget projects that trademark applications filed will increase, which will contribute to 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 five years, indicating continued earned revenue from this source. Further, in the FY 2010 President’s Budget, earned revenue from trademark renewals is expected to continue in the future.

Trademark Renewal Rates
Trademark Renewal RatesRead Footnote 11 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009Read Footnote 22
Renewals 28.6% 28.8% 28.6% 27.0% 27.4%

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, in FY 2009, 27.4 percent of the trademarks granted ten and 20 years ago were renewed. (back to text)

Note 2: Preliminary data. (back to text)

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