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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

Balance Sheet and Statement of Changes in Net Position

At the end of FY 2009, the USPTO’s consolidated Balance Sheet presents total assets of $1,532.3 million, total liabilities of $1,156.5 million, and a net position of $375.8 million.

Total assets increased 8.7 percent over the last four years, resulting largely from the increase in Fund Balance with Treasury and Property, Plant, and Equipment. The decrease in total assets during FY 2009 is a result of the decrease in Fund Balance with Treasury, resulting from the decrease in fee income. The table below shows the changes in assets during this period.

Composition of USPTO Assets
(Dollars in Millions)
Asset FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Cash $    8.8 $    6.8 $    7.0 $    4.4 $    3.2
Fund Balance with Treasury  1,240.8  1,401.8  1,402.7  1,431.2  1,309.8
Property, Plant, and Equipment, Net    148.4    164.5    204.6    204.2    205.8
Accounts Receivable and Prepayments     11.1
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     7.2
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    11.2
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     8.5
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    13.5
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Total Assets $1,409.1
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$1,580.3
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$1,625.5
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$1,648.3
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$1,532.3
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Percentage Change in Total Assets     8.6%    12.1%     2.9%     1.4%   (7.0)%

Fund Balance with Treasury is the single largest asset on the Balance Sheet and represents 85.5 percent of total assets at the end of FY 2009. This asset is comprised of unpaid obligated funds of $331.8 million, temporarily unavailable fees of $528.7 million, unavailable special receipt funds under OBRA of $233.5 million, other funds held on deposit for customers of $97.1 million, and unobligated funds of $118.7 million.

The unavailable special receipt funds and the temporarily unavailable funds require Congressional appropriation before they will be available for USPTO’s use. These funds, together with amounts obligated and held on deposit, represent 90.9 percent of the Fund Balance with Treasury.

The other major asset is property, plant, and equipment. The net balance of this asset has increased by $57.4 million during the past four years, with the acquisition values of property, plant, and equipment increasing by $240.9 million. Investments in IT software and software in development increased $111.2 million, in conjunction with enhancing the existing e-government capabilities in areas such as e-filing, application information retrieval, data and image capture, and web-based search systems.

Total liabilities decreased from $1,215.7 million at the end of FY 2008 to $1,156.5 million at the end of FY 2009, representing a decrease of $59.2 million, or 4.9 percent. The table below shows the annual change in liabilities for each of the past five years.

Composition of USPTO Liabilities
(Dollars in Millions)
Liability FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Deferred Revenue $706.7 $  774.4 $  828.1 $  848.5 $  800.3
Accounts Payable  101.8    104.4     96.6     96.7     90.2
Accrued Payroll, Leave, and Benefits   90.7    101.4    120.3    145.4    156.8
Customer Deposit Accounts   74.1     83.8     91.9    101.5     98.1
Other Liabilities   18.0
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    18.3
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    24.6
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    23.6
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    11.1
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Total Liabilities $991.3
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$1,082.3
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$1,161.5
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$1,215.7
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$1,156.5
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Percentage Change in Total Liabilities  19.7%     9.2%     7.3%     4.7%   (4.9)%

The USPTO’s deferred revenue is the largest liability on the Balance Sheet. The liability for deferred revenue is calculated by analyzing the process for completing each service provided. The percent incomplete based on the inventory of pending work is applied to fee collections to estimate the amount for deferred revenue liability.

From FY 2005 through FY 2008, the deferred revenue liability increased $141.8 million, or 20.1 percent. At the end of FY 2009, deferred revenue liability was $800.3 million, representing a one year decrease of $48.2 million, or 5.7 percent. The deferred revenue liability includes unearned patent and trademark fees, as well as undeposited checks. The unearned patent fees represented 92.7 percent of this liability. The following graph depicts the composition of the deferred revenue liability, in addition to the change in this liability over the past four years.

 Bar chart summarizing deferred revenue for the last five fiscal years in millions of dollars.D
  

Deferred revenue at the USPTO is largely impacted by the change in patent and trademark filings, changes in the first action pendency rates, and changes in fee rates. In a year where increased fees associated with the unearned patent and trademark application filings are not a factor, such as with FY 2007, the percentage change in deferred revenue is consistent with the percentage change in the first action pendency months. In a year where increased fees associated with the unearned patent and trademark application filings are a factor, such as with FY 2005, FY 2006, FY 2008, and again in FY 2009, the percentage change in first action pendency months was less than the percentage change in deferred revenue.

The below table depicts the annual changes in the filings and pendencies during each of the past five years.

Filings and Pendencies
Filings and Pendencies FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Patent Filings 409,532 445,613 468,330 496,886 485,500Read Footnote 11
Percentage Change in Patent Filings    8.1%    8.8%    5.1%    6.1%  (2.3)%
Patent First Action Pendency (months)    21.1    22.6    25.3    25.6    25.8
Percentage Change in Patent First Action Pendency    4.5%    7.1%   11.9%    1.2%    0.8%
Total Patent Pendency (months)    29.1    31.1    31.9    32.2    34.6
Percentage Change in Total Patent Pendency    5.4%    6.9%    2.6%    0.9%    7.5%
Trademark Filings 323,501 354,775 394,368 401,392 352,051
Percentage Change in Trademark Filings    8.4%    9.7%   11.2%   1.8% (12.3)%
Trademark First Action Pendency (months)     6.3     4.8     2.9     3.0     2.7
Percentage Change in Trademark First Action Pendency  (4.5)% (23.8)% (39.6)%    3.4% (10.0)%
Total Trademark Pendency (months)    19.6    18.0    15.1    13.9    13.5
Percentage Change in Total Trademark Pendency    0.5%  (8.2)% (16.1)%  (7.9)%  (2.9)%

Note 1: Preliminary data. (back to text)

Deferred revenue associated with the patent process is expected to further decrease. In the FY 2010 President’s Budget, the number of patent applications filed from FY 2010 through FY 2014 is expected to gradually increase, with first action pendency decreasing to 21.3 months by FY 2014 and total pendency at 33.8 months by FY 2014. The pendency decreases will result in patent deferred revenue decreases.

The deferred revenue associated with the trademark process continued to decrease in FY 2009. Trademark unearned fees decreased by $11.4 million, or 16.5 percent, from FY 2008, with a total 33.3 percent decrease over the past four years. This was consistent with trademark first action pendency decreasing to 2.7 months and total trademark pendency decreasing to 13.5 months, combined with the decrease in trademark applications. Estimates included in the FY 2010 President’s Budget project the pendencies to remain constant in the upcoming years.

USPTO Net Position
(Dollars in Millions)
  FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
Net Position  $417.8 $498.0 $464.0 $432.6  $375.8
Percentage Change in Net Position (10.9)%  19.2% (6.8)% (6.8)% (13.1)%

The Statement of Changes in Net Position presents the changes in the financial position of the USPTO due to results of operations and unexpended appropriations. The movement in net position is the result of the net income or net cost for the year. The annual change in the net position for each of the past five years is presented in the above table.

The decrease in net position from $432.6 million at the end of FY 2008 to $375.8 million at the end of FY 2009, or 13.1 percent, is attributable largely to the results of operations.

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