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Performance and Accountability Report Fiscal Year 2007
Management's Discussion and Analysis

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

Statement of Net Cost

The Statement of Net Cost presents the USPTO’s results of operations by the following responsibility segments – Patent, Trademark, and Intellectual Property Protection. The following table presents the total USPTO’s results of operations for the past four fiscal years. From FY 2004 through FY 2005, the USPTO’s operations resulted in a net cost. In FY 2006, the USPTO generated a net income due to the increased maintenance fees received and revenue recognition of previously deferred revenue collected subsequent to the fee increase on December 8, 2004. During FY 2007, the USPTO’s operations resulted in a net cost of $33.9 million.

Net (Cost)/Income (Dollars in Millions)
  FY 2004 FY 2005 FY 2006 FY 2007
Earned Revenue $ 1,239.0  $ 1,372.8  $ 1,594.4  $ 1,735.7 
Program Cost  (1,289.2)
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Net (Cost)/Income $   (50.2)
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$    (51.2) 
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$    80.2 
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$   (33.9)
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The Statement of Net Cost compares fees earned to costs incurred during a specific period of time. It is not necessarily an indicator of net income or net cost over the life of a patent or trademark. Net income or net cost for the fiscal year is dependent upon the groups of work that have been completed over the various phases of the production life cycle. The net income calculation is based on fees earned during the fiscal year being reported, regardless of when those fees were collected. Maintenance fees also play a large part in whether a total net income or net cost is recognized. Maintenance fees collected in FY 2007 are a reflection of patent issue levels 3.5, 7.5, and 11.5 years ago, rather than a reflection of patents issued in FY 2007. Therefore, maintenance fees can have a significant impact on matching costs and revenue.

While the backlog for patent applications continues to increase, increasing deferred revenue and decreasing earned revenue, during FY 2007, the Patent organization disposed of 8.9 percent more applications than were disposed of during FY 2006.

During FY 2007, even though the number of trademark applications increased 11.2 percent over the prior year, the Trademark organization was able to continue to reduce their backlog and register 2.9 percent more trademarks over FY 2006. While additional costs were incurred in reducing the backlog, the Trademark organization was able to recognize a significant increase in revenue earned.

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