USPTO budget and finances are stable but limited

The USPTO’s Budget includes two distinct programs: the Patent Program and the Trademark Program. The agency receives fee collections for incoming patent and trademark work to finance patent and trademark operations, respectively. As a fully fee-funded agency, the USPTO relies on a comprehensive, multiyear budgetary outlook. Long-term planning estimates facilitate effective resource planning and inform fee setting over the five-year budget horizon. The five-year forecast summary reflects the USPTO’s point-in-time planning assumptions and budget priorities. The five-year estimates contain inherent uncertainty because future economic conditions upon which the USPTO bases fee collections and spending requirements are unknown. The USPTO routinely updates its fee collection forecasts, tracks operational and financial performance, and monitors changes in the economy to mitigate this risk of uncertainty. Appendix IV provides a detailed description of how the USPTO develops workload and fee collection estimates for the two programs. The USPTO has two [operating reserves] ORs: patent and trademark. The agency maintains OR balances to mitigate financial and operational risk (see the OR description in Appendix IV). The ORs contain[ing] unspent prior-year fee collections that, once apportioned by the Office of Management and Budget (OMB), are immediately available for use. The USPTO uses all available funding sources (i.e., appropriated fee collections and ORs) to finance agency operations continuously. The ORs supplement annual collections when annual spending requirements exceed revenue, help the USPTO manage cash flow when normal seasonal variability causes spending to exceed fee collections periodically, and provide funding for unplanned requirements necessary for the USPTO’s continued operations. The ORs are not distinct accounts or segregated fund balances. The USPTO manages the ORs within a range of acceptable balances (between minimum and optimal targets) and assesses its options when balances fall either below or above that range. Annually, the USPTO evaluates OR forecasts, including cash flow and any planned use of OR funds, as part of the budget formulation process and in accordance with the USPTO’s OR policy. The USPTO compares the forecasted OR balances to the operating range for both ORs. Minimum planning targets are intended to address immediate, unplanned changes in the economic or operating environments as the reserve builds to the optimal target level. The USPTO reviews minimum and optimal planning targets every three years to ensure the reserve operating range (between minimum and optimal targets) mitigates the severity of an array of financial risks. Based on the current risk environment, including various risk factors such as economic and funding uncertainty and the high percentage of fixed costs, the USPTO established a minimum planning level of 8% of total spending (or one month of operating expenses) and an optimal, long-range planning target of 22% (or about three months of operating expenses) for the Patent Program as well as a minimum planning level of 23% of total spending (or about three months of operating expenses) and an optimal, long-range planning target of 50% (or six months of operating expenses) for the Trademark Program. Annual OR balances do not include USPTO deposits in the Patent and Trademark Fee Reserve Fund (PTFRF), which is a separate account. When actual fee collections exceed amounts authorized in annual appropriations in any given year, the USPTO deposits the excess in the PTFRF. The USPTO cannot use PTFRF deposits immediately; thus, PTFRF balances do not mitigate short-term operational financing risks. The agency must notify Congress, using the congressional reprogramming process, before it may use PTFRF deposits to finance USPTO operations. Long-Term Planning As mentioned in the Executive Summary, the UAIA was enacted on December 29, 2022. The USPTO has identified the resources and budgetary requirements needed to satisfy UAIA provisions. The agency plans to continue refining costs associated with the UAIA in future budgets. Significant provisions of the UAIA include: • Establishment of satellite (regional) and community outreach offices: The law directs the USPTO to establish a Southeast Regional Office by December 2025 and to complete a study by December 2024 to determine whether additional satellite offices are necessary. In addition, it directs the USPTO to establish no fewer than four community outreach offices throughout the United States by December 2027. It also requires the agency to partner with local organizations to create programs that provide education on the patent system, promote career benefits of entrepreneurship and innovation, and educate prospective inventors in underrepresented populations and locations. • Updates to the Patent Pro Bono Program: the law directs the USPTO to increase efforts to enhance the Patent Pro Bono Program, including completing a study by December 2023 and submitting the results to the Committee on the Judiciary of the House of Representatives. • Pre-prosecution assessment pilot program: The law directs the USPTO to establish a pilot program to assist first-time prospective patent applicants in assessing the strengths and weaknesses of a potential patent application by December 2023. • Fee reductions for small and micro entities: The law increased small entity discounts from 50% to 60% and micro entity discounts from 75% to 80% on December 29, 2022. It also directs the agency to perform a fee study by December 2024 and to submit the results to the Committee of the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives. Cost Containment and Savings The USPTO is committed to fiscal responsibility. The agency makes prudent decisions to align spending priorities with fee collection projections to meet workload requirements and maintain sufficient OR levels. This Budget builds on $40 million in real estate savings assumed in the FY 2024 PB and beginning in FY 2025 to include an additional annual cost savings of $12 million through more leased space reductions in Northern Virginia. The combined reduction in campus space amounts to estimated annual cost savings of approximately $52 million. Further, despite upward pressure from inflation, supply chain disruptions, and government-wide pay raises, along with a steady appetite for IT improvements that offer business value to fee-paying customers, the USPTO will continue to achieve IT cost containment goals via systems and equipment modernization over the budget horizon. Patents Five-Year Outlook The USPTO continues to focus on producing accurate and consistent results in patent search and examination while improving timeliness. Ensuring the reliability of issued patents so stakeholders have confidence in patent grants requires the USPTO to invest time, training, and other resources, as supported by the Budget. In the FY 2025 Budget, the USPTO projects a 1.5% growth annually for serialized (original) filings—the largest component of the overall application growth rate—for FY 2024 and FY 2025 and a 1.0% growth each year between FY 2026 and FY 2029. Given current filing trends and other economic behavior assumptions, the USPTO plans to hire approximately 800 to 850 patent examiners in FY 2024 through FY 2025, and between 700 and 900 patent examiners in FY 2026 through FY 2029, as demonstrated in figure 1(a). As seen in figure 1(b), the USPTO projects an overall annual growth rate of 2.1% in UPR application filings in FY 2025. The agency calculates all patent spending and fee estimates based on these assumptions. The UPR annual growth rate differs from the serialized growth rate in that it also includes request for continued examination (RCE) filings. RCE filings comprise approximately 24% of disposal filings annually. The USPTO continues to engage in various initiatives designed to reduce RCE filings, which would ultimately reduce the total UPR filing growth rate.

New efforts to reduce backlog now

Department of Commerce, March 2024. United States Department of Commerce, United States Patent and Trademark Office “United States Patent and Trademark Office Fiscal Year 2025 Congressional Submission” ///MSU///QLC///

Budget Highlights The USPTO’s FY 2025 estimated spending is $4,569 million. This figure is a $122 million net increase from the agency’s FY 2024 estimated spending of $4,447 million. The net increase includes a $224 million upward adjustment for prescribed inflation and other adjustments to base, and a $102 million downward adjustment in program spending and other realized efficiencies. This aggregate spending level allows for the USPTO to hire 850 patent examiners (approximately 360 over estimated attrition levels) and 80 trademark examining attorneys (approximately 50 over estimated attrition levels), as well as implement sufficient production support capabilities to match the agency’s examination capacity with its expected workload. Furthermore, the Budget funds additional examination capacity to improve patent reliability, maintain patent term adjustment (PTA) compliance rates, maintain trademark quality, and improve trademark processing times to match demand and reduce the backlog of unexamined inventory (resulting from unprecedented demand during 2021). Additionally, the Budget supports the following major USPTO strategic initiatives: the Council for Inclusive Innovation (CI 2); emerging technologies like artificial intelligence (AI); the Women’s Entrepreneurship (WE) initiative; military community-focused entrepreneurship resources; the White House Cancer Moonshot initiative; enhanced collaboration between the USPTO and the U.S. Food and Drug Administration (FDA); support for international cooperation on IP rights to advance global competitiveness and improve enforcement, capacity building, and legislative reform; engagement with domestic and global partners to incentivize, protect, and commercialize green tech, climate-related innovation, and sustainability; and the provision of equal opportunity for people of all backgrounds to become innovators through inclusive innovation. The Budget builds on the $40 million in real estate savings assumed in the FY 2024 President’s Budget (PB), to include additional annual cost savings of $12 million through leased space reductions in Northern Virginia. The combined reduction in campus space amounts to estimated annual cost savings of approximately $52 million.