1 GAO-12-514R Patent and Trademark Office

United States Government Accountability Office

Washington, DC 20548

April 25, 2012 

The Honorable Frank R. Wolf

Chairman

Subcommittee on Commerce, Justice, 

 Science, and Related Agencies

Committee on Appropriations

House of Representatives

Subject: Patent and Trademark Office: New User Fee Design Presents Opportunities to 

Build on Transparency and Communication Success

Dear Mr. Chairman:

This report formally transmits the briefing we gave on January 23, 2012 on the U.S. Patent 

and Trademark Office’s (USPTO) user fee design (see enc. I), as well as subsequent 

comments from USPTO (see enc. III). Some updates were made to this briefing after it was 

initially delivered to USPTO officials. This letter presents a summary overview; the slides 

present our work and findings more completely. 

The Leahy-Smith America Invents Act (AIA), enacted in September 2011, significantly 

broadened USPTO’s authority to design and set its user fees.1 Our objective was to analyze 

how aspects of USPTO’s proposed user fee design may address challenges facing USPTO 

and stakeholders. We began this work under the authority of the Comptroller General in the 

context of questions raised over time by USPTO’s appropriations and authorizing 

committees on the USPTO reauthorization debate, including how USPTO’s fee design 

affected both its operations and oversight. Subsequently, you expressed interest in our 

analysis and asked that this work be addressed to you. 

We focused on patent fees and processes, and excluded trademark fees and processes, 

because patent fees represent almost all of USPTO fee collections. Given the authority to 

set or adjust patent fees newly granted to USPTO in the AIA, we assessed how USPTO 

fees are set, used, and reviewed using our Federal User Fees: A Design Guide.

2 We 

reported on issues related to USPTO fee collections in a previous report.3

 

1

Pub. L. No. 112-29.

For more 

information on our objectives, scope, and methodology, see enclosure II. In addition to this 

briefing, USPTO officials requested and received information from us on effective 

stakeholder communication in October 2011.

2

See GAO, Federal User Fees: A Design Guide, GAO-08-386SP (Washington, D.C.: May 29, 2008). 3

See GAO, Budget Issues: Electronic Processing of Non-IRS Collections Has Increased but Better 

Understanding of Cost Structure Is Needed, GAO-10-11 (Washington, D.C.: Nov. 20, 2009).
2 GAO-12-514R Patent and Trademark Office

In summary, to successfully manage AIA implementation, USPTO must consider a number 

of trade-offs as it sets and uses its over 340 fees, as well as maintain an effective fee review 

process. USPTO officials have stated that the agency’s limited fee-setting authority prior to 

the AIA and uncertainty about the extent to which its collections would be available 

contributed to a number of the agency’s operational challenges, such as the current backlog 

of over 640,000 patent applications and patent application processing time of over 30 

months. They said fees that generated over 80 percent of USPTO’s revenues were set in 

statute, limiting the agency’s ability to ensure that total collections kept pace with total costs 

as its workload has grown. USPTO can only use its fee collections to the extent that 

Congress makes them available. In the past, Congress has in some years made available 

less than the total amount collected; there has been significant debate about the status and 

use of these fees collected in excess of amounts appropriated.

The AIA made changes to USPTO’s fee design, including granting the agency the ability to 

set fee rates and changing how any excess collections would be treated. Prior to enactment 

of the AIA, fees collected were deposited into USPTO’s account and were available to the 

extent appropriated. The AIA created a second account; USPTO collections in excess of 

appropriations are to be deposited into the new Patent and Trademark Fee Reserve Fund. 

As before, these excess collections are available to USPTO only to the extent appropriated 

by Congress. However, we believe the establishment of this special account increases 

transparency for the use of these funds because any amounts appropriated, transferred, or 

rescinded from the fund would be clearly visible. 

By law, USPTO patent fees must cover patent costs in the aggregate, but USPTO is not 

required by law to align individual fees and activity costs on a fee-by-fee basis; we found 

that individual USPTO fees and costs are not aligned in many cases. We have previously 

reported that while less precise alignment between fees and costs may result in some 

inequity or inefficiency, there may be policy and administrative reasons for this choice such 

as, for example, holding patent filing fees lower than costs in order to encourage innovation. 

USPTO reported that, not unlike the situation faced by other federal agencies that depend 

on fee revenue, uncertainty about (1) the extent to which requests for services and related 

collections match estimates and (2) the level of collections that would be available to the 

agency annually complicates its ability to execute annual and multi-year plans. To smooth 

the impact of economic downturns on operations and to help mitigate funding uncertainty, 

since fiscal year 2010 USPTO has been reserving a portion of the amount Congress makes 

available annually through appropriations as a designated operating reserve that could be 

carried over for use in future years, as USPTO is generally appropriated no-year funds. 

USPTO is drafting an operating reserve policy on the management of this reserve. This 

practice is consistent with our previous reporting that an operating reserve is important for 

fee-funded programs to match fee collections to average program costs over time and 

because program costs do not necessarily decline with a drop in fee collections. However, it 

will be important that the policy governing the use of this reserve ensures alignment with 

agency goals. USPTO has a robust fee review process in place and stakeholder 

communication regarding AIA-related fee adjustments is under way. However, USPTO has 

not included some information—such as an accounting of program costs and assumptions 

used to project future program costs—in some past examples of communications with 

stakeholders and Congress. We have previously reported that tools for oversight are 

enhanced if the agency clearly reports its methods for setting the fee, including such cost 

information. While stakeholder groups we spoke with were generally satisfied with USPTO’s 
3 GAO-12-514R Patent and Trademark Office

communication approach, some interviewees were not certain that this success would be 

maintained when agency leadership changes. USPTO’s challenge will be to establish 

guidance and protocols to help ensure consistency over time and through subsequent 

leadership transitions. In our briefing, we make a number of recommendations to strengthen 

transparency and communication during the implementation of the AIA reforms, including 

finalizing a policy for USPTO’s operating reserve; providing program costs, fee-setting 

methods, and the rationale for policy choices in communications with Congress and 

stakeholders; and establishing protocols for communication with stakeholders.

We provided a draft of this product for comment to the Secretary of Commerce. We received 

written comments from the Department of Commerce (Commerce) which are summarized 

below, and reprinted in enclosure III. USPTO provided technical comments that we 

incorporated as appropriate. We also provided portions of the report to nonfederal 

stakeholders for their review and made technical corrections as appropriate.

In its comments, Commerce concurred with our recommendations and provided target 

completion dates for each recommendation. Commerce stated that USPTO is in the process 

of finalizing the operating reserve policy. In addition, Commerce stated that Commerce and 

USPTO “published a high-level overview of the accounting of both historical and prospective 

program costs, fee-setting methodology, and rationale in the information provided to the 

public in support of the initial fee proposal on February 7, 2012” and will provide additional 

details in these areas in the notice of proposed rulemaking.

____________________

We are sending copies of this report to the Secretary of Commerce, the Under Secretary of 

Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office 

and interested Congressional committees. In addition, the report is available at no charge on 

the GAO website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me at (202) 512-

6806 or irvings@gao.gov. Contact points for our Offices of Congressional Relations and 

Public Affairs may be found on the last page of this report. GAO staff who made key 

contributions to this report are listed in enclosure IV.

Sincerely yours,

Susan J. Irving

Director for Federal Budget Analysis

Strategic Issues 

Enclosures – 4 
4 GAO-12-514R Patent and Trademark Office

Enclosure I: Briefing Slides

U.S. Patent and 

Trademark Office

User Fee Review

For more information, contact Susan J. Irving on (202) 512-6806 or irvings@gao.gov. Page 1
5 GAO-12-514R Patent and Trademark Office

 

Objectives, Scope, and Methodology

• In order to evaluate the U.S. Patent and Trademark Office’s (USPTO) user fee 

design in a way that timely informs USPTO’s implementation of its new feesetting authority, we analyzed how aspects of USPTO’s proposed user fee 

design may address challenges facing USPTO and its stakeholders.

• To do this, we reviewed documentation from USPTO and interviewed cognizant 

officials from USPTO and the Department of Commerce’s Office of the 

Inspector General. We also interviewed five groups that represent USPTO 

stakeholders (in this briefing we refer to these associations as stakeholder 

groups):

• Patent Public Advisory Committee (PPAC), 

• Intellectual Property Owners Association (IPO), 

• American Intellectual Property Law Association,

• National Association of Manufacturers, and

• Association of American Universities (AAU).

Page 2
6 GAO-12-514R Patent and Trademark Office

 

Objectives, Scope, and Methodology 

(cont’d)

• This review focuses on patent fees and processes, excluding trademark fees and 

processes, because fees for patent-related processes represent almost all of USPTO 

fee collections. For these fees, we assessed how USPTO fees are set, used, and 

reviewed. We reported on issues related to USPTO fee collections in GAO-10-11.1

• We conducted this performance audit from June 2011 to April 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we 

plan and perform the audit to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

1See GAO, Budget Issues: Electronic Processing of Non-IRS Collections Has Increased but Better Understanding of Cost Structure 

Is Needed, GAO-10-11 (Washington, D.C.: Nov. 20, 2009). Page 3
7 GAO-12-514R Patent and Trademark Office

 

Results in Brief

• We provided portions of this briefing to USPTO officials in January 2012, in the early 

stages of its fee-setting process. In addition to this briefing, in October 2011 USPTO 

officials requested and received information from us on effective stakeholder 

communication. During the course of the engagement, USPTO officials also stated that 

they were familiar with our Federal User Fees: A Design Guide.

2

• The America Invents Act (AIA), enacted in September 2011, made changes to USPTO’s 

user fee design. To successfully manage implementation of the fee-related aspects of 

the AIA, USPTO must consider a number of trade-offs as it sets and uses fees. In 

addition, as USPTO employs a number of new flexibilities, it becomes increasingly 

important that it maintain an effective fee review process. 

• USPTO patent fees must cover patent costs in aggregate, but USPTO is not required by 

law to align its more than 340 patent and trademark fees with costs on a fee-by-fee 

basis. In many cases individual USPTO fees are not closely aligned with activity costs. 

We have previously reported that while less precise alignment between fees and costs 

may result in some inequity or inefficiency, there may be policy and administrative 

reasons for making this choice. For example, USPTO has set patent filing fees lower 

than costs in order to encourage innovation. 

2See GAO, Federal User Fees: A Design Guide, GAO-08-386SP (Washington, D.C.: May 29, 2008). Page 4
8 GAO-12-514R Patent and Trademark Office

 

Results in Brief (cont’d)

• USPTO reported that, not unlike the situation faced by other federal agencies that 

depend on fee revenue, uncertainty about (1) the extent to which requests for services 

and related collections match estimates and (2) the level of collections that would be 

available each year complicates its ability to execute annual and multi-year plans. To 

mitigate these uncertainties, since fiscal year 2010 USPTO has been reserving a portion 

of the amount Congress makes available annually through appropriations as a 

designated operating reserve, which could be carried over for use in future years, as 

USPTO is generally appropriated no-year funds. We have previously reported that an 

operating reserve is important for fee-funded programs to match fee collections to 

average program costs over time and because program costs do not necessarily decline 

with a drop in fee collections. 

Page 5
9 GAO-12-514R Patent and Trademark Office

 

• USPTO has a robust fee review process in place and stakeholder communication 

regarding AIA-related fee adjustments is under way. 

• The agency submits biennial fee reviews, publishes fee and forecasting information 

in its annual budget submission and performs internal analysis of fees and related 

activity costs. 

• USPTO has not included some information—such as an accounting of program 

costs and assumptions used to project future program costs—in some 

communications with stakeholders and Congress. 

• We have previously reported that tools for oversight are enhanced if the agency 

clearly reports its methods for setting the fee, including an accounting of program 

costs and the assumptions it uses to project future program costs. 

• USPTO is conducting outreach to stakeholders on upcoming fee changes. While 

stakeholder groups we spoke with were generally satisfied with USPTO’s 

communication approach, some interviewees were not certain that this success would 

continue when agency leadership changes.

Results in Brief (cont’d)

Page 6
10 GAO-12-514R Patent and Trademark Office

 

Background: USPTO Funding Model

• Fully fee funded since 1990

• Over 340 patent and trademark fees of different types

• Patent fees generate approximately 90 percent of revenues; trademark fees generate 

the remaining 10 percent

• Fees are collected for USPTO products and services at different points in the patent 

process 

Source: USPTO

• By law, patent fee collections are required to cover patent costs in the aggregate, and 

trademark fees cover trademark costs in aggregate; however, fees are not required to 

align with costs on a fee-by-fee basis. 

Page 7

Filing Publication Search and exam Issue Maintenance

Application filings 

(filing, search, 

examination, excess 

claims, size fees)

Responses during 

prosecution 

(extension of time, 

appeal fees)

Fees after 

examination 

(issue and 

publication fees)

Maintaining 

exclusive rights 

(maintenance 

fees)
11 GAO-12-514R Patent and Trademark Office

 

Background: Fee Design Prior to the LeahySmith America Invents Act 

• USPTO officials stated that prior to the passage of the AIA, limited fee-setting authority 

and uncertainty about the extent to which its collections would be available contributed 

to USPTO’s challenges. Specifically, they said the following:

• Fees that generated over 80 percent of USPTO’s revenues were set in statute, 

limiting the agency’s ability to adjust fees and therefore more closely match costs to 

collections each year. Fees generating the remaining revenue could be set through 

the regulatory process. 

• USPTO can only use collections to the extent that Congress makes them available. 

In some years, collections have exceeded both USPTO’s estimates and the 

amount made available by Congress. In other years, collections have been less 

than the amount made available. In years when USPTO has collected more than 

the appropriated amounts, these excess amounts remained unavailable to USPTO. 

At the same time, USPTO’s workload has grown.

• Uncertainty about future access complicated multi-year planning.

• These factors significantly impaired USPTO’s ability both to hire examiners to keep 

up with USPTO’s workload and to invest in needed information technology systems 

to modernize USPTO. There is a backlog of over 640,000 patent applications, and 

patent application processing time is running over 30 months.

Page 8
12 GAO-12-514R Patent and Trademark Office

 

Background: Leahy-Smith America Invents Act 

(P.L. 112-29, Enacted September 16, 2011)

The AIA:

• Granted USPTO authority to set all of its fee rates through regulation;3

• Requires the relevant public advisory committee—that is, PPAC or the Trademark 

Public Advisory Committee—to to hold a public hearing within 30 days of receiving a 

new fee proposal from USPTO; 

• Established a temporary 15 percent surcharge on USPTO’s current fees that will remain 

in effect until fees are set for the first time under USPTO’s new authority;

• Created a special account called the Patent and Trademark Fee Reserve Fund. Any 

USPTO collections in excess of the amounts annually appropriated by Congress are 

deposited into this account. As before, these excess collections are available to USPTO 

to the extent appropriated by Congress. However, we believe this special account 

increases transparency about the use of these funds because any amounts 

appropriated, transferred, or rescinded from the fund would be clearly visible – an issue 

about which there has been significant debate in the past.

• Required USPTO to establish significantly reduced fee rates for micro entities.4

Page 9

3However, the statutory framework continues to impose other requirements related to fees, for example, maintenance fees must be paid 

at particular points in time.

4Micro entities are defined as small entities that are not named as an inventor on more than four previous applications and had a gross

income less than three times the median household income in the preceding calendar year.
13 GAO-12-514R Patent and Trademark Office

 

Background: Key Factors to Consider When 

Designing User Fees

• In 2008, we published a design guide with criteria and key questions to consider when 

designing user fees.5 Examples include:

1. Setting fees: How will program costs be determined and assigned?

2. Collecting fees: At what point should the fees be collected? What mechanisms are 

available to ensure payment/compliance?

3. Using fees: Is agency access to fees subject to Congressional appropriation? To 

what extent is agency access to fee collections limited? 

4. Reviewing fees: How frequently will fees be reviewed and updated? What 

information is included in the review? What role do stakeholders play in fee 

reviews?

• USPTO officials stated that they were familiar with our User Fee Design Guide.

5For a complete list of criteria, see GAO-08-386SP. Page 10
14 GAO-12-514R Patent and Trademark Office

 

USPTO Must Consider Design Trade-offs When 

Setting, Using, and Reviewing Its Fees 

• Through the AIA, Congress granted USPTO the ability to set all of its fee rates 

and created a new account structure for fees collected in excess of amounts 

appropriated. 

• However, as we will discuss, to successfully manage the AIA implementation, 

USPTO must consider a number of design trade-offs as it determines the rates 

at which to set its fees and the manner in which fee collections will be used. 

• In addition, as USPTO employs its new flexibilities, it will become increasingly 

important that it continues to build on and improve an already-robust fee review

process to ensure that total collections and costs remain aligned over time. 

Page 11
15 GAO-12-514R Patent and Trademark Office

 

Setting Fees: Aligning Fees with Costs

• USPTO collects historical program cost information at the activity level using an activity 

based information cost-accounting system.

• Current fees are set at what the agency described as reasonable rates to encourage 

innovation. As part of this strategy, fee rates for activities at the beginning of the patent 

process are lower than actual historical costs to encourage people to file patent 

applications. To bridge the resulting cost-collections gap, USPTO charges fees that are 

higher than the costs of activities that occur later in the patent process. As such, fees 

charged later in the patent process subsidize the costs of activities that occur earlier in 

the patent process. 

• We found that as of fiscal year 2010, the majority of USPTO’s individual patent fees and 

costs for which we had data were misaligned by more than 50 percent.

• In February 2012, USPTO proposed some targeted adjustments to fees where the gap 

between cost and current fee rate is greatest.

Page 12
16 GAO-12-514R Patent and Trademark Office

 

Setting Fees: Aligning Fees with Costs

(cont’d.)

• We previously reported that aligning fees closely with activity costs promotes 

equity and economic efficiency.6

• Disconnect between fees and costs

• can lead to overuse of more expensive services, because fee 

payers do not bear the full cost of the service, and 

• results in some fee payers subsidizing others.

• However, there may be policy or administrative reasons for less precise 

alignment.

• Some stakeholder groups we interviewed report mixed opinions on setting fee 

rates that are not precisely aligned with costs, especially in light of USPTO’s 

new fee setting authority.

6GAO-08-386SP. Page 13
17 GAO-12-514R Patent and Trademark Office

 

Setting Fees: Charging Some Users Less than 

Their Full Cost

• The AIA requires USPTO to establish significantly reduced fee rates for small 

and micro entities. 

• We have previously reported that charging some users less than their full cost 

to promote certain policy goals may provide one kind of equity while raising 

other equity and efficiency concerns.7

• Charging users less than their full cost can promote equity by factoring in 

the filer’s ability to pay.

• However, the practice also

• creates cross-subsidies and

• can increase administrative costs because the agency must track 

eligibility and application of the reduced rates.

• Some stakeholder groups’ opinions on this practice parallel the constituencies 

they represent. Specifically:

• IPO is concerned about the 75 percent micro entity discount, because it 

results in larger entities subsidizing smaller entities and

• AAU strongly supports the micro entity discount.

7GAO-08-386SP. Page 14
18 GAO-12-514R Patent and Trademark Office

 

Setting Fees: Fee Adjustments

• The AIA established the potential for future fee adjustments by granting USPTO feesetting authority. We have reported that substantial changes in fees could have 

unintended consequences.

• For example, significant fee increases can result in an anticipatory surge in 

applications that could exacerbate workload issues8 and encourage applicants to 

seek patents elsewhere. USPTO recently experienced a version of this. Specifically, 

• As previously mentioned, the AIA established a 15 percent surcharge that went 

into effect just prior to the beginning of fiscal year 2012.

• As users anticipated the impending surcharge, USPTO received a spike in 

payments near the end of fiscal year 2011, resulting in $130 million in fees 

collected in excess of appropriations.

• We have also reported that transitional measures—such as phasing in increases—

can help mitigate these consequences.9 However, this may affect operations by 

delaying expected revenue.

• In addition, we have reported that, moving forward, more frequent fee reviews can 

result in smaller fee increases.

8For one example, see GAO, Federal User Fees: Additional Analyses and Timely Reviews Could Improve Immigration and 

Naturalization User Fee Design and USCIS Operations, GAO-09-180 (Washington, D.C., Jan. 23, 2009). 9GAO-08-386SP.

Page 15
19 GAO-12-514R Patent and Trademark Office

 

Using Fees: Access to Collections

• Annual fee collections vary from year to year and are available to USPTO only to the 

extent appropriated by Congress. USPTO reports that, not unlike the situation faced by 

other federal agencies that depend on fee revenue, uncertainty about (1) the extent to 

which requests for services and related collections match estimates and (2) the level of 

collections that would be available each year complicates its ability to execute annual 

and multi-year plans. 

• To smooth the impact of economic downturns on operations and help address 

funding uncertainty, since fiscal year 2010 USPTO has been reserving a portion of 

the amount Congress makes available annually through appropriations as a 

designated operating reserve that could be carried over for use in future years, as 

USPTO is generally appropriated no-year funds. 

• As of March 2012, USPTO has published information on the management of its 

operating reserve, including rationale, purpose, expected level of reserves, and 

reporting. The agency is drafting a final operating reserve policy.

• We have previously reported that a reserve is important for fee-funded programs to 

match fee collections to average program costs over time and because program costs 

do not necessarily decline if fee collections drop.10 

10GAO-08-386SP. Page 16
20 GAO-12-514R Patent and Trademark Office

 

Using Fees: Access to Collections

(cont’d.) 

• In some years, Congress has made available to USPTO the full amount or more than 

USPTO expected to collect; in other years Congress has made less available. 

• USPTO has in some years collected more than it estimated; in other years, it 

collected less. Since 2000, USPTO estimated that it would collect $19.8 billion and 

has actually collected $18.8 billion.11

• USPTO reports that cumulatively over $1 billion in fees collected since 1991 remain 

unavailable to USPTO without additional Congressional action.12 

• This long-standing issue, including the status and use of these excess collections, 

was central to the patent reform debate. As previously mentioned, any USPTO 

collections in excess of appropriations are to be deposited into the newly established 

Patent and Trademark Fee Reserve Fund. Because any appropriation, transfer or 

rescission from the fund would be clearly visible, we believe the Fund increases 

transparency for these monies.

Page 17

11USPTO reports that fee estimates during this time period included three years of legislative assumptions that did not materialize as expected and 

significantly affected estimated fee collections.

12USPTO reports that this amount includes unavailable fees of $790.1 million and unavailable special receipt funds under the Omnibus Budget 

Reconciliation Act of 1990 of $233.5 million.
21 GAO-12-514R Patent and Trademark Office

 

• The newly established Patent and Trademark Fee Reserve Fund does not ensure 

USPTO’s access to these funds because Congress must act to make the funds 

available. 

• Providing freer access to an agency’s fee collections can increase agency 

flexibility but may increase the need/desire for an oversight structure.13 Congress 

could increase accountability for and oversight of fee collections in various ways. 

For example, it could require more detailed spending plans, hold hearings on 

progress toward expected results, limit the availability or use of the collections in 

annual appropriation acts, limit the amount of funds an agency is permitted to 

carry over from year to year, or take a combination of these actions.

• All of the stakeholder groups we interviewed cited fee access as a key concern.

• Two of the stakeholder groups we spoke with stated that members of the user 

community had expressed a willingness to pay more for better and faster service if 

USPTO were guaranteed access to all of its collections.

13GAO-08-386SP.

Using Fees: Access to Collections

(cont’d.)

Page 18
22 GAO-12-514R Patent and Trademark Office

 

Reviewing Fees: Oversight

• USPTO has a robust fee review process:

• USPTO submits biennial fee reviews to the Department of Commerce that list fees, 

fee rates, review dates, total collections and the number of transactions per fee.

• USPTO publishes fees, actual collections, collection estimates, collection estimate 

assumptions, and a discussion of workload estimates in its annual budget 

submission.

• USPTO reports that it internally performs fee analysis that compares fees to 

historical program costs on a regular basis.

• In a June 18, 2008 notice of proposed rulemaking for fiscal year 2009, USPTO 

proposed changes to three fees. The proposal included information on average 

program costs for the activity in question. 

• However, USPTO did not include projected costs or how the costs were 

calculated; rather, information on how costs were calculated was included in 

the Final Rule. 

• USPTO stated that it followed the fee-setting guidance in GAO’s Federal User 

Fees: A Design Guide when developing its cost methodology and included 

projected costs when it published various notices of proposed rulemaking in 

early 2012.

Page 19
23 GAO-12-514R Patent and Trademark Office

 

Reviewing Fees: Criteria

• We have previously reported the following:14

• Agencies should review fees regularly to provide transparency and ensure that 

fees remain aligned with program costs.

• The risk of agencies that set their own fees artificially inflating their costs may be 

reduced—and tools for Congressional and stakeholder oversight enhanced—if 

an agency clearly reports its methods for setting the fee, including an 

accounting of program costs and the assumptions it uses to project future 

program costs and fee collections.

• When an agency has authority to adjust a fee through the regulatory process, it 

should make substantive information about recent and projected program costs 

and fee collections available to the public through notices in the Federal 

Register.

• Other sources of fee review guidance:

• The Chief Financial Officers Act of 1990 and Office of Management and Budget 

Circular A-25

14GAO-08-386SP. Page 20
24 GAO-12-514R Patent and Trademark Office

 

Reviewing Fees: Stakeholder 

Communication

• Stakeholder communication regarding the AIA-related fee adjustments is under way. 

Stakeholder input on the AIA-related changes has been solicited via e-mail and postal 

mail. 

• Prior to the AIA, USPTO used Federal Register notices to solicit feedback on regulatory 

fee changes.

• When forecasting fee collections, USPTO discusses current and future environment 

assumptions with stakeholders, other nations’ intellectual property offices, intellectual 

property organizations and bulk payment firms.

• The AIA states that USPTO must solicit stakeholder input when setting fees through the 

regulatory process via

• public hearings and

• Federal Register notices.

• USPTO advertised two public fee-setting hearings and seven AIA “road show” events 

nationwide to review patent operations and process changes in February and March 

2012.

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25 GAO-12-514R Patent and Trademark Office

 

Reviewing Fees: Stakeholder 

Communication (cont’d.)

• All stakeholder groups we spoke with were generally satisfied with communication with 

USPTO and expressed confidence in USPTO’s current leadership. However, 

• some interviewees reported less successful communication under previous 

leadership and expressed concern that current success could diminish when 

agency leadership changes. 

• Stakeholder groups we interviewed noted that USPTO uses a combination of the 

following to communicate with stakeholders:

• Webinars

• Meetings

• Newsletters

• Website information

• E-mail

• PPAC members expressed an interest in receiving more written information and data at 

an earlier date prior to meetings with USPTO to better prepare for the meetings, as well 

as more detailed cost information as USPTO’s new fee-setting authority is exercised.

Page 22
26 GAO-12-514R Patent and Trademark Office

 

Reviewing Fees: Stakeholder 

Communication (cont’d.)

• During the course of our review, USPTO officials requested examples of our previous 

work on successful fee reviews. We provided this information in October 2011 in order 

to inform USPTO’s development of its stakeholder communication approach for fees set 

under the AIA.

• We have previously reported the following: 

• Effectively communicating with stakeholders involves sharing relevant analysis and 

information as well as providing opportunities for stakeholder input.15 

• Stakeholder collaboration was most successful in cases where substantive, twoway communication had taken place between the agency and stakeholders.16

• Reliance on the Federal Register is insufficient for obtaining input, especially for 

nonfederal stakeholders.17

• Agencies and nonfederal parties suggested making greater use of diverse 

communication technologies and venues to promote public participation.18

15GAO-08-386SP. 16See GAO, Federal User Fees: Substantive Reviews Needed to Align Port-Related Fees with the Programs They Support, GAO-08-321

(Washington, D.C.: Feb. 22, 2008), and Federal User Fees: Key Aspects of International Air Passenger Inspection Fees Should Be Addressed 

Regardless of Whether Fees Are Consolidated, GAO-07-1131 (Washington, D.C.: Sept. 24, 2007). 17See GAO, Reexamining Regulations: Opportunities Exist to Improve Effectiveness and Transparency of Retrospective Reviews, GAO-07-791 

(Washington, D.C.: July 16, 2007).

18GAO-07-791.

Page 23
27 GAO-12-514R Patent and Trademark Office

 

Conclusions

• Through the AIA, Congress has provided USPTO the opportunity to consider and 

address many aspects of its funding model previously noted as challenges.

• Now that USPTO has new flexibilities in designing its fees, it must consider a number of 

trade-offs to successfully design and implement its fee structure, including

• who pays how much,

• who subsidizes whom,

• whether costs are recovered at the aggregate or activity level and how these 

choices incentivize/decentivize the use of various USPTO services, and 

• whether the expected results align with USPTO’s goals.

• USPTO has taken steps to manage funding uncertainty by setting aside in an operating 

reserve a portion of the amount Congress appropriates to it; USPTO’s challenge is to 

develop controls and policies to ensure its use aligns with agency goals and its balances 

are sufficient to meet possible emergency needs.

• USPTO has a strong stakeholder communication base on which to build in order to 

ensure transparency, encourage two-way communication, and promote acceptance of 

proposed changes, regardless of leadership changes. 

Page 24
28 GAO-12-514R Patent and Trademark Office

 

Recommendations for Executive Action

• To strengthen transparency and communication during the implementation of the AIA 

reforms, we recommend that the Secretary of Commerce direct the Under Secretary of 

Commerce for Intellectual Property and Director of the U.S. Patent and Trademark 

Office to take the following actions:

(1) Finalize an operating reserve policy, including the expected level of reserves, to 

smooth the impact of economic downturns on operations and to ensure its use 

aligns with agency goals.

(2) Build on current communication success to provide stakeholders opportunities for 

substantive, two-way communication when seeking input on the AIA fee-setting 

process. Moving forward, this should include 

• providing an accounting of program costs and the assumptions used to project 

future program costs in biennial fee reviews and 

• clearly communicating its fee-setting methods and rationale for policy choices 

to provide Congress with sufficient information for oversight and transparency 

for stakeholders and the public.

(3) Establish guidance and protocols for communication with PPAC and other 

stakeholders about the fee process in order to help ensure consistency over time 

and through subsequent leadership transitions.

Page 25
29 GAO-12-514R Patent and Trademark Office

 

Page 26

GAO on the Web

Website: http://www.gao.gov/

Contact

Chuck Young, Managing Director, Public Affairs, youngc1@gao.gov

(202) 512-4800, U.S. Government Accountability Office

441 G Street NW, Room 7149, Washington, D.C. 20548

Copyright

This is a work of the U.S. government and is not subject to copyright 

protection in the United States. The published product may be reproduced 

and distributed in its entirety without further permission from GAO. However, 

because this work may contain copyrighted images or other material, 

permission from the copyright holder may be necessary if you wish to 

reproduce this material separately. 
30 GAO-12-514R Patent and Trademark Office

Enclosure II: Objectives, Scope, and Methodology 

We performed our work under the authority of the Comptroller General in the context of 

questions raised over time about how fee design affected both operations and oversight of 

the U.S. Patent and Trademark Office (USPTO) and to inform USPTO’s implementation of 

the fee-setting authority granted by the Leahy-Smith America Invents Act (AIA). Our 

objective was to analyze how aspects of USPTO’s proposed user fee design may address 

challenges facing USPTO and stakeholders. This review focuses on patent fees and 

processes, excluding trademark fees and processes, because patent fees represent almost 

all of USPTO fee collections. We assessed how USPTO fees are set, used, and reviewed 

using criteria outlined in our Federal User Fees: A Design Guide.

1 We reported on issues 

related to USPTO fee collections in a previous report.2

To do this, we reviewed documentation from USPTO and the Department of Commerce’s 

Office of the Inspector General. We reviewed relevant statutes and guidance governing 

USPTO patent fee processes. We also attended a Patent Public Advisory Committee 

(PPAC) public hearing intended to inform users about fee changes during AIA 

implementation. We interviewed cognizant officials from USPTO, the Department of 

Commerce’s Office of the Inspector General, as well as five of USPTO’s internal and 

external stakeholder groups: PPAC, the Intellectual Property Owners Association, the 

American Intellectual Property Law Association, the National Association of Manufacturers, 

and the Association of American Universities. Stakeholder groups were identified either by 

USPTO or our team as relevant stakeholder groups for USPTO. The list of stakeholder 

groups selected was then limited to those with headquarters near Washington, D.C. We 

selected these organizations in order to provide variation in organization type, member type, 

and industry type. 

 

We conducted this performance audit from June 2011 to April 2012 in accordance with 

generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based on 

our audit objectives.

 

1

GAO-08-386SP. 2

GAO-10-11. 
31 GAO-12-514R Patent and Trademark Office

Enclosure III: Comments from the Department of Commerce
32 GAO-12-514R Patent and Trademark Office
33 GAO-12-514R Patent and Trademark Office
34 GAO-12-514R Patent and Trademark Office

Enclosure IV: GAO Contact and Staff Acknowledgments

GAO Contact Susan J. Irving, (202) 512-6806 or irvings@gao.gov

Staff In addition to the contact named above, Jackie Nowicki,

Acknowledgments Assistant Director, and Elizabeth Hosler, Senior Analyst-in-Charge, 

managed all aspects of this assignment. Vida Awumey, Hayley 

Landes, Felicia Lopez, Julia Matta, and Elizabeth Wood made key 

contributions to this report. 

(450934)
This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
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