Program Costs

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Program costs totaled $1,514.2 million for the year ended September 30, 2006, an increase of $90.2 million, or 6.3 percent, over FY 2005 program costs of $1,424.0 million. The USPTO’s most significant program cost is personnel services and benefits, which traditionally comprise over half of USPTO’s total program costs. Any significant change or fluctuation in staffing or pay rate directly impacts the change in total program costs from year to year. Total personnel services and benefits costs for the year ended September 30, 2006, were $883.4 million, an increase of $81.2 million, or 10.1 percent, over FY 2005 personnel services and benefits costs of $802.2 million. This change, 90.0 percent of the total increase in program costs, was a result of a 3.4 percent increase in the Federal pay scale, combined with a net increase of 826 personnel, from 7,363 at the end of FY 2005 to 8,189 at the end of FY 2006.

The USPTO directs maximum resources to the priority functions of patent and trademark examination. For FY 2006, costs directly attributable to the Patent and Trademark business areas represent 81.5 percent of total USPTO costs. The remaining costs, representing support costs, are allocated to the business areas using ABC accounting.

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Patent

Total costs for the Patent business unit increased $261.5 million, 24.3 percent, from FY 2003 through FY 2006. The following table presents the major components of Patent costs for the past four years.

Patent Costs (Dollars in Millions) Component FY 2003 FY 2004 FY 2005 FY 2006 Personnel Costs $  566.3 $  603.6 $  646.5 $  718.3 Contractual Services    125.1    150.4    156.1    184.3 Printing and Reproduction     72.7     71.8     68.9     71.9 Rent, Communications, and Utilities     62.9     76.3     82.6     72.5 Depreciation, Amortization, or Loss on Asset Disposition     36.4     32.5     26.1     24.9 Other     18.8     21.3     25.7     26.7 Direct Costs    882.2    955.9  1,005.9  1,098.6 Allocated Costs    191.9    189.9    247.2    237.0 Total Patent Costs $1,074.1 $1,145.8 $1,253.1 $1,335.6 Percentage Change in Patent Costs     5.1%     6.7%     9.4%     6.6%

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The Patent organization’s most significant program costs relate to personnel services, and account for 58.1 percent of the increase in total cost of Patent operations during the past three years. Patent personnel costs for the year ended September 30, 2006, were $718.3 million, an increase of $71.8 million, or 11.1 percent, over FY 2005 personnel costs of $646.5 million. Of the total USPTO-wide program costs increases during FY 2006, 79.5 percent of the 90.0 percent increase in personnel costs are attributable to the Patent organization. Rent, communications, and utilities, printing and reproduction, and contractual service costs represent 24.6 percent of the Patent program costs for FY 2006. Over the last three years, these costs increased in line with the overall increase in total Patent costs due to additional rental costs for the new USPTO headquarters in Alexandria, increases in the number of patents issued, and increased spending on indexing and scanning documents for the PFW. In addition, while rental costs increased 15.3 percent over the past three years, these costs decreased during FY 2006 by $10.1 million as the move to Alexandria has been completed.

Patent costs were spread over four main patent products: utility patents, design patents, plant patents, and PCT patents. Utility patents were further broken down into the technology of the utility patent. The cost percentages presented below are based on direct and indirect costs allocated to patent operations and are a function of the volume of applications processed in each product area.

Trademark

Total costs for the Trademark business unit increased $46.6 million, 35.3 percent, from FY 2003 through FY 2006. The following table shows the major components of Trademark costs for that period.

Trademark Costs (Dollars in Millions) Component FY 2003 FY 2004 FY 2005 FY 2006 Personnel Costs $ 65.4  $ 72.6 $ 80.0 $ 89.5 Contractual Services 19.9   22.3   23.2   27.1 Printing and Reproduction  2.6    1.2    0.8    0.3 Rent, Communications, and Utilities  7.5    8.9    8.4    8.6 Depreciation, Amortization, or Loss on Asset Disposition  4.5    4.9    6.1    6.1 Other  3.5    4.4    3.7    3.6 Direct Costs 103.4   114.3  122.2  135.2 Allocated Costs 28.6   29.1   48.7   43.4 Total Trademark Costs $132.0   $143.4 $170.9 $178.6 Percentage Change in Trademark Costs   (4.8)%     8.6%    19.2%     4.5%

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The Trademark organization’s most significant program costs relate to personnel services, and account for 51.7 percent of the increase in total cost of Trademark operations during the past three years. Of the total USPTO-wide program costs increases during FY 2006, 10.5 percent of the 90.0 percent increase in personnel costs are attributable to the Trademark organization. Contractual services have increased $7.2 million, which represents 15.5 percent of the increase in total Trademark costs over the past three years, primarily attributable to the increased costs associated with operating in a fully electronic environment.

The Intent to Use cost includes costs related to examining both the application and the additional intent to use disclosures. The overall cost percentages presented below are based on both direct costs and indirect costs allocated to trademark operations and are a function of the volume of applications processed in each product area.

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