Financial Highlights

The following presents the USPTO’s FY 2010 financial highlights for budgetary resources and requirements, along with results of operations. Details behind these highlights are included in the discussion of the USPTO’s financial statements beginning with Financial Statements.

Budgetary Resources and Requirements

The USPTO was provided appropriation authority to spend anticipated fee collections in FY 2010 for an amount up to $2,016.0 million. This was less than the amount of total fees collected in FY 2010. When spending authority is less than fee collections, the additional fee collections are temporarily unavailable. During FY 2010, the USPTO collected an additional $52.5 million in fees that were temporarily unavailable for spending.

The table below presents the source of funds made available to the USPTO, and the use of such funds.

During FY 2010, total budgetary resources available for spending was 9.1 percent over the amount available in the preceding year. Of the total amount of the remaining unobligated balance, $100.5 million of the remaining unobligated balance at the end of the fiscal year is derived from Trademark fee collections. The increase in budgetary resources available for use over the past four years is depicted by the graph below.

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In FY 2010, the USPTO was not provided with authority to spend all of its estimated fee collections. At the end of FY 2009, the USPTO’s estimate for FY 2010 fee collections was based on the lower than average fee levels experienced during FY 2009 – resulting in the low amount appropriated to the Agency. As an Agency funded entirely by user fees, this affects our operations significantly. The fees collected would enable the USPTO to increase the number of patent examiners to assist in addressing the growing backlog of patent applications and increasing workloads and to allocate additional resources towards protecting intellectual property in the United States and abroad.

The USPTO was initially appropriated and apportioned up to $1,887.0 million of fee collections. As the fiscal year progressed, it was identified that our fee collections would exceed the anticipated fee collections, as appropriated by Congress. We worked with the Department of Commerce, Office of Management and Budget, and Congress to obtain a supplemental appropriation to spend an additional $129.0 million in actual fee collections. This additional funding is being used for hiring additional examiners, funding full overtime for examiners and support staff, accelerating examination process reengineering, and continuing to contract for PCT searches. Mission-critical information technology projects to increase the effectiveness of every USPTO function will also be accelerated.

Given that the supplemental appropriation was not enacted until August, during the majority of FY 2010, any overtime spending was limited to the Patent organization for producing patents and fees, new hiring was limited, information technology business system improvement projects were limited, and operating services obtained through contracts continued at reduced levels. However, as the economy has begun showing signs of recovering, the Patent and Trademark application filings have also been slowly recovering.

As we return to financial health, we must build a sustainable funding model that provides USPTO fee setting authority so that we are able to manage patent and trademark revenue fluctuations and properly align fees in a timely, fair, and consistent manner. We must collaborate and build relationships with our international counterparts that foster seamless and cost-effective intellectual property rights and that ensure global competitiveness for American innovators and businesses. Only through building these solid partnerships – where we work together to achieve our goals – is the USPTO capable of being successful.

Results of Operations

The USPTO generated a net income of $94.7 million for the year ended September 30, 2010, an increase of $149.5 million over FY 2009 net cost of $54.8 million. This variation is the result of a few factors, explained in more detail in the Statement of Net Cost discussion.

Due to the increase in pendency, the amount of time an application is waiting before a patent is issued or trademark is registered, the USPTO had been recognizing a steadily increasing deferred revenue liability through FY 2008 for fees received prior to the revenue being earned. From FY 2006 through FY 2008, unearned patent fees increased 12.2 percent, with the majority of the increase occurring during FY 2007. The increase during FY 2007 was consistent with the increase in first action pendency of 11.9 percent; however, as a result of increased Patent staffing and increased focus on workload, first action pendency has remained fairly constant since FY 2007, despite overall increases in Patent applications. In FY 2009 and FY 2010, unearned patent fees decreased 4.6 percent and 4.2 percent, respectively. As a result of the process improvements and increased efficiencies, the USPTO was able to make progress in working off the existing inventory, despite an increase in the number of patent filings of 4.7 percent over the prior year. This was evidenced by the Patent organization disposing of 13.6 percent more applications than were disposed of during FY 2009. From FY 2006 through FY 2009, unearned trademark fees decreased 22.8 percent, with the majority of the decrease occurring during FY 2009.