Pursuant to a congressional request, GAO examined information on alternative approaches to the Patent and Trademark Office (PTO) proposal to restrict the current 50-percent reduction in the patent fees paid by small-entity users in response to a legislative requirement that it recover all of its patent costs through patent user fees.

GAO found that: (1) PTO has proposed to reduce the subsidy to small entities by retaining the 50-percent subsidy for fees associated with filing a patent application, while eliminating the subsidy for fees associated with issuing and maintaining a patent; (2) PTO projects that, in FY 1992 and FY 1993, it will need a total of $778 million in patent fee revenues to support rising patent system costs; (3) PTO projects that revenue under its current fee structure would total $703 million, resulting in a $75-million shortfall which could be provided by increases in small-entity fees; (4) under the required 69-percent surcharge on patent fees, small entities would pay almost the same fees, overall as large entities to obtain and maintain protection for a patent's 17-year life; (5) because independent inventors account for 72 percent of the small-entity applicants, they would be adversely affected by the reduction of the patent fee subsidy and would be less likely to have the resources to pay the higher fees; (6) if the 50-percent subsidy were limited to independent inventors and nonprofit organizations, the fees paid by both large and small entities would be lower than if the current 50-percent subsidy were retained; (7) if the small-entity subsidy were reduced from 50 percent to 25 percent, small entities, which filed about 34 percent of the patent applications in FY 1990, would contribute about 24 percent of patent revenues; and (8) the Navy has been experiencing a greater adverse impact than other federal agencies since higher fees have come at a time when its budget has been reduced.