Fees Are Not Always Commensurate With the Costs of Services
RCED-97-113, May 9, 1997
Pursuant to a congressional request, GAO reviewed issues related to intellectual property fees charged by the Patent and Trademark Office (PTO) and the Copyright Office, focusing on: (1) how fees are set for the services provided by the federal agencies; (2) the extent to which intellectual property fees are recovering the costs of the services provided; (3) whether different users of the same services pay different fees; (4) whether patent fees encourage or discourage the completeness and accuracy of applications; and (5) the potential effects of increasing copyright fees.
GAO noted that: (1) patent fees, like trademark and copyright fees, are set primarily by statute; (2) overall, patent fees recover the costs of the patent process within PTO and, by law, can be adjusted annually for inflation; (3) despite this self-sufficiency overall, fees for individual services are not necessarily commensurate with the costs of those services because the largest fees are paid at the back end of the patent process, while PTO incurs most of its costs at the front end, and different categories of applicants pay different fees for the same service; (4) generally, successful applicants and large entities tend to pay more than unsuccessful applicants and small entities for the same services; (5) because fees do not differ on the basis of the complexity of the invention and because fees do little to discourage the submission of inaccurate and incomplete applications, applicants with complicated inventions and applicants who create delays in the process may not pay fees sufficient to recover the additional costs they create; (6) trademark fees also recover the overall costs of the trademark process and can be adjusted annually for inflation; (7) trademark fees are smaller and fewer in number than patent fees; (8) fees and costs tend to be more closely aligned in the trademark process because most income is received prior to the examination of the application; (9) there are no differences in trademark fees based on the size of the entity applying, no significant differences in the costs for different types of trademark applications, and fewer costs and delays caused by inaccurate and incomplete applications; (10) copyright fees are the smallest and simplest of all the federal intellectual property fees; (11) most applicants pay only an up-front, one-time registration fee, with no differences based on entity size, the accuracy or completeness of the application, or the type of copyright being registered; (12) copyright fees do not recover costs and, as a result, the Copyright Office receives about $10 million a year in appropriations; (13) copyright fees have not been increased since fiscal year (FY) 1991 because the Copyright Office chose not to raise fees to adjust for inflation in FY 1995; (14) the Copyright Office has supported fee increases in the past and supports legislative proposals that would give the Register of Copyrights the authority to raise fees to recover costs; and (15) Copyright Office officials do not believe that the Copyright Office should be fully self-sustaining through fees because it performs other functions that the officials believe are more appropriately funded through appropriations.
- Review Pending
- Closed - implemented
- Closed - not implemented
Recommendation for Executive Action
Recommendation: To reduce the deterioration of fees by inflation, the Register of Copyrights should raise fees to account for inflation as provided by law, when given the opportunity to do so.
Agency Affected: Library of Congress: Copyright Office
Status: Closed - Implemented
Comments: The Copyright Office has been responsive to the recommendations made.
Matters for Congressional Consideration
Matter: To reduce the costs of the copyright process, the Congress may wish to consider making the storage requirements for unpublished copyrighted works the same as those for published works.
Status: Closed - Not Implemented
Comments: In July 2001, GAO discussed this issue again with an official from the Copyright Office. This official said that legislation would have to be enacted by Congress to change the storage requirement for unpublished works, and that because the Copyright Office has recently increased the amount of storage space it has available for unpublished works, it was highly unlikely storage requirements for unpublished copyrighted works would be made the same as those for published works.
Matter: The Congress may wish to consider setting copyright fees that are more closely aligned with the services for which they are assessed.
Status: Closed - Implemented
Comments: In late 1997, the Congress passed legislation (P.L. 105-80) to provide the Copyright Office the authority to increase fees to recover the reasonable costs of its services. Effective July 1, 1998, the Copyright Office increased the fees it charges for special services based on the actual costs of providing such services. The Copyright Office also initiated some new fees for special services. Effective July 1, 1999, the Copyright Office increased fees for basic registration and other services. The new fees will result in revenue increases of about $1.1 million for fiscal year 1999, and about $4.5 million for fiscal year 2000 and beyond. Although the new fees in total will probably not be enough to recover full costs, they should recover the vast majority, and the Copyright Office will be in a position to make further adjustments, if necessary.
Matter: To promote greater consistency in the government's approach to assessing intellectual property fees and to eliminate the need for appropriated funds in the copyright process, the Congress may wish to consider requiring that the Copyright Office achieve full cost recovery through fees.
Status: Closed - Implemented
Comments: In P.L. 105-80, dated November 13, 1997, the Congress authorized the Copyright Office to increase copyright fees to a level sufficient to cover costs.
Matter: In considering proposals affecting PTO's funding and organizational status, the Congress may wish to consider whether the current patent fee structure needs to be changed so that fees for particular services more nearly reflect the costs of those services. Specifically, the Congress may wish to consider whether: (1) the fee differential between large and small entities should be continued; (2) a larger portion of fees should be tied to the examination process itself; (3) larger fees should be paid for those applications that require more examination time; and (4) applicants who create delays in the examination process should pay for the costs of these delays.
Status: Closed - Implemented
Comments: In November 1999, Congress enacted legislation that required the U.S. Patent and Trademark Office (USPTO) to conduct a study of alternative fee structures that would encourage participation by the U.S. inventor community. A potential study outcome may be restructuring patent fees to more closely align them with the costs of services. In June 2002, partly in response to the 1999 requirement, USPTO and the administration issued a proposal for restructured patent fees that would continue to have fees primarily assessed for filing and examination of an application, granting a patent, and maintaining patent rights. The proposal supports practices to reduce the office's burden or allow greater participation by financially disadvantaged inventors (discounts) and deters practices that increase the office's burden or disadvantage the public (surcharges). The result of these fee changes will more closely align applicant payments and office revenues with actual costs, reduce incentives for applicants to pursue wasteful examination, and encourage applicants to be more concise and focused throughout the examination process. This should make more funding available to meet changes in patent demand and improve the quality of examination. On July 25, 2003 the House Judiciary Committee reported H.R. 1561 to the full house. The bill substantially responds to our suggestions to more closely align fees to costs. Specifically it eliminates fee differentials between large and small entities, establishes fees specifically for search and examination services, and allows higher fees for applications of greater length In March 2004 the bill passed the House. In April 2004 the Senate Judiciary Committee reported the bill favorably and it was placed on the Legislative Calendar. On December 8, 2004, the President signed the Consolidated Appropriations Act (H.R. 4818) into law. The act, among other things, revised the schedule of fees that the PTO charges for patent applications. The PTO fee changes reflect provisions that were extracted from the PTO's Fee Modernization Act (H.R. 1561).