Why do We Pay Maintenance Fees?

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Patent maintenance fees continue to increase. However, once the patent has issued, the USPTO does not provide any ongoing services to the patent holders. Therefore patent holders are correct in wondering why they must pay patent maintenance fees and why the fees are increasing. The requirement of maintenance fees has both economic and public policy reasons. First, maintenance fee revenue is used to fund the operations and expenses of the USPTO such as the examination of new patents. Second, maintenance fees allow for the promotion of progress of science and useful arts.

Funding the USPTO

The net cost of the USPTO program in 2014 was $2.73 billion. This was a 7.6% increase from the 2013 program costs. Additionally, the costs for the Patent business of the USPTO have increased 38.5% since 2010.  To combat this growing expense sheet, the USPTO must raise funding.

Maintenance fees are a big part of the USPTO revenue. Maintenance fees accounted for 41.4% of the USPTO’s $3.02 billion revenue in 2014.  The revenue generated from maintenance fees has increased by 49% from 2013 to 2014. This increase was preceded by a 20% increase in maintenance fee revenue from 2012 to 2013.Thanks in large part to the maintenance fees, the USPTO was able to have a net income of $290 million.

It is clear that without the maintenance fees the USPTO would be operating at a loss. The cost of collecting maintenance fees is low, whereas the USPTO is incurring most of their costs in the patent application examination process.

Foster Progress of Science and Useful Arts

This is unequivocally the goal of patent law as stated in the Constitution and maintenance fees have a strong impact in achieving this goal. The underlying public policy of collecting maintenance fees is to make technology available to the public as soon as possible.

Escalating maintenance fees force patent owners to decide if the patent warrants higher future maintenance fees. If a patent holder decides that a patent does not warrant the next maintenance fee, then the patent will be abandoned which frees the patent to the public.  Not only does this allow the public to gain free access to the patented invention but it also prevents patent holders from squatting on a patent to a certain extent. The statistics show that maintenance fees have continued to be a deterrent to squatting on unused patents.

In 2014, 91.8% of patents were renewed at their First Stage. The number of renewed patents dropped to 78.8% for the Second Stage. Furthermore, only 50.7% of patents were renewed at the Third Stage.  The First, Second, and Third Stage refer to the maintenance fee deadlines in the 3.5, 7.5, and 11.5 years of the patent term. These patent renewal rates have remained comparable and without much fluctuation since 2010.

It is evident  that many patent owners cannot justify paying the 3rd maintenance fee for a patent. Increasing the maintenance costs would only (which are discounted by 50% for small entities) further this goal of promoting progress of science since it forces patent holders to make a rational decision in regards to their patent.

Written by: Bharath Venkat, J.D.