Friday food for thought: Did the Patent and Trademark Office leave $118 million on the table?


We're all familiar with the so-called cash crunch that the Patent and Trademark Office faced during fiscal 2009. Patent-based revenue was hit from several angles during the year, resulting in a dramatic reduction in the fees that support operations. A drop in the number of new applications meant applicants were paying fewer filing fees, and the historically low allowance rate translated to fewer issue fees being paid.

Acting Director John Doll reported the lower filing rate in March...and indicated that the Office had stopped hiring Patent Examiners as a result.

The impact of the shortfall didn't stop at a hiring freeze, though. The Office warned of furloughs and lowered bonuses, reportedly eliminating some. A source has even indicated that the Office adjusted air conditioning schedules in an attempt to save money.

At the end of the summer, the situation appeared so grim that the Office went to Congress and asked permission to move a$60-70M surplus from the trademark side over to the patent side (yes, an act of Congress is needed).  Congress acted swiftly, and President Obama signed the transfer into law on August 7, 2009.

The urgency of the situation seemed to pass, and operations continued at new 'adjusted' levels.

Then, shortly after closing the books on fiscal year 2009, the Office issued its 2009 Performance and Accountability Report. In it, the Office notes that actual fee collections for 2009 totaled $1.874B. As a result, the Office was left with a final appropriation level of $1.874B despite having an approved budget of $2.010B.

So there's the shortfall. The crunch.

In these circumstances, I would have expected the Office to have spent every penny available to it, making difficult choices along the way. I'm not entirely sure that this happened, though. The table on page 45 of the Report, seems to indicate that $118M was left...on the proverbial table.

I don't see that management specifically addressed these monies in the Report, and do not know the status of these funds. I suspect they may be lost to fee diversion - a very odd result considering the overall budget shortfall -  since they were not spent during the year in which they were collected. The status indicator "Unobligated Balance, Available" might suggest that the Office will have access to these funds in 2010...but it's not entirely clear.

FY2009 was certainly full of challenges and I think it's a bit much to expect the Office to have incurred expenses that neatly matched fee collections, particularly considering the drastic cost-cutting measures that had to be implemented in the final months of the year.  That said, missing it "by that much" would be acceptable. Missing the mark by $118M, though, isn't.

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