Trademark Fee Proposal Detailed Appendices Presented to: Trademark Public Advisory Committee November, 2015

Trademark Fee ProposalDetailed Appendices

Presented to:

Trademark Public Advisory Committee

November, 2015

2

IntroductionThis document includes appendices that provide backgroundinformation and explain details supporting the Executive Summary of the Trademark Fee Proposal, presented separately. The following additional documents are an integral part of the proposal:

Transmittal letter;

Trademark Fee Proposal: Executive Summary;

Attachment 1 ‐ Table of Trademark Fee Adjustments; and

Attachment 2 ‐ Table of Trademark Fees – Current, Proposed and Unit Cost.

3

Table of ContentsAppendices:

Appendix A – Background on USPTO Funding Model ……………………………………....… 4 Appendix B – Background on Fee Setting Methodology and Analyses …………..…….6 Appendix C – Background on Activity Based Information (ABI) Costing

Methodology (Unit Cost Calculation)……………….……………………..….….18 Appendix D – Background on Trademark Fees ………………………………..…...……..……..26 Appendix E – Aggregate Cost Information ………………………………………………….……..35 Appendix F – Aggregate Revenue Information …………………………………………..………40 Appendix G – Rationale for Specific Fee Changes ……………………………………….……..42 Appendix H – Paper vs Electronic Trademark Filings…………………….………..…………...53 Appendix J – Operating Reserve (Carryover of Fees) ………………………………….……...55

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Appendix A

Background on USPTO Funding Model Appendix A

Background on USPTO Funding Model

The information included in this appendix provides more details on the manner in which the USPTO plans and estimates fee collections that fund operations and the relationship between fees, costs, application filings, and workloads.

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USPTO Funding ModelThe USPTO operates like a business in certain respects:

• Stakeholders pay fees that fund the costs of providing products and services they request.

• The aggregate cost [see Appendix E for details] of providing the products and services (budgetary requirements) are funded from the aggregate revenue [see Appendix F for details] derived from trademark fees.

• Trademark fees that are not used to support current year operations are maintained as an operating reserve.

The Leahy‐Smith America Invents Act (AIA) mandates that trademark fees be set to recover the prospective aggregate cost of trademark operations - leaving a zero net cost to general taxpayers. Therefore, fees must be set at levels projected to cover the cost of future budgetary requirements.

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Appendix B

Background on Fee Setting Methodology and Analysis

Appendix B

Background on Fee Setting Methodology and Analysis

The information included in this appendix describes the framework and philosophy of USPTO fee setting, the methodology used to adjust the fee structure, and an overview of the proposed fee structure.

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Authority and Requirements for Fee Setting

Section 10 of AIA authorizes the Director of the USPTO to set or adjust by rule all patent and trademark fees established, authorized, or charged under Title 35 of the U.S. Code and the Trademark Act of 1946 (15 U.S.C. § 1051 et seq.), respectively.

• Authority effective on date of enactment (9/16/2011); Sec. 10 (i)(1)

• Authority terminates 7 years after enactment (9/15/2018); Sec. 10(i)(2)

• Prescribes that fees may be set or adjusted to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to trademarks, including administrative costs to the Office with respect to such trademark operations; Sec. 10(a)(2)

• Authority includes flexibility to set individual fees in a way that furthers key policy considerations, while taking into account the cost of the respective services.

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Authority and Requirements for Fee Setting (cont.)

Fee Setting Authority Process• Annually, the USPTO shall consult with the Trademark Public

Advisory Committee (TPAC) on the advisability of reducing fees; Sec. 10(c)

• USPTO shall provide TPAC proposed fees not less than 45 days prior to publishing the proposed fee(s) in the Federal Register; Sec. 10 (d)(1)

• TPAC shall hold a public hearing related to the proposed fee(s) during the first 30 days of the 45 day period; Sec. 10(d)(2)(B)

• TPAC shall make a written report with comments, advice, and recommendations related to the proposed fees available to the public; Sec. 10(d)(3)

• USPTO shall consider and analyze the report before setting or adjusting the proposed fee(s); Sec. 10(d)(4)

9

Authority and Requirements for Fee Setting (cont.)

Fee Setting Authority Process • USPTO shall publish any proposed fee change in the Federal

Register; Sec. 10(e)(1)(A)• The proposal shall include the rationale and purpose for the

proposal, including possible expectations or benefits; Sec. 10(e)(1)(B)

• No later than the date published, the USPTO shall notify Congress of the proposed change; Sec. 10(e)(1)(C)

• The public comment period will be not less than 45 days; Sec. 10(e)(2)

• The final rule will be published in the Federal Register and Official Gazette; Sec. 10(e)(3)

• The new or adjusted fee(s) may not become effective before 45 days after publishing the final rule; Sec. 10(e)(4)(A)

• Congress may pass a law to disapprove the new or adjusted fee(s); Sec. 10(e)(4)(B)

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Biennial Fee ReviewProposals were developed to align with the Office’s fee structure philosophy and the goal to provide sufficient financial resources to facilitate the effective administration of the United States intellectual property system. The following objectives have been established in support of this goal:• Align fees with the full cost of products and services• Offer application processing options• Promote Administration innovation strategies

During the biennial fee review, the USPTO followed the defined fee structure philosophy, which includes a goal, objectives, and guiding principles. This philosophy provides the framework upon which analysis and decisions are based.

Biennial Fee Review Process

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The trademark fee proposal rulemaking process assumes the following timeline:

• A draft Notice of Proposed Rulemaking (NPRM) will be transmitted to the Department of Commerce (DOC) and OMB no later than January 2016.

• The draft NPRM, along with additional requirements including: updated budget plans, workload and fee forecasting, regulatory and economic impact assessment, paperwork reduction act compliance; would be published in the Federal Register by the end of April.

• There will be a 60 day period to allow for comments to the NPRM and accompanying materials.

• A final rule, including responses to all comments received during the public comment period, will be transmitted to the DOC and OMB no later than August 2016

• The final rule will be published in the Federal Register no later than November 2016.

• Implementation of the final rule is expected for early January 2017.

Rulemaking Timeline Considerations

Fee Structure PhilosophyGuiding

Principles Self-Sustaining

TransparentStreamlined BalancedDynamic Agile

Guiding Principles

Provide sufficient financial resources to facilitate the effective administration of the United States intellectual property system.G

oal

Objectives

Align fees with the full cost of products and

services.

Set fees to facilitate the

effective administration of the patent

and trademark systems.

Promote Administration

Innovation Strategies

Offer application processing

options.

“Innovation IP Protection Jobs Economic Growth”

Explanation of Objectives

(a) Promoting competitive markets that spur productive entrepreneurship; (b) Fostering innovation that will lead to technologies of the future; and (c) Encouraging high-growth and innovation-based small business entrepreneurship. * Small entrepreneur subsidy * Easy entry * Certain amount of back-end subsidy *

Analyzing the full cost of USPTO processes compared to the fee amount. Aggregate fees should recover the full prospective cost of aggregate costs of the patent or trademark business. Total fees should be sufficient to address workload input on a steady-state basis, plus the necessary costs to achieve strategic objectives such as reducing the backlog, process improvements, multi-year initiatives, capital improvements, and maintain an operating reserve.

(a) submitting applications or taking actions which help to facilitate efficient processing; (b) encouraging the prompt conclusion of application prosecution; or (c) recovering costs for actions that are strenuous on the patent and trademark systems (i.e., increased fees for certain rework,

large applications, missing parts).

Setting fees for certain processes that provide special (unique) value or advantages for the applicant. Includes processing choices such as trademark filings via paper, TEAS, TEAS Plus, or TEAS RF.

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14

Fee Setting Components

Historical ABI Cost

Budget Formulatio

n

Strategic Planning

Legal & Policy

Analysis

Economic Analysis

Production

Workloads

Fee Setting

Information from the established process will provide the planned (prospective) cost of sustaining and improving the USPTO. Fees should be set at a rate to recover the cost of themulti-year budget plan.

Economic data and data related to the elasticity of certain fees will provide a

frame of reference for the balance between

setting fee rates.

Understanding USPTOpriorities and plans for the future permits prospective fee amounts to be set at the appropriate level to pay for achieving strategic objectives and improvements.

The data output from ABI cost analyses of fees will be used for the baseline historical cost.

USPTO Fee Structure

Filings forecast, existing inventory, workflow and production capacity are considered in developing estimates. The relative cost of operations to support examination capacity and IT systems and investments are factors in developing the multi-year budget plans.

Legal and policy considerations are

factors in analyzing the relationships between

fees and operational processes.

15

Fee Setting MethodologyActivity based

historical cost and

aggregate cost from

budget plansEscalate for prospective aggregate

cost

Calculate operating reserve needs

+/- for changes to

USPTO production

input/output

+/- for changes to Strategic Priorities, Plans, and Processes

Review economic impact of

intellectual property fee

changesReview and readjust fee

rates

Initial forecast of

fees

Apply economic elasticity analysis

Forecast total

aggregate revenue and

refine

Review and readjust fee

rates

Forecast total


refine

USPTO Fee Setting Methodolog

y

The fee setting process uses a complex and

iterative methodology

until the optimal balance between


aggregate cost is achieved

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Factors Considered in Formulating the Fee Structure

Completed calculations and analyses of:• Historical cost using an activity-based information cost accounting

results [see Appendix C for details];• Identified the full historical cost associated with the activities

supporting fees as a reference point to set fees based on both cost and policy factors.

• Full cost includes all costs that directly support an individual activity, such as filing a trademark application, allocating an appropriate share of direct (e.g. IT systems, space and facilities costs) and indirect costs (e.g., general, financial, administrative, and legal expenses).

• Aggregate prospective costs beginning in the year fees will be effective [see Appendix E for details];

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Factors Considered in Formulating the Fee Structure (cont.)

• Maintain a sufficient operating reserve [see Appendix J for details];

• Fee Proposal Objectives:• Targeted changes to fees where the gap between cost and

current fee rate is greatest.• Fee changes that could administratively improve application

processing by encouraging more electronic filing.• Fee changes to encourage more timely filing to improve the

accuracy of the trademark register.

• Amount of aggregate revenue [see Appendix F for details] required to fund the aggregate cost of operations [see Appendix E for details] over multiple years.

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Appendix C

Background on Activity-Based Information (ABI) Costing Methodology (Unit Cost Calculation)Appendix C

Background on Activity-Based Information (ABI) Costing Methodology (Unit Cost

Calculation)

The information included in this appendix provides an overview of the methodology used by USPTO to determine the unit cost of the trademark fees at Appendix H – Rationale for Specific Fee Changes and Attachments 1 and 2 – Table of Trademark Fee Adjustments and Table of Trademark Fees – Current, Proposed and Unit Cost

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USPTO Activity Based Information• The Office uses an activity-based costing (ABC) methodology, which

is referred to as activity-based information (ABI) at the USPTO, to determine historical costs for trademark-related activities and outputs allocating an appropriate share of administrative costs to determine aggregate cost.

• The USPTO’s ABI program has been in place for more than 15 years.• The ABI methodology follows the full cost guidance outlined in

Federal managerial cost accounting and fee setting standards and is used for developing, maintaining and updating cost information for all USPTO organizations.

• USPTO’s ABI program is widely recognized to be one of the best in the Federal government and also compares well with commercial implementations of ABC. The USPTO ABI program has been the subject of a special Inspector General study, and is examined each year as part of the financial statement audit. There has never been a material weakness in internal controls reported concerning the ABI methodology or data.

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USPTO Activity Based Information (cont.)

• An independent verification and validation study was conducted on the ABI program in 2009, which identified the USPTO ABI program as a best practice in the Federal government.

• Since the inception of the program, ABI methodologies have continuously improved and have been used in fee setting, budgeting, performance reporting, financial statement (Statement of Net Costs) preparation, and ad-hoc cost analyses and studies.

• To facilitate agency-wide collaboration in the ABI program, the ABI Steering Committee was established and is the official rulemaking body for all issues related to ABI at the USPTO. This committee is comprised of representatives from all organizations at the USPTO and all changes to ABI methodology or ABI models are approved by the Steering Committee.

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• ABI uses a two-step methodology to assign costs to activities and related outputs to determine the share of patent and trademark costs on a fiscal year basis for total USPTO expenses.• Expenses (also referred to as costs) are those things which an

organization spends from its budget, such as salaries and benefits for employees, contractor costs, rent, equipment, etc.

• Activities represent the work that people in the organization undertake (e.g., examining a trademark application, fee processing).

• Outputs are the goods or services that the organization produces through its activities (e.g., issuing trademark registrations).

• The cost analysis and all historical expenses referenced in this proposal are based upon FY 2014, the most recent fiscal year for which complete cost and production measure information was available when the analysis was prepared.

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• ABI analysis is based on expense information from the USPTO’s core financial system. This information is “tagged” with identifiers such as the source organization code, the amount spent, the activities performed, and the type of expense (e.g., salaries, benefits, printing, rent).

• Direct expenses are spending by the Patent or Trademark Organizations, Patent or Trademark Trial and Appeal Boards. These expenses do not require any type of allocation methodology.

• Direct allocations originate in another organization on behalf of the patent or trademark operations, (e.g. IT systems, rent and facilities).

• Indirect allocations require a “driver” to determine the appropriate share of expenses (e.g., surveys, help desk calls by organization, number of hires, or invoices processed).

• Direct expenses are compiled into “categories” of spending called processes and activities – “examination” is an example of a process and “perform initial search” is an example of an activity.

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• The direct costs for an activity plus the indirect costs is known as the “fully burdened” cost for that activity.

• The “fully burdened” cost for an activity is then divided by workload measures (number of outputs for that particular activity completed) to arrive at the fully burdened unit cost for that activity.

• In some cases, the cost for a particular process is determined by ascertaining which activities occur for the process, and how often each activity occurs. This is known as the “equivalent unit of production” (EUP) and is based on a statistical analysis of a one year set of completed applications.

• During the last five years (FY 2011 thru FY 2014), on average, direct and allocated direct expenses accounted for 67% of the Trademark organization’s costs while the remaining 33% were classified as indirect.

• Examples of the unit cost calculations can be found on the following pages.

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USPTO ABI Costing ResultsExample: Trademark Filings

Fee Code Fee Code Description Contributing Activity

All Trademark

Costs

EUP

Adjusted

Workload

FY14 Activity

Unit Rate 7001 TM TICRS Activity 90,489$ 262,693 0.34$

TM TPostal Activity 105,983$ 262,693 0.40$

TM TradeUps Activity 96,295$ 262,693 0.37$

TM TRAM Activity 774,128$ 262,693 2.95$

TM XS Activity 148,468$ 262,693 0.57$

Trademark Data Entry and Update System - TRADEUPS 205,512$ 262,693 0.78$

Trademark Image Capture and Retrieval System - TICRS 144,908$ 262,693 0.55$

Trademark Reporting and Application Monitoring

System - TRAM 312,172$ 262,693 1.19$

X-Search - XS 123,406$ 262,693 0.47$

RAM Distributed Cost 116,010$ 276,327 0.42$

First Actions System for Trademarks - FAST 2.X 242,247$ 262,693 0.92$

First Actions System for Trademarks 1.x - FAST 1.X 644,762$ 262,693 2.45$

TECLO Systems Cost 4,065$ 262,693 0.02$

TM TMEP Activity 9,929$ 262,693 0.04$

Trademark Electronic Application Submission - TEAS 1,324,013$ 262,693 5.04$

7001: Application for

registration per

international class

(electronic filing TEAS

application)

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USPTO ABI Costing ResultsExample: Trademark Filings (cont)Fee Code

Fee Code Description Contributing Activity

All Trademark

Costs

EUP Adjusted Workload

FY14 Activity Unit

Rate 7001 7001: Application for

registration per international class (electronic filing TEAS application)

Trademark Manual of Examining Procedure - TMEP $ 2,745 262,693 $ 0.01

Abandonments $ 266,586 262,693 $ 1.01

Final Refusals $ 2,646,727 262,693 $ 10.08

First Actions $ 39,864,867 262,693 $ 151.75

Publications $ 8,319,155 262,693 $ 31.67

Subsequent Actions $ 36,314,808 262,693 $ 138.24

Suspension Reviews $ 281,552 262,693 $ 1.07

Conduct and monitor photocomp project $ 1,348,983 262,693 $ 5.14

LIE Suspension Checks $ 150,061 262,693 $ 0.57

Perform examination quality review $ 4,369,536 262,693 $ 16.63

Perform law office publications quality review $ 36,060 262,693 $ 0.14

Perform non-examination quality review $ 2,249,339 262,693 $ 8.56

Provide Law Library reference and on-line database services $ 55,305 262,693 $ 0.21

Review and enter amendments $ 837,681 262,693 $ 3.19

Review for publication $ 1,563,641 262,693 $ 5.95

Review OG records prior to publication $ 2,965,067 262,693 $ 11.29

Tram II processing by Examiner $ 21,815 262,693 $ 0.08

Process Trademark / TTAB mail $ 262,638 262,693 $ 1.00

Review and classify new electronically filed applications $ 1,451,542 262,693 $ 5.53

Perform library work $ 8,603 262,693 $ 0.03

245 non-production - system unavailable $ 4,342 262,693 $ 0.02

7001 Total $ 408.68

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Appendix D

Background on Trademark Fees

Appendix D

Background on Trademark Fees

The information included in this appendix provides an overview of the current Trademark fee structure, including historical trends of fees and fee collections.

27

Basic Trademark Process and

Relative Fee PaymentsFees collected for trademark activities occur at different intervals over the life of a trademark application filing • The blue boxes display a high-level overview of the trademark

lifecycle • The gray boxes identify the fees associated with each element of the

trademark lifecycle For Use

28

Trademark Application Filings

Oct

ober

Novem

ber

Decem

ber

Janu

ary

Febru

ary

Mar

chApr

ilM

ayJu

neJu

ly

Augus

t

Septe

mbe

r24,000

29,000

34,000

39,000

44,000

49,000

Classes Filed on a Monthly Basis

FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

29

Trademark Fee CollectionsFY 2015 preliminary trademark fee collections are $272.6 million.

53.2%

23.4%

16.7%

0.9%1.4%

3.7%0.8% 0.0%

Application Filings Maintaining Exclusive Rights Intent to Use/Use Fees Madrid Protocol Fees

Trademark Trial and Appeal Board Other Trademark Fees Trademark Processing Fees Finance Service Fees

30

Trademark Application Filings

• Application filing fees are the source of more than one-half of trademark fee collections.

• Filing fees are not refunded, even if the application is later refused registration on legal grounds.

Application Filings

$140.0M52.7%

All Other Trademark

Fees$124.7M47.3%

FY 2013

Application Filings

$145.0M52.7%

All Other Trademark

Fees$130.4M47.3%

FY 2014

Application Filings

$144.9M53.2%

All Other Trademark

Fees$127.7M46.8%

FY 2015

31

Maintaining Exclusive Rights

• Affidavit of use, renewal, and amendment fees make up one-quarter of trademark filing fees.

• Failure to maintain use and file these documents on a timely basis will result in the cancellation of the registration.

Maintaining Exclusive

Rights $68.7M26.0% All Other

Trademark Fees

$195.0M74.0%

FY 2013


Rights $69.0M25.0%

All Other Trademark

Fees$206.7M75.0%

FY 2014


Rights $63.8M23.4%

All Other Trademark Fees

$208.9M76.6%

FY 2015

32

Intent to Use Fees• Applications initially filed and

approved based upon the applicant's bona fide intention to use the mark in commerce require additional filings to demonstrate use and proceed to registration.

• The applicant may file a statement of use prior to approval for publication or within six months from the date of the notice of allowance to either: (1) Use the mark in commerce and submit a statement of use (SOU) with the applicable fee; or (2) pay a fee to request a six-month extension of time to file a statement of use.

Intent to Use $44.0M16.7%

All Other Trademark

Fees$219.7M83.3%

FY 2013

Intent to Use $43.6M15.8% All Other

Trademark Fees

$232.1M84.2%

FY 2014

Intent to Use $45.5M16.7%

All Other Trademark

Fees$227.1M83.3%

FY 2015

33

Trademark Trial and Appeal Fees• The Trademark Trial and Appeal Board (TTAB), an administrative tribunal within the USPTO addresses inter and ex parte appeals.

• When an applicant does not agree with the examining attorney’s decision that a mark should not be registered, the applicant may pay a fee and appeal to the TTAB. TTAB’s ruling may overturn or affirm the examining attorney’s decision.

• Third parties may pay a fee and file an opposition before registration of a trademark. In a similar fashion, trademarks that have been registered may be challenged for cancellation.

TTAB $3.6M1.3%


$260.2M98.7%

FY 2013

TTAB $3.8M1.4%


$271.9M98.6%

FY 2014

TTAB $3.4M1.7%


$268.9M98.6%

FY 2015

34

Trademark Fee Collections

Aug '13

Sep '13

Oct '13

Nov '13

Dec '13

Jan '14

Feb '14

Mar '14

Apr '14

May '14

Jun '14

Jul '14

Aug '14

Sep '14

Oct '14

Nov '14

Dec '14

Jan '15

Feb '15

Mar '15

Apr '15

May '15

Jun '15

Jul '15

$0.0

$5,000,000.0

$10,000,000.0

$15,000,000.0

$20,000,000.0

$25,000,000.0

$30,000,000.0

Application Filings Maintaining Exclusive Rights Intent to Use/Use FeesMadrid Protocol Fees Trademark Trial and Appeal Board Other Trademark FeesTrademark Processing Fees Finance Service Fees Total Trademark Fees

Monthly Trademark Fees By Category: August 2013-July 2015

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Appendix E

Aggregate Cost Information

Appendix E

Aggregate Cost Information

The information included in this appendix provides additional details related to the proposed fee structure.

This appendix also outlines the assumptions for trademark filing, workload, production, and performance, which provide the underlying foundation for calculating aggregate cost.

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USPTO 2014 – 2018 Strategic Plan PrioritiesThe USPTO spends trademark fees in support of the following strategic priorities:• Maintain Trademark First Action Pendency on Average between

2.5-3.5 Months with 12.0 Months Final Pendency.• Maintain High Trademark Quality.• Ensure Optimal IT Service Delivery to All Users.• Continue and Enhance Stakeholder and Public Outreach.• Enhance Operations of Trademark Trial and Appeal Board

(TTAB). • Provide domestic and global leadership to Improve Intellectual

Property Policy, Protection and Enforcement Worldwide• Achieve Organizational Excellence

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Aggregate Cost-Revenue Balance• During FY 2015, the USPTO focused on financial risk management,

priorities for spending, revenue estimates and collections, and the size of operating reserves to mitigate financial and operational risk. This included: • Beginning a comprehensive review of all USPTO operating

requirements, • Initiating a biennial patent and trademark fee review process, and • Committing to maintaining a minimal trademark operating reserve of

$55 million [see Appendix J for details].• A comprehensive funding review is currently under way and the results will

be presented in the FY 2017 President’s Budget. • The biennial fee review has resulted in the proposed fee schedule

addressed in this briefing. Under this proposed schedule, targeted fees would be adjusted, as well as trademark fee revenue [see Attachment – Table of Trademark Fee Adjustments and Appendix F and for details].

• To ensure the USPTO’s core operations are able to sustain financial risk, the USPTO has identified an optimal operating reserve balance and a minimum or lower bound of operating reserve balance [see Appendix J for details].

38

Aggregate Cost Distribution

1% 5% 4%4%

6%

59%

21%

Executive Direction and Communications

Financial Management Services

Human Resource Manage-ment and Administrative Services

Legal Services

Management Information Resources

IT Infrastructure and IT Support Services

Miscellaneous General Expense*

44%

5%

16%

35%

Trademark Examining

Trademark Appeals and Inter Partes Proceedings

Trademark Information Resources

Management Goal- Al-located

* MGE includes cross-cutting expenses such as rent, utilities, telecommunications, and lease management.

A majority of the fees used to support the trademark operation are spent on activities that directly support trademark examination and information technology (trademark information resources and IT infrastructure).

A percentage of trademark fees are used to support

underlying mission support services.

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Breakdown of Aggregate CostsThe vast majority of USPTO’s spending is for items that the Office has little discretion in choosing to pay in order to sustain operations.

64%18%

4%

4%

1%

9%

0%

Low discretion itemsCompensation and Benefits 63.7%Contracts 17.5%Rent and Utilities 3.7%Printing 4.1%Supplies and Materials 1.4%

Higher discretion items Equipment 9.1%Other 0.1%

Higher discretion items, 9%

40

Appendix F

Aggregate Revenue Information

Appendix F

Aggregate Revenue Information

The information included in this appendix provides an overview of the methodology used to forecast aggregate revenue.

41

Fee Collection Forecasting ComponentsWhen forecasting fees to calculate aggregate revenue, the USPTO

considers many factors, such as:• The global and national economic outlook, by analyzing

forecasts of Gross Domestic Product (GDP), research and development (R&D), consumer price index (CPI), and venture capital investments as indicators of future applicant demand;

• The future of the IP environment, by examining legislative, regulatory and judicial actions/changes and procedural/process improvements that may affect demand for IP rights. This includes strategic initiatives, management of resources, and fee rate adjustments;

• The Office’s historical experience by analyzing events and trends to help predict future demand for IP and applicant behavior; and

• Stakeholder input.

42

Appendix G

Rationale for Specific Fee Changes

Appendix G

Rationale for Specific Fee Changes

The information included in this appendix outlines the rationale for the trademark fee changes.

43

Investing in the FutureAdjusting the trademark fee schedule allows the Agency to implement the trademark-related strategic goals and objectives as documented in the USPTO 2014 – 2018 Strategic Plan. This includes:Ensure Optimal IT Service Delivery to All Users• Modernize IT Systems by developing Trademark Next Generation (TMNG)• Continue to provide optimal service on legacy systems

Continue and Enhance Stakeholder and Public Outreach• Expand Outreach by providing opportunities for interaction and updates on Trademark issues• Encourage use of the federal trademark registration system• Engage stakeholders to ensure the integrity of the register

Enhance Operations of the Trademark Trial and Appeal Board (TTAB) • Develop consistent pendency measures that reduce overall pendency• Enhance quality of TTAB orders and opinions and contribute to development of the law

through issuance of precedential decisions.• Expand outreach to stakeholders by providing opportunities for interaction and updates on

TTAB operations and issues

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Benefits For Stakeholders• Continue to provide high quality trademark examination in an efficient and

timely manner• Protect the integrity of the Trademark Register; encourage timely filing to

ensure the rights of other applicants and the public are not adversely affected

• Incentivize electronic communications; modify behavior, reduce costs • Adjust Trademark Trial and Appeal Board fees while maintaining high

quality and efficient proceedings• Modernize IT systems to create full electronic workflow, state-of-the-art IT

systems for conducting business with the Office, including filing, updating information, and paying fees

• Ensure sufficient financial resources in support of trademark stakeholders, even in times of financial uncertainty or workload fluctuations

• Streamline the fee schedule – revise “at cost” service fees to a set amount

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Trademark Processing FeesIncrease Trademark Paper Fees

• Incentivize electronic communications• Increase office efficiency• Reduce total costs

Increase Trademark Processing Fees (Includes paper filed applications, petitions, extensions, and divisions)

• Ensure integrity of the Trademark Register• Discourage misuse to ensure the rights of other applicants and the public are not adversely

affected

Increase existing TTAB Fees• Ex parte Fees have not been adjusted in over 25 years; inter parte fees have not been adjusted

in 15 years• Increase maintains the optimal alignment between costs and fee rate (processes would remain

largely subsidized)• Additional increase to paper fees will incentivize electronic communication to increase office

efficiency and reduce total costs.

Establish Extension of Time Fee• Encourage potential opposition filers to make decisions earlier and reduce delay to applicant• Encourage faster conclusion of TTAB cases• Increase office efficiency

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Trademark Processing FeesFee Code* Description

Historical Cost (2014)

Current Fee Proposed Fee Dollar ChangePercent Change

Paper Electronic Paper Electronic Paper Electronic Paper Electronic Paper Electronic

6001 Application for registration, per international class (paper filing) $661 -- $375 -- $600 -- +$225 -- +60% --

7001Application for registration, per international class (electronic filing, TEAS application)

-- $409 -- $325 -- $325 -- $0 -- 0%

7009Application for registration, per international class (electronic filing, TEAS RF application)

-- -- -- $275 -- $275 -- $0 -- 0%

7007Application for registration, per international class (electronic filing, TEAS Plus application)

-- $294 -- $225 -- $225 -- $0 -- 0%

6002/7002 Filing an Amendment to Allege Use under §1(c), per class $298 $76 $100 $100 $200 $100 +$100 $0 +100% 0%

6003/7003 Filing a Statement of Use under §1(d)(1), per class $135 $103 $100 $100 $200 $100 +$100 $0 +100% 0%

6004/7004Filing a Request for a Six-month Extension of Time for Filing a Statement of Use under §1(d)(1), per class

$668 $17 $150 $150 $350 $250 +$200 +$100 +133% +67%

6005/7005 Petitions to the Director $3,107 $94 $100 $100 $300 $200 +$200 +$100 +200% +100%

6006/7006 Dividing an application, per new application created $221 -- $100 $100 $300 $200 +$200 +$100 +200% +100%

6008/7008Additional fee for application that doesn't meet TEAS Plus or TEAS RF filing requirements, per class

$38 $3 $50 $50 $150 $50 +$100 $0 +200% 0%

6201/7201 Application for renewal under §9, per class $69 $27 $400 $300 $500 $300 +$100 $0 +25% $0

6203/7203Additional fee for filing renewal application during grace period, per class

$77 $7 $100 $100 $200 $100 +$100 $0 +100% 0%

6204/7204 Correcting a deficiency in a renewal application $102 -- $100 $100 $200 $100 +$100 $0 +100% 0%

6205/7205 Filing §8 affidavit, per class $70 $28 $100 $100 $200 $100 +$100 $0 +100% 0%

6206/7206 Additional fee for filing §8 affidavit during grace period, per class $77 $7 $100 $100 $200 $100 +$100 $0 +100% 0%

*The 7000 series fee code (e.g., 7001, 7002, etc.) is used for electronic filing via TEAS.Note: The TM fee unit expense numbers in this report have been updated to reflect changes to the Process Mail activity, and therefore will not match prior reports.

47

Trademark Processing Fees (cont.)

Fee Code* Description



Paper Electronic Paper Electronic Paper Electronic Paper Electronic Paper Electronic

6207/7207 Correcting a deficiency in a §8 affidavit $105 -- $100 $100 $200 $100 +$100 $0 +100% 0%

6208/7208 Filing §15 affidavit, per class $70 $28 $200 $200 $300 $200 +$100 $0 +50% 0%

6210/7210 Publication of mark under §12(c), per class -- -- $100 $100 $200 $100 +$100 $0 +100% 0%

6211/7211 Issuing new certificate of registration $872 -- $100 $100 $200 $100 +$100 $0 +100% 0%

6212/7212 Certificate of correction, registrant's error $872 $400 $100 $100 $200 $100 +$100 $0 +100% 0%

6213/7213 Filing disclaimer to registration -- -- $100 $100 $200 $100 +$100 $0 +100% 0%

6214/7214 Filing amendment to registration $872 $3 $100 $100 $200 $100 +$100 $0 +100% 0%

6215/7215 Filing §71 affidavit, per class -- -- $100 $100 $200 $100 +$100 $0 +100% 0%

6216/7216 Filing §71 affidavit grace period, per class -- -- $100 $100 $200 $100 +$100 $0 +100% 0%

6401/7401 Petition for cancellation, per class $2,158 $2,198 $300 $300 $500 $400 +$200 +$100 +67% +33%

6402/7402 Notice of opposition, per class $1,796 $1,851 $300 $300 $500 $400 +$200 +$100 +67% +33%

6403/7403 Ex parte appeal, per class $2,274 $2,315 $100 $100 $300 $200 +$200 +$100 +200% +100%

NewRequest to extend the time for filing a notice of opposition for Good Cause or Consent (paper filing) -- -- -- -- $200 -- +$200 -- -- --

NewRequest to extend the time for filing a notice of opposition for Good Cause or Consent (electronic filing) -- -- -- -- -- $100 -- +$100 -- --

NewRequest to extend the time for filing a notice of opposition with consent or under extraordinary circumstances (paper filing) -- -- -- -- $300 -- +$300 -- -- --

NewRequest to extend the time for filing a notice of opposition with consent or under extraordinary circumstances (electronic filing) -- -- -- -- -- $200 -- +$200 -- --


48

Trademark Madrid Protocol Fees

Fee Code* Description



Paper Electronic Paper Electroni

c Paper Electronic Paper Electroni

c Paper Electronic

6901/7901Certifying an International application based on single application or registration, per class

$3,379 $97 $100 $100 $200 $100 +$100 $0 +100% 0%

6902/7902Certifying an International application based on more than one basic application or registration, per class

$3,453 $97 $150 $150 $250 $150 +$100 $0 +67% 0%

6903/7903Transmitting a Request to Record an Assignment or restriction under 7.23 or 7.24

$77 $3 $100 $100 $200 $100 +$100 $0 +100% 0%

6904/7904 Filing a Notice of Replacement, per class $835 -- $100 $100 $200 $100 +$100 $0 +100% 0%

6905/7905 Filing an affidavit under 71 of the Act, per class $6 $6 $100 $100 $200 $100 +$100 $0 +100% 0%

6906/7906Surcharge for filing affidavit under 71 of the Act during grace period, per class

-- $6 $100 $100 $200 $100 +$100 $0 +100% 0%

6907/7907 Transmitting a subsequent designation -- $46 $100 $100 $200 $100 +$100 $0 +100% 0%

6908/7908 Correcting a deficiency in an affidavit under 71 of the Act $6 $6 $100 $100 $200 $100 +$100 $0 +100% 0%


49

Trademark Service FeesFee Code Description Current Fee

Proposed Fee

Dollar Change

Percentage Change

8501Printed Copy of Registered Mark, Delivery by USPS, USPTO Box, or Electronic Means $3 $3 $0 0%

8503Certified Copy of Registered Mark with Title and/or Status, Regular Service $15 $15 $0 0%

8504Certified Copy of Registered Mark with Title and/or Status, Expedited Local Service $30 $30 $0 0%

8507 Certified Copy of Trademark Application as Filed $15 $15 $0 0%

8508Certified or Uncertified Copy of Trademark-Related File Wrapper and Contents $50 $50 $0 0%

8513Certified or Uncertified Copy of Trademark Document, Unless Otherwise Provided $25 $25 $0 0%

8514For Assignment Records, Abstracts of Title and Certification per Registration $25 $25 $0 0%

8521Recording Trademark Assignment, Agreement or Other Paper, First Mark per Document $40 $40 $0 0%

8522 For Second and Subsequent Marks in the Same Document $25 $25 $0 0%

8523 Labor Charges for Services, per Hour or Fraction Thereof $40 discontinue

8524 Unspecified Other Services, Excluding Labor at cost discontinue New Fee Code Additional Fee for Overnight Delivery $40 New Fee Code Additional Fee for Expedited Service $160

• Labor service fees are replaced with specified service fees to provide users clear costs upfront.

50

Fastener Quality Act Fees

Fee Code* DescriptionHistorical

Cost (2014)Current Fee Proposed Fee Dollar Change

Percent Change

6991 Recordal Application Fee $1,324 $20 $20 $0 0%

6992 Renewal Application Fee $1,324 $20 $20 $0 0%

6993 Late Fee for Renewal Application Fee $1,324 $20 $20 $0 0%

6994Application Fee for Reactivation of Insignia, per Request

$1,324 $20 $20 $0 0%

51

Eliminate Self-Service Copy ChargeFee Code

Description Historical Cost(2014)

Current Large

Entity Fee

Proposed Large Entity

Fee

Dollar Chang

e

Percent

Change

8902 Self-service copy charge, per page

-- $0.25 Discontinue -- --

• This fee proposal is to comply with Executive Order 13681. The current contract for copiers, expiring in September 2016, will not be renewed. Photo-copy services and all related costs and payments will be handled by the vendor. USPTO will no longer offer this service.

52

Eliminate Establish Deposit Account FeeFee

CodeDescription Historica

l Cost(2014)

Current Large

Entity Fee

Proposed Large Entity

Fee

Dollar Chang

e

Percent

Change

9201 Self-service copy charge, per page

-- $10.00 Discontinue -- --

• Eliminate the fee to establish a new deposit account because when the new system is deployed customers will be able to establish deposit accounts online over the USPTO website.

53

Appendix H

Paper vs Electronic Trademark Fees

Appendix H

Paper vs Electronic Trademark Fees

The information included in this appendix provides an overview of the fees eligible for electronic discounts.A complete listing of paper and electronic fees can be found inAttachment – Table of Trademark Fee Adjustments.

54

Paper and Electronic FilingsThe following table shows the percentages of paper versus electronic modes for paired Trademark fees in FY 2014.

Mode Paper Electronic

TEAS Plus

Application fees 0.6% 64.5% 34.9%Other Groups of Fees Paper Electronic

Fees for Statement of Use or to Allege Use 0.7% 99.3%

Petition, Notice of Opposition, and Appeal related fees 1.9% 98.1%

Fees for Renewal 2.2% 97.8%

Section 8 Declaration of Continued Use related fees 2.1% 97.9%Section 71 Use in Commerce or Excusable Nonuse related fees 1.3% 98.7%

Other Trademark Processing fees 1.6% 98.4%

Certifying an International Application related fees 0.1% 99.9%

Other Madrid Protocol fees 0.1% 99.9%

55

Appendix J

Operating Reserve Assumptions(Carryover of Fees) Appendix J

Operating Reserve Assumptions

(Carryover of Fees)

The information included in this appendix provides more details on rationale, purpose, and size determination of the USPTO operating reserve to carry over unspent fee revenues into future years.

56

Operating Reserve – Definition and Purpose

The patent and the trademark operating reserves are funded from patent and trademark fee collections that have been appropriated but unobligated and carried over from the prior year. The operating reserve is intended to sustain operations in the event of short term lapses in appropriation authority, unanticipated lower fee collections and/or increases in operating expenses or for long term investments.Overall, the operating reserve is intended to:

• Improve long-term financial stability and response to immediate and temporary changes.

• Protect against unexpected increases in requirements or unexpected declines in fee collections.

• Mitigate the risk of a cash flow shortage.• Provide a contingency to minimize the impact of normal fluctuations in fee

collections.

57

Operating Reserve – Size The USPTO will manage the patent and trademark operating reserves within a range of acceptable balances.

• The USPTO has defined an optimal balance and a minimal acceptable balance for both patent and trademark funded operating reserves.

• The optimal balance sets the upper goal for the operating reserves. It is stated in terms of the amount of budgetary requirements sufficient to fund 4 to 6 months of trademark operations or 3 months of patent operations.

• The minimum acceptable balance establishes a lower bound of operating reserve the USPTO will use in planning budgetary requirements. It is set at $55 million for trademark operations and $300 million for patent operations.

58

Optimal Operating Reserve Assessment• The assessment considered environmental risk factors associated with

funding the trademark and the patent operations and related activities.

• The two main areas that contribute to the risk environment of financial volatility are spending and fee collection.

• Spending risk is associated with:• High Percentage of Fixed Costs: non-discretionary (fixed) costs

and long-term commitments in human capital, facilities, and information technology impacts the ability to respond to reduced fee collections or lower than planned spending authority.

• Unexpected Costs: an increase in unfunded/unplanned services or activities due to external requirements may exceed available fee collections.

• Funding Authorization: uncertainty in the timing and amount of fees the USPTO is authorized to spend.

59

Optimal Operating Reserve Assessment (cont.)Fee Collection risk factors are:

• Economic Uncertainty and Climate: fee collections may deviate substantially from planned budgetary requirements due to poor visibility into the economic indicators used to forecast filings. Historically, economic downturns have occurred roughly once every 5 to 10 years.

• Environmental Uncertainty and Behavioral Changes: Business, regulatory, IP policy, or legal frameworks may change, resulting in fee collections that deviate substantially from forecasts.

• Fee and Workload Projection Uncertainties: Variation in the type and number of filings received presents an inherent uncertainty in the precision of modeling fee projections.

60

Optimal Operating Reserve Assessment (cont.)

As a fully fee-funded organization, each of these environmental risk factors has significant risk for trademark operations.

Therefore, the USPTO adopted an optimal trademark operating reserve of up to six months of operating expenses based on the magnitude of the likelihood and consequence of risk occurrence.

61

Operating Reserve – Optimal Level

The USPTO will assess, at least every two years, the environmental risks outlined above to determine the optimal operating reserve size.

• The routine evaluation is necessary because an environmental risk or risk score that was appropriate last year may not be appropriate in the future due to changing circumstances, to ensure that it continues to represent the USPTO risk appetite.

• A change in circumstance may cause the USPTO to reevaluate the optimal operating reserve sizes more frequently. The results of the most recent evaluation will be used to inform the USPTO comprehensive fee review, fee setting, and the requirements-based budget formulation processes.

62

Operating Reserve – Minimum Level

• The USPTO recognizes that it may take a significant amount of time to achieve optimal operating reserve balances and, once achieved, the occurrence of any number of the environmental risk factors could cause the balances to drop below the optimal level.

• The minimum acceptable balances are defined to address immediate unplanned changes in the economic and operating environments or circumstances. Unlike the significant uncertainty associated with the environmental factors used to assess the size of the optimal operating reserve, the considerations for the minimum acceptable balances are more operational in nature.

63

Operating Reserve – Minimum Level (cont.)

The most significant operational risk factors that could contribute to using the contingency provided by the minimum operating reserves are:

• If the USPTO does not receive a timely authorization to spend the fees collected, then operations could be reduced or closed. A minimum acceptable balance will allow for continuing operations over a limited period of time.

• If the ratio of fixed versus discretionary budgetary requirements is high, then the USPTO has few levers to immediately reduce the cost of operations.

• If the USPTO determines that there is a high likelihood of new and specific operational risk factors (e.g., expected regulatory, legal, Congressional, or operational actions), then the minimum acceptable balance should be increased by the estimated impact of risk occurrence.

64

Operating Reserve - Management

A comprehensive review of the five-year projected operating reserve balances will be completed as a part of the annual requirements-based budget formulation process.

• This will be accomplished by estimating fee collections for each of the five years, subtracting the respective budgetary requirements for each of the five years, and accumulating the excess of fees or costs into the beginning operating reserve balance to calculate an estimated ending balance in each of the five years (projected annual operating reserve balance).

• The projected annual operating reserve balance will be evaluated against the current minimum and optimal operating reserve amounts. Variances between the projected annual operating reserve balances and the minimum acceptable and optimal operating reserve sizes will be reviewed and reassessed.

Documents

Trademark Fee Proposal Detailed Appendices Presented to: Trademark Public Advisory Committee November, 2015