Intellectual Property: Fees Are Not Always Commensurate With the Costs of
Services (Chapter Report, 05/09/97, GAO/RCED-97-113).
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) Copyr*
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-97-113
TITLE: Intellectual Property: Fees Are Not Always Commensurate
With the Costs of Services
DATE: 05/09/97
SUBJECT: Copyrights
Patents
Trademarks
Intellectual property
Fees
Inflation
Proposed legislation
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Cover
================================================================ COVER
Report to the Chairman, Committee on the Judiciary, U.S. Senate
May 1997
INTELLECTUAL PROPERTY - FEES ARE
NOT ALWAYS COMMENSURATE WITH THE
COSTS OF SERVICES
GAO/RCED-97-113
Intellectual Property
(307746)
Abbreviations
=============================================================== ABBREV
CBO - Congressional Budget Office
CPI - Consumer Price Index
GAO - General Accounting Office
GDP - Gross Domestic Product
IPO - Intellectual Property Organization
PTO - Patent and Trademark Office
SBA - Small Business Administration
Letter
=============================================================== LETTER
B-274301
letter date goes here
The Honorable Orrin G. Hatch
Chairman, Committee on the Judiciary
United States Senate
Dear Mr. Chairman:
As requested, this report presents the results of our review of
issues related to intellectual property fees charged by the Patent
and Trademark Office within the Department of Commerce and the
Copyright Office within the Library of Congress. Our report provides
information on the manner in which these agencies use fees to provide
services. The report specifically discusses patents, trademarks, and
copyrights. It also provides matters for congressional consideration
concerning both patents and copyrights and a recommendation to the
Register of Copyrights.
As arranged with your office, unless you publicly announce its
contents earlier, we plan no further distribution of this report
until 30 days after the date of this letter. At that time, we will
send copies to appropriate House and Senate committees; interested
Members of Congress; the Secretary of Commerce; the Assistant
Secretary of Commerce and Commissioner of Patents and Trademarks; the
Librarian of Congress; the Register of Copyrights; the Director,
Office of Management and Budget; and other interested parties. We
will also make copies available to others upon request.
If you or your staff have any questions about this report, please
call me at (202) 512-3841. Major contributors to this report are
listed in appendix XIV.
Sincerely yours,
Victor S. Rezendes
Director, Energy, Resources,
and Science Issues
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
The Congress has begun to consider a number of issues involving the
federal agencies that issue or register patents, trademarks, and
copyrights--commonly known as intellectual property. Furthermore,
the administration has made the reform of intellectual property a
part of its plan to "reinvent" government. In this regard, GAO has
issued a number of reports discussing certain operations of the
Patent and Trademark Office (PTO) within the Department of Commerce
and the Copyright Office within the Library of Congress.
The Senate Committee on the Judiciary is considering funding and
organizational proposals for PTO and the Copyright Office. To help
the Committee in its deliberations, the Chairman requested that GAO
review the manner in which these agencies use fees in providing
services. He asked GAO to address fees as they relate specifically
to patents, trademarks, and copyrights and, where applicable, to
determine (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. This report addresses these issues in individual chapters on
patents, trademarks, and copyrights. Because the last two issues
relate primarily to patents and to copyrights, respectively, the
report addresses them only in those applicable sections.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
The federal government regulates intellectual property rights through
the grant of patents and the registration of trademarks and
copyrights. Patents and trademarks are administered by PTO, while
copyrights are administered by the Library of Congress. While the
three types of intellectual property bear many similarities, they
also have important differences.
Generally, inventors need to obtain patents in order to benefit
economically from their inventions. The grant of a patent in the
United States is a complicated process whereby PTO examiners
determine that the product or process in question is new, useful, and
non-obvious. Once the patent is issued, the patent holder in most
cases has exclusive rights to the invention for 20 years from the
date the application was filed.
A trademark is acquired through use rather than registration;
however, registration does afford the trademark owner procedural
advantages against infringement. The trademark process also requires
an examination by PTO to ensure that others have not already
registered the same or a similar trademark, but the examination
process is more streamlined. A trademark registration has a term of
10 years but, unlike patents and copyrights, can be renewed.
A copyright is gained when a work is created, not when it is
registered. However, much like trademarks, registration of a
copyright affords the copyright owner certain statutory rights that
would not be available otherwise. The examination process for
copyrights is much different than for either patents or trademarks
because the Copyright Office does not verify whether others have
already registered the same or similar works. In most cases, a
copyright lasts for the author's life plus 50 years.
Both PTO and the Copyright Office charge fees for the services they
provide, but they differ in the types of fees charged and the
revenues obtained. In fiscal year 1995, patent fees totaled $577.7
million, trademark fees totaled $68.5 million, and copyright fees
totaled $14.6 million.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
Patent fees--like trademark and copyright fees--are set primarily by
statute. Overall, patent fees recover the costs of the patent
process within PTO and, by law, can be adjusted annually for
inflation. Despite this self-sufficiency overall, fees for
individual services are not necessarily commensurate with the costs
of those services because (1) 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 (2) different categories of applicants pay different
fees for the same service. Generally, successful applicants and
large entities tend to pay more than unsuccessful applicants and
small entities for the same services. Furthermore, 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.
Trademark fees also recover the overall costs of the trademark
process and can be adjusted annually for inflation. However,
trademark fees are smaller and fewer in number than patent fees. In
addition, 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. 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.
Copyright fees are the smallest and simplest of all the federal
intellectual property fees. Most applicants pay only an up-front,
one-time registration fee of $20, with no differences based on entity
size, the accuracy or completeness of the application, or the type of
copyright being registered. However, copyright fees do not recover
costs either in total or by type of service and, as a result, the
Copyright Office receives about $10 million a year in appropriations.
Copyright fees have not been increased since fiscal year 1991 because
the Copyright Office chose not to raise fees to adjust for inflation
in fiscal year 1995. The Copyright Office has supported the need for
fee increases in the past and currently supports legislative
proposals that would give the Register of Copyrights the authority to
raise fees to recover the costs of copyright registration and
services. Copyright Office officials do not believe that the
Copyright Office itself should be fully self-sustaining through fees
because it performs other functions that the officials believe are
more appropriately funded through appropriations. Similarly, the
Copyright Office did not support a 1996 proposal to make it
self-sustaining through fees in a new, government-owned, intellectual
property corporation, believing that such a move would lead to
unacceptably high fee increases and registration decreases.
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4
PATENT FEES RECOVER OVERALL
COSTS BUT NOT THE COSTS OF
INDIVIDUAL SERVICES
-------------------------------------------------------- Chapter 0:4.1
Most patent fees are set by statute and tend to be the largest and
most extensive of all federal intellectual property fees, with 139
individual types of fees ranging as high as $2,900 in fiscal year
1995. Once dependent on appropriations, the patent process has been
self-sustaining overall since fiscal year 1993. However, for several
reasons, individual applicants may not pay fees that are commensurate
with the services they receive. First, while most of the costs of
the patent process are incurred during PTO's examination of the
application, most of the patent fees are paid after the examination
has been completed. In fiscal year 1995, for example, about 19
percent of the fee revenues came from issue fees, which are payable
after PTO has decided that a patent can be granted, and about 34
percent were maintenance fees, which are payable in three stages
after the patent is issued.
Second, fees do not match the costs of individual services because
large entities--for-profit organizations with 500 or more
employees--pay fees that are twice the size of those paid by small
entities. While this feature was added to the law in 1982 to reduce
the burden of increasing fees on small businesses, nonprofit
organizations, and individual inventors, PTO officials said there are
no differences in the costs associated with the patents granted to
large and small entities.
Third, any particular patent fee may not recover costs because fees
generally do not vary by invention type, even though the time and
complexity involved in examining applications for different types of
inventions can vary significantly. For example, overall "patent
pendency"--the time taken by PTO to examine an application prior to a
patent being issued or the application being abandoned--averaged 19.8
months for fiscal year 1995. However, pendency varied from 17.4
months for solar heating devices to 26.2 months for computer systems.
Finally, patent fees may not recover costs because they generally are
not designed to discourage an applicant's delays in the examination
process. Examination time can increase significantly when PTO has to
obtain additional information from the applicant because the
application was either inaccurate or incomplete. Even though some
applicants pay additional fees for such delays, the "extension" fees
accounted for about 8 percent of total fees collected in fiscal year
1995, while the delays for which extension fees were paid accounted
for about 19 percent of the overall average patent pendency.
PTO recognizes that patent fees are not necessarily commensurate with
the costs of individual services. However, its current
cost-accounting system does not provide sufficient information to
determine costs on a per-service basis. For this reason, PTO has
undertaken two studies designed to improve its cost-accounting system
and to determine how fees for both patents and trademarks compare
with the costs of individual services. The first of these--a study
of PTO's cost-accounting system--is due to be completed in December
1997.
TRADEMARK FEES APPEAR TO BE
ALIGNED WITH COSTS
-------------------------------------------------------- Chapter 0:4.2
While smaller and fewer in number, trademark fees are similar to
patent fees in that most revenues come from statutory fees, the fees
can be adjusted annually to account for inflation, and fee revenues
are sufficient to make the trademark process self-sustaining within
PTO. Furthermore, the fees do not vary on the basis of the type of
trademark for which registration is sought.
Trademark fees are more nearly commensurate with the costs of
individual services than are patent fees. This is because (1) most
costs occur at the front end of the process, with about 76 percent of
the costs of the trademark process attributable to the examination of
applications; (2) most fees are paid prior to or during examination,
with over 71 percent of the trademark revenues obtained through the
basic filing fee alone; (3) the fees do not vary on the basis of the
size of the entity applying for registration; and (4) registration
costs for different types of trademarks do not vary significantly.
Similarly, incomplete and inaccurate applications do not create the
delays and costs common in the patent process.
PTO officials believe that, despite the relatively close alignment of
trademark fees and costs, adjustments may be needed in specific
areas, such as appeals, where the current $100 fee is below PTO's
costs of handling these actions. These officials believe that, as
with patents, the two studies under way eventually will enable PTO to
better determine the costs of the services being provided and the
adequacy of the fees charged for these services.
COPYRIGHT FEES DO NOT
RECOVER COSTS
-------------------------------------------------------- Chapter 0:4.3
In many ways, copyright fees differ from patent and trademark fees.
While copyright fees are also set primarily by statute, they do not
recover the costs of the Copyright Office either in total or by type
of service. In most cases, an applicant pays only $20 to register a
copyright, yet the average cost of registration in fiscal year 1995
was $36.53 per application, and the average cost by the type of
copyright ranged from $28.32 to $59.60.
The basic copyright application fees have not been raised since
fiscal year 1991, when, with the support of the Copyright Office,
they were doubled to $20. Copyright Office officials said that they
have supported proposals to increase fees since then but only when
they believed such an increase would be cost-effective and would not
lead to an unacceptable decrease in applications for copyright
registration. In this regard, the Copyright Office has supported
proposed legislation that would give the Register the discretion to
raise fees to reflect the fair cost of registering copyrights and
providing services. The Copyright Office is now planning a fee and
cost study to determine the costs of individual copyright services
and the fees necessary to recover these costs.
The Copyright Office did not raise fees in fiscal year 1995 to
account for the effects of inflation as authorized by law. The
acting Register of Copyrights at the time did not do so because she
believed that the revenues attributable to the increase were not
worth the additional costs that would be incurred. However, GAO
found that fees could have been raised overall by more than 16
percent, which would have increased net revenues by about $500,000 in
the first year and even more in subsequent years. In addition, the
adjusted fees would have been the basis for future fee increases.
In September 1996, the Copyright Office opposed proposed legislation
that would have made it self-sustaining through fees in a new,
government-owned, intellectual property corporation. The Register of
Copyrights told the Senate Committee on the Judiciary that, for the
Copyright Office to be self-sustaining under such a proposal, fees
would have to be raised fivefold and applications would fall as a
result. GAO found that the Copyright Office's projections were based
on a worst-case, least-likely scenario and that other scenarios would
have resulted in fees that ranged from $41 to $89 per application as
well as smaller decreases in applications.
Other studies--including a GAO-contracted management review of the
Library of Congress\1
and an internal review by the Library itself--support the need for a
fee increase. In addition, one of the options in the Congressional
Budget Office's deficit reduction package for fiscal year 1998 would
make the Copyright Office self-sustaining, with fees in the range of
$35 to $40 per application. The Register of Copyrights believes that
the copyright process can be made self-sustaining within the Library,
probably by increasing fees to about twice the current level.
However, she said that certain costs of the Copyright Office not
directly tied to the registration process should continue to be
funded through appropriations.
On a related issue, costs attributable to the copyright process are
higher than they need to be because of a provision in the law that
the Copyright Office maintain copies of unpublished works for the
full term of the copyright, now estimated to be an average of 125
years. Because the Library of Congress and the copyright owners
rarely retrieve these copies and many of the works deteriorate after
a few years, copyright costs could be reduced by adopting the same
retention requirements for unpublished works as for published works.
In most cases, this would require the copyright holder to pay an
additional $270 fee if the works were retained beyond 5 years.
--------------------
\1 Library of Congress: Opportunities to Improve General and
Financial Management (GAO/T-GGD/AIMD-96-115, May 7, 1996).
MATTERS FOR CONSIDERATION BY
THE CONGRESS
---------------------------------------------------------- Chapter 0:5
In view of the various legislative proposals involving PTO and the
Copyright Office currently being considered, the Congress may wish to
reexamine the fees these agencies charge for particular services.
With regard to patent fees, the Congress may wish to consider whether
fees for particular services should more nearly reflect the costs of
those services. Specifically, the Congress may wish to consider
whether (1) the fee differential between large and small businesses
should be continued; (2) a larger portion of fees should be tied to
the examination process itself; (3) larger fees should apply to those
applications requiring more examination time; and (4) applicants who
delay the examination process should pay larger fees.
With regard to copyright fees, the Congress may wish to consider
whether the Copyright Office should achieve full cost recovery
through fees, as it has done with PTO, and, if so, whether fees for
particular services should be commensurate with the costs of those
services. In addition, to reduce the costs of the copyright process,
the Congress may wish to consider whether storage requirements for
unpublished copyrighted works should be made the same as those for
published works.
RECOMMENDATION TO THE REGISTER
OF COPYRIGHTS
---------------------------------------------------------- Chapter 0:6
To ensure that fees are not further deteriorated by inflation, GAO
recommends that the Register of Copyrights raise fees to account for
inflation when given the opportunity to do so.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:7
GAO provided copies of a draft of this report to the Department of
Commerce and the Library of Congress for their review and comment.
At the Library's request, GAO also met with Library officials to
discuss further the Library's written comments. The comments of the
Department and the Library and GAO's responses to those comments are
included in appendixes XII and XIII, respectively.
Generally, the Department of Commerce agreed with the information in
the draft report, although the Department recommended a number of
technical and language changes. The Library strongly disagreed with
GAO's discussion of copyright fees and said that the report was
incorrect in stating that the Copyright Office had opposed fee
increases, did not acknowledge the role of the Congress in setting
copyright fees, and did not sufficiently discuss the impact of fee
increases on the Library's collections. The Library also disagreed
with a perceived criticism by GAO of the fee increase projections
that the Register provided the Senate Committee on the Judiciary in a
September 1996 hearing.
Concerning the Department of Commerce's comments, several of the
technical changes proposed related to GAO's not having included $2.4
million in miscellaneous fees in the statistics on patent fees. GAO
had not included these in the draft report because the source
materials indicated such information could not be tied specifically
to either patents or trademarks. After reviewing the Department's
comments, GAO determined that these fees should have been shown as
patent fees and revised the report accordingly. The Department also
noted that the cost-accounting information PTO expects to have by
December 1997 will greatly enhance the substantive information
available with which to analyze potential changes to the current fee
structure. Although it is too early to know the outcome of PTO's
study, GAO makes the point in this report that, in order to match
fees more closely with services, it will be necessary to determine
the actual costs of those services. Throughout its comments, the
Department emphasized the role that the Congress has played in
creating and developing the existing patent fee structure. GAO
agrees and believes that this point is made clear in the report. GAO
also believes that any policy changes regarding patent fees would
require congressional action. For this reason, GAO has included
matters for congressional consideration dealing with patent fees.
Concerning the Library's comments regarding the Copyright Office's
position on fee increases, GAO added information to the report
showing that the Copyright Office has supported the need for fee
increases in the past, believes a fee increase is needed currently,
and supports proposed legislation that would allow the Register to
raise fees to cover the costs of copyright registration and services.
GAO continues to believe, however, that the Copyright Office should
have adjusted fees to account for inflation in fiscal year 1995
because the increase would have been cost-effective, and Library
officials agree that the Register should make adjustments for
inflation in the future.
GAO disagrees with the Library's comments that the role of the
Congress in setting fees was not adequately discussed in the draft
report. To the contrary, GAO's report shows that the Congress has
chosen to continue to recover copyright costs through a combination
of fees and appropriations. GAO points out that the Congress has
chosen to make the patent and trademark processes self-sustaining.
In keeping with this approach, GAO states that the Congress may wish
to consider whether the Copyright Office should achieve full cost
recovery through fees.
GAO also believes that the report fairly discusses the potential
impact of a fee increase on deposits available for the Library's
collections. Because the Library (1) has access to all copyrighted
materials submitted for registration, (2) is entitled by law to any
other materials under copyright protection published in the United
States, and (3) rarely takes any unpublished materials, GAO continues
to believe that the works available should not decline substantially
even if copyright registration applications decline.
Finally, GAO believes that the report accurately portrays the
Register's testimony in the September 1996 hearings. However, GAO
clarified the report to show that the Register's concern was with the
high costs of making the Copyright Office self-supporting within a
new, government-owned, intellectual property corporation outside the
Library. GAO continues to believe that the fees projected were too
high and were not presented in a proper context. For these reasons,
GAO believes it is necessary to show its analyses of these
projections in the report.
INTRODUCTION
============================================================ Chapter 1
"America's thinkers and creators are at the heart of
technological-based economic growth--they are the engine that runs
the American economic machine." This statement, from the 1994
strategic plan of the Patent and Trademark Office (PTO), effectively
summarizes the importance of advancing, regulating, and administering
patents, trademarks, and copyrights--collectively referred to as
intellectual property.
The administration has made intellectual property reform a part of
its plan to "reinvent" government. The Congress has also recently
considered legislation that would affect how intellectual property
rights are administered. Some of these proposals would affect the
organization and funding of PTO and the Copyright Office. In this
regard, the Chairman of the Senate Committee on the Judiciary asked
us to review various issues relating to intellectual property fees.
BACKGROUND
---------------------------------------------------------- Chapter 1:1
In this country, the federal government is the primary regulator of
intellectual property through the grant of patents and the
registration of trademarks and copyrights. In this regard--and
because federal statutes and regulations provide various economic and
procedural benefits concomitant with the grant or registration--these
three types of intellectual property are much alike. In other ways,
however, they are different. Registering copyrights, for example,
takes less time than granting patents or registering trademarks, yet
copyrights generally have a much longer life. Trademarks have the
shortest original term; however, they can be renewed indefinitely
while patents and copyrights cannot. Patents for inventions never
brought to market and copyrights for materials never published
nevertheless are protected for their entire terms, while a trademark
can be lost if it is not used.
Similarly, the roles of the agencies regulating and administering
intellectual property differ. Generally, PTO examines patent and
trademark applications in great detail to ensure that others have not
already applied for a patent on the invention or are not using the
trademark in question. The Copyright Office essentially registers
any materials that appear to be copyrightable and for which the
application is complete. Unlike PTO, the Copyright Office generally
does not determine whether some other person has a similar copyright
or whether the materials are in the public domain. The differences
in the complexities of the procedures followed by the agencies are
mirrored by differences in the fees and related expenses.
PATENTS
-------------------------------------------------------- Chapter 1:1.1
A patent is a grant given by a government to an inventor of the right
to exclude others for a limited time from making, using, or selling
his or her invention. In the United States, the sole granting
authority for patents is PTO. The patent process is totally funded
through user fees. In fiscal year 1995, PTO issued 114,642 patents.
PTO typically classifies patents as one of four types:
Over 90 percent of all patent applications are for "utility"
patents for inventions that are either a process, machine,
manufactured article, or composition of matter, or an
improvement to one of these. A second type of patent is the
"plant" patent--constituting less than 1 percent of all
applications--which is granted for asexually propagated plants.
Previously, utility and plant patents had a term of 17 years
from the date the patents were issued. For those applications
filed after June 7, 1995, however, utility and plant patents
will have a nonrenewable term of 20 years from the date the
earliest application is filed.
The third type of patent is the "design" patent, available for a
new, original, and ornamental design for an article of
manufacture. In fiscal year 1995, design patent applications
accounted for about 6.5 percent all applications filed. Design
patents have a nonrenewable term of 14 years from the date of
issuance.
The fourth type of patent is the "reissue" patent, which is granted
as a replacement for a patent that was in some way defective.
The reissue patent is granted for the unexpired term of the
patent it replaced. Reissue patents typically account for less
than 1 percent of all applications.
Prior to issuing a patent, PTO examines the application to verify
that the patent is indeed new, useful, and non-obvious. In this
regard, PTO requires that every patent application include (1) a
specification that describes the manner and process of making and
using the invention as well as the claim or claims that make the
invention patentable; (2) an oath or declaration that the applicant
is the original inventor; (3) drawings, where necessary for
understanding the nature of the invention; and (4) a filing fee.
Additional fees may be necessary during examination, when the patent
is issued, and during the term of the patent.
Within PTO, the patent application examination process consists of
several progressive phases. An applicant files a patent application
with PTO, which reviews the application for accuracy and completeness
during a preexamination phase. Following preexamination, the
application is assigned, or "docketed," to an examiner within an
examination group that has expertise in a specific field, such as
computer systems or biotechnology.
At this point, the examiner begins the process of determining whether
the invention is a new and useful process or product that should
receive a patent. Usually early in the process, the examiner makes a
preliminary decision, or "first action," which may be followed by
contacts with the applicant to resolve questions and/or obtain
additional information. If PTO decides to issue a patent, termed an
"allowance," it informs the applicant and, upon the payment of the
necessary fees, issues a patent. The application may be abandoned
during any of these stages.
The examination process can be lengthy. During fiscal year 1995, for
example, the average "patent pendency"--the period from the date an
application is filed until the date it is abandoned by the applicant
or a patent is issued by PTO--was 19.8 months. While not required,
most inventors use the services of an attorney to help prepare the
application and to assist them throughout the examination process,
according to PTO.
TRADEMARKS
-------------------------------------------------------- Chapter 1:1.2
A trademark is a word, name, symbol, or design used to distinguish or
identify the goods or services of a particular merchant or
manufacturer from those of others.\2 As with patents, the federal
authority for registering trademarks in the United States is PTO, and
the trademark process is funded through user fees. In fiscal year
1995, PTO issued 65,662 certificates of registration.
Federal registration does not create a trademark because a trademark
can only be acquired by actually using it in association with
particular goods or services. However, federal registration does
offer the registrant substantial procedural advantages should the
trademark owner be faced with an infringement. Once registration has
been obtained, the trademark must remain in substantially continuous
use in order to be preserved. Trademark registrations have a term of
10 years but can be renewed indefinitely for additional 10-year
terms.
An applicant seeking to register a trademark must file an application
accompanied by a fee, specimens of the trademark as it is actually
used, a drawing of the mark, and various statements describing when
the mark was first used and the types of goods and services on which
it is used. Trademarks are categorized into various classes, such as
toys or clothing, and, if registration for more than one class is
sought, the applicant must pay an additional fee for each class.
Once filed, the application is examined by an examining attorney
within the Trademark Office of PTO. The attorney verifies that the
trademark for which registration is sought is not "confusingly
similar" to trademarks for other goods or services. If there is no
such similarity and there are no other statutory bars to
registration, PTO publishes the trademark and gives members of the
public the right to oppose registration if they feel it is
confusingly similar to another trademark, even if this other
trademark in not already registered. If no problems are identified
at this stage, the trademark is registered. Even then, however, it
can be challenged at some later date if it is not used properly or if
a prior user comes forward.
The trademark process can also be lengthy. In fiscal year 1995, for
example, PTO reported that the time between the filing of an
application and the registration of the trademark averaged 16.4 to
16.7 months. While applicants may use attorneys in the application
process, attorney involvement is not as extensive as with patents,
according to PTO officials.
--------------------
\2 As used in this report, "trademarks" refers to both trademarks and
service marks.
COPYRIGHTS
-------------------------------------------------------- Chapter 1:1.3
A copyright is a type of intellectual property that protects literary
and artistic expression as well as the media where these are
displayed. Thus, copyrights are available for works such as books,
periodicals, speeches, printed and recorded music, plays, computer
software, paintings, sculpture, and motion pictures. Copyright
registration in the United States is the exclusive province of the
Copyright Office in the Library of Congress. In fiscal year 1995,
the Copyright Office registered 609,195 copyrights.
As with trademarks, a copyright is not gained through registration
but rather when the work itself is created and reduced to some
tangible form of expression. It is the expression of an idea that is
copyrightable, not the idea itself. Registration does offer
advantages, however, because the copyright owner has better evidence
regarding the priority of the claim and is entitled to certain
statutory benefits and damages upon infringement that would not
otherwise be available. A copyright generally lasts for the (1)
author's lifetime plus 50 years for personal works or (2) shorter of
75 years from publication or 100 years from creation for works for
hire, anonymous works, or pseudonymous works.
The copyright registration process is simpler than for patents and
trademarks. The copyright owner submits an application accompanied
by a filing fee and one or two copies of the work, depending on the
type. Most applicants, according to Copyright Office officials, do
not use an attorney. The examination process is also relatively
simple, taking an average of 38 to 83 days in fiscal year 1995 to
complete, depending on the type of application. The examiner ensures
the application is complete and accurate, that the materials appear
to be copyrightable, that the fee is proper, and that the required
copies are provided. The Copyright Office does not attempt to verify
that others have not already copyrighted the materials or that the
materials are in use, have use, or have value.
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:2
The Chairman of the Senate Committee on the Judiciary, which is
considering various funding and organizational proposals involving
PTO and the Copyright Office, requested that we examine several
interrelated issues concerning the fees these agencies charge for
their services. He asked that we address fees as they relate
specifically to patents, trademarks, and copyrights and, where
applicable, determine (1) how fees are set for the services provided
by PTO and the Copyright Office, (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. We address these issues in chapters on patents,
trademarks, and copyrights.
In order to answer these interrelated questions, we determined that
we would have to develop data and report on patents, trademarks, and
copyrights separately because each has its own laws, application and
examination procedures, and fee structure. In this regard, we
obtained fee information on patents and trademarks from PTO and
copyrights from the Copyright Office. This information included
current fee schedules for each form of intellectual property as well
as a summary of the fees actually received during fiscal year 1995,
the most recent year for which such information was available. To
the extent possible, we subdivided the fee receipts by fee type and
computed the ratio of each fee type to total fees received.
To determine how fees are set, we reviewed the statutory authority
provided to PTO and the Copyright Office as well as the procedures
these two agencies had developed for adjusting fees. We reviewed the
legislative history for the statutory fees to determine the reasons
for and timing of the various changes. We obtained information from
the agencies showing the actual process and data used in the most
recent fee adjustments considered.
We also obtained certain workload information from PTO and the
Copyright Office, showing the number of patents, trademarks, and
copyrights issued or registered or for which the applications were
abandoned or rejected during fiscal year 1995. This year was used
because of the need for consistency with the fee receipt data
discussed above and because in most cases it was the year for which
the most recent data were available. In addition, we obtained
information the agencies had developed showing the impact of fee
increases on applications. For copyrights, we also performed a
regression analysis to estimate the association between fee increases
and changes in the number of applications while controlling for the
influences of other factors that may affect application levels.
We discussed the establishment of fees, fee history, the equity and
fairness of fees by applicant and type of application, and the
potential impact of adjusting fees with officials from PTO, the
Copyright Office, and the intellectual property community. Where
possible, we obtained comparable fee data for the Japanese Patent
Office and the European Patent Office, the two other large patent
offices in the world besides PTO.
We provided a draft of this report to the Department of Commerce and
the Library of Congress. These agencies provided written comments,
which are included in appendices XII and XIII, respectively, along
with our responses. In addition, we met with officials of the
Library of Congress after receiving their comments.
Additional information on our scope and methodology are included in
appendix I.
WHILE THE OVERALL PATENT PROCESS
IS SELF-SUSTAINING, INDIVIDUAL
FEES ARE NOT COMMENSURATE WITH
COSTS OF THE SERVICES PROVIDED
============================================================ Chapter 2
By design, the patent process is self-sustaining through a system of
fees assessed by PTO for its services. Changes to the law in 1990
and 1991 set patent fees at levels that would recover costs overall
and authorized PTO to make annual adjustments for inflation. Despite
the self-sufficiency of the patent process overall, however,
individual fees are not necessarily commensurate with the costs of
the services for which they are assessed. Again, this is by design
because (1) the largest fees are paid at the back end of the process,
while most costs occur at the front end of the process; (2) large and
small entities generally are charged different fees for the same
service; (3) costs vary by invention type, while fees do not; and (4)
delays caused by the applicants generate more costs than fees.
Recognizing these anomalies, PTO is studying the need to make the
individual fees more nearly commensurate with the costs of the
services provided.
THE PATENT PROCESS IS DESIGNED
TO BE SELF-SUSTAINING
---------------------------------------------------------- Chapter 2:1
Understanding the current patent fee structure first requires an
explanation of how the role of patent fees has changed over the past
4 decades. Until recently, patent fees were not intended to cover
the costs of PTO's patent process. In 1965, for example, patent and
trademark fees were set at a level that recovered 67 percent of PTO's
costs. By 1980, however, inflation had reduced the impact of these
fees--which had not been revised in the interim--so that they
recovered only 27 percent of PTO's operating costs.
In 1980, the Congress revised the patent fee structure. Public Law
96-517, enacted December 12, 1980, provided that fees would be set to
recover 50 percent of the costs of PTO's patent process. The law
also provided that, like most other industrialized countries, patent
fees would be paid not only for application filing and patent
issuance but also for the life of most patents through fees known as
maintenance fees.
Public Law 97-247, enacted August 27, 1982, further modified the
patent fee structure. In addition to raising fees, the law provided
that filing, issue, and maintenance fees would be set by statute and
could be adjusted every 3 years on the basis of fluctuations in the
Consumer Price Index (CPI). The law also provided that large
entities would pay statutory fees double the rate of small
entities--those entities classified as small businesses by the Small
Business Administration (SBA), nonprofit organizations, and
individual inventors. The purpose of this reduced fee for small
entities was to reduce the impact of fee increases on the inventors
most likely to be burdened by higher fees.
Public Law 101-508, enacted November 5, 1990, put PTO on the road to
self-sufficiency by increasing statutory patent fees by 69 percent in
fiscal year 1991. This increase, known as a "surcharge," was a
replacement for appropriations from the general fund. Subsequently,
the surcharge was extended through fiscal year 1998 and modified so
that the amounts specified by statute are collected. Unlike regular
fees, which are treated as offsetting collections for budget purposes
and are fully available to PTO, the surcharge fees were to be treated
as offsetting receipts and would be available to PTO only to the
extent appropriated back by the Congress.
Public Law 102-204, enacted December 10, 1991, authorized PTO to
adjust patent fees annually to account for changes in the CPI. Since
fiscal year 1993, PTO has been self-sufficient, receiving no
appropriations other than those generated by the surcharges.
Actually, PTO has not been allowed to use all the fees it has
collected. Through fiscal year 1997, the Congress has withheld
$142.8 million of the $729.3 million in surcharge fees collected by
PTO.
INDIVIDUAL PATENT FEES ARE
ASSESSED FOR SPECIFIC SERVICES
---------------------------------------------------------- Chapter 2:2
PTO collects fees for an assortment of patent services. Fiscal year
1995 fee revenues totaled $577.7 million. While these fees were
collected under 139 separate fees for specific services, there were
three primary types of fees--application filing, patent issuance, and
patent maintenance. Table 2.1 summarizes fiscal year 1995 revenues
by primary type of fee, and appendix II provides a detailed
comparison of these revenues for the individual fees.
Table 2.1
Fiscal Year 1995 Patent Fee Revenues by
Fee Type
Fiscal year 1995
Fee type collections Percent of total\a
------------------------------ ------------------ ------------------
Filing $164,932,389 28.5
Issue 109,374,237 18.9
Maintenance 194,668,049 33.7
Other 108,725,154 18.8
======================================================================
Total $577,699,829 99.9
----------------------------------------------------------------------
\a Does not total to 100 percent due to rounding.
Source: PTO, GAO computations.
Each applicant pays a filing fee prior to PTO's examination of the
merits of the patent application. There are different filing fees
for utility, design, plant, and reissue applications, just as there
are different fees for large and small entities. In fiscal year
1995, utility patent applications were dominant, accounting for 89.8
percent of large entities' filing fees and 85.7 percent of small
entities' filing fees. Overall, large entities paid $134 million, or
4.3 times the filing fees paid by small entities.
Once PTO decides to allow the grant of a patent, the applicant must
pay an issue fee in order to receive the patent. As with application
fees, issue fees differ by the type of patent as well as by large and
small entities. In fiscal year 1995, utility and reissue
patents--which are assessed the same issue fees--accounted for 97.6
percent of all large entities' issue fees and 92.3 percent of all
small entities' issue fees. In total, large entities paid $88.7
million, or 4.3 times the issue fees paid by small entities.
Maintenance fees represent the largest single source of patent fee
collections, accounting for more than a third of all patent fees
collected during fiscal year 1995. The fees are paid at three stages
during the life of the patent--at 3.5, 7.5, and 11.5 years into the
patent term--with the fees at each stage being progressively higher.
Unlike filing and issue fees, maintenance fees are not assessed on
design and plant patents. However, large entities pay maintenance
fees at twice the rate of small entities.
Maintenance fees constitute some of the largest individual fees,
ranging from $960 to $2,900 for large entities and $480 to $1,450 for
small entities during fiscal year 1995. In fiscal year 1995, large
entities paid $171.2 million, or 7.6 times the amount paid by small
entities.
While filing, issue, and maintenance fees are the three primary types
of fees--accounting for 81.5 percent of all patent fees during fiscal
year 1995--PTO collects other types of patent fees. These include
such fees as those paid by an applicant to file and process an
international patent application under the Patent Cooperation Treaty,
to appeal a PTO decision, to revive an abandoned application, and to
obtain an extension in the time to respond to a request or inquiry by
PTO during examination. All these fees are different for large and
small entities. Other fees, such as those for filing a petition to
the Commissioner, make no distinctions in the amount of the fee by
the size of the entity.
As noted previously, PTO now has discretion to raise most fees
annually to adjust for inflation. PTO has raised fees each year
except one since the surcharge was added in fiscal year 1991. Most
of the discussion of fees in this chapter is based on fiscal year
1995 data, since this was the most recent year for which complete
statistics on fees and patent examination statistics were available
at the time of our review. Appendix III shows the fees in effect
during fiscal year 1997.
In commenting on a draft of this report, the Department of Commerce
noted that PTO's revenues from filing fees in fiscal year 1995
actually were a greater proportion of total revenues than is normally
the case. This was due to the large number of applications submitted
prior to the change in the patent term that became effective on June
8, 1995. In fiscal year 1994 and 1996, filing fees, according to
PTO, accounted for 27.5 percent and 23.7 percent, respectively, of
total fee revenues, compared with 28.5 percent in fiscal year 1995.
INDIVIDUAL FEES ARE NOT
COMMENSURATE WITH THE COSTS OF
THE SERVICES PROVIDED
---------------------------------------------------------- Chapter 2:3
PTO notes that it is essentially an agency that provides services and
that its customers pay for these services. At a September 18, 1996,
hearing before the Senate Committee on the Judiciary, for example,
the Assistant Secretary of Commerce and Commissioner of Patents and
Trademarks provided the following testimony:
"The revenues needed to meet the Patent and Trademark Office's
expenditures are, as you know, more than fully offset by fees
paid by those who use our services and buy our information
products. Our workload consists primarily of patent and
trademark applications filed by individuals and businesses in
the United States and from other countries. These applicants,
both domestic and foreign, pay fees for the services they
request. Because they pay fees for those services, they expect
and deserve prompt and efficient service, and the Patent and
Trademark Office must have the flexibility to deliver that
service."
While the Commissioner's statement is correct--PTO's expenditures are
recovered through fee revenues--this does not mean that individual
fees are set to recover the costs of the specific services provided.
Actually, patent fees are structured so that in effect (1) successful
applicants pay more than unsuccessful applicants, (2) large entities
pay more than small entities, (3) applicants with less complicated
applications pay the same as those with more complicated
applications, and (4) applicants who create delays in the examination
process do not pay fees commensurate with the additional pendency
caused by those delays.
SUCCESSFUL AND UNSUCCESSFUL
APPLICANTS
-------------------------------------------------------- Chapter 2:3.1
While PTO does not have a cost-accounting system capable of
determining the costs associated with individual services, PTO
officials advised us that most of the costs of the patent process are
attributable to application processing and examination. For fiscal
year 1995, for example, they estimated that only 8.6 percent of the
costs associated with an individual patent were attributable to the
actual issue of the patent and 0.1 percent were attributable to its
maintenance. As noted above, however, patent issue fees accounted
for 18.9 percent of patent fees collected in fiscal year 1995, while
maintenance fees accounted for 33.7 percent.
The dichotomy of front-end costs and back-end revenues causes
successful applicants to pay a larger share of costs than
unsuccessful applicants because so many applications are abandoned
during the examination stage. Of the 186,195 patents issued and
applications abandoned during fiscal year 1995, for example, 114,642
patents, or 61.6 percent, were issued and 71,553 applications, or
38.4 percent, were abandoned. Patent pendency--the amount of time
PTO spends in examining a patent prior to the patent's being issued
or the application's being abandoned--averaged 19.8 months, with 21
months for patents issued and 17.9 months for applications abandoned.
None of the applications abandoned will pay an issue or maintenance
fee because no patent was issued, even though abandoned applications
accounted for more than a third of total pendency.
LARGE AND SMALL ENTITIES
-------------------------------------------------------- Chapter 2:3.2
As noted earlier, large entities typically pay twice the fee that
small entities pay for the same service. Because of this difference
in the fee itself and because large entities submit more applications
and receive more patents, large entities pay a much larger share of
overall patent costs. In fiscal year 1995, for example, large
entities accounted for 81 percent of the $164.9 million in filing
fees, 81.1 percent of the $109.4 million in issue fees, 87.9 percent
of the $194.7 million in maintenance fees, 83.2 percent of the $48.4
million in response-time extension fees, 86.8 percent of the $6.2
million in appeal fees, 73.4 percent of the $3 million in abandoned
application revival fees, and 85.8 percent of the $9.8 million in
Patent Cooperation Treaty filing fees.
These differences in fees are mandated by the law. The Congress
added the fee-differential provision in 1982 to reduce the effects of
fee increases on small businesses, individual inventors, and
nonprofit organizations. However, the differences today are much
greater, now that PTO has become totally dependent on fees and the
fees themselves are larger. In this regard:
PTO officials told us that the size of the entity has no bearing on
PTO's costs.
For patent fee purposes, a small entity is a small business with no
more than 500 employees, a nonprofit organization, or an
individual inventor. The categorization of a small business as
defined by the Congress is taken from the criteria SBA uses to
determine whether a business qualifies as a small business for
its programs. While this employee-based criteria may be useful
for SBA, PTO officials said such a definition has little
significance when considering the economic impact of fees on a
patent applicant. In today's high-tech environment, many
businesses that are highly capitalized and profitable have 500
or fewer employees. Similarly, some of the more successful
applicants are individual inventors or work for small
businesses. As one example, PTO officials noted that one of the
most prolific U.S. inventors--whose patents have returned him
hundreds of millions of dollars--is considered a small entity
for patent fee purposes.
Patents are the only form of intellectual property for which the
size of an entity has a bearing on the fees assessed. There is
no such division of fees for either trademarks or copyrights.
The patent fees themselves are only a portion of the costs of
receiving a patent. By definition, a patent represents a new
and useful invention or process, and other costs are involved in
researching, developing, producing, and marketing these
inventions that typically are much greater than would be
experienced in obtaining a trademark or copyright registration.
In addition, in most cases, attorneys are involved in preparing,
filing, and prosecuting the application. While attorneys' fees
vary according to the circumstances, an intellectual property
guide published by the Minnesota Small Business Assistance
Office in 1992 estimated that attorneys' fees could range from
$7,500 to $18,000 per application.
While patent fees have increased significantly since the surcharges
were implemented in fiscal year 1992, inventor organizations
generally did not believe they were too high or that they were
stifling the inventive process. Furthermore, as shown in
appendix IV, U.S. patent fees appear to be among the lowest in
the industrialized world.
APPLICATION COMPLEXITY
-------------------------------------------------------- Chapter 2:3.3
Patent applications cover a wide range of inventions, and the more
complicated inventions generally require the most examination time.
As shown in appendix V, the differences in average pendency can vary
significantly among examination groups. For those patents issued and
applications abandoned during fiscal year 1995, the average pendency
was 19.8 months. Among the 17 individual examination groups,
however, pendency ranged from a low of 17.4 months for solar, heat,
power and fluid engineering devices to a high of 26.2 months for
computer systems. Among the more specialized groupings within the
examination groups, pendency can vary even more. For example,
average pendency for the grouping of special receptacles, packages,
shoes, and shoemaking was 15.8 months, compared with 29.6 months for
the grouping of database and file management systems.
While pendency alone is not the only determinant of costs, PTO
officials agreed that the more complicated the invention, the more
time and expense are attributable to examination. However, the fee
schedule makes few provisions for these differences in examination
time. One such provision is that, as shown in appendixes II and III,
fees for design and plant applications--which tend to be less
complicated--are lower than for utility patent applications. There
are no differences in filing fees, however, for different types of
inventions within the utility patent category, which accounts for
over 90 percent of all patent applications.
APPLICANT DELAYS
-------------------------------------------------------- Chapter 2:3.4
During PTO's examination of a patent application, the examiner makes
a preliminary decision on the merits of the application as filed. At
such time, the examiner may ask the applicant to respond to questions
or provide the examiner with information. This process may occur a
number of times. In many cases, PTO cannot complete the examination
until the applicant has taken some further action. For example, (1)
the applicant may have filed an incomplete application that must be
corrected before it can be assigned to an examination group, (2) the
applicant may need to answer questions raised by the examiner or
provide PTO with additional information, or (3) PTO may have to wait
for the payment of a fee before it can proceed with the examination
process.
In fiscal year 1995, the time taken by applicants to respond to
official PTO "office actions" accounted for 3.7 months, or 18.7
percent, of the total average pendency of 19.8 months. This does not
include any pendency that was added because PTO had to process the
responses.
There are no additional fees for responses made within 3 months of a
PTO office action. However, if the respondent wants to extend the
response time, he or she must pay extension fees, as shown in
appendixes II and III. If no response is received after 7
months--the 3 "grace" months plus the 4 extension months--the
application is considered abandoned.
As shown in appendix II, the extension fees received during fiscal
year 1995 were $48.4 million, or 8.4 percent of the total patent fees
received. As noted above, however, the contribution to pendency by
the respondents for all patents issued or applications abandoned
during fiscal year 1995 was 18.7 percent. While an exact correlation
cannot be made, these differences indicate that respondent fees may
not be commensurate with the amount of additional pendency they
create.
PTO IS STUDYING THE NEED FOR
CHANGES IN PATENT FEES
---------------------------------------------------------- Chapter 2:4
PTO officials believe that anomalies exist in the current patent fee
structure and have two initiatives under way to address the issue.
Under one of these initiatives, PTO is developing a cost-accounting
system that will allow it to determine the unit costs of particular
services, something it cannot do under its current accounting system.
Under the second initiative--which depends to a large extent on the
development of cost centers--PTO will attempt to determine whether
there is a need for revisions in the fee structure. At the time of
our review, PTO officials said the cost study was expected to be
completed in December 1997 and that the fee study would be completed
at an undetermined time after the cost study.
In its Audit Inspection Plan for Fiscal Years 1997-98, the Department
of Commerce's Inspector General noted that "PTO has no uniform
process to track the costs of operations within its various program
areas...[and] does not have the information that would enable it to
develop a fee structure that would accurately establish fees to
recover the full costs of operations." In this regard, the Inspector
General plans to review PTO's cost-accounting and fee-restructuring
efforts, beginning in the third quarter of fiscal year 1997.
PATENT ORGANIZATIONS GENERALLY
ARE SATISFIED WITH CURRENT FEES
---------------------------------------------------------- Chapter 2:5
Officials from organizations representing patent owners and attorneys
agreed that the current fee system is designed to recover costs in
the aggregate rather than on a per-service basis. While they
recognized that this is in effect a type of subsidy and creates
inequities among applicants, they also said that their constituents
were generally satisfied with the current system because they (1)
know what to expect, (2) are familiar with the fee structure as now
designed, and (3) recognize that there is some logic in creating a
fee system in which successful applicants bear a greater proportion
of the costs. In addition, fees paid to PTO are a relatively small
portion of the overall costs of creating a new product, obtaining a
patent, and bringing the product to market.
These officials' primary dissatisfaction was not in the fee structure
itself but in the Congress's not appropriating all the surcharge fees
back to PTO. They fear that, ultimately, this may keep PTO from
being able to manage the patent workload and could lead to higher
patent pendency.
The officials from the patent organizations also said that, if the
Congress does wish to look at the appropriateness of fees, now is the
time. Legislative proposals have been made in both the prior and
current sessions of the Congress that would make PTO a wholly-owned
government corporation, and questions have been raised concerning how
fees would be set and who would set them . The officials believed
that these questions should be resolved as a part of the decision on
PTO's organizational status.
CONCLUSIONS
---------------------------------------------------------- Chapter 2:6
In many ways, the current patent fee structure is working well. The
patent process within PTO has been self-sufficient since fiscal year
1993 and a mechanism is in place to ensure that fees can be raised
annually to account for inflation. Furthermore, the applicants
appear to be generally satisfied with the current system.
At the same time, however, individual applicants are not necessarily
paying their own way because (1) there appears to be little
correlation between the service being provided and the cost of that
service to PTO and (2) certain applicants pay more than others for
the same services. Applicants who abandon their applications,
qualify as small entities, submit more complicated applications, and
create delays in the examination process are paying less for the same
services than other applicants who receive patents, are considered
large entities, have less complicated applications, and create fewer
delays.
We recognize that there may be policy reasons for having different
applicants pay different fees for essentially the same services.
Ultimately, the question is whether the Congress wants a closer
alignment between the costs of the patent services being provided by
PTO and the fees charged for those particular services. While the
current system works from the standpoint of overall revenue,
individual applicants do not always get what they pay for or pay for
what they get.
In order to match fees more closely with services, it will be
necessary to know the actual costs of those services. We believe
that PTO is taking the correct approach in developing a
cost-accounting system that will identify the costs attributable to
specific patent services.
MATTERS FOR CONSIDERATION BY
THE CONGRESS
---------------------------------------------------------- Chapter 2:7
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.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 2:8
In commenting on a draft of this report, the Department of Commerce
generally agreed with the information presented but recommended a
number of technical and language changes. Several of the
Department's comments concerned our not having included $2.4 million
in miscellaneous fees in the statistics on patent fees. We had not
included these in the draft report because the source materials
indicated such information could not be tied specifically to either
patents or trademarks. After reviewing the Department's comments, we
determined that these fees should have been shown as patent fees and
we revised the report accordingly.
The Department also noted that the cost-accounting information PTO
expects to have by December 1997 will greatly enhance the substantive
information available with which to analyze potential changes to the
current fee structure. Although it is too early to know the outcome
of PTO's study, we make the point in this report that in order to
match fees more closely with services, it will be necessary to
determine the actual costs of those services.
Throughout its comments, the Department emphasized the role the
Congress has played in creating and developing the existing patent
fee structure. We agree and believe that this point is made clear in
the report. We also believe that any policy changes regarding patent
fees would require congressional action. For this reason, we have
included matters for congressional consideration dealing with patent
fees.
The complete text of the Department's comments and our responses to
those comments are included in appendix XII.
TRADEMARK FEES APPEAR TO BE
ALIGNED WITH THE COSTS OF SERVICES
============================================================ Chapter 3
Like the patent process, the trademark process is self-sustaining.
However, unlike patents, trademark fees do not vary on the basis of
the size of the entity applying, and most fees are paid at the
beginning of the process before PTO begins to incur costs.
Consequently, while PTO believes some adjustments may be needed, fees
in the trademark process appear to be more closely aligned with the
costs of services.
THE TRADEMARK PROCESS IS
SELF-SUSTAINING
---------------------------------------------------------- Chapter 3:1
The trademark process--accounting for receipts of $68.5 million in
fiscal year 1995--now totally depends on fees. However, unlike the
patent process--which has been self-sustaining since fiscal year
1993--the trademark process's self-sufficiency began in fiscal year
1983.
In 1965, trademark processing fees were increased, with the most
significant change being an increase in the basic application filing
fee from $25 to $35. These fees remained in effect until fiscal year
1983. Public Law 97-247, enacted August 27, 1982, authorized PTO to
increase trademark fees, this time to a level intended to recover 100
percent of trademark costs. The increase implemented was
substantial, with the basic filing fee raised to $175 per
application. The law also provided that trademark fees could be used
only to fund trademark operations.
Since fiscal year 1983, trademark processing fees have remained
essentially stable, with only some limited changes in the basic
filing fee. In October 1986, PTO raised the basic fee to $200 but in
April 1989 lowered it back to $175. In December 1991, PTO again
raised the basic filing fee to $200, and Public Law 103-179, enacted
December 3, 1993, raised it to $245. This fee is still in effect.
PTO now has the authority to raise trademark processing fees and
service fees annually within the CPI increase of the previous year.
In practice, PTO does not always exercise its authority to adjust
fees. Appendix VI shows trademark processing and service fees
received during fiscal year 1995, and appendix VII shows the fees in
effect in fiscal year 1997. The only fees raised over this period
were two service fees, which together accounted for less than 0.5
percent of revenues in fiscal year 1995.
TRADEMARK FEES APPEAR TO BE
COMMENSURATE WITH THE COSTS OF
SERVICES
---------------------------------------------------------- Chapter 3:2
Trademark fees are more streamlined and less complicated than patent
fees. In total, there are 19 separate trademark processing fees and
18 separate service fees. Unlike patents, these fees do not differ
by the size of the entity applying to register the trademark, no
additional fees are levied when the trademark is approved for
registration, and no maintenance fees must be paid during the term of
the trademark. A renewal fee of $300 per class is paid only if the
trademark owner wishes to extend the trademark for additional 10-year
terms.
According to PTO officials, trademark fee revenues are tied closely
to the trademark examination process. As shown in table 3.1 and
appendix VI, the trademark process generated $68.5 million in fee
revenues during fiscal year 1995. Of this total, 94.5 percent came
from trademark processing fees. More specifically, 71.5 percent of
all revenues came from one fee--the basic application filing fee.
Table 3.1
Fiscal Year 1995 Trademark Fee Revenues
Fiscal year 1995
Fee type collections Percent of total\
------------------------------ ------------------ ------------------
Application filing $48,975,658 71.5
Other processing 15,769,278 23.0
Service 3,741,860 5.5
======================================================================
Total $68,486.796 100.0
----------------------------------------------------------------------
Source: PTO, GAO computations.
As with the patent process, PTO does not have a cost-accounting
system capable of determining the costs of particular services.
However, PTO officials estimated that about 76 percent of its overall
trademark costs were related to the examination process. They also
told us that there is not a significant difference in the amount of
time spent examining different types of trademarks. In fiscal year
1995, the average time spent in examining all trademark applications
prior to registration ranged from 16.4 to 16.7 months.
The situation in which successful patent applicants pay more than
unsuccessful applicants does not exist in the trademark process
because, as noted above, there are no separate issue or maintenance
fees for trademarks. Thus, even though 42,214 trademark applications
were abandoned in fiscal year 1995, compared with 75,372 applications
that "matured to registration," all applicants paid the same basic
filing fee in advance. Unlike patents, there are no separate fees
tied to late responses to PTO requests for additional information.
However, PTO officials said that, because of the nature of the
application, there are fewer occasions to request additional
information during the processing of a trademark application. Unlike
patent regulations, trademark regulations do not require acceptance
of incomplete applications and, as a result, PTO does not accept and
process incomplete trademark applications.
PTO officials believe that fees generally are appropriately allocated
to the services provided. They also said, however, that they were
aware of some individual areas in which the fees probably were not
adequate. For example, they said that the fees for actions such as
filing an appeal ($100 per class) were likely to be well below PTO's
costs of handling these actions. As with patents, PTO officials
believed that the two studies now under way to develop a new
cost-accounting structure and to reassess fees--as discussed in
chapter 2--will provide better information on how well specific fees
are tied to specific services and what fees may need to be adjusted.
The representatives from the trademark community with whom we
discussed fees generally had no problems with the current fee
structure. They believed, like PTO, that the costs were adequately
tied to the services provided.
CONCLUSIONS
---------------------------------------------------------- Chapter 3:3
Trademark fees are more streamlined than patent fees. There are
fewer individual fees, the size of the entity applying has no effect
on the fee paid, most fees are tied to the application examination,
and most fees are paid in advance of the examination. There are no
separate fees for registration or maintenance, and the processing
time does not appear to vary significantly by type of application.
There also is less reason for PTO to request additional information
on problem applications.
For these reasons, we do not believe fees in the trademark process
raise the issues we identified in the patent process, in which
certain applicants pay more than others for the same services.
However, we believe that PTO should continue its efforts to (1)
develop a cost-accounting system that will allow it to identify the
costs attributable to specific trademark services and (2) reassess
the fees paid to determine whether they are commensurate with the
costs of the services provided.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 3:4
In commenting on a draft of this report, the Department of Commerce
generally concurred with the information we provided on trademark
fees. As suggested by the Department, we added information regarding
PTO's proposed cost-accounting study. The complete text of the
Department's comments and our responses to those comments are
included in appendix XII.
COPYRIGHT FEES DO NOT RECOVER THE
COSTS OF COPYRIGHT SERVICES
============================================================ Chapter 4
Unlike the patent and trademark process, the copyright process is not
self-sustaining, and copyright fees have been adjusted infrequently
since the 1950s. The current fees have been in effect since 1991 and
have not been adjusted for inflation as permitted by law. Most
applicants pay a one-time fee of $20, or about half the cost the
Copyright Office incurs to register a copyright.
Copyright Office officials have supported the need for a fee increase
in the past and currently support proposed legislation that would
give the Register of Copyrights the discretion to raise fees to
reflect the fair cost of registering copyrights and providing
services. However, the Register testified against a 1996 proposal to
make the Copyright Office self-sustaining through fees within a new,
government-owned, intellectual property corporation because she
believed fees would increase too much, applications for registration
would decrease, and the Library's collections could suffer as a
result. Recently, the Register said that she favors making the
copyright process self-sustaining within the Library, joining
others--including the Library itself and the Congressional Budget
Office--that believe a fee increase would be advantageous.
On a related matter, the Copyright Office is now required to retain
unpublished works at no additional cost for the life of the
copyright, while most published works are retained for only 5 years.
Because these unpublished works are rarely used, the full-term
storage represents an unnecessary cost to the government.
COPYRIGHT FEES HAVE BEEN
ADJUSTED INFREQUENTLY
---------------------------------------------------------- Chapter 4:1
The Congress has taken a different direction with copyright fees than
with patent and trademark fees. The copyright process, once
self-sustaining, now depends on appropriations to supplement the
revenues obtained through fees.
For most of the first half of this century, the copyright process was
self-sustaining. The Copyright Act of 1909 required applicants to
pay a fee for the registration of a copyright, and from 1909 to 1942,
copyright fee receipts exceeded expenditures. Over the next 5 years,
however, revenues lagged behind costs.
In 1948, Public Law 501 increased the basic copyright registration
fee from $2 to $4. Consequently, fee receipts once again exceeded
expenditures in 1949. From 1950 until 1965, however, the ratio of
fees to expenditures dropped to 63 percent as costs increased while
fees remained at the same level. Under Public Law 89-297 in 1965,
the Congress again increased the basic registration fee, this time to
$6 per claim. At the time, the Copyright Office estimated that this
new fee would result in a recovery of 80 percent of its costs. By
1976, however, inflation had reduced the value of copyright fees, and
the Congress, under Public Law 94-553, raised the basic fee to $10,
with the increase actually effective in 1978.
Over a decade later, as the value of the basic registration fee again
had been eroded by inflation, the Congress increased the fee to $20
under the Copyright Fees and Technical Amendments Act of 1989 (P.L.
101-318, July 3, 1990). This act also authorized the Register of
Copyrights to adjust fees for inflation every 5 years, beginning in
fiscal year 1995. Fiscal year 1991 was the last year in which the
copyright registration fees were raised because the Acting Register
of Copyrights did not make an inflation adjustment in fiscal year
1995.
Copyright fees traditionally have had a simpler structure than patent
and trademark fees because there are fewer fees and the fees
themselves are much smaller. As shown in appendix IX, the basic fee
for most purposes is $20. Unlike patent fees, copyright fees do not
differ according to the size of the entity submitting the
application. In addition, there are no issue fees, no maintenance
fees, and no renewal fees except on some older copyrights. In
addition to the statutory fees, the Register of Copyrights sets fees
by regulation for special services, such as providing optional
full-term storage of published materials.
CURRENT COPYRIGHT FEES ARE NOT
SUFFICIENT TO RECOVER THE COSTS
OF SERVICES
---------------------------------------------------------- Chapter 4:2
Copyright fees do not cover the costs of copyright services, either
in total or by type of service. We found that the (1) gap between
total copyright fee revenues and costs exceeds $10 million a year;
(2) gap varies widely by type of service; and (3) Copyright Office
has not raised fees to cover the effects of inflation. Copyright
Office officials said that they have supported the need for a fee
increase that would move toward recovering the full costs of
copyright registration and services.
COSTS EXCEED FEES BY $10
MILLION A YEAR
-------------------------------------------------------- Chapter 4:2.1
The Copyright Office obtains funding from three sources: (1)
copyright fees, (2) appropriations from the general fund, and (3)
cost reimbursements taken from royalties collected and disbursed by
its Licensing Division and the Copyright Arbitration Royalty Panel.
In fiscal year 1995, the Copyright Office collected $14.6 million in
fees, received $10 million in appropriations, and recovered $2.4
million in costs from royalty fees.
As shown in table 4.1, the reliance on appropriations has been
relatively constant at the $9 million to $10 million range since
1991, the year in which the most recent fee increase became
effective. Appendix IX shows the sources of all copyright fee
revenues for fiscal year 1995.
Table 4.1
Comparison of Copyright Fee Revenues and
Copyright Office Appropriations, Fiscal
Years 1990 Through 1995
Fiscal year Fee revenues Appropriations
------------------------------ ------------------ ------------------
1990 $ 7,696,295 $12,999,000
1991 $11,805,298 $10,258,000
1992 $13,858,690 $ 9,161,791
1993 $14,499,140 $ 9,511,000
1994 $14,136,233 $ 9,411,000
1995 $14,611,332 $10,045,000
----------------------------------------------------------------------
Source: Copyright Office.
THE GAP BETWEEN FEES AND
COSTS VARIES BY TYPE OF
SERVICE
-------------------------------------------------------- Chapter 4:2.2
The disparity between the fees applicants pay and the costs of the
services they receive can be considerable on a per-service basis.
This is because some types of copyrights cost more to register than
others, while the basic registration fee is a "one-size-fits-all"
fee, and because some service fees are set below costs.
Although the basic copyright registration fee is $20, an analysis of
costs by the Copyright Office indicates that the average cost of a
copyright registration in fiscal year 1995 was $36.53, or about 183
percent of the basic fee. As shown in table 4.2, however, the
average cost by type of work varied from a high of $59.60 for a
"mask" work--or a work imbedded in a semiconductor chip--to a low of
$28.32 for literary serials.
Table 4.2
Comparison of Copyright Costs and Fees
by Type of Copyright
Fiscal year
Category 1995 cost Current fee
------------------------------ ------------------ ------------------
Literary monograph $40.83 $20
registration
Literary serial registration $28.32 $20
Performing arts registration $38.81 $20
Visual arts registration $36.25 $20
Sound recording registration $41.15 $20
Mask works registration $59.60 $20
----------------------------------------------------------------------
Source: Copyright Office.
Fees for other services were also far below the costs incurred by the
Copyright Office in providing such services during fiscal year 1995.
For example:
While the Copyright Office charged a fee of $20 per hour for
conducting reference searches of its records, these searches
cost an average of $70.02 per hour, or 3.5 times the fee.
The average cost of recording a document was $77.81, or about 3.9
times the $20 fee.
Copyright renewals cost an average of $43.37 each, or more than
twice the $20 fee.
Some high-cost services require no separate fee at all. For example,
the Copyright Office does not charge an additional fee for requesting
additional information from applicants submitting incorrect or
incomplete applications, even though these applications require more
time to process. As of October 1996, approximately 15 percent of all
copyright applications required correspondence with the applicant to
complete the registration process. Copyright Office officials
estimated the cost of each correspondence at approximately $45.
THE COPYRIGHT OFFICE HAS NOT
RAISED FEES TO ACCOUNT FOR
INFLATION
-------------------------------------------------------- Chapter 4:2.3
One of the problems associated with statutory fees is that their
value tends to be eroded by inflation if several years transpire
between fee increases. Thus, the effective fee actually declines
during the period. This has been the case with copyright fees, as
shown in figure 4.1. Using 1996 dollars as the base and adjusting
the nominal fee for the effects of inflation, we found that the
"real" fee decreased in value significantly during each period a
particular fee was in effect.
Figure 4.1: Comparison of Real
and Nominal Copyright Fees,1959
Through 1996
(See figure in printed
edition.)
Note: To measure fees in inflation-adjusted dollars, the nominal fee
was adjusted using the implicit price deflator for Gross Domestic
Product, based on 1996 dollars.
Source: Copyright Office, GAO computations.
As noted above, Public Law 101-318 established a new copyright fee
schedule to account for the inflation that had occurred since the
fees were last raised in 1978. The act also granted the Register of
Copyrights the authority to adjust the fee schedule by regulation
every 5 years to account for any inflation as determined by the CPI.
The first such adjustment was to be effective in 1995. In March
1994, an internal Copyright Office task force recommended that basic
registration fees not be increased, and the Acting Register of
Copyrights at the time followed this recommendation. By statute, the
next such increase cannot be made until 2000, and, according to
Copyright Office officials, any increase at that time would consider
only CPI increases since 1995.
According to the report prepared by the task force, the increase in
the CPI was 16.53 percent from 1989 to 1993, the most recent 4-year
period for which data were available. This would have allowed basic
registration fees to increase from $20 to $23.30. The task force
estimated that, if fees were raised by the maximum allowable, the
additional revenues would be $1 million to $2.1 million in the first
year after the fee increase, depending on the extent to which
applications decreased. After deducting $493,866 in increased costs
that would be incurred by the Copyright Office, the task force
estimated that the fee increase would have potentially increased the
Copyright Office's income by $529,590 in the first year of the fee
increase. Costs associated with the fee increase would decrease to
an estimated $102,869 in the second year and $69,877 in the third
year.
In determining the additional costs and other problems of raising
fees, the task force cited the expenses and difficulty of publicizing
the new fees to copyright registrants; the administrative burden of
dealing with claims that arrive with insufficient fees; the necessity
of modifying the automated accounting system; the difficulty that
Copyright Office staff and applicants would have working with an odd
fee, and the expenses associated with drafting, printing, and
distributing new applications and circulars reflecting a fee
increase. The task force also believed that applications would
decline, offsetting to some extent any gains made by raising the
fees.
In summary, the task force believed that the additional revenues were
not worth the anticipated problems and expenses and recommended
against raising the basic registration fee. The task force did
recommend that certain service fees, such as those for special
handling and full-term storage of published works, be increased. The
Acting Register of Copyrights raised fees for special services, but
opted against increasing copyright registration fees.
We disagree with the Acting Register's decision not to raise fees for
several reasons. First, most of the costs would have declined after
the first year. However, overall fee income would have continued to
increase each year, depending on the effect any such increase would
have had on applications. Second, the revised fees would have formed
the basis for any fee adjustments for inflation in the future.
Third, while there may be administrative costs associated with
publicizing fee increases, processing claims accompanied by
insufficient remittances, and modifying paperwork and automation
systems to reflect fee increases, the task force did not study ways
that these costs and difficulties might be mitigated. For example,
Copyright Office officials could not explain why they would have to
take elaborate measures to publicize the fee increase and to reprint
all publications. They said they did not consider as an option
simply rejecting any application with an insufficient fee, nor did
they consider listing a toll-free number or Internet address on the
application where an applicant could obtain information on the
appropriate fee, rather than listing the fee itself.
We also do not agree with the task force's concern that an "odd fee"
would be difficult for the applicants or the Copyright Office staff
to understand and use. Apparently, the concern is that the $20 fee
is easy for applicants to remember and easy for Copyright Office
employees to work with to ensure that the proper amounts are paid.
However, fees of amounts other than in increments of $5 or $10 are
common in commerce and government operations. For example, the
applicant must pay postage in dollars and cents on each package he or
she submits to the Copyright Office. In addition, millions of
taxpayers and Internal Revenue Service employees work with many
different rates and fees each year in computing income taxes.
Furthermore, assuming that the concerns over odd fees were justified,
the Copyright Office could have mitigated the effect by raising its
basic registration fee to the even-dollar amount of $23. This
increase would have been within the CPI ceiling.
COPYRIGHT OFFICE OFFICIALS
BELIEVE A FEE INCREASE IS
NEEDED
-------------------------------------------------------- Chapter 4:2.4
Copyright Office officials told us that they believe a fee increase
is needed and support "the goal of moving toward full cost recovery
of fee services." They noted that this was not the same as saying
that all Copyright Office operations should be paid for through fees
because they believe there are costs of the Copyright Office--such as
public information, rulemaking, development of national and
international copyright policy, preparation of reports and studies
for the Congress, administration of section 407 mandatory deposit
provisions, and the special funding for the International Copyright
Institute--that should be supported by appropriations, not fees.
The Register of Copyrights told us that she supports the language in
H.R. 672 and S. 506, which would authorize the Register to adjust
fees to reflect the fair cost of registering copyrights and providing
services. She said that she had supported similar provisions in H.R.
1861, which passed the House of Representatives but not the Senate
during the past session of the Congress. The Copyright Technical
Amendments Act, H.R. 672, was passed by the House of Representatives
on March 18, 1997. The Copyright Clarification Act of 1997, S. 506,
was introduced in the Senate on March 20, 1997.
The Register also said that the Copyright Office plans to initiate a
fee study to determine (1) what costs are attributable to the
copyright process and (2) what fees would be necessary to recover
costs in total and by type of service. As of March 1997, Copyright
Office officials were deciding on the scope of the study but had not
yet begun the study. The Register said that the study would probably
be conducted by outside consultants.
THE COPYRIGHT OFFICE HAS
OPPOSED BECOMING
SELF-SUSTAINING OUTSIDE THE
LIBRARY
---------------------------------------------------------- Chapter 4:3
In September 1996, the Senate Committee on the Judiciary held a
hearing on S. 1961, which, among other things, would have made the
Copyright Office self-sustaining through fees within a new,
government-owned, intellectual property corporation. The Register of
Copyrights testified against this proposal, providing three
interrelated reasons for her opposition. First, to cover the
increased costs, fees would have to be raised to an unacceptably high
level. Second, the increased fees would lead to a decrease in
copyright registrations. Third, the decrease in registrations would
reduce the number of free works submitted to the Copyright Office for
consideration by the Library of Congress for its collections.
While we take no position on S. 1961--which was not passed during
the last session of Congress--we disagree with the fee increases and
application decreases projected by the Register in her testimony.
Our disagreement is based on the Copyright Office's own study. We
also believe that, even if decreases in applications had occurred,
they would not have created a harmful shortage of works available for
the Library's collections. Recently, the Register said that she
believes the copyright process could be made self-sustaining within
the Library by increasing fees to about twice their current level.
COSTS WOULD NOT INCREASE AS
PROJECTED
-------------------------------------------------------- Chapter 4:3.1
In September 1996, the Senate Committee on the Judiciary held a
hearing on S. 1961, the Omnibus Patent Act of 1996. This
legislative proposal would establish an Intellectual Property
Organization (IPO) that comprised essentially the existing PTO and
the Copyright Office. This proposal also called for the Copyright
Office to become self-sustaining through copyright fees. During the
hearing, the current Register of Copyrights testified that the basic
copyright registration fee would have to be raised "five-fold" to the
$100 range in order for the Copyright Office to be self-sustaining
outside the Library of Congress. The Register said that such an
increase would place a substantial burden on copyright owners,
especially those companies that own hundreds or thousands of works.
We reviewed the analysis the Copyright Office used to support the
cost estimates cited in the Senate hearing. We found that, as shown
in appendix X, the Copyright Office's analysis considered 12
scenarios involving the Copyright Office's organizational status,
costs, and projected applications. The fivefold increase in fees
presented at the hearing was the worst-case, least-likely scenario
studied. According to the Copyright Office's analysis, the other
scenarios would have required raising the basic registration fee from
the current $20 to a new fee of $41 to $89 for the first year. Fees
would have increased the second year because the Copyright Office
estimated that registrations would continue to decrease.
We question many of the costs projected in the worst-case scenario
presented by the Copyright Office for several reasons:
The costs in general were based on the Copyright Office's becoming
an independent and self-sustaining agency, while S. 1961--the
bill under discussion at the hearings--proposed including it
within the IPO, which would also include patent and trademark
offices.
Facilities were estimated to cost $5 million. This was based on
the Copyright Office's obtaining new space at a cost of $32 per
square foot. It did not consider leaving the Copyright Office
in its current space, where the facilities are government-owned
and there is no rental cost to the Copyright Office.
The analysis projected a significant decrease in applications, as
discussed below, but did not consider that costs might be lower
if applications were fewer.
The analysis assumed that the Copyright Office would have to
acquire new computer equipment and services rather than continue
to use those now shared with the Library of Congress or share
such equipment and services with the other offices within the
new IPO.
In discussions with Copyright Office officials concerning the
analysis, they said that the figures were "loose, educated guesses"
and that the scenario used was never intended to be characterized as
the most-likely scenario but rather as one example. They
acknowledged that expenses would be somewhat lower than shown in
their analysis if the Copyright Office were combined with the
existing PTO because some costs could be shared. They also
acknowledged that fee increases appear to have a greater impact on
some types of works than others. They advised against our attempting
to use the estimates they developed in projecting the level of fees
that would be necessary to make the Copyright Office self-sufficient.
APPLICATIONS MAY NOT
DECREASE AS PROJECTED
-------------------------------------------------------- Chapter 4:3.2
The Copyright Office maintains that fee increases adversely affect
applications for copyright registration. However, both the Copyright
Office's and our own analyses indicate that any such decrease in
registrations is not likely to be large.
The aforementioned March 1994 report prepared by the Copyright Office
task force studying the need for adjusting fees for inflation also
said that fee increases are a disincentive to registration. As
evidence, the report stated that, when the registration fees were
doubled in January 1991, applications decreased 3.3 percent from the
1990 level after they had risen an average of 4.1 percent per year
for the 8 years prior to the fee increase.
The Register of Copyrights also raised concerns about the effect of a
fee increase on applications during her September 18, 1996, testimony
on S. 1961. She said that reorganizing the Copyright Office into a
self-sustaining entity outside of the Library of Congress could mark
the end of a vital and meaningful registration and deposit system.
She reasoned that historical experience has shown that registrations
decrease whenever fees are increased. Because the fee increase would
likely be the largest such increase on record, the Copyright Office
anticipated that many individual copyright owners would choose not to
register their works and that businesses would register fewer works.
This would result in a diminished and less valuable public database
on works of authorship, making it more difficult for users to
determine who owns what rights at a particular time. In addition,
there would be a decrease in Library-deposit copies of works received
through copyright registrations.
In examining the support for the Register of Copyright's concerns
over decreasing registrations, we again looked at the Copyright
Office's preliminary analysis supporting the projected fivefold
increase in fees. We found that this scenario was based on estimates
that registrations would decrease 30 percent in the first year after
the fee increase and an additional 15 percent in the second year.
As with the estimates on cost increases, these estimates of
registration decreases are questionable for various reasons. For
example, decreases of the magnitude projected have never occurred in
the more than 100 years for which the Copyright Office has data. As
shown in figure 4.2, it is common for copyright registrations to
decrease in the years following a fee increase. However, the
decrease has usually been small, and registrations have tended to
rebound in subsequent years.
Figure 4.2: Copyright
Registrations, 1945-95
(See figure in printed
edition.)
Note: Superimposed dollar amounts are the basic registration fees in
effect during each period. Fiscal year 1976 includes 15 months of
data because of the transitional fiscal year.
Source: Copyright Office.
We also question the Copyright Office's projections because, while
they consider only the overall impact on registrations, Copyright
Office officials agree that some types of registrations are more
likely to be affected than others. Following the 1991 fee increase,
for example, applications for registration decreased significantly
for some types of works but remained stable for others. Applications
for performing arts decreased about 14 percent from fiscal years 1990
to 1992, while applications for visual arts and motion pictures
increased by about 1 percent during the same period. In addition,
the number of copyright registrations for unpublished works decreased
by about 10 percent over the period, while the number of
registrations for published works declined by about 3 percent.\3
The Copyright Office's projections also do not consider the effect on
registrations of changes in internal reporting procedures and other
legislative changes that accompanied past fee increases. We found
that these other factors can affect the number of applications
received and registered. For example, when the registration fee was
increased from $6 to $10 in fiscal year 1978, Copyright Office
records show about a 27-percent reduction in the number of copyright
registrations from the previous year.\4
However, Copyright Office officials told us that they reported only
11 months of registrations for fiscal year 1978 rather than a full 12
months.
Similarly, after the registration fee was increased to $20 on January
1, 1991, the number of applications for copyright registration
decreased by about 3 percent in fiscal year 1991 and an additional 5
percent in fiscal year 1992. However, the fee increase was not the
only change affecting applications. For example, the Copyright
Office initiated group registration for serial issues during
mid-1991. In doing so, all issues of a weekly, biweekly or monthly
serial published within a 3-month period could be registered on one
application at a fee of $10 per issue. According to Copyright Office
officials, this reduced the number of serial registrations by an
unknown amount. In addition, renewal of copyrights became automatic
beginning in 1992. This accounted largely for the substantial and
steady drop in renewal registrations beginning that year. While
registration applications overall decreased by almost 10 percent from
fiscal years 1990 to 1995, applications for these categories
decreased by about 34 percent and 39 percent, respectively.
Because there may be other, external issues--such as the onset of a
recession in 1991--that could have affected applications beyond
changes in copyright fees, we developed a model that allowed us to
examine the association between fee changes and the number of
applications while controlling for the effects of other factors. As
discussed in appendix XI, we found that the association between fee
increases and application decreases is likely to be small--about a
0.1-percent decrease in applications for a 1-percent increase in
fees. However, a regression model of this type is best at estimating
such associations for relatively small changes in explanatory
factors. We also found that there may be an even greater correlation
between applications and the level of economic activity, as measured
by the Gross Domestic Product.
--------------------
\3 The number of applications for unpublished and published works
received for these years could not be obtained because the Copyright
Office does not record a work's publication status until it is
registered.
\4 The Copyright Office was unable to provide the number of
applications received on an annual basis prior to fiscal year 1986.
FEE INCREASES SHOULD NOT
AFFECT LIBRARY COLLECTIONS
-------------------------------------------------------- Chapter 4:3.3
We also question whether there would be any harmful results to the
government even if copyright applications did decrease in reaction to
a fee increase. The economic benefits of copyright registration
primarily are those that pass to the copyright holder. In fact, the
United States is one of the few countries in the world that even has
a government agency registering copyrights. The primary advantage of
registration in this country is that it provides official evidence of
the copyright and provides statutory damages against infringement.
Thus, if a person decides not to register a copyright, that person
assumes the risk of loss.
According to the testimony of the Register of Copyrights in the
Senate hearing on S. 1961, one of the Copyright Office's primary
concerns regarding a decrease in copyright registrations is that such
a decrease might limit the works available at no cost for the
collections of the Library of Congress. However, because of other
provisions in existing legislation, a decline in registrations should
have no significant impact. Section 407 of the Copyright Act
requires that all material under copyright protection and published
in the United States on or after March 1, 1989, be deposited with the
Copyright Office within 3 months of publication.\5 These deposits are
available to the Library of Congress for its collections or for
exchange or transfer to another library. Thus, published documents
must be submitted to the Copyright Office and made available for the
Library's collections even if copyright registration is not sought.
If documents are not submitted as required by law, the Register of
Copyrights can demand that the deposits be made and subject those not
complying to fines and penalties.
Although section 407 does not apply to unpublished material, the
Library of Congress seldom selects unpublished material for its
collections, with the exception of genealogy studies. According to
Copyright Office officials, the Library of Congress selected less
than 100 of the approximately 254,000 unpublished documents that were
registered in fiscal year 1995.
--------------------
\5 Material first published before Mar. 1, 1989, is subject to the
deposit requirement if it was published in the United States with
notice of copyright.
COPYRIGHT OFFICE OFFICIALS
NOW AGREE THAT THE COPYRIGHT
PROCESS COULD BE
SELF-SUSTAINING WITHIN THE
LIBRARY
-------------------------------------------------------- Chapter 4:3.4
In March 1997, the Register of Copyrights told us that she supports
the concept of making the copyright process self-sustaining within
the Library. She said that the fivefold increase in fees cited in
the Senate hearing in September 1996 was indeed a worst-case
scenario. However, she had presented this scenario because she
viewed the proposal being considered at that time as entailing the
separation of the Copyright Office from the Library of Congress. She
believed that such a move would create uncertainties, such as whether
new space would have to be obtained, whether a new computer system
would have to be purchased, and how other services the Library and
the Copyright Office now provide for each other at no charge would be
provided in the future. Thus, the Register believed that it was
necessary to show the potential fee increases that might be required
under the most costly circumstances.
The Register of Copyrights said that, in retrospect, she recognizes
that the costs and fee increases associated with self-sufficiency
would be lower than those presented at the September hearing,
particularly if the Copyright Office is left in the Library of
Congress, as is now being proposed. While the Copyright Office does
not have a current estimate on what would be required to make it
self-sustaining, the Register said that any fee increase would at a
minimum have to replace the approximately $10 million the Copyright
Office now receives in appropriations each year. She believed this
would probably require fees that are about twice the current level.
In subsequent discussions on a draft of this report, the Register
said that she had not intended to say that she believed the Copyright
Office itself should be self-sustaining. Rather, she believed that
it should charge fees for services that reflect the costs of those
services to the Copyright Office. She said that certain costs--such
as those of the Copyright Acquisitions Division--were not directly
related to the copyright process; thus, they should not be paid for
by registrants but are more appropriately covered through
appropriations.
The Register also said in our March 1997 discussion that, if the
copyright process is to be made self-sustaining though fees, these
fees should be commensurate with the services provided. As we have
previously noted, the costs of individual services vary widely, while
most users of these services pay the same fee. In addition, the
Copyright Office and the Library now provide services to each other
that are not necessarily related to their primary missions and for
which they are not reimbursed. For example, the Library provides
numerous computer services to the Copyright Office at no charge,
while the Copyright Office obtains works that were requested by the
Library for its collections but not available through the copyright
registration process, also at no charge. The Register believed that
the fee study now being planned by the Copyright Office will address
this issue.
OTHER STUDIES SUPPORT A FEE
INCREASE
---------------------------------------------------------- Chapter 4:4
Other recent studies of the Copyright Office support the need for a
fee increase. In a 1996 report on the results of a management review
of the Library of Congress contracted by GAO,\6 Booz-Allen & Hamilton
recommended that the Library of Congress focus its efforts on
increasing revenues. As one means for doing so, the report
recommended that the Library pursue full recovery of copyright costs.
The report stated that fully recovering copyright registration costs
offers significant opportunities, both in terms of additional
revenues and the relative ease of implementation. It further stated
that the Copyright Office meets two key criteria for pursuing a
fee-based service. First, there are opportunities for significant
revenues. Second, the Copyright Office has been subject to full cost
recovery in the past, so a precedent has been established. To
accomplish full cost recovery, the report recommended that the
Copyright Office establish a differentiated fee structure based on
the cost of the services provided. According to the study, to
achieve full cost recovery, proposed registration fees would range
from a low of $10 for group serials to a high of $38 to $420 for mask
works.
In October 1996, an internal management report of the Copyright
Office prepared by a senior Library of Congress official at the
request of the Librarian recommended that the Copyright Office
recover relevant fees for services. However, the report also
recommended that the Congress continue appropriating funds for
activities, such as "service to the Congress," that are not
associated with registration services and that the Library of
Congress continue to provide its support to the Copyright Office in
exchange for the value of the copyright deposits made available to
the Library's collections. Unlike the Booz-Allen report, the Library
of Congress recommended establishing either a single fee for all
copyright registrations or a separate fee only for visual arts works
based on the costs of these works. If the fee difference for visual
arts is less than $5 per registration, however, the report
recommended establishing only a single fee. While the Library of
Congress's report concluded that a $35 registration fee would bring
fees and costs into balance the first year, it also concluded that a
$40 registration fee is desirable to account for the effects of
inflation in subsequent years.
Although the Library of Congress's report recognized that a fee
increase may harm the Library's collections through reduced
applications, it stated that any decline in registrations would
likely occur primarily in unpublished works and in relatively
low-value published works. It acknowledged that the demand
provisions of section 407 of the Copyright Act would still apply to
published works and that more works might come from that source than
from applications for copyright registrations.
Recently, the Congressional Budget Office (CBO) noted that the fee
structure of the Copyright Office could be revised to generate more
revenue and reduce the need for appropriations. In its March 1997
publication entitled Reducing the Deficit: Spending and Revenue
Options, CBO offered the option of requiring the Copyright Office to
achieve full cost recovery as a deficit-reduction measure. According
to the report, achieving full cost recovery would require that the
copyright registration fee be increased to about $35 or $40 per
application.
The CBO estimate of what would be required to make the Copyright
Office self-sufficient is similar to that advanced by the Register of
Copyrights--about double the current level. On the basis of our
regression analysis, we believe that the decrease in applications
from doubling the fees would be about 10 percent in the year
following the fee increase. However, as noted earlier, models such
as the one we developed tend not to be as highly predictive at such a
high level of increase.
In discussions we had with intellectual property organizations, they
either opposed or had no opinion regarding any fee increase for
copyrights. None of them provided independent estimates regarding
what effect any such increase would have on applications or the
ability of copyright holders to benefit from their works.
--------------------
\6 GAO contracted with Booz-Allen & Hamilton, Inc. to conduct a
general management review of the Library in order to meet time frames
specified by congressional requesters. Booz-Allen's findings are
summarized in Library of Congress: Opportunities to Improve General
and Financial Management (GAO/T-GGD/AIMD-96-115, May 7, 1996).
ELIMINATING THE REQUIREMENT TO
RETAIN COPIES OF UNPUBLISHED
WORKS COULD REDUCE COSTS
---------------------------------------------------------- Chapter 4:5
We identified one additional area that, while not essential to a
decision to raise fees, nevertheless affects other costs to the
government of the copyright process and the ability of fees to
recover those costs. This is the requirement in the law to retain
copies of unpublished works for the full term of the copyright.
Currently, the law requires that the Copyright Office retain
unpublished works for the life of the copyright, which for most works
is the author's life plus 50 years. Copyright Office officials told
us that they estimate this term to average 125 years. In contrast,
the law requires that published materials that are not selected by
the Library of Congress be retained for the longest period considered
practicable and desirable by the Register of Copyrights and the
Librarian of Congress. The Register and the Librarian have set the
period at 5 years for all works except visual arts, which are kept
for 10 years. If a copyright owner wants to extend the retention
period for a published work to cover storage costs for the full
length of the copyright term, the Copyright Office assesses a $270
fee.
As a result of the requirement in the law, millions of unpublished
works could be stored for up to 125 years at taxpayer expense, while
few published works will be stored longer than 5 years. Copyright
Office officials told us that in some cases--as with audio tapes, for
example--the copy is usually of no use after a few years because of
the natural deterioration of the medium. They also said that they
are rarely called upon to extract copies of unpublished works from
storage, either by the Library of Congress or by the holder of the
copyright.
As a result of the difference in the retention requirements,
published works consume far less storage space than unpublished
works, even though published works represent the majority of items
that are registered by the Copyright Office each year. Approximately
3.3 million unpublished works were placed in storage at either the
Landover Storage Facility or the Washington National Records Center
between 1978\7 and the end of fiscal year 1996. In addition to this
material, other unpublished works have been microfilmed and are
currently stored at the Copyright Office itself. In contrast, as of
December 1996, only an estimated 1.8 million published works were in
storage at the two facilities, and most of these were still within
the statutory 5-year retention period. From fiscal year 1990 through
fiscal year 1995, the Copyright Office received only 85 requests for
extended storage for published works.
The annual cost of the space utilized by the Copyright Office at its
Landover Storage Facility is $230,000 and is paid for by the Library
of Congress. The space utilized by the Copyright Office at the
Washington National Records Center is owned by the General Services
Administration and leased to the National Archives. Although neither
the Copyright Office nor the Library of Congress pays for this
storage space, it is a cost of the copyright process and a cost to
the government. National Archives officials estimated the fiscal
year 1996 costs to be $1.56 per cubic foot. Given the number of
cubic feet being utilized by the Copyright Office, the fiscal year
1996 cost was approximately $97,000.
--------------------
\7 Prior to 1978, musicals and dramas were the only categories of
unpublished works that were eligible for copyright registration.
CONCLUSIONS
---------------------------------------------------------- Chapter 4:6
Unlike PTO, the Copyright Office is not self-sustaining through fees,
and the government provides about $10 million in appropriations each
year to cover the costs not recovered by copyright fees or
reimbursements from royalties. While the law permits the Copyright
Office to raise fees periodically to account for the effects of
inflation, it chose not to do so in fiscal year 1995, the last year
it had the authority to do so. Thus, most fees remain at the level
they were in 1991. Copyright Office officials have supported the
need for a fee increase that will match fees to the costs of services
more closely and are planning a study to show what type of fee
structure may be needed.
In September 1996, the Copyright Office objected to a proposal that
it become self-sustaining within a new, government-owned,
intellectual property corporation because of fears that the increased
costs would lead to a burdensome increase in fees, a dramatic
decrease in registrations, and a reduction in free materials
available for the Library of Congress's collections. These concerns
are not supported by the Copyright Office's own study used for the
testimony. In March 1997, the Register of Copyrights agreed that the
fivefold increase in fees she had projected was a worst-case scenario
and was based on the uncertainties the Copyright Office would face if
removed from the Library of Congress. She said that the copyright
process could become self-sustaining--probably with fees about double
those now in effect--under its current organizational structure.
Recently, other organizations--including the Library itself--have
recommended fee increases. CBO has included an option for making the
Copyright Office self-sustaining in its deficit-reduction package for
fiscal year 1998, estimating that fees would need to be raised to a
range of $35 to $40.
The requirement in the law that unpublished works be retained for the
life of the copyright adds to the costs of the copyright process
without providing any measurable benefits to either the copyright
holders or the government. We believe that by eliminating this
requirement, reducing the retention period, or requiring a fee for
extended retention, the additional costs to the government could be
reduced or recovered.
MATTERS FOR CONSIDERATION BY
THE CONGRESS
---------------------------------------------------------- Chapter 4:7
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. The Congress may also wish to consider
setting copyright fees that are more closely aligned with the
services for which they are assessed. In addition, 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.
RECOMMENDATION TO THE REGISTER
OF COPYRIGHTS
---------------------------------------------------------- Chapter 4:8
To reduce the deterioration of fees by inflation, we recommend that
the Register of Copyrights raise fees to account for inflation as
provided by law, when given the opportunity to do so.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 4:9
We provided copies of a draft of this report to the Library of
Congress for its review and comment. At the Library's request, we
also met with Library officials to discuss the Library's written
comments further. The comments of the Library and our responses to
those comments are included in appendix XIII.
The Library strongly disagreed with our discussion of copyright fees
and said that the report was incorrect in stating that the Copyright
Office had opposed fee increases, did not acknowledge the role of the
Congress in setting copyright fees, and did not sufficiently discuss
the impact of fee increases on the Library's collections. In
addition, the Library disagreed with a perceived criticism of the fee
increase projections that the Register provided to the Senate
Committee on the Judiciary in a September 1996 hearing.
Concerning the Library's comments regarding the Copyright Office's
position on fee increases, we added information to the report showing
that the Copyright Office has supported the need for fee increases in
the past, believes a fee increase is needed currently, and supports
proposed legislation that would allow the Register to raise fees to
cover the costs of copyright registration and services. We continue
to believe, however, that the Copyright Office should have adjusted
fees for inflation in fiscal year 1995 because the increase would
have been cost-effective, and Library officials agree that the
Register should make inflation adjustments in the future.
We disagree with the Library's comments that the role of the Congress
in setting fees was not adequately discussed in the draft report. To
the contrary, our report shows that the Congress has chosen to
continue to recover copyright costs through a combination of fees and
appropriations. We point out that the Congress has chosen to make
the patent and trademark processes self-sustaining. In keeping with
this approach, we state that the Congress may wish to consider
whether the Copyright Office should achieve full cost recovery
through fees.
We also believe that the report fairly discusses the potential impact
of a fee increase on deposits available for the Library's
collections. Because the Library (1) has access to all copyrighted
materials submitted for registration, (2) is entitled by law to any
other materials under copyright protection published in the United
States, and (3) rarely takes any unpublished materials, we continue
to believe that the works available should not decline substantially
even if copyright registration applications decline.
Finally, we believe that the report accurately portrays the
Register's testimony in the September 1996 hearings. However, we
clarified the report to show that the Register's concern was with the
high costs of making the Copyright Office self-supporting within a
new, government-owned, intellectual property corporation outside the
Library. We continue to believe that the fees projected were too
high and were not presented in a proper context. For these reasons,
we believe it is necessary to show the Copyright Office's analyses of
these projections in the report.
OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix I
On July 15, 1996, the Chairman of the Senate Committee on the
Judiciary requested that we review the manner by which the U.S.
agencies grant or register patents, trademarks, and copyrights and
use fees in providing services. He asked that we address a series of
interrelated questions regarding how fees are set, whether they
recover costs, and how they are used in the granting and registration
processes.
In subsequent discussions with the Committee staff, we agreed that we
would determine (1) how fees are set for the services provided by the
Patent and Trademark Office (PTO) and the Copyright Office, (2) the
extent to which 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. Our report discusses these
issues in individual chapters on patents, trademarks, and copyrights.
We conducted our work by reviewing available records and interviewing
knowledgeable officials from PTO, the Copyright Office, and
intellectual property organizations. While we developed both
historical and current information on fees, the information we
developed on costs was primarily for fiscal year 1995, the last year
for which complete data were available at the time of our review.
The cost and fee data used in this report are based on data provided
by PTO and the Copyright Office. Except as specifically noted, we
did not independently verify these data.
For the first objective, we determined the extent to which fees are
established by law and by the agencies themselves, the rationale used
by the agencies in updating fees, and the process used by the
agencies in determining individual fees. We also reviewed the
legislative history regarding intellectual property fees to determine
the evolution of the current fee structures. In addition, we
reviewed economic literature related to fee increases.
For the second objective, we determined, to the extent that data were
available, the relationship between the costs and fees charged for
particular services provided by PTO and the Copyright Office during
fiscal year 1995. We then used these data to show the extent to
which the agencies were recovering their costs in total and for
individual services. To the extent possible, we also compared U.S.
fees and costs with those in Europe and Japan; however, the only data
that were sufficient for use in our report involved patents. We did
not independently verify the information obtained.
For the third objective, we identified differences in fees for
various types of services and users of those services. Specifically,
we determined the costs and benefits of (1) charging large and small
entities different fees for the same patent services, (2) charging a
fee for extended storage of published copyrighted materials while
storing unpublished copyrighted materials for the life of the
copyright at no additional cost, and (3) charging a maintenance fee
for patents and a renewal fee for trademarks but no additional fees
to keep a copyright current.
For the fourth objective, we identified areas in which applicants'
errors and delays added to examination time and determined the extent
to which fees were assessed for such delays. Our work for this
objective primarily involved a comparison of patent extension fees
with the applicant delays in the patent process as identified in our
July 1996 report entitled Intellectual Property: Enhancements Needed
in Computing and Reporting Patent Examination Statistics
(GAO/RCED-96-190, July 15, 1996). To perform this analysis, we
updated the data to include fiscal year 1995.
For the fifth objective, we identified areas where fees could be
increased, and to the extent possible, the potential effects of these
increases. This work primarily involved copyright fees because the
patent and trademark processes were already self-sufficient. For
copyrights, we identified potential revenues possible under various
fee scenarios. To determine the potential effects of fee increases
on copyright applications, we also performed a regression analysis
showing the effect of fees on applications since 1986.
During the course of our review, we also developed information on
fiscal year 1995 patent pendency using information from PTO's
automated Patent Application Location and Monitoring system. This
system contains background information on each patent application as
well as a "prosecution history" that shows the date when key actions
were taken on each application during examination. We used these
data to prepare a report to the Chairman entitled Intellectual
Property: Comparison of Patent Examination Statistics for Fiscal
Years 1994 and 1995 (GAO/RCED-97-58, Mar. 13, 1997). These data
were also used in appendix V of this report.
We provided a draft of this report to the Department of Commerce and
the Library of Congress. These agencies provided written comments,
which are included in appendixes XII and XIII, respectively, along
with our responses. In addition, we met with officials of the
Library of Congress after receiving their comments.
We performed our work from July 1996 through April 1997. We
conducted our work in accordance with generally accepted government
auditing standards.
PATENT FEE INCOME RECEIVED BY PTO
IN FISCAL YEAR 1995
========================================================== Appendix II
Percent
Type of fee and Fee per Total fee of
fee code Fee title service income total
------------------ ----------------------------- ------------ ------------ ----------
Patent filing fees
(large entity)
101 Basic filing fee--utility $730.00 $120,038,488 20.78
102 Independent claims in excess 76.00 3,158,166 0.55
of 3
103 Claims in excess of 20 22.00 3,478,376 0.60
104 Multiple dependent claim 240.00 270,234 0.05
105 Surcharge--late filing fee or 130.00 4,482,760 0.78
oath or declaration
106 Design filing fee 300.00 1,689,243 0.29
107 Plant filing fee 490.00 110,544 0.02
108 Reissue filing fee 730.00 361,458 0.06
109 Reissue independent claims 76.00 1,475 0.00
over original patent
110 Reissue claims in excess of
20 and over original patent 22.00 27,708 0.00
=========================================================================================
Total patent
filing fees $133,618,452 23.13
(large entity)
Patent filing fees
(small entity)
201 Basic filing fee--utility $365.00 $26,825,569 4.64
202 Independent claims in excess 38.00 795,620 0.14
of 3
203 Claims in excess of 20 11.00 1,115,036 0.19
204 Multiple dependent claim 120.00 58,893 0.01
205 Surcharge--late filing fee or 65.00 983,792 0.17
oath or declaration
206 Design filing fee 150.00 1,389,035 0.24
207 Plant filing fee 245.00 69,820 0.01
208 Reissue filing fee 365.00 70,525 0.01
209 Reissue independent claims 38.00 77 0.00
over original patent
210 Reissue claims in excess of 11.00 5,570 0.00
20 and over original patent
=========================================================================================
Total patent $31,313,937 5.41
filing fees
(small entity)
Total patent $164,932,389 28.54
filing fees
Patent issue fees
(large entity)
142 Utility issue fee $1,210.00 $86,656,572 15.00
143 Design issue fee 420.00 1,914,960 0.33
144 Plant issue fee 610.00 88,905 0.02
=========================================================================================
Total patent issue
fees (large $88,660,437 15.35
entity)
Patent issue fees
(small entity)
242 Utility issue fee $605.00 $19,122,870 3.31
243 Design issue fee 210.00 1,521,095 0.26
244 Plant issue fee 305.00 69,835 0.01
=========================================================================================
Total patent issue $20,713,800 3.58
fees (small
entity)
=========================================================================================
Total patent issue $109,374,237 18.93
fees
Patent maintenance
fees (large
entity)
181 Maintenance fees received -$33,400 -0.01
without explanation
183 Due at 3.5 years $960.00 55,182,178 9.55
184 Due at 7.5 years 1,930.00 68,797,276 11.91
185 Due at 11.5 years 2,900.00 46,720,870 8.09
186 Surcharge--late payment 130.00 488,236 0.08
within 6 months
=========================================================================================
Total patent $171,155,160 29.62
maintenance fees
(large entity)
Patent maintenance
fees (small
entity)
283 Due at 3.5 years $480.00 $9,388,440 1.63
284 Due at 7.5 years 965.00 8,871,525 1.54
285 Due at 11.5 years 1,450.00 3,956,618 0.68
286 Surcharge--late payment 65.00 312,893 0.05
within 6 months
=========================================================================================
Total patent $22,529,476 3.90
maintenance fees
(small entity)
Patent maintenance
fees regardless
of entity
187 Surcharge--late payment is 640.00 49,435 0.01
unavoidable
188 Surcharge--late payment is 1,500.00 933,978 0.16
unintentional
=========================================================================================
Total patent $983,413 0.17
maintenance fees
regardless of
entity
=========================================================================================
Total patent $194,668,049 33.69
maintenance fees
Patent extension
fees (large
entity):
115 Extension for response within $110.00 $4,516,399 0.78
first month
116 Extension for response within 370.00 8,464,762 1.47
second month
117 Extension for response within 870.00 25,087,326 4.34
third month
118 Extension for response within 1,360.00 2,167,206 0.38
fourth month
=========================================================================================
Total patent $40,235,693 6.97
extension fees
(large entity)
Patent extension
fees (small
entity)
215 Extension for response within $55.00 $920,697 0.16
first month
216 Extension for response within 185.00 1,630,439 0.28
second month
217 Extension for response within 435.00 4,901,266 0.85
third month
218 Extension for response within 680.00 681,674 0.12
fourth month
=========================================================================================
Total patent $8,134,076 1.41
extension fees
(small entity)
Total patent $48,369,769 8.38
extension fees
Patent appeal fees
(large entity)
119 Notice of appeal $280.00 $3,650,465 0.63
120 Filing a brief in support of 280.00 1,418,636 0.25
an appeal
121 Request for oral hearing 240.00 311,503 0.05
Total patent $5,380,604 0.93
appeal fees
(large entity)
Patent appeal fees
(small entity)
219 Notice of appeal $140.00 $535,305 0.09
220 Filing a brief in support of 140.00 230,844 0.04
an appeal
221 Request for oral hearing 120.00 52,330 0.01
=========================================================================================
Total patent $818,479 0.14
appeal fees
(small entity)
=========================================================================================
Total patent $6,199,083 1.07
appeal fees
Patent revival
fees (large
entity)
140 Petition to revive $110.00 $32,058 0.01
unavoidably abandoned
application
141 Petition to revive 1,210.00 2,140,180 0.37
unintentionally abandoned
application
=========================================================================================
Total patent $2,172,238 0.38
revival fees
(large entity)
=========================================================================================
Patent revival
fees (small
entity)
240 Petition to revive $55.00 $33,161 0.01
unavoidably abandoned
application
241 Petition to revive 605.00 753,189 0.13
unintentionally abandoned
application
=========================================================================================
Total patent $786,350 0.14
revival fees
(small entity)
=========================================================================================
Total patent $2,958,588 0.52
revival fees
Statutory
disclaimer fees
148 Statutory disclaimer (large $110.00 $592,634 0.10
entity)
248 Statutory disclaimer (small 55.00 155,266 0.03
entity)
=========================================================================================
Total statutory $747,900 0.13
disclaimer fees
=========================================================================================
Other patent
processing fees
111 Extension of patent term $1,030.00 $41,075 0.01
112 Requesting publication of 840.00 31,153 0.01
Statutory Invention
Registration prior to
examiner's action
113 Requesting publication of 1,690.00 83,377 0.01
Statutory Invention
Registration after
examiner's action
122 Petitions to the 130.00 1,853,081 0.32
commissioner, unless
otherwise specified
126 Submission of an information 210.00 2,546,562 0.44
disclosure statement
138 Petition to institute a 1,390.00 5,480 0.00
public use proceeding
139 Non-English specification 130.00 94,419 0.02
145 Certificate of correction 100.00 565,172 0.10
147 Filing a request for 2,320.00 862,997 0.15
reexamination
=========================================================================================
Total other patent $6,083,316 1.06
processing fees
Patent Cooperation
Treaty
application fees
(large entity)
956 International Preliminary $660.00 $244,906 0.04
Examining Authority--U.S.
958 International Searching 730.00 60,825 0.01
Authority--U.S.
960 PTO is not International 980.00 737,127 0.13
Searching Authority or
International Preliminary
Examining Authority
962 Claims meet Patent 92.00 13,448 0.00
Cooperation Treaty Article
33(1)-(4)--International
Preliminary Examining
Authority--U.S.
964 Claims--extra independent 76.00 352,804 0.06
(over 3)
966 Claim--extra total (over 20) 22.00 618,319 0.11
968 Claims--multiple dependent 240.00 406,912 0.07
970 For filing with European 850.00 5,600,936 0.97
Patent Office or Japanese
Patent Office search report
154 Oath or declaration after 20 130.00 414,495 0.07
or 30 months from priority
date
=========================================================================================
Total Patent $8,449,772 1.46
Cooperation
Treaty
application fees
(large entity)
Patent Cooperation
Treaty
application fees
(small entity)
957 International Preliminary $330.00 $50,287 0.01
Examining Authority--U.S
959 International Searching 365.00 26,682 0.00
Authority--U.S.
961 PTO is not International 490.00 341,685 0.06
Searching Authority or
International Preliminary
Examining Authority
963 Claims meet Patent 46.00 3,280 0.00
Cooperation Treaty Article
33(1)-(4)--International
Preliminary Examining
Authority--U.S.
965 Claims--extra independent 38.00 45,385 0.01
(over 3)
967 Claim--extra total (over 20) 11.00 98,098 0.02
969 Claims--multiple dependent 120.00 49,357 0.01
971 For filing with European 425.00 703,191 0.12
Patent Office or Japanese
Patent Office search report
254 Oath or declaration after 20 65.00 76,082 0.01
or 30 months from priority
date
=========================================================================================
Total Patent $1,394,047 0.24
Cooperation
Treaty
application fees
(small entity)
=========================================================================================
Total Patent $9,843,819 1.70
Cooperation
Treaty
application
filing fees
Patent Cooperation
Treaty processing
fees
150 Patent Cooperation Treaty $210.00 $3,345,943 0.58
transmittal fee
151 Patent Cooperation Treaty 640.00 388,476 0.07
search fee --no U.S.
application
152 Supplemental search per 180.00 252,300 0.04
additional invention
153 Patent Cooperation Treaty 420.00 3,666,851 0.63
search fee --prior U.S.
application
155 Patent Cooperation Treaty-- Variable 15,512 0.00
late payment fee
156 English translation--after 20 130.00 36,341 0.01
months
157 Patent Cooperation Treaty-- Variable 49,368 0.01
designation confirmation fee
159 Overpayments--Patent 46,103 0.01
Cooperation Treaty
190 Preliminary examination fee- 460.00 3,478,187 0.60
-International Searching
Authority was the U.S.
191 Preliminary examination fee- 690.00 694,321 0.12
-International Searching
Authority not the U.S.
192 Additional invention-- 140.00 76,692 0.01
International Searching
Authority was the U.S.
193 Additional invention-- 240.00 1,360 0.00
International Searching
Authority not the U.S.
=========================================================================================
Total Patent < b>$12,051,45 2.08
Cooperation 4
Treaty processing
fees
=========================================================================================
Total Patent $21,895,273 3.78
Cooperation
Treaty
application and
processing fees
Patent service
fees
561 Printed copy of patent w/o $3.00 $2,961,287 0.51
color, regular service
562 Printed copy of patent w/o 6.00 7,279 0.00
color, overnight delivery to
PTO box or overnight fax
563 Printed copy of patent w/o 25.00 6,617 0.00
color, ordered via expedited
mail or fax, expedited
service
564 Printed copy of plant patent, 12.00 20,215 0.00
in color
565 Copy of utility patent or 24.00 834 0.00
Statutory Invention
Registration, with color
drawings
566 Certified or uncertified copy 12.00 923,499 0.16
of patent application as
filed, regular service
567 Certified or uncertified copy 24.00 437,799 0.08
of patent application as
filed, expedited local
service
568 Certified or uncertified copy 150.00 156,046 0.03
of patent-related file
wrapper and contents
569 Certified or uncertified copy 25.00 175,902 0.03
of document, unless
otherwise provided
570 For assignment records, 25.00 305,648 0.05
abstract of title and
certification, per patent
571 Library service 50.00 200 0.00
572 List of U.S. patents and 3.00 192 0.00
Statutory Invention
Registrations in subclass
573 Uncertified statement 10.00 6,770 0.00
regarding status of
maintenance fee payments
574 Copy of non-U.S. Document 25.00 69,128 0.01
575 Comparing and certifying 25.00 52,118 0.01
copies, per document, per
copy
576 Additional filing receipt, 25.00 20,578 0.00
duplicate or corrected due
to applicant error
577 Filing a disclosure document 10.00 219,570 0.04
578 Local delivery box rental, 50.00 4,948 0.00
per annum
579 International type search 40.00 955 0.00
report
580 Self-service copy charge, per 0.25 3,965,313 0.69
page
581 Recording each patent 40.00 7,844,060 1.36
assignment, agreement or
other paper, per property
583 Publication in official 25.00 3,175 0.00
gazette
584 Labor charge for services, 30.00 51,897 0.01
per hour or fraction thereof
585 Unspecified other services 170,326 0.03
586 Retaining abandoned 130.00 27,975 0.00
application
587 Handling fee for incomplete 130.00 26,155 0.00
or improper application
588 Automated Patent Search 40.00 806,589 0.14
System text terminal session
time, per hour
589 Handling fee for withdrawal 130.00 582 0.00
of Statutory Invention
Registration
590 Patent coupons 3.00 1,023,519 0.18
591 Automated Patent Search 15.00 1,644 0.00
System text terminal session
time at the PTDLs, per hour
592 Automated Patent Search 50.00 -9,295 0.00
System--Classified Search
and Retrieval terminal
session time, per hour
=========================================================================================
Total patent < b>$19,281,52 3.33
service fees 5
Patent attorney
enrollment fees
609 Admission to examination $300.00 $628,080 0.11
610 Registration to practice 100.00 110,027 0.02
611 Reinstatement to practice 15.00 1,650 0.00
612 Copy of certification of good 10.00 1,317 0.00
standing
613 Certificate of good standing- 20.00 250 0.00
-suitable for framing
615 Review of decision of 130.00 1,040 0.00
Director, Office of
Enrollment and Discipline
616 Regrading an examination 130.00 15,355 0.00
=========================================================================================
Total patent $757,719 0.13
attorney
enrollment fees
=========================================================================================
Miscellaneous
service fees
607 Establish deposit account $10.00 $710 0.00
608 Service charge for below 25.00 79,232 0.01
minimum balance
617 Processing returned checks 50.00 19,045 0.00
618 Computer records at costs 954,665 0.17
Unspecified patent fees 1,378,329 0.24
=========================================================================================
Total $2,431,981 0.42
miscellaneous
service fees
=========================================================================================
Total patent $577,699,829 99.98
fees\a
-----------------------------------------------------------------------------------------
\a Percent does not equal to 100 because of rounding.
Source: Patent and Trademark Office; GAO's computations.
PATENT FEES FOR FISCAL YEAR 1997
========================================================= Appendix III
Type of fee and fee
code Fee title Fee per service
------------------- ------------------------------------------------ ------------------
101 Basic filing fee--utility $770.00
102 Independent claims in excess of 3 80.00
103 Claims in excess of 20 22.00
104 Multiple dependent claim 260.00
105 Surcharge--late filing fee or oath or 130.00
declaration
106 Design filing fee 320.00
107 Plant filing fee 530.00
108 Reissue filing fee 770.00
109 Reissue independent claims over original patent 80.00
110 Reissue claims in excess of 20 and over original 22.00
patent
Patent filing fees
(small entity)
201 Basic filing fee--utility 385.00
202 Independent claims in excess of 3 40.00
203 Claims in excess of 20 11.00
204 Multiple dependent claim 130.00
205 Surcharge--late filing fee or oath or 65.00
declaration
206 Design filing fee 160.00
207 Plant filing fee 265.00
208 Reissue filing fee 385.00
209 Reissue independent claims over original patent 40.00
210 Reissue claims in excess of 20 and over original 11.00
patent
Patent issue fees
(large entity)
142 Utility issue fee 1,290.00
143 Design issue fee 440.00
144 Plant issue fee 650.00
Patent issue fees
(small entity)
242 Utility issue fee 645.00
243 Design issue fee 220.00
244 Plant issue fee 325.00
Patent maintenance
fees (large
entity)
183 Due at 3.5 years 1,020.00
184 Due at 7.5 years 2,050.00
185 Due at 11.5 years 3,080.00
186 Surcharge--late payment within 6 months 130.00
Patent maintenance
fees (small
entity)
283 Due at 3.5 years 510.00
284 Due at 7.5 years 1,025.00
285 Due at 11.5 years 1,540.00
286 Surcharge--late payment within 6 months 65.00
Patent maintenance
fees regardless of
entity
187 Surcharge--late payment is unavoidable 680.00
188 Surcharge--late payment is unintentional 1,600.00
Patent extension
fees (large
entity)
115 Extension for response within first month 110.00
116 Extension for response within second month 390.00
117 Extension for response within third month 930.00
118 Extension for response within fourth month 1,470.00
Patent extension
fees (small
entity)
215 Extension for response within first month 55.00
216 Extension for response within second month 195.00
217 Extension for response within third month 465.00
218 Extension for response within fourth month 735.00
Patent appeal fees
(large entity)
119 Notice of appeal 300.00
120 Filing a brief in support of an appeal 300.00
121 Request for oral hearing 260.00
Patent appeal fees
(small entity)
219 Notice of appeal 150.00
220 Filing a brief in support of an appeal 150.00
221 Request for oral hearing 130.00
Patent revival fees
(large entity)
140 Petition to revive unavoidably abandoned 110.00
application
141 Petition to revive unintentionally abandoned 1,290.00
application
Patent revival fees
(small entity)
240 Petition to revive unavoidably abandoned 55.00
application
241 Petition to revive unintentionally abandoned 645.00
application
Statutory
disclaimers
148 Statutory disclaimer (large entity) 110.00
248 Statutory disclaimer (small entity) 55.00
Other patent
processing fees
111 Extension of term of patent under 1.740 1,090.00
111 Initial application for interim extension under 410.00
1.790
111 Subsequent application for interim extension 210.00
under 1.790
112 Requesting publication of Statutory Invention 900.00
Registration--prior to examiner's action
113 Requesting publication of Statutory Invention 1,790.00
Registration--after examiner's action
122 Petitions to the Commissioner, unless otherwise 130.00
specified
126 Submission of an information disclosure 230.00
statement
138 Petition to institute a public use proceeding 1,470.00
139 Non-English specification 130.00
145 Certificate of correction 100.00
147 Filing a request for reexamination 2,460.00
146 Filing a submission after final rejection (large 770.00
entity)
246 F iling a submission after final rejection (small 385.00
entity)
149 Per additional invention to be examined (large 770.00
entity)
249 Per additional invention to be examined (small 385.00
entity)
Patent Cooperation
Treaty application
fees (large
entity)
956 International Preliminary Examining Authority-- 700.00
U.S
958 International Searching Authority--U.S. 770.00
960 PTO is not International Searching Authority or 1,040.00
International Preliminary Examining Authority
962 Claims meet Patent Cooperation Treaty Article 96.00
33(1)-(4)--International Preliminary Examining
Authority--U.S.
964 Claims--extra independent (over 3) 80.00
966 Claims--extra total (over 20) 22.00
968 Claims--multiple dependent 260.00
970 For filing with European Patent Office or 910.00
Japanese Patent Office search report
154 Oath or declaration after 20 or 30 months from 130.00
priority date
Patent Cooperation
Treaty application
fees (small
entity)
957 International Preliminary Examining Authority-- 350.00
U.S
959 International Searching Authority--U.S. 385.00
961 PTO is not International Searching Authority or 520.00
International Preliminary Examining Authority
963 Claims meet Patent Cooperation Treaty Article 48.00
33(1)-(4)--International Preliminary Examining
Authority--U.S.
965 Claims--extra independent (over 3) 40.00
967 Claims--extra total (over 20) 11.00
969 Claims--multiple dependent 130.00
971 For filing with European Patent Office or 455.00
Japanese Patent Office search report
254 Oath or declaration after 20 or 30 months from 65.00
priority date
Patent Cooperation
Treaty processing
fees
150 Patent Cooperation Treaty transmittal fee 230.00
151 Patent Cooperation Treaty search fee--no U.S . 680.00
application
152 Supplemental search per additional invention 200.00
153 Patent Cooperation Treaty search fee--prior U.S. 440.00
application
156 English translation--after 20 months 130.00
190 Preliminary examination fee--International 480.00
Searching Authority was the U.S.
191 Preliminary examination fee--International 730.00
Searching Authority not the U.S.
192 Additional invention--International Searching 140.00
Authority was the U.S.
193 Additional invention--International Searching 260.00
Authority not the U.S.
Patent service fees
561 Printed copy of patent w/o color, regular 3.00
service
562 Printed copy of patent w/o color, delivery to 6.00
PTO box or overnight fax
563 Printed copy of patent w/o color, ordered via 25.00
expedited mail or fax, expedited service
564 Printed copy of plant patent, in color 12.00
565 Copy of utility patent or SIR, with color 24.00
drawings
566 Certified or uncertified copy of patent 15.00
application as filed, regular service
567 Certified or uncertified copy of patent 30.00
application as filed, expedited local service
568 Certified or uncertified copy of patent-- 150.00
related file wrapper and contents
569 Certified or uncertified copy of document, 25.00
unless otherwise provided
570 For assignment records, abstract of title and 25.00
certification, per patent
571 Library service 50.00
572 List of U.S. patents and Statutory Invention 3.00
Registrations in subclass
573 Uncertified statements re status of maintenance 10.00
fee payments
574 Copy of non-U.S. Document 25.00
575 Comparing and certifying copies, per document, 25.00
per copy
576 Additional filing receipt, duplicate or 25.00
corrected due to applicant error
577 Filing a disclosure document 10.00
578 Local delivery box rental, per annum 50.00
579 International type search report 40.00
580 Self-service copy charge, per page 0.25
581 Recording each patent assignment, agreement or 40.00
other paper, per property
583 Publication in official gazette 25.00
584 Labor charge for services, per hour or fraction 30.00
thereof
585 Unspecified expedited services At cost
586 Retaining abandoned application 130.00
587 Handling fee for incomplete or improper 130.00
application
588 Automated Patent Search System--text terminal 40.00
session time, per hour
589 Handling fee for withdrawal of Statutory 130.00
Invention Registration
590 Patent coupons 3.00
592 Automated Patent Search System--Classified 50.00
Search and Image Retrieval terminal session
time, per hour
Patent attorney
enrollment fees
609 Admission to examination 40.00
610 Registration to practice 100.00
611 Reinstatement to practice 40.00
612 Copy of certification of good standing 10.00
613 Certificate of good standing--suitable for 20.00
framing
615 Review of decision of Director, Office of 130.00
Enrollment and Discipline
616 Regarding an examination 225.00
Miscellaneous
service fees
607 Establish deposit account 10.00
608 Service charge for below minimum balance 25.00
617 Processing returned checks 50.00
618 Computer records At cost
-----------------------------------------------------------------------------------------
Source: PTO.
COMPARISON OF PATENT FEES FOR PTO,
JAPANESE PATENT OFFICE, AND
EUROPEAN PATENT OFFICE
========================================================== Appendix IV
Fees to Fees to
obtain maintain
PTO patent\a patent Total fees
------------------------------ ------------ ------------ ----------
Large entity $2,060 $6,150 $8,210
Small entity $1,030 $3,075 $4,105
Japanese Patent Office $985 $10,230 $11,215
European Patent Office
One country $4,942 $2,121 $7,063
Eight countries\b $6,546 $71,047 $77,593
All countries $8,608 $117,515 $126,123
----------------------------------------------------------------------
Notes: Foreign currency exchange rates based on Oct. 1996 average.
Fees as used in this table are the fees paid to the agency and do not
include external fees such as attorneys' fees. The European Patent
Office has reported that its fees are scheduled to be adjusted
downward on July 1, 1997.
\a The fees to obtain a patent include all basic fees from filing
application to grant of patent.
\b In the European Patent Office, additional fees must be paid for
each country designated. The average number of member states
designated for each European Patent Office application was 7.9 in
1995. Thus, we made our calculation using the fees for the eight
member states that were designated most often in 1995.
Source: PTO; GAO's calculations.
COMPARISON OF PATENT PENDENCY BY
EXAMINATION GROUP FOR PATENTS
ISSUED OR APPLICATIONS ABANDONED
DURING FISCAL YEAR 1995
=========================================================== Appendix V
Number of Average pendency
Group Description applications in months
------------------ ----------------------------- ------------------ ------------------
1100 General, metallurgical, 12,835 19.2
inorganic, petroleum and
electrical chemistry and
engineering
1200 Organic chemistry drug, etc. 9,473 19.3
1300 Specialized chemical 8,635 19.4
industries, etc.
1500 High polymer chemistry, 14,079 19.4
plastics, coating,
photography, etc.
1800 Biotechnology 12,605 21.6
2100 Industrial electronics, 10,232 20.9
physics, etc.
2200 Special laws administration 5,429 24.4
2300 Computer systems, etc. 8,701 26.2
2400 Packages, cleaning, textiles, 8,006 18.9
and geometrical instruments
2500 Electronic/optical systems, 15,431 19.6
etc.
2600 Communications, measuring, 13,463 22.1
testing and lamp/discharge
group
2900 Special designs 16,134 19.4
3100 Handling and transporting 9,121 17.5
media
3200 Material shaping, tools, etc. 9,132 17.7
3300 Medical technology, sporting 12,186 18.4
goods, etc.
3400 Solar, heat, power and fluid 9,401 17.4
engineering devices
3500 Construction, petroleum and 10,325 18.7
mining engineering
Not determined 1,007 Not determined
=========================================================================================
Total 186,195 19.8
-----------------------------------------------------------------------------------------
Source: Patent Application Location and Monitoring system, PTO;
GAO's computations.
TRADEMARK FEE INCOME RECEIVED BY
PTO IN FISCAL YEAR 1995
========================================================== Appendix VI
Type of fee and Fee per Total fee Percent of
fee code Fee title service income total
------------------ ----------------------------- ---------- -------------- ----------
Trademark
processing fees
361 Application for registration, $245.00 $48,975,658 71.51
per class
362 Filing an amendment to allege 100.00 514,920 0.75
use under section 1(c), per
class
363 Filing a statement of use 100.00 2,179,315 3.18
under section 1(d)(1), per
class
364 Filing a request for a 6- 100.00 3,561,243 5.20
month extension of time for
filing a statement of use
under section 1(d)(1), per
class
365 Application for renewal, per 300.00 2,431,445 3.55
class
366 Additional fee for late 100.00 88,543 0.13
renewal, per class
367 Publication of mark under 100.00 6,939 0.01
section 12 (c), per class
368 Issuing new certificate of 100.00 22,600 0.03
registration
369 Certificate of correction, 100.00 45,920 0.07
registrant's error
370 Filing disclaimer to 100.00 1,300 0.00
registration
371 Filing amendment to 100.00 58,800 0.09
registration
372 Filing section 8 affidavit, 100.00 305,785 0.45
per class
373 Filing section 15 affidavit, 100.00 64,860 0.09
per class
374 Filing combined sections 8 200.00 5,012,103 7.32
and 15 affidavit, per class
375 Petition to the Commissioner 100.00 92,550 0.14
376 Petition for cancellation, 200.00 276,620 0.40
per class
377 Notice of opposition, per 200.00 903,080 1.32
class
378 Ex parte appeal, per class 100.00 135,630 0.20
379 Dividing an application, per 100.00 67,625 0.10
new application, (file
wrapper) created
=========================================================================================
Total trademark $64,744,936 94.54
processing fees
Trademark service
fees
461 Printed copy of each $3.00 $4,812 0.01
registered mark, regular
service
462 Printed copy of each 6.00 1,148 0.00
registered mark, overnight
delivery to PTO box or
overnight fax
463 Printed copy of each 25.00 647 0.00
registered mark ordered via
expedited mail or fax,
expedited service
464 Certified copy of registered 10.00 84,110 0.12
mark, with title and/or
status, regular service
465 Certified copy of registered 20.00 217,848 0.32
mark, with title and/or
status, expedited local
service
466 Certified or uncertified copy 12.00 113,705 0.17
of trademark application as
filed, regular service
467 Certified or uncertified copy 24.00 152,199 0.22
of trademark application as
filed, expedited local
service
468 Certified or uncertified copy 50.00 21,719 0.03
of trademark-related file
wrapper and contents
469 Certified or uncertified copy 25.00 5,204 0.01
of trademark document,
unless otherwise provided
470 For assignment records, 25.00 21,648 0.03
abstracts of title and
certification per
registration
475 Comparing and certifying 25.00 9,214 0.01
copies, per document, per
copy
480 Self-service copy charge, per 0.25 440,631 0.64
page
481 Recording trademark 40.00 661,937 0.97
assignment, agreement or
other paper, first mark per
document
482 For second and subsequent 25.00 1,846,515 2.70
marks in the same document
484 Labor charges for services, 30.00 22,467 0.03
per hour or fraction thereof
485 Unspecified other services At cost 60,335 0.09
488 Each hour of X-SEARCH 40.00 72,132 0.11
terminal session time
490 Trademark coupons 3.00 5,464 0.01
Unspecified trademark fees 125 0.00
=========================================================================================
Total trademark $3,741,860 5.47
service fees
=========================================================================================
Total\a $68,486,796 100.01
-----------------------------------------------------------------------------------------
\a Total percent does not equal 100.00 percent because of rounding.
Source: PTO; GAO's computations.
TRADEMARK FEES FOR FISCAL YEAR
1997
========================================================= Appendix VII
Type of fee and fee code Fee title Fee per service
------------------------ --------------------------------------- ----------------------
Trademark processing
fees
361 Application for registration, per class $245.00
362 Filing an amendment to allege use under 100.00
section 1(c), per class
363 Filing a statement of use under section 100.00
1(d)(1), per class
364 Filing a request for a 6 month 100.00
extension of time for filing a
statement of use under section
1(d)(1), per class
365 Application for renewal, per class 300.00
366 Additional fee for late renewal, per 100.00
class
367 Publication of mark under section 100.00
12(c), per class
368 Issuing new certificate of registration 100.00
369 Certificate of correction, registrant's 100.00
error
370 Filing disclaimer to registration 100.00
371 Filing amendment to registration 100.00
372 Filing section 8 affidavit, per class 100.00
373 Filing section 15 affidavit, per class 100.00
374 Filing combined sections 8 and 15 200.00
affidavit, per class
375 Petition to the Commissioner 100.00
376 Petition for cancellation, per class 200.00
377 Notice of opposition, per class 200.00
378 Ex parte appeal, per class 100.00
379 Dividing an application, per new 100.00
application, (file wrapper) created
Trademark service fees
461 Printed copy of each registered mark, $3.00
regular service
462 Printed copy of each registered mark, 6.00
overnight delivery to PTO box or
overnight fax
463 Printed copy of each registered mark 25.00
ordered via expedited mail or fax,
expedited service
464 Certified copy of registered mark, with 10.00
title and/or status, regular service
465 Certified copy of registered mark, with 20.00
title and/or status, expedited local
service
466 Certified or uncertified copy of 15.00
trademark application as filed,
regular service
467 Certified or uncertified copy of 30.00
trademark application as filed,
expedited local service
468 Certified or uncertified copy of 50.00
trademark-related file wrapper and
contents
469 Certified or uncertified copy of 25.00
trademark document, unless otherwise
provided
470 For assignment records, abstracts of 25.00
title and certification per
registration
475 Comparing and certifying copies, per 25.00
document, per copy
480 Self service copy charge, per page 0.25
481 Recording trademark assignment, 40.00
agreement or other paper, first mark
per document
482 For second and subsequent marks in the 25.00
same document
484 Labor charges for services, per hour or 30.00
fraction thereof
485 Unspecified other services At cost
488 Each hour of X-SEARCH terminal session 40.00
time
490 Trademark coupons 3.00
-----------------------------------------------------------------------------------------
Source: PTO.
COPYRIGHT FEES FOR FISCAL YEAR
1997
======================================================== Appendix VIII
Fee title Fee per service
--------------------------------------------------------------------- ------------------
Application for registration $20.00
Application per issue for group serial registration (minimum fee 10.00
$20.00)
Application for group registration of daily newspaper, per month 40.00
Application for restoration of copyright under the General Agreements 10.00
on Tariffs and Trade treaty (minimum fee $20.00)
Recordation, under section 205, of a document containing no more than 20.00
one title
Recordation of additional titles; each group of 10 or fewer 10.00
Recordation, under the Uruguay Round Agreements Act, of a notice of 30.00
intent to enforce copyright, containing no more than one work
Additional works contained in the notice of intent to enforce 1.00
copyright, each
Additional certificates, each 8.00
Any other certification including Copyright Office records, each, per 20.00
hour
Search: reports from official records, per hour 20.00
Search: locating Copyright Office records, per hour 20.00
Filing of notice of intent to make and distribute phone records under 12.00
section 115(b)
Receipt for deposit, each 4.00
Special handling for registration 330.00
Special handling for registration given if a single deposit copy 50.00
covers multiple claims and special handling is requested only for
one
Special handling for recordation of a document 330.00
Full-term retention of copyright deposits under section 704 (e) 270.00
Expedited additional certificate, per hour 50.00
Expedited in-process search, per hour 50.00
Expedited copy of assignment, per hour 50.00
Expedited certification, per hour 50.00
Expedited copy of deposit stored off-site, first hour 70.00
Expedited copy of deposit stored off-site, each additional hour 50.00
Expedited copy of correspondence file stored in Madison Building or 70.00
at an off-site storage facility, first hour
Expedited copy of correspondence file stored in Madison Building or 50.00
at an off-site storage facility, each additional hour
Expedited reference and bibliographic search, first hour 100.00
Expedited reference and bibliographic search, each additional hour 50.00
-----------------------------------------------------------------------------------------
Source: Copyright Office.
COPYRIGHT FEE REVENUES RECEIVED BY
THE COPYRIGHT OFFICE IN FISCAL
YEAR 1995
========================================================== Appendix IX
Fee per Percent of
Title service Total fee income total
--------------------------------------- -------------- ---------------- --------------
Supplementary information for $20.00 $68,386 .46
registration
Serial registration 20.00 1,539,664 10.45
Literary works registration 20.00 3,936,280 26.71
Group daily newspaper registration 40.00 77,080 .52
Group serial registration 10.00 267,640 1.82
Mask works registration 20.00 18,580 .13
Motion picture registration 20.00 355,780 2.41
Performing arts registration 20.00 2,833,246 19.22
Sound recording registration 20.00 721,173 4.89
Renewal registration 20.00 646,882 4.39
Visual arts registration 20.00 2,107,476 14.30
Special handling for registration\a 330.00 838,200 5.69
Special handling for recordation of a 330.00 193,050 1.31
document
Document recordation\b 20.00 544,569 3.70
Surcharges for expedited certifications 50.00 .77
and reference and bibliographic 114,092
searches, first hour\c
Certifications\d 8.00 123,107 .84
Searches, per hour 20.00 194,849 1.32
Other\e Variable 157,676 1.07
=========================================================================================
Total $14,737,730 100.00
-----------------------------------------------------------------------------------------
\a An additional fee of $50 is charged for each claim given special
handling if a single deposit copy covers multiple claims and special
handling is requested only for one.
\b A $10 fee is charged for recording each group of 10 or fewer
additional titles.
\c A fee of $70 for the first hour and $50 for each additional hour
is charged for obtaining copies of correspondence stored at an
off-site storage facility or at the Madison Building and copies of
deposits stored off-site. A surcharge of $100 for the first hour and
$50 for each additional hour is charged for expedited reference and
bibliographic searches.
\d A $20 per hour fee is charged for additional certifications.
\e This includes various fees collected for miscellaneous services,
such as making copies and inspecting records.
Source: Copyright Office.
COPYRIGHT OFFICE'S ANALYSIS
SHOWING FEES REQUIRED FOR SELF
SUFFICIENCY
=========================================================== Appendix X
In September 1996, the Senate Committee on the Judiciary held a
hearing on S. 1961, the Omnibus Patent Act of 1996. Among other
things, S. 1961 would have moved the Copyright Office with PTO into
a new Intellectual Property Organization and would have made the
Copyright Office self-sustaining through fees. In the hearings, the
Register of Copyrights opposed making the Copyright Office
self-sufficient, stating that fees would increase fivefold and
applications would decrease. This position was based on one scenario
taken from an analysis the Copyright Office had made that considered
fees under 12 scenarios. The entire analysis is reprinted in the
following sections, using the Copyright Office's own terminology.
Table X.1
Financial Impacts of Separation Expenses
in Fiscal Year 1997 for Copyright Basic
Current Independent Outsi
Organization Agency in LC de LC
------------- ---------------------------- ------------ -------------- -----
Personals Salaries and Benefits $22,750,000 $21,900,000\a $21,9
00,00
0\a
Increased Staffing for 2,000
Automation ,000\
b
Mandatory Pay Increases 1,000,000 1,000,000 1,000
,000
Non Non Automation 1,600,000 1,500,000\d 1,700
Personals\c ,000\
e
Automation 240,000 240,000 2,240
,000\
f
Overhead\g *** 8,700,000\h 6,000
,000
Facilities Office, Light Industrial & *** 230,000\i 5,000
Warehouse ,000\
j
Security *** 80,00
0\k
Relocation Moving 80,00
Costs\l 0
Furnishings\m 2,500
,000
Telephones\n 1,300
,000
Security\o 840,0
00\p
Increased Printing 250,0
00\q
Total $ 25,590,000 $ 33,570,000 $ 44,89
0,000
--------------------------------------------------------------------------------
*** Provided by the Library
\a Assumes that Copyright Acquisitions Division ($701,000) and
Compliance Records Unit ($144,300) are transferred to the Library.
\b Replaces automation staff support lost as a result of separation
from the Library.
\c Less the $2,340,000 appropriated for GATT for fiscal 1996 and
1997.
\d Non personals of $67,624 (8% x 845,300) deducted for Copyright
Acquisitions Division and Compliance Records Unit.
\e $170,000 increase for two contracts: $9,400 ($185 per week x 52)
to send deposits to storage, and $160,000 ($40,000 x 4) for minimum
security staffing.
\f $2 million increase for mainframe and server processing.
\g Personnel, Financial and Health Services, Procurement and
Contracting Support.
\h The Library's overhead rate of 21.4% applied to Copyright's
appropriation of $27,828,000 = $5,955,192 + $2.7 million for the
Library's estimate of Copyright automation expenses.
\i The Library calculates Copyright's space usage at $7.6 million.
$230,000 is for Landover warehouse space, and $7.4 million (147,725
sq. ft. @ $50 per sq. ft.) is Madison space. The space usage in
Madison is a "beneficial occupancy" and should not be assessed.
\j Facility costs calculated at the General Service Administration's
rate of $32 per sq. ft.
\k Annual maintenance cost.
\l $5 million.
\m $5,000 x 500 for workstations + $100 x 500 for file cabinets.
\n Equipment $250,000, switch $500,000, and wiring 500,000.
\o Startup costs for knogo gates ($55,000), cameras, and card
readers, and intrusive detection system.
\p Electronic ($840,000) and non electronic ($80,000).
\q Reprinting costs for registration forms, circulars, and stationery
to include address change.
Source: Copyright Office.
Table X.2
Fee Per Registration for Full Cost
Recovery Current Organization
Year 1 Year 2 Year 1 Year 2 Year 1 Year 2 Year 1 Year 2
30% 15% 20% 10% 10% 5% 5% 2.5%
--------- -------- -------- -------- -------- -------- -------- -------- --------
Expenses $25,590, $25,590, $25,590, $25,590, $25,590, $25,590, $25,590, $25,590,
000 000 000 000 000 000 000 000
Less -$ -$ -$ -$ -$ -$ -$ -$
Other 2,000,00 2,000,00 2,000,00 2,000,00 2,000,00 2,000,00 2,000,00 2,000,00
Service 0 0 0 0 0 0 0 0
Fees
Plus $ $ $ $
Mandator 1,000,00 1,000,00 1,000,00 1,000,00
ies 0 0 0 0
Adj. $23,590, $24,590, $23,590, $24,590, $23,590, $24,590, $23,590, $24,590,
Expenses 000 000 000 000 000 000 000 000
Registrat 420,000 357,000 480,000 432,000 540,000 513,000 570,000 555,750
ions
Fee Per $56 $69 $49 $57 $44 $48 $41 $44
Registra
tion
-----------------------------------------------------------------------------------------
Assumptions:
Congress mandates full cost recovery.
Enactment of legislation authorizing fee increases.
Fiscal 1997.
Year 1 expenses include $1 million for mandatory pay increases.
Current registrations (600,000) decrease when fees are increased.
Other fees are level.
Source: Copyright Office.
Table X.3
Fees Per Registration for Full Cost
Recovery Independent Agency in the
Library without Offsetting Credits
Year 2
Year 1 Year 2 Year 1 Year 2 Year 1 Year 2 Year 1 2.5%
30% Loss 15% Loss 20% Loss 10% Loss 10% Loss 5% Loss 5% Loss Loss
--------- -------- -------- -------- -------- -------- -------- -------- --------
Expenses $33,570, $33,570, $33,570, $33,570, $33,570, $33,570, $33,570, $33,570,
000 000 000 000 000 000 000 000
Less $2,000,0 $2,000,0 $2,000,0 $2,000,0 $2,000,0 $2,000,0 $2,000,0 $2,000,0
Other 00 00 00 00 00 00 00 00
Service
Fees
Mandatory $1,000,0 $1,000,0 $1,000,0 $1,000,0
Pay 00 00 00 00
Increase
Adj. $31,570, $32,570, $31,570, $32,570, $31,570, $32,570, $31,570, $32,570,
Expenses 000 000 000 000 000 000 000 000
Registrat 420,000 357,000 480,000 432,000 540,000 513,000 570,000 555,750
ions
Fees Per $75 $91 $66 $75 $62 $63 $55 $59
Registra
tion
-----------------------------------------------------------------------------------------
Assumptions:
Congress mandates full cost recovery.
Enactment of legislation authorizing fee increases.
Fiscal 1997 Expenses.
Year 1 expenses include $1 million for mandatory pay increases.
LC charges for overhead and facilities and there is no credit for
value deposits.
Current registrations (600,000) decrease when fees are increased.
Other fees are level.
Source: Copyright Office.
Table X.4
Fees Per Registration for Full Cost
Recovery Copyright Office Outside the
Library
Year 2
Year 1 Year 2 Year 1 Year 2 Year 1 Year 2 Year 1 2.5%
30% Loss 15% Loss 20% Loss 10% Loss 10% Loss 5% Loss 5% Loss Loss
--------- -------- -------- -------- -------- -------- -------- -------- --------
Expenses $44,890, $39,890, $44,890, $39,890, $44,890, $39,890, $44,890, $39,890,
000 000 000 000 000 000 000 000
Less - - - - - - $ $
Other $2,000,0 $2,000,0 $2,000,0 $2,000,0 $2,000,0 $2,000,0 2,000,00 2,000,00
Service 00 00 00 00 00 00 - 0 - 0
Fees
Plus $1,000,0 $1,000,0 $1,000,0 $
Mandator 00 00 00 1,000,00
ies 0
Adj. $42,890, $38,890, $42,890, $38,890, $42,890, $38,890, $42,890, $38,890,
Expenses 000 000 000 000 000 000 000 000
Registrat 420,000 357,000 480,000 432,000 540,000 513,000 570,000 555,750
ions
Fees Per $102 $109 $89 $90 $79 $76 $75 $70
Registra
tion
-----------------------------------------------------------------------------------------
Assumptions:
Congress Mandates Full Cost Recovery.
Fiscal 1997.
Year 1 expenses include $1 million for mandatory pay increases.
Year 2 expenses are less $5 million relocation costs.
Enactment of legislation authorizing fee increases.
Current registrations (600,000) decrease when fees are increased.
Other fees are level.
Source: Copyright Office.
REGRESSION ANALYSIS OF COPYRIGHT
APPLICATIONS
========================================================== Appendix XI
This appendix discusses the regression model we developed to examine
the effect that fee changes have had on copyright applications over
the past 11 years.\8 We developed a statistical regression model for
this analysis that examined whether several factors are associated
with changes in applications. We found that although applications
were negatively correlated with fees--that is, fee increases were
correlated with reduced applications--the primary factor associated
with the level of applications was the general level of economic
activity as measured by the Gross Domestic Product (GDP). The
discussion in this appendix describes the (1) purpose and limitations
of the analysis, (2) data sources used, (3) structure of the model,
and (4) model's results.
--------------------
\8 This time period was required by the fact that "receipt of
claims," or copyright applications, have only been recorded since
1986. As such, we used a quarterly model over this 11-year time
period. An alternative measure of quantity could have been
registrations of copyrights, but this would pose some problems.
First, applications that are rejected because they are incomplete
probably represent those that are of minimal economic benefit to the
applicant. These same applicants are also likely to be the most
deterred by an increase in the fee. Thus, registrations are not
likely to be the best measure to use for studying the effects of fee
changes.
PURPOSE AND LIMITATIONS OF THIS
ANALYSIS
-------------------------------------------------------- Appendix XI:1
The primary purpose of this analysis was to measure how copyright
applications change in response to fee changes. In order to do this,
we constructed a regression model that analyzed several factors that
we hypothesized, on the basis of economic reasoning, would be related
to the level of copyright applications. For example, a considerable
amount of economic literature explores the relationship between
research and development expenditures and patenting experience.
While patents would likely be more related to research expenditures,
we hypothesized that one of the driving factors for copyright
applications would be the general level of economic activity. Thus,
the basic model related applications to the level of economic
activity, as measured by the GDP, the application fee, and dummy
variables to control for seasonal variation in applications
throughout the year.
An important caveat to this analysis is that there are likely to be
factors that influence copyright applications that are unknown or
unmeasurable. Thus, this model may not be highly predictive. In
particular, if we wanted to use the model to predict the effect of
fee increases on applications, the greater the fee increase we want
to analyze, the less valid the model would be in predicting the drop
in applications that would result. This is because the results of
econometric models are best used for analyzing the effects of small
changes in the independent factors. In this case, however, because
our model results are stable and statistically significant, the model
is a reasonable tool for analyzing the effects of larger changes in
the independent factors, such as fee levels, on the level of
applications.
SOURCES FOR DATA
-------------------------------------------------------- Appendix XI:2
All data on copyright applications as well as information on
application fees were obtained from the Copyright Office. The
applications data were obtained for total applications and also for
certain specific categories of applications, as discussed later.
Additionally, we received information on applications that were
cancelled because they were not fully paid for after the 1991 fee
increase. Data on specific categories of applications and on
cancellation were available on a fiscal year basis, which required
that these data to be apportioned for a quarterly model.
We obtained data on GDP and the implicit price deflator for GDP from
Data Resources, Inc.
STRUCTURE OF THE MODEL
-------------------------------------------------------- Appendix XI:3
The basic hypothesis underlying this analysis is that copyright
applications vary over time and that this variation is related to
changes in the level of macroeconomic activity, the fee charged for
copyright applications, and seasonal variation in applications over
the course of the year. Regarding GDP, we hypothesize that there may
be a lag in the relationship between GDP and applications. We also
hypothesize that because fee increases are usually announced ahead of
time, applications may surge in the period prior to a higher fee.
The basic quarterly model is thus:
Qt\c = f(GDPlag, feet, seasonal dummies, surge),
where:
Qt\c is the number of applications submitted in period t, GDPlag is
the level of real GDP in some lagged time period, fee is the real
level of the fee in time period t, seasonal dummies are two dummy
variables for winter and summer, and surge is a dummy variable that
takes a value of 1 in the quarter before a nominal fee increase and a
value of zero in all other quarters.
MEASUREMENT OF DEPENDENT
VARIABLE
-------------------------------------------------------- Appendix XI:4
The measurement of the dependent variable--the number of copyright
applications per quarter--was not straightforward. In defining
applications, we would prefer to use total applications, not
accounting for different categories of copyrights. However, for
three categories of applications, there were "rule changes" in 1991
that made their inclusion in this analysis problematic.
First, filings of serials were changed in 1991 so that applicants
were allowed to bundle several issues over a 3-month period and file
them together. In doing so, they were grandfathered in at the old
fee: They continued to pay only $10 per issue for the bundled set.
This caused filings for Class SE, the original serials category, to
drop after 1991 and a new category called Group SE to be established.
Unfortunately, however, within one Group SE filing there are a bundle
of issues and thus the counts over time are reduced not because there
were necessarily any fewer filings, but because some of them are
being bundled together. At the same time, another category, Class
RE, which are renewals, also had a drop-off in applications because
renewals became automatic after 1991.\9 We were told by a Copyright
Office official that in the office's own analyses of applications
over time, Class RE, Class SE, and Group SE are usually eliminated.
As suggested by the Copyright Office, we used one measure of
applications in our model that excluded these three categories.
However, in an effort to retain the data on serials, which constitute
a large category of applications, we made an estimate of the number
of individual issues contained within the average Group SE filing.\10
Doing this allowed us to estimate an alternative measure of
applications that only eliminated Class RE from the total number of
applications filed each quarter.
For both measures of applications, we also reduced the original
"receipt of claims" data by the number of cancellations of
applications that occurred due to lack of full payment of the fee.
Data on cancellations, available for fiscal years but not quarterly,
were obtained from the Copyright Office.
To summarize, there are two measures of applications that we used.
The first took the total number of applications in a quarter and
subtracted the number of Class SE, Group SE, Class RE, and cancelled
(for nonpayment) applications. The second measure only deleted Class
RE and cancelled applications but retained Class SE and Group SE by
estimating the number of issues contained within an average Group SE
application.
--------------------
\9 In particular, after the fee increase in 1991, many applications
were received that included the pre-1991 application fee. The
copyright office followed up with letters asking for an additional
$10 to process the application. Many of those additional fees were
never received. This is important because it may indicate that the
applicant was put off by the additional fee and chose to let the
application be cancelled. In order to take this into account, the
total application counts were reduced by the number of cancelled
applications.
\10 To estimate the number of issues contained within a Group SE
filing, we obtained information from the Copyright Office on the
revenues received for Group SE filings. Since each issue contained
within a Group SE filing still retained the $10 fee, we divided the
revenue figure by 10 to get the number of Group SE filings in each
year. This allowed us to retain both Class and Group SE filings in
the analysis, but it should be noted that since Group SE filings
still retained the $10 fee, including these applications in the
analysis poses some conceptual problems.
MEASUREMENT OF INDEPENDENT
VARIABLES
-------------------------------------------------------- Appendix XI:5
There are five independent variables included in the model.
REAL GDP
------------------------------------------------------ Appendix XI:5.1
As noted earlier, the theoretical basis for including GDP is that one
would expect applications to rise and fall with the level of economic
activity since this may be a factor in determining how many
copyrightable works are developed. For example, during an economic
boom, new magazines might be established, more financing might be
available for people looking to write a novel, and so forth.
Conversely, during a recession, newsletters and magazines might
discontinue publishing, fewer contracts might be let for songwriters,
and financing for creative projects might be more difficult to
obtain. Additionally, since some time might elapse from when
projects are begun until copyrights are filed, there could be some
lag between the economic activity that gives rise to copyrights. We
found that a lag of 2 quarters was the best relationship. Therefore,
the value of GDP entered into the model is real GDP (in 1996 dollars)
for the period 2 quarters prior to the given quarter of each
observation.
APPLICATION FEE
------------------------------------------------------ Appendix XI:5.2
The application fee is the variable of interest in this model.
Although during the 11 years of this analysis there was only one
nominal fee increase, inflation was effectively reducing the real fee
before and then after the nominal fee increase. We used the implicit
price deflator for GDP to adjust the nominal fee into a real fee.
SEASONAL DUMMY VARIABLES
------------------------------------------------------ Appendix XI:5.3
Two variables were calculated with a value of 1 for a particular
quarter and 0 for all other quarters. The first of these was for the
second quarter of the fiscal year, and the second was for the fourth
quarter of the fiscal year. Thus, the first variable would measure
whether applications were systematically higher or lower during
winter and the second would measure any systematic difference during
summer.
SURGE VARIABLE
------------------------------------------------------ Appendix XI:5.4
A dummy variable was established that had a value of 1 for the first
quarter of the 1991 fiscal year--right before the nominal fee
increase--and a value of 0 for all other quarters. This was needed
because the fee increase was preannounced and, as such, could be
expected to cause people to rush to file applications in anticipation
of the higher fee. This dummy variable is intended to measure any
effect on applications in the quarter before the announced fee
increase.
MODEL RESULTS AND
INTERPRETATION
-------------------------------------------------------- Appendix XI:6
Table XI.1 presents the results of two specifications of the
model:\11 for specification one the measure of applications was used
that eliminates Class and Group SE, and the second retains these
categories. All continuous variables--the number of applications,
the fee, and the GDP--are in natural logarithms.
Table XI.1
Regression Results for Copyright
Applications
Specification Specification
Explanatory factor one two
-------------------------------------- -------------- --------------
Fee, 1996 dollars -.09 (-3.7) -.11 (-4.8)
2 quarter lag of GDP, 1996 dollars .92 (10.0) .73 (8.7)
Dummy for winter quarter .05 (4.4) .05 (4.9)
Dummy for summer quarter -.03 (-2.7) -.03 (-2.8)
Dummy for quarter before fee increase .13 (3.8) .12 (3.9)
Summary statistics
n 44 44
Adjusted R-square .80 .77
----------------------------------------------------------------------
Note: t-statistics are in parentheses.
Source: GAO analysis.
We found all of the independent variables included in this model to
be statistically significant and have the expected effect. Moreover,
results were reasonably stable across the two specifications with
different measures of the dependent variable. In particular, our
results indicate that if fees increase by 1 percent, applications
would be expected to fall (the coefficient is negative) by about .1
percent. Similarly, if GDP rises by 1 percent, applications would be
expected to rise by somewhat less than 1 percent. The dummy for the
quarter before the price rise suggests that there was about a 12 to
13 percent rise in applications for that quarter because of the
expected increase in the fee the following quarter. The seasonal
dummies show that applications are about 5-percent higher during the
winter and about 3-percent lower during the summer. Overall, our
findings indicate that GDP, or the general level of macroeconomic
activity, appears to be the driving factor in the level of copyright
applications over time. Changes in the real fee have a small but
statistically significant effect.
We also want to reemphasize that this model may not be highly
predictive. In particular, if we wanted to use the model to predict
the effect of fee increases on applications, the greater the fee
increase we want to analyze, the less valid the model would be in
predicting the drop in applications that will result. This is
because the results of econometric models are best used for analyzing
the effects of small changes in the independent factors.
(See figure in printed edition.)Appendix XII
--------------------
\11 We tested for autocorrelation in this model and found only
minimal correlation of the error terms. Results were affected only
slightly by a correction for autocorrelation.
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
========================================================== Appendix XI
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's comments on the Department of Commerce's
letter dated April 18, 1997.
1. In our draft report, we did not include certain miscellaneous
fees that were not specifically identified as either patent or
trademark fees. Upon further review, we agree with the Department
that these miscellaneous fees should be included as patent fees and
adjusted the statistics in our report accordingly.
2. We revised the executive summary as suggested.
3. We did not revise the report as suggested by the Department. We
believe the report sufficiently shows throughout that the current
patent fee system was established by law and that it is intentionally
designed to recover most costs through issue and maintenance fees.
The report also notes in chapter 2 and appendix IV that U.S. patent
fees are lower than those in Europe and Japan.
4. We revised the executive summary to show that trademark income is
received prior to examination.
5. We revised chapter 3 to show that PTO does not accept incomplete
trademark applications.
6. See comment 1.
7. We did not revise the report because, as we have noted in earlier
reports on patent pendency, we believe our statistics--which include
design patents and calculate pendency for the entire fiscal year
rather than the end of the last quarter of the fiscal year--provide a
better appraisal of patent pendency than the statistics reported by
PTO.
8. We revised the executive summary and chapter 2 to emphasize that
the additional fees charged are not commensurate with the additional
"pendency" created. Chapter 2 already made the point that it was not
possible to make a direct correlation between extension fees and the
costs of the delays.
9. We did not revise the report further than as discussed in comment
8 because chapter 2 notes that we are discussing only those delays
for which extension fees are charged rather than all delays.
10. We did not revise the executive summary because the point made
by Commerce is that filer delays should decrease because of the
change in the patent term. Our point was that the fees charged do
not discourage filer delays.
11. We revised the executive summary to show that most trademark
revenues come from statutory fees.
12. We agree with Commerce and noted in our conclusions in chapter 2
that PTO is taking the correct approach with this study.
13. We revised the language in chapter 1.
14. We revised the language in chapter 1 as suggested.
15. We revised the language in chapter 1 as suggested.
16. We did not revise the introductory paragraph; however, these
points are made in the remainder of chapter 2.
17. See comment 16.
18. We did not revise this section of chapter 2 because it already
notes that it was the Congress that created different fees for large
and small entities.
19. We did not revise this section of chapter 2 because the purpose
here is to show only that, after the change in the law, large
entities would pay twice the amounts charged small entities.
20. We revised chapter 2 to clarify that the surcharge fees are not
excess fees but a replacement for appropriated funds.
21. See comment 1.
22. We added a paragraph to chapter 2 to show that fiscal year 1995
had an unusually large number of filings because of the change in the
patent term and that, correspondingly, filing fees were also
abnormally high for that year.
23. We revised the amount shown as revenues for large entities in
chapter 2. However, we did not adjust the percentages shown for
large and small entities because, after discussions with PTO
officials, we determined that the percentages we had included were
correct.
24. We revised the language in chapter 2 as suggested.
25. We revised the language in chapter 2 to reflect Commerce's
comment.
26. We did not revise the percentage of maintenance fees paid by
large entities because we determined that the percentage we included
in our draft report was correct.
27. We revised the language in chapter 2 as suggested by Commerce.
28. We did not revise the language in chapter 2 because the section
already notes that the small business categorization was set by law
and is that used by the Small Business Administration.
29. We revised the language in chapter 2 to reflect Commerce's
comment.
30. See comment 8.
31. We revised the language in chapter 2 to reflect Commerce's
comment. We did not include Commerce's suggested language that most
government accounting systems cannot provide unit costs for
particular services because we do not have such information available
to us on these other systems.
32. We revised the language in chapter 2 as suggested by Commerce.
33. We revised the language in chapter 2 as suggested by Commerce.
34. We did not revise the legal citation. After discussions with
PTO officials, we determined that the citation shown in the draft was
correct. Public Law 97-247 specifies that trademark fees be used
exclusively for the processing of trademark registrations and for
other services and materials related to trademarks. Public Law
102-204 modified this provision to allow trademark fees also to be
used to pay a proportion of overall PTO administrative costs.
35. We did not revise the language in chapter 3 as suggested because
this information is already included in the section.
36. See comment 1.
37. See comment 1.
(See figure in printed edition.)Appendix XIII
COMMENTS FROM THE LIBRARY OF
CONGRESS
========================================================== Appendix XI
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
See comment 2.
(See figure in printed edition.)
See comment 4.
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's comments on the Library of Congress's letter
dated April 16, 1997.
1. The Library notes that the Copyright Office obtains funding in
three ways: (1) fees set by law or authorized by law to be set by
the Register, (2) appropriations, and (3) deductions from royalty
payments. We do not agree that our report "oversimplifies the fee
structure," because we made this same point in the report. We
included table 4.1 for the specific purpose of comparing fee revenues
and appropriations since the last statutory fee increase.
2. The Library emphasizes that it is the Congress which determines
how copyright fees should be set and, to date, has chosen to cover
copyright costs through a combination of fees and appropriations. As
the Library acknowledges in its comments, our report makes this same
point. It is also important to recognize that our report does not
make any recommendations to the Congress that fees be raised or that
the Copyright Office become self-sustaining. Rather, we point out
that, in view of the manner in which the Congress has chosen to fund
the patent and trademark processes--both of which were funded
partially at one time by appropriations--it may also wish to consider
making the Copyright office self-sustaining through fees.
Ultimately, the issue of how the copyright process should be funded
is a matter of policy that depends on a number of factors and
requires a decision that only the Congress can make.
3. We do not suggest that the Copyright Office has been remiss in
"pressing for full cost recovery" as the Library states in its
comments and have added information showing the Copyright Office's
support for a fee increase. As we note in our response to comment 2,
however, we believe this is an issue for the Congress. We discuss
the Copyright Office's documented positions on fee increases since
the last statutory fee increase because we believe the Congress in
its own deliberations should be aware of the positions the Copyright
Office has taken on the need for fee increases, the rationales for
these positions, and our evaluation of these rationales. Thus, while
we revised the report to show the Copyright Office has supported the
need for fee increases, we also believe it is important to discuss
(1) the opportunity to raise fees to cover inflation in fiscal year
1995 and (2) the Register's testimony on S. 1961 in September 1996.
We also cite the Register's position on this issue as discussed with
us in March 1997 and provide additional information based on our
discussion with Library officials in April 1997.
4. Our report makes repeated references to the legislative history
of copyright fees and emphasizes that the structure now in place was
established by the Congress and that the Congress chose to fund the
Copyright Office with a mixture of fees, royalty payments, and
appropriations in the past. The focus of our report is on what has
occurred since the last statutory fee increase went into effect in
1991. We revised the language where appropriate in the report to
address this point.
5. We agree that the legislative history for the most recent
statutory fee increase indicated a congressional intent to continue
funding the copyright process through a combination of fees and
appropriations. However, as our report illustrates, much has changed
since the last statutory fee increase, including PTO's having become
totally dependent on fees. Our report notes only that, in light of
these recent events, the Congress may wish to reconsider the manner
in which the copyright process is to be funded in the future.
6. See comments 4 and 5.
7. See comments 4 and 5. We are not questioning the Copyright
Office's actions related to fee increases in 1976, 1982, 1984, 1987,
and 1991, when they recognized and supported the need for fee
increases. Again, we focus on what has happened since the last
statutory fee increase. We have added information showing that the
Copyright Office currently supports a fee increase. In discussing
the decision on increasing fees for inflation, our report notes that
the Register raised fees for special services. We also point out
that the Copyright Office has set a fee of $270 for full-term storage
of published materials and, in fact, we use this in our discussion of
the high costs of storing unpublished materials without charging an
additional fee.
8. The Library says that "only once" did the Register choose not to
raise statutory fees for inflation. As our report states, this one
time was the only time the opportunity has arisen since the last
statutory fee increase. According to the Copyright Office's own
study of the need for an inflation adjustment, a fee increase to
cover inflation would have been cost-effective, yet the Acting
Register chose only to raise certain discretionary fees. The Library
commented in footnote 12 that the report did not note that the fee
increase, if made, would not have "made fees come close to recovering
costs." We did not make this statement because, by its very nature,
an inflation adjustment could not make the Copyright Office
self-sustaining if it were not self-sustaining before. Our point in
this section of chapter 4 is not that an inflation adjustment would
have made the Copyright Office self-sustaining but rather that the
increase would have kept the ratio of fees to costs closer to that
established by the Congress at the point of the last statutory fee
increase.
9. Our report does not attempt to determine the exact cost of the
copyright process but rather uses the costs that the Copyright Office
and the Library use in their own documents, including budget
submissions. We recognize that the Library may be providing some
services to the Copyright Office at no cost and that the Copyright
Office may be incurring costs that are not directly related to the
copyright process. For purposes of this report, we consider the
costs of the copyright process to be those now being covered by
copyright fees and Copyright Office appropriations. We also consider
these costs as the Copyright Office is now configured, not as it
might have been configured under the provisions of S. 1961. To
become self-sustaining as now configured, the Copyright Office would
have to raise fees to a level that would at least cover
appropriations of the Copyright Office.
We also note in our report that the Copyright Office is planning to
initiate a study to determine the costs of the copyright process and
the fees that would be necessary to recover these costs. The results
from such a study should be beneficial to the Congress if it does
decide to consider a statutory fee increase.
10. See comment 9. Again, the purpose of our report was not to
discuss the merits of an agency such as that proposed by S. 1961 but
rather to show that (1) the scenario presented in the hearing was the
worst case and (2) the costs and fee increases needed could change
significantly under various assumptions. We recognize that, if an
agency such as that envisioned under S. 1961 had been created,
decisions would be needed on how to handle certain items now being
provided to the Copyright Office at no cost. However, this would
also seem to be true--as the Library notes in comment 11--for the $13
million in free materials being provided to the Library by the
Copyright Office each year. Thus, if accounting adjustments are
necessary--a point not necessary for the discussion here--it seems
that they would have to be made for both the Library and the
Copyright Office.
11. See comment 10. Our report does not discuss the value of
deposits acquired through the copyright process because this
factor--while certainly of importance to the Library and the nation
as a whole--is not relevant in determining how copyright fees are to
be set. Our report points out that a copyright fee increase should
not materially affect the Library's ability to obtain free copies of
materials for its collections because (1) by law, the Library still
has access to anything that is submitted for copyright registration
or is published in the United States and (2) it rarely takes any
unpublished materials for its collections.
12. Our report does not discuss the fees necessary for recovering
costs to the government as a whole for the reasons discussed in our
response to comments 9 and 10. Our report also does not discuss
these other costs as they relate to patents and trademarks. For
purposes of this report, we use the costs necessary to fund the
agencies as now configured, using the agencies' own documentation for
these costs. The issue of whether there are other intellectual
property costs--for example, in areas such as treaty negotiation,
judicial proceedings, Customs protection, etc.--is beyond the scope
of this report. Also, our report provides reasons why we disagree
with the Register's estimates. We point out that, while these
estimates were presented as a likely outcome of the Copyright
Office's becoming self-sustaining under S. 1961, the Register did
not disclose that they were in fact a worst-case scenario and that
the Copyright Office had prepared other estimates that would lead to
other outcomes under other assumptions. In addition, as noted in the
report, we do not believe some of these costs were necessarily
reasonable even under the scenario presented. For a discussion on
the Library's point on our regression analysis, see comment 15.
13. Our report does not discuss "three- or four-fold increases" in
fees as reasonable if the Copyright Office were to become a part of
an IPO, as stated by the Library in its comments. The proposal to
make the Copyright Office part of the IPO was withdrawn and, to our
knowledge, is not now under consideration. Our report does not
discuss "increasing fees by more than 100%" because both the Register
and the Congressional Budget Office (CBO) estimated that the
Copyright Office could become self-sustaining as now configured by an
approximate doubling of fees.
14. We address the cost projections for S. 1961 in our report
because (1) these were the projections used by the Register in her
prepared statement for the hearing before the Senate Committee on the
Judiciary and (2) S. 1961 was the only proposal to make the
Copyright Office self-sustaining that had been made--and on which the
Copyright Office had taken a published position--since the last
statutory fee increase went into effect in fiscal year 1991. In
addition, during the discussion period following the Register's
testimony, the Chairman questioned the projections and noted that he
had asked GAO to study the fees issue. The only fee projection the
Register made was for a fivefold increase--the worst-case scenario
developed by the Copyright Office. We believe that it is important
for the Committee to know that the Copyright Office had developed 12
separate scenarios that had different outcomes using different
assumptions and that the scenario presented at the hearing was not
only the worst-case scenario but also included costs we consider
questionable. Otherwise, the Committee could be left with the
impression that the fivefold increase is a likely scenario for making
the Copyright Office self-sustaining. As we discuss in the report,
this is not the case, as CBO and the Register herself later said
that, as presently configured within the Library, the Copyright
Office could probably become self-sustaining by doubling current
fees.
15. Based on the Library's comments, we believe that it used our
model inappropriately. The report states that our regression
analysis indicates a decrease in applications of about 10 percent in
the first year if fees were doubled but also that a regression model
such as the one we used tends not to be as highly predictive at this
high a level of fee increase. Consequently, the regression analysis
would be even less predictive at even higher levels of fee increases.
As noted by the Library and our report, there is no precedent for fee
increases beyond 100 percent.
In discussing the effects of a fee increase on applications, we also
believe it is important to consider what applications would be
affected as well as the impact on the Copyright Office and the
Library. As noted in our report, for example, Copyright Office
officials said that some types of applications would be affected more
than others by a fee increase. After the most recent statutory fee
increase, applications for unpublished works decreased at a rate
higher than published works. This would seem to limit any
potentially harmful effects on the Copyright Office and the Library
because (1) a decrease in unpublished submissions would reduce the
Copyright Office's workload and storage costs and (2) the Library
rarely takes unpublished submissions for its collections. Similarly,
according to Copyright Office officials, higher fees might cause
authors and composers to submit works as collections rather than
individual works. This would appear to would reduce the Copyright
Office's workload without reducing the works available to the
Library.
16. We agree that projecting revenues depends on being able to
project the number of applications and that cost recovery depends
upon the public's being willing to pay the necessary fees. However,
this is true of any process--including patents and trademarks--where
costs are recovered through user fees. Thus, it seems appropriate
for the Congress to consider what it wants to achieve through the
process and who should pay. The user then must determine whether the
benefits are worth the costs. The real issue here is that, if fees
are raised to a level necessary to make the Copyright Office
self-sustaining, there may be uncertainties in projecting the fees
that will be necessary initially because it may be difficult to
predict the behavior of applicants. However, this also would appear
to have been an issue for PTO as well--whose costs and fees are much
higher--when it became self-sustaining. We do not believe that this
concern should be a bar to the Congress's consideration of funding
the Copyright Office through fees.
17. See comment 16.
18. Our report notes that the Register of Copyrights now supports
making the copyright process self-sustaining within the Library.
Furthermore, we do not use the term "official policy" in discussing
the management report cited in the Library's comments. However, we
believe that we are correct in citing the findings of the management
report in our own report. The official identified in the Library's
comments as "an advisor to the Librarian" was in fact a senior
Library official and former Acting Register of Copyrights who was
detailed by the Librarian to conduct the review of the Copyright
Office's operations. The report was provided to us by the advisor
himself and is identified on its face as a Library of Congress
document. There are no references in the report to its being a
draft, a personal opinion, etc. The report was used in a discussion
we held with Copyright Office officials and the advisor as containing
the positions of the Library, and we were given no caveats on its
use. We have clarified our report to show that the management report
is an internal Library of Congress document.
19. The Library states in its comments that the "implication in the
report that full-cost recovery would be met if Congress's annual
appropriation of $10 million could be eliminated is simplistic" and
that there are broader issues at stake regarding who should pay costs
of a public nature. We believe that the message in our report is
accurate as presented: While the Copyright Office may "support the
goal of moving toward full-cost recovery," it nevertheless has
opposed its current costs being totally recovered through fees. We
understand the Library's position that there are other costs
allocated to the Copyright Office that are not directly related to
the registration process; however, we note that this is also an issue
for the patent and trademark processes--where costs and fees are much
higher.
Also, the Library's comments raise other issues. For example, it
appears that there may be questions regarding what costs should be
allocated to the copyright process. We agree that, in order to
determine whether copyright costs should be recovered through fees,
the costs actually attributable to the copyright process within the
Library should be identified. Thus, if (1) the Library is providing
services to the Copyright Office that are covered by Library-specific
appropriations and (2) the Copyright Office is providing services
under its own funding that are not directly related to the copyright
process, there may be a need for some reallocation--an issue beyond
the scope of this report. It is our understanding this issue will be
addressed in the Copyright Office's planned study of costs and fees
that, according to Library officials, will help the Copyright Office
determine what costs should be charged to the copyright process and
what costs should be recovered through fees. In the interim--and for
the purposes of this report--we assumed the costs of the Copyright
Office were the costs of the copyright process within the Library.
Consequently, to become self-sustaining as now configured, fees would
have to be increased to cover amounts now covered by Copyright Office
appropriations.
Ultimately, deciding what should be recovered through fees is a
matter of policy that only the Congress can determine. As noted by
the Library in its comments, the Congress in the past has chosen to
fund the copyright process through a combination of fees and
appropriated funds. Our point is that--given the direction the
Congress has now taken with patent and trademark fees as well as
proposals by others that copyright fees be raised--the Congress may
wish to consider this issue again.
20. See comments 12 and 19.
21. See comment 11. Our report notes that the Library normally
takes only copies of published materials for its collections.
Consequently, the Library's collections should not suffer from a fee
increase because, even if there is a decrease in applications, the
Library still would have access to all materials that are submitted
for registration and is entitled by law to free copies of all works
published in the United States even if not submitted for
registration. In its comments, the Library says that it does not
believe persons would comply with the provisions of section 407 to
provide two copies of unregistered publications. We have no way to
confirm or dispute this belief. However, if there is a problem, it
would require the offending party to decide not to publish, not to
seek registration, or to ignore the law and face penalties.
Ultimately, the question is to what extent eliminating the risk is
worth the cost, and again, this is an appropriate matter for the
Congress to consider.
22. The Copyright Acquisition Division may be an example of a cost
to the Copyright Office that is not directly tied to the copyright
process if, as noted in the Library's comments, it "exists for the
purpose of requesting or demanding deposits not sent in voluntarily
that are identified as desirable for the Library's collections." If
not related to the copyright process, this cost might be allocated to
the Library, thereby reducing by about $1 million the copyright fees
that would be necessary to recover costs.
23. Our report does not intend to imply that the Register "misled
the Senate Judiciary Committee." Rather, as discussed in our report,
we do not believe that the fee projections were presented in the
proper context. If, as stated in the Library's comments, the
Register "has an obligation to present to the Congress the worst-case
scenario that could result from their proposed legislation," we
believe that the Register also had an obligation to disclose that it
was in fact the worst-case scenario and that, under different
assumptions, other less costly scenarios could be projected.
Instead, her written testimony stated, "(O)ur preliminary analysis
indicates that, if our operational costs otherwise remained the same,
becoming self-supporting outside of the Library would entail a
five-fold increase in fees (from $20 to the $100 range)." During the
discussion period following the delivery of the prepared statement,
the Chairman questioned the Register concerning her use of the
worst-case scenario among many different possibilities. The Chairman
also questioned why the Register found the most drastic of all
estimates provided by the Copyright Office study to be the minimum.
As noted above, the Chairman also told the Register he had asked GAO
to look into the fees issue.
24. See comment 23.
25. We do not question these other scenarios in the report because
they were not presented at the hearing. We do not accept them as
fact but note only that the Register made no mention of them.
26. See comments 23, 27, 28, 29, and 30.
27. We take no position on the merits of S. 1961. However, if the
Copyright Office had problems with the proposed legislation such as
the one cited--having each of the three agencies cover one-third of
overhead costs when their overhead-related costs would vary--this is
the very type of issue that should be surfaced in a hearing such as
the one held. In fact, we believe that all of the issues raised in
the Library's comments regarding the effect of a fee increase or
organizational move on applications, costs, the Library's
collections, accounting standards, etc.were appropriate issues to be
raised. This is why we believe the Register should have presented
cost projections under various assumptions rather than stating that
fees would increase fivefold.
28. In our report, we note not only that the Register presented the
worst-case scenario at the hearing but also that some of the costs
and application estimates used in the scenario were questionable. As
one example, we noted that the projection included moving into new
space at a cost of $32 per square foot and did not address the
savings that might be possible if the Copyright Office were to remain
located in Library space at no cost. In its comments, the Library
said that, to its knowledge, housing an executive agency within a
legislative entity is unprecedented in the history of the U.S.
government and that doing so would contradict Statement of Federal
Financial Accounting Standards number 4. The Library said that to
"expect the Copyright Office to contemplate such an unprecedented
move" was unwarranted.
Our report does not say we expect the Copyright Office to contemplate
remaining in Library space at no expense nor do we believe the
Copyright Office should contradict federal cost-accounting standards.
Again, our concern is that these issues should have been raised in a
proper context at the hearing instead of simply stating fees would
have to increase fivefold.
We do not take any position on whether the Copyright Office could
remain in Library space if it had become a part of the IPO. This
issue is moot, because there is no current proposal to make the
Copyright Office part of a wholly-owned government corporation.
However, the Congress could have allowed the Copyright Office to be
housed rent-free at the Library if the Congress wanted to do so,
particularly considering the Library was to continue to receive free
materials worth $13 million a year. Similarly, the Congress could
have provided for the Library's and the Copyright Office's sharing
other items, such as computer systems. Again, the issue is that we
believe the Register should have placed her projections within a
better framework.
Concerning cost-accounting standards, our report does not
suggest--nor do we in any way support--the Copyright Office's not
following applicable standards. Any discussion of specific
cost-accounting standards is beyond the scope of this report.
29. Our point is that, if applications decrease, workload should
decrease. We do not suggest the Copyright Office would have been
able to decrease staffing but rather note that this issue was not
discussed when the Register presented her projections on the impact
of a fee increase at the hearing.
30. See comment 28.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix XIV
RESOURCES, COMMUNITY AND ECONOMIC
DEVELOPMENT DIVISION
Allen Li, Associate Director
Amy D. Abramowitz
Frankie Fulton
John P. Hunt, Jr.
Mitchell Karpman
Deborah Ortega
Paul Rhodes
Mindi Weisenbloom
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