The Trump administration is reportedly exploring a new framework for patent fees and valuation. The proposal could fundamentally reshape the U.S. patent system and harm startup innovation.
Officials at the Department of Commerce are discussing a new approach to address the national debt with a proposed “patent tax.” Under this proposal, the U.S. Patent and Trademark Office (PTO) would charge patent holders an annual fee of 1% to 5% of their patent’s assessed value in addition to the existing application and maintenance fees. The Trump administration has not released details on how this value-based assessment would operate in practice, leaving substantial uncertainty about how a patent tax would be implemented and enforced.
Currently, the U.S. patent system is funded entirely through user fees. Innovators pay to file their applications, and patent holders pay maintenance fees to keep their intellectual property protection in force throughout the patent’s 20-year term. These fees support the operations of the PTO, which does not receive taxpayer funding to operate. The PTO collects these fees to fund its patent examiners, provide the resources needed to review patent applications, and support the Patent Trial and Appeal Board. However, under the proposed patent tax, the value-based fees would be used to generate revenue for the federal government rather than fund the PTO. The PTO’s mission would shift from advancing innovation to addressing the nation’s debt.
The creation of a patent tax would also introduce significant uncertainty for innovators and investors. Patents protect new ideas, yet the value of these novel inventions often cannot be determined until they reach the market. The patent valuation would be entirely subjective and frequently shift based on trends. The PTO currently has no procedures for assessing patent value, and the creation of such a system would inevitably lead to disputes over valuation and potential legal challenges. The office is already facing challenges in ensuring only high-quality patents are granted amidst policy and procedure changes. Implementing a value-based tax framework would strain the PTO’s already limited resources and large backlog by adding the nearly impossible burden of predicting how the market will respond to new innovations. Additionally, the PTO could be incentivized to grant more patents to maximize revenue under this new framework. This will further distract from the critical need to maintain patent quality.
Most notably, the proposed patent tax could have severe unintended consequences for startups and small businesses, the drivers of innovation. Early-stage companies often have limited funds and resources yet would be required to pay taxes on the uncertain valuation of their patent. Paying these taxes could divert critical resources away from development and scaling. Meanwhile, the value of a startup’s patent may not pay off for years.
A shift away from the current fee system—which provides the resources necessary to operate the PTO—to a value-based tax would introduce significant uncertainty, making it harder for startups to build. Instead of having the PTO work to address the nation’s debt, it should be focused on supporting patent quality and advancing U.S. innovation and competitiveness.
Disclaimer: This post provides general information related to the law. It does not, and is not intended to, provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.
