FY 2010 and FY 2011 USPTO Financial Report Trademark Public Advisory Committee Meeting February 25, 2010

2 FY 2010 Fee Collections FY 2010 USPTO appropriation of $1,887M  Patent estimate of $1,664.8M  Trademark estimate of $222.2M Current Fee Collection Projections are $2,003M  Patent maintenance and issue fee increases are the main drivers $116M in patent fee collections estimated as unavailable without further legislation USPTO is in discussions with OMB and DOC regarding full access to fee collections in FY 2010.

3 Operating In 2010 at $1,887M — Reductions in Patent Funded Programs  Used 2009 Savings to Offset Costs in FY2010  USPTO Made Further Reductions in FY2010 to Redirect Additional Money to Activities with Direct Impact on Pendency  Hire 250 Examiners, Limited OT & PCT Outsourcing (2/2010)  Early Data Capture Halted—Funds Redirected to PCT & OT  Awards Curtailed—Funds Redirected to OT and Examiner Hires  Efficiency Improvements

4 FY 2011 President’s Budget Highlights  Introduces a new set of Strategic Priorities  Provides authority for Sustainable Funding – 15% interim patent fee adjustment and fee setting authority  Multi-year plan to achieve goal of an average patent first action pendency of 10 months, average total pendency of 20 months  Investment in IT – accelerate critical initiatives  Establishes an operating reserve to manage multi- year planning and budgeting.

5 USPTO Strategic Priorities The USPTO strategic priorities support the Administration/Department high priority performance goals:  Reduce Patent Pendency and Backlogs  Improve the Quality of Examination  Improve/Enhance Patent Appeal and Post-Grant Processes  Demonstrate Global Leadership in all Aspects of IP Policy Development  Improve Information Technology Infrastructure and Tools  Implement a Sustainable Funding Model for Operations, and  Improve Relations with Stakeholders

6 Trademark Strategic Priorities Information Technology  Separate trademark systems from patent systems to allow for new infrastructure and virtualization  Collect user community feedback on preferences and needs for a 21st century Trademark Office Quality Initiatives  Accuracy of Goods and Services in Applications and Registrations  Improved Examination Quality – establish a new quality measure that focuses on the excellence of the entire Office Action Human Resource Initiatives  Continuation of the Trademark Human Capital Strategic Plan launched in partnership with the Office of Human Resources nearly three years ago. Anti Counterfeiting and Anti Piracy Initiatives  Education – Partner with OIPPE to develop public awareness of effects of trademark counterfeiting and  Customs Recordation Project – Partner with OIPPE and Customs and Border Patrol to develop on-line system to permit Trademark Owners to request Customs recordation when filing for a federal Trademark registration.

7 Information Technology Investment FY2010 Stabilization and continued operations and maintenance of our existing IT systems; develop documentation of patent business requirements to proceed with redesign of patent IT. FY 2011 Funds are requested to begin working towards a new IT Vision which includes:  Conducting a ground up redesign of the USPTO’s infrastructure and applications on 21st Century platforms  Stabilizing current systems to “keep the trains running” Investing $122.3M in  Patent end-to-end electronic processing  Trademark’s Next Generation

8 Implement a Sustainable Funding Model to Support Operations Short Term / Interim Funding Authority – Begins putting USPTO on stable ground to set USPTO priorities in motion  Access to USPTO fee collections  Interim Fee Adjustment on Patent fees  Fee Setting Authority  Operating reserve Long Term / Sustainable – Reform USPTO Fee Structure and manage multi- year plans  Establish fees that better reflect costs of services  Structure fees to provide appropriate incentives for innovation  Structure fees to facilitate the effective administration of patent and trademark processes  Establish and Maintain Operating Reserve

9 Trademark Performance TrademarksFY 2009FY 2010FY 2011FY 2012FY 2013FY 2014FY 2015 Applications352,051356,000374,000397,000431,000474,000518,000 Growth Rate-11.8%1.1%5.1%6.1%8.6%10.0%9.3% Balanced Disposals784,990742,000753,000824,000889,000975,0001,067,000 Registrations241,637218,000221,000241,000261,000286,000313,000 Performance Measures Applications Processed Electronically62.0%65.0%68.0%71.0%74.0%78.0%81.0% First Action Compliance Rate96.4%95.5% Final Compliance Rate97.6%97.0% Avg. First Action Pendency (Months) to 3.5 Avg. Total Pendency (Months) Examining Attorneys at End-of-Year

10 USPTO Requirements vs. Funding DescriptionFY 2011FY 2012 FY 2013 Total Requirements2,3312,4762,533 Fee Collections/ Other Income 2,1162,2292,258 Interim Funding Adjustment Total Collections2,3402,4612,486 Reserve-Activity9(15)(47) Reserve-Balance Dollars in Millions

11 Requirements vs. Funding by Business Line DescriptionFY 2011FY 2012FY 2013 Total Requirements 2,0812,2222,275 Fee Collections/ Other Income 1,9031,9922,001 Surcharge Total Collections 2,1272,2242,229 Reserve-Activity 462(46) Reserve-Balance PATENTS Dollars in Millions DescriptionFY 2011FY 2012FY 2013 Total Requirements Fee Collections/ Other Income Reserve-Activity(37)(17)(1) Reserve-Balance TRADEMARKS Dollars in Millions