Last week, U.S. Patent and Trademark Office Director Andrei Iancu sent a letter to the Chairmen and Ranking Members of the Senate and House Committees on the Judiciary, Senate Subcommittee on Intellectual Property, and House Subcommittee on Courts, Intellectual Property, and the Internet, responding to an April 14, 2020 request to provide information regarding the Office's transition to full time telework, status of patent and trademark filings and fee collections, and cost saving measures taken by the Office in response to the COVID-19 pandemic-related economic downturn.  In particular, the letter was sent to Sen. Lindsey Graham (R-SC) and Dianne Feinstein (D-CA), Chairman and Ranking Member, respectively, of the Senate Committee on the Judiciary; Sen. Thom Tillis (R-NC) and Sen. Christopher Coons (D-DE), Chairman and Ranking Member, respectively, of the Senate Subcommittee on Intellectual Property; Rep. Jerrold Nadler (D-NY) and Rep. Jim Jordan (R-OH), Chairman and Ranking Member, resoectively, of the House Committee on the Judiciary; and Rep. Henry C. "Hank" Johnson, Jr. (D-GA) and Rep. Martha Roby (R-AL), Chairman and Ranking Member, respectively, of the House Subcommittee on Courts, Intellectual Property and the Internet.

With respect to the Office's transition to mandatory telework, Director Iancu noted that prior to the COVID-19 pandemic, about 88% of the USPTO's workforce had been working from home at least one day per week, and of the approximately 11,185 employees working from home at least one day per week, about 7,200 had been working from home full-time.  On March 23, 2020, in response to guidance from federal, state, and local authorities, the USPTO announced that it would be operating under mandatory telework.  Since transitioning to mandatory telework, Director Iancu noted that more than 14,000 USPTO employees and contractors use the Office's network, which was upgraded in January 2020, to connect to the campus daily from a remote location to perform their jobs.  And using secure videoconferencing tools to conduct meetings, patent and trademark applicant interviews, and hearings before both the Patent and Trademark Trial and Appeal Boards, the USPTO has had more than 1,200 virtual meetings with more than 6,600 participants per day since moving to mandatory telework.

Acknowledging that the transition to mandatory telework "involved a tremendous amount of change for our employees," who "were facing challenges at home and new challenges at work," the Office provided "reasonable relief to production requirements for patent and trademark examiners during the first weeks of the transition when additional leave for federal employees had not yet been enacted into law."  And for the "very limited number" of employees who still needed to report to USPTO headquarters, the Office established strict safety protocols, limited access and the number of employees at various critical IT centers, and provided those employees with personal protective equipment such as masks and gloves.

Turning to the status of trademark filings and fee collections, Director Iancu informed the Chairmen and Ranking Members that USPTO trademark activity traditionally correlates with the overall state of the economy, and given the domestic and global economic conditions resulting from the COVID-19 pandemic, trademark revenues had not surprisingly been lower than planned for FY 2020.  The lower revenues were the result of a 4.4% drop in Q2 trademark application filings for FY 2020 as compared with FY 2019.  The potentially good news was that preliminary data for May 1-14, 2020 showed a 2.9% increase in trademark application filings as compared to the same period in May 2019.

As for trademark revenue, year-to-date fee collections (including preliminary data through May 2020) were down 9.2% from projected revenue of $369 million to collected revenue of approximately $335 million.  Although Director Iancu noted that May fee collections were stronger than those for April (when collected revenue was 9.4% lower than the Office's projection), he indicated that "it is too soon to say that this is a sign of continued recovery."  The Director also suggested that the Office anticipates revenue for FY 2021 to be lower than previously estimated.  As a result of the drop in trademark revenue, the USPTO has been using its trademark operating reserve to satisfy trademark obligations and expenditures, with the current $95 million trademark reserve capable of funding the Office's trademark operations for 13 weeks in the absence of additional fee collections.

With respect to patent filings and fee collections, Director Iancu noted that while patent activity is also correlated with the overall state of the economy, "the impacts of economic shocks on patent application filings and fee collections usually take longer to manifest than with trademarks."  While Q1 patent application filings for FY 2020 were 4.7% higher as compared with FY 2019, Q2 filings were down 2.9% in FY 2020 as compared with FY 2019.  In April 2020, filings were 3.7% lower as compared with April 2019, and preliminary data for May 1-14, 2020, indicated that filings were 3.8% lower than the same period in 2019.

As for patent fee collections, the Office averaged $11.8 million in collections per day during the first half of May 2020, which was 7% lower than projected daily collections of $12.7 million.  And through May 2020, the patent operating reserve was $356 million, which the Director indicated could fund patent operations for approximately six weeks in the absence of additional fee collections.  He also noted, however, that "a prolonged economic downturn could force us to draw down the reserve below our published minimum of $300 million to unsustainable levels, which is less than four weeks of operations funding."  The Director stated that "[t]hese trends are troubling and the current economic uncertainty could lead us to revise FY 2020 and FY 2021 revenue estimates further downward."

The Director also noted that while the USPTO promptly provided relief to intellectual property owners under The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) "to help mitigate U.S. intellectual property loss and abandonment during these uncertain times," because Congress did not allocate additional funds to the USPTO, "any fee relief provided by the USPTO to applicants is funded by our reserves."  The Director informed the Chairmen and Ranking Members that "[t]he current relief has begun to impact patent revenues."  And according to the Director, it may take some time to fully understand the ultimate impact of such relief, when the Office will have a better grasp as to "how much this reduced revenue is attributable to a general reduction in patent application and patent maintenance activity due to the economic downturn (in which case it will never be paid) and how much is attributable to individuals simply deferring fee payments to a later date (in which case it will ultimately be paid)."

The Director closed his letter to the Chairmen and Ranking Members by pointing out that "additional funds may be needed to supplement the USPTO's internal reserves and support operations," and suggesting that Congress could make available to the Office user fees and surcharges previously collected by the Office between 1990 and 2011, which the USPTO does not currently have the authority to spend.