The Trump Administration is discussing a significant change to patent fees, according to a recent Wall Street Journal report. The Commerce Department are considering the addition of an annual tax to patent holders equal to 1% to 5% of the overall value of the patent. This tax would be in addition to the existing maintenance fees that are paid every 3.5, 7.5, and 11.5 years, after patent issuance.

The proposed tax could raise some concerns for patent holders.

First, it’s difficult to ascertain how valuable a patent is as each patent is unique and generally directed towards a different invention. Without a publicly available baseline to serve as a measure for the value of a patent, the value of the patent cannot be determined. For example, in the stock market, millions of identical shares in companies are traded daily and are therefore easy to value. Likewise, in the real estate industry, houses can be compared to similar houses with similar features in the same area that have recently sold in order to determine value. In contrast, individual patents are sold or licensed in private transactions, making valuation hard to determine.

Second, many patents are filed on inventions that never make it to market. In fact, these patents arguably have “negative value” because of the costs associated with them (e.g., maintenance fees). They bring in no revenue in the form of royalties or by protecting a particular product or line of business.

If the Trump Administration is successful with implementing this tax, patent owners will need to be strategic in how they manage their portfolio. Although it’s too early to know if this proposed tax will be implemented, and what consequences may arise, Thomas Horstemeyer will continue to follow this news. For questions and guidance on your patent, email us at info@thip.law.