By Ryan Davis

Law360 (May 7, 2020, 5:03 PM EDT) -- The pandemic and economic downturn have not yet had a significant impact on operations at the U.S. Patent and Trademark Office, officials said Thursday, but the agency is closely monitoring how a projected decline in revenue due to fewer filings could affect its budget.

The strain on the U.S. economy caused by the pandemic has spurred some speculation that companies might put off or forgo filing patent and trademark applications in favor of more pressing business needs. That could cause a hit to the USPTO's budget, since it is funded entirely by the fees it collects.

There has not been much of a drop in filings so far, with revenue down about 1.6% from what had been expected for April, USPTO Chief Financial Officer Jay Hoffman told the agency's Patent Public Advisory Committee at a meeting held Thursday via videoconference.

However, the office is bracing for a drop in revenue in the coming months as the long-term impact of the economic downturn becomes clearer.

"We are concerned that we could see a 5 to 10% reduction in patent revenues over the next 12 months," he said. "We haven't seen that revenue track yet, but it's a scenario that we're actively playing out."

The office has a reserve fund of $361 million, which it may need to tap into to cover a budget shortfall, Hoffman said. While "we're understandably a little nervous," Hoffman said, the fund should be sufficient to make up any gaps.

"I don't think there's a huge risk we'll run out of money in the reserve, but I look at this every day because these numbers are very volatile," he said.

To date, the office has made only a few small adjustments to its spending, including putting off some planned hiring of examiners until later in the summer, Hoffman noted. The USPTO has also extended some deadlines due to the pandemic, which could potentially reduce fee collections as applicants put off filing until later.

Hoffman said that if every applicant for whom relief was available took advantage, it would have cost the office about $19.5 million a week, but "we haven't seen numbers anywhere close" to that figure. The impact has been less than 3% of the agency's overall revenue, he said.

"That could change as more people become aware of the relief and take advantage of it," he said. "But thus far, anyway, that's something the agency has been able to afford to do without damaging us financially and hurting our ability to operate."

USPTO Director Andrei Iancu told the committee that a substantial number of patent examiners either always or sometimes worked from home before the pandemic, so the switch to a completely remote workplace on March 23 has gone smoothly.

The closure "did not put an enormous strain on our agency, and we were able to ramp up telework," including by sending new equipment to employees who did not already have what they needed to work at home, Iancu said.

Iancu said that the office has continued to track staff's work output, as it had before the pandemic, and has "found that the production of patent examiners has remained steady and in some cases has actually increased."

"This is a tribute to the professionalism of our examiners," he said.

Whatever happens in the months to come, the USPTO "will continue to focus on our core mission of fostering innovation, competitiveness and economic growth," Iancu said.

"This is critically important, especially at this time, because inventors and intellectual property promote the well-being of all Americans," he said. "Even in the midst of a global pandemic, indeed perhaps especially in the midst of a global pandemic, inventors, as they always do, will create new technologies that will help us overcome new and unprecedented challenges."

--Editing by Alanna Weissman.

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