USPTO Opens its Books: A Look into the Agency’s Financial Engine
A USPTO Hour gives insights into USPTO financing
On July 30, 2025, the U.S. Patent and Trademark Office (USPTO) offered a rare and detailed glimpse into its financial operations during a USPTO Hour event hosted by the Office of the Chief Financial Officer (OCFO). For patent attorneys, IP owners, and inventors who rely on the agency’s efficiency and stability, the session provided valuable transparency into how the fees they pay are managed, allocated, and protected. Led by Acting Chief Financial Officer Sean Mildrew and his team of office directors, the presentation detailed the intricate processes that fund the nation's innovation agency.
Mildrew began by highlighting the unique nature of the USPTO's financial structure. "In many ways the USPTO acts like a business meaning customers ask us to perform a service, and they pay a fee for the service," he explained. This fee-for-service model means the agency's workload and funding are "tightly coupled with a broader economy."
However, the comparison to a private business ends there. Mildrew emphasized, "we're not completely like a business. We have to keep our public oriented mission in mind at all-times. We're working for the good of the country. Not for the good of the USPTO."
This dual identity creates a distinct set of operational rules. The agency operates within the constraints of the federal government, with personnel costs driving 70% of its budget and the next largest expense, at about 18%, is for Information Technology (IT).. Critically, despite being fully fee-funded, the USPTO requires a congressional appropriation before it can spend a single dollar of the revenue it collects.
"Unlike a business, we're unable to invest the funds or take out a loan or rely on a credit line to get us through financial rough patches," Mildrew noted. To manage this, the agency maintains operating reserves, a best practice for fee-funded agencies.
The Financial Machinery and Its Components
The presentation underscored the highly interconnected work of the various OCFO departments. The directors described their functions as essential, interlocking gears in a complex machine designed for fiscal responsibility.
Office of Planning and Budget: Acting Director Michelle Rahn described her office as the "front end of financial management," responsible for budget planning, monitoring annual budgets, and setting fees. Her team navigates the complex federal budget cycle, often juggling three fiscal years simultaneously. For instance, in July 2025, the office is "preparing the 2027 and justifying the 2026 and finishing the execution of 2025".
Office of Finance: Acting Director Meredith Madwatkins likened her office to a "traditional private sector" finance department that collects fees and prepares financial statements. She proudly noted that the USPTO has maintained "32 years of the consecutive clean audit opinions," a testament to the agency's accountability. Her office also manages a sophisticated cost accounting model to ensure funds are properly allocated.
Office of Procurement: Director Kristin Fuller explained that her office is the only one legally permitted to "commit or obligate the USPTO to spend money". They partner with internal customers to acquire necessary goods and services. A significant portion of this spending supports the Office of the Chief Information Officer (OCIO) and the Patents organization, which together account for 90% of contract dollars.
Office of Financial Management Systems: Acting Director Carol Stout leads what Mildrew called a "mini CIO office for financial management". Her team provides the IT backbone for all financial activities, aiming for a system where "data entered just once and let it flow through all of the systems". This integration is crucial for efficiency and fraud prevention.
This intricate system ensures that patent fees are used exclusively for patent-related activities and trademark fees for trademark activities—a separation mandated by law and known as "the fence."
Madwatkins explained that a detailed cost allocation model tracks direct costs and distributes indirect support costs (like IT, rent, and HR) using "activity base information" derived from employee time sheets and other workload drivers.
Adjusting fees is a complex process that takes 1.5 to 2 years. It involves multiple stages of internal and interagency review, as well as two separate opportunities for public comment.
Concerns and Risks in a Digital Age
While the presentation projected confidence and competence, the speakers were candid about the risks the agency faces. These challenges range from macroeconomic pressures and congressional budget cycles to the persistent threat of cybercrime and fraud.
Carol Stout provided a sobering, real-world example of these modern threats. She revealed that a recent decision to require user logins for paying patent maintenance fees, eliminating the guest user option, was a direct response to a security incident.
"Around July 10th we noticed that -- a bad actor was using a bot on the patent agency store front to perform credit card testing," she stated. The bot was attempting to validate stolen credit card numbers. After combating the activity, the USPTO determined that turning off guest access "was the most effective path forward". This incident highlights the agency's proactive, if sometimes inconvenient, measures to protect its systems and user data.
Stout added a note of caution about the future, saying, "The [use of] artificial intelligence is going to make it difficult to combat to actors. We need to be prepared."
Despite this caution of AI attacks, the agency is not shying away from AI for defense. Stout mentioned the OCFO is "exploring the use of AI and updating the codes" and has already deployed several bots to automate routine tasks and improve efficiency.
They are even piloting an internal AI tool amusingly named "ask Mom" (for the Momentum financial system) to help end-users with system questions. This balanced approach—embracing AI's potential for efficiency while hardening defenses against its misuse—reflects a pragmatic strategy.
Beyond cybersecurity, the USPTO remains exposed to the uncertainties of the federal appropriations process. As Rahn explained, if Congress fails to pass an appropriation on time, the agency faces continuing resolutions or, in a worst-case scenario, a government shutdown.
The operating reserves provide a crucial buffer, but their use is carefully managed between minimum and optimal levels to ensure long-term financial stability. Further complicating matters is a separate, "billion dollars fees" balance that Rahn clarified is "temporarily unavailable" because it consists of funds collected before the agency had full spending authority and requires a separate act of Congress to be accessed.
The USPTO’s financial leadership presented a picture of a sophisticated and resilient organization navigating a demanding environment. The office seems well aware that sharks may be circling as the next appropriation bills come around.
For the IP community, the session offered reassurance that the fees paid are managed with a high degree of rigor and accountability, even as the agency confronts the evolving risks of the digital world and the perennial unpredictability of federal governance.
Disclaimer: This is provided for informational purposes only and does not constitute legal or financial advice. To the extent there are any opinions in this article, they are the author’s alone and do not represent the beliefs of his firm or clients. The strategies expressed are purely speculation based on publicly available information. The information expressed is subject to change at any time and should be checked for completeness, accuracy and current applicability. For advice, consult a suitably licensed attorney and/or patent professional.