President Trump and Secretary of Commerce Howard Lutnick have vocalized concerns about China’s anticompetitive trade practices and the need to address them with an all-of-government approach, including at USPTOUnited States Patent and Trademark Office. See also PTO.. As the USPTO’s acting director erodes the agency’s own patent quality checks in ways that benefit bad-faith actors at the cost of American innovators, it should not be lost that the USPTOUnited States Patent and Trademark Office. See also PTO. is actually subsidizing foreign entities that obtain U.S. patents, including those based in China.
The majority of patents issued by the USPTOUnited States Patent and Trademark Office. See also PTO. now go to foreign-based entities. Among these, patents granted to entities based in China have seen the largest recent increase, rising by 65% over the past five years, with a rise of 31.5% in just the past year. Several sources have found that, historically, Chinese entities have a “quantity over quality” approach to patenting their intellectual property worldwide, and like all patent-issuing agencies, the USPTOUnited States Patent and Trademark Office. See also PTO. is not immune to wrongfully issuing some of the more dubious ones.
When patents of questionable quality make their way into competitors’ hands, they gain a tool to undermine American businesses and the U.S. economy—slowing R&D, decreasing competition, and raising prices for both businesses and consumers.
An overlooked dynamic at play here is that not only is the USPTOUnited States Patent and Trademark Office. See also PTO. arming global competitors with potentially invalid patents while also weakening the process to rereview them, but it is also subsidizing that IP at the time of issuance. The USPTOUnited States Patent and Trademark Office. See also PTO., which is fully funded by fees, spends more to review a patent than it charges the patent owner in up-front fees. This back-ended fee structure means the agency only recovers the full cost of reviewing a patent through maintenance feesFees for maintaining in force a patent based on an application filed on or after December 12, 1980. See MPEP 2500 for more. paid more than 7 years after the patent issues.
Back-of-the napkin math reveals that, over the past five years, the USPTOUnited States Patent and Trademark Office. See also PTO. has subsidized Chinese-based patent applicants to the tune of nearly $600 million. Using figures from the agency’s 2024 fee-setting rule, we can estimate that the subsidy per patent issued—calculated by subtracting the filing, searching, examining, and issuance fees from the USPTO’s unit cost for these activities—is approximately $3,414. This means that the 173,860 patents granted over the last five years to entities based in China, Hong Kong, and Macau resulted in a total subsidy of roughly $594 million—expenses a U.S. federal agency shoulders on behalf of its express competitors.
While this estimate does not account for maintenance feesFees for maintaining in force a patent based on an application filed on or after December 12, 1980. See MPEP 2500 for more. paid later by the patent owner—nor, conversely, the costs incurred by the USPTOUnited States Patent and Trademark Office. See also PTO. for patents it reviews but does not issue—it provides a general, albeit clear picture of how the USPTOUnited States Patent and Trademark Office. See also PTO. is set up.
For example, if China were to orchestrate a widespread effort to avoid paying renewal fees, it could blow a serious hole in the USPTO’s budget. As a study from the Brookings Institution notes, “any unexpected decline in the rate at which applicants pay renewal fees […] can have a negative effect on the Agency’s ability to cover its operational costs with its fee revenue.”
At the very least, if the USPTOUnited States Patent and Trademark Office. See also PTO. is expending its resources to issue patents to foreign entities at a loss, it should ensure that those patents are high-quality and that low-quality patents can be swiftly canceled by the PTABPatent Trial and Appeal Board. Reviews adverse decisions of examiners on written appeals of applicants and appeals of reexaminations, and conducts inter partes reviews and post-grant reviews. The Board also continues to decide patent interferences, as it was known as the Board of Patent Appeals and Interferences (BPAI) before the AIA. so they do not impose additional costs on U.S. industry.
