How reimagining USPTO fee structure is key to US economic security
How reimagining USPTO fee structure is key to US economic security
The patent landscape today is dominated by patent oligarchs: not individuals pursuing personal innovation but systematic corporate R&D programs filing thousands of applications annually.
While US Secretary of Commerce Howard Lutnick has been universally criticized by industry for his reported proposal to tax patent values and revenue share with universities, he is absolutely right about the problem. Here’s why.
The patent system was designed for individual inventors such as Thomas Edison, the Wright Brothers –sole entrepreneurs who got temporary monopoly rights for revealing their inventions to the public. Sometime after World War II however, corporations and universities carried out a quiet takeover of the patent office. The patent landscape today is dominated by patent oligarchs: not individuals pursuing personal innovation but systematic corporate R&D programs filing thousands of applications annually. Still, the USPTO functions as if nothing has changed. When 19th century governance is applied to 21st century corporate patent strategies, there are three simultaneous crises. The first being corporate governance blindness. If you ask any fortune 500 board member to identify which patent families generate 20% of their company’s revenue, there is silence. Not because the directors are incompetent, but because the patent system provides no visibility at the family level. The second being filing incentive distortion and the flooding crisis. When individual patents cost $5 to $15,000 to maintain over 20 years but can cost $5 million to litigate, the system incentivizes volume over value. “Maintain for thousands. Enforce for millions” – This disparity makes patents simultaneously too cheap to file and too expensive to defend. Companies file defensively, speculatively, strategically. They flood the system with patents that will never be commercialized, never generate revenue, never advance innovation. The third being exploitation vulnerability. Foreign actors recognize filing in jurisdictions with minimal examination standards, obtaining quick allowances, and then using bilateral programs like the Patent Prosecution Highway (PPH) to exploit much diminished U.S. examination trusting foreign office “approval.” The result is that patents that would take years under normal US examination are granted in months with significantly less scrutiny.
What Lutnick recognizes and his critics miss is that USPTO reform will help the agency to be what recently confirmed USPTO Director Squires reportedly described as: “the Department of Commerce’s Central Bank of Innovation. Every piece of IP we put into circulation is a potential job, a new business, a competitive advantage, or an investible asset.”
As such, the governance lag is being exploited systematically by sophisticated actors. Between 2010 and 2021, patent filing volume was incentivized by Chinese government subsidies, resulting in a patent flood in America. In 2000, 0.2% of U.S. patent filings were Chinese which rose to 7.2% by 2022. But as economists now realize, volume creates its own strategic weapon through what China calls ‘involution’ or a competition cycle that is so fierce that it destroys profits, creates overcapacity, and establishes dominance through manufactured scale. Similarly with patents, involution implies flooding the field with volume, creating patent thickets that impede competitors’ freedom to operate, and establishing IP monopolies in critical technologies. As a remedial measure, larger, front-end fees need to be included for corporate funded filers so as to disincentivize flooding while incentivizing sound patent filings with a focus on patent families as commercial drivers. When Chinese applicants obtain quick allowances from CNIPA (China’s patent office), they leverage the PPH (Patent Prosecution Highway) to accelerate U.S. examination. Chinese PPH applications get considerably less scrutiny than US-origin applications: 38% shorter examination actions, 39% fewer prior art references cited, statistically significant higher first-action allowance rates. Lutnick during his January 2025 Senate confirmation hearing, in response to China IP questions from senators, reportedly said that he thinks the Chinese use the USPTO against the US. He said the Chinese are abusing the USPTO. He said that the US is now working to end this state of affairs and ensure that American inventors get taken care of quickly and effectively.
An in-depth CATL IPO investigation in 2025 revealed systematic financial misrepresentations around high patent value filings that cut the company’s targeted $7.7 billion raise nearly in half and triggered ongoing Congressional investigations. The disconnect between patent governance and corporate reality creates a peculiar blindness: companies invest billions in R&D, generate thousands of patents, yet struggle to articulate which intellectual property actually drives business value. This isn’t corporate negligence but a failure of the infrastructure.
Corporate strategy operates at the level of product lines, market segments, and revenue streams. Patent families, groups of related patents protecting a coherent technology, map to these business realities. However, USPTO governance, corporate IP management systems, and financial reporting all operate at the individual patent level. Patent families representing a material share of corporate revenue remain invisible to boards. Strategic planning proceeds without IP considerations. Acquisition due diligence misses critical dependencies. Competitors file around unprotected adjacent claims because companies don’t recognize family-level vulnerabilities. The US accounting systems, and thereby tax systems, are 140 years out-of-date to recognize the commercial and economic dependency on patents, especially patent families. The remedy is that corporations should be funding their own patent protections at a level commensurate with the commercial materiality those protections enable, not treating $5-15,000 maintenance fees as sufficient support for assets that generate hundreds of millions and often billions in revenue.
Next year likely creates conditions for fundamental reform and Lutnick has the authority, motivation and incentive to act. First, the USPTO fee-setting authority expires on September 16, 2026. This presents an opportunity for reimagining fee structure to incentivize commercialization, reward domestic retention, and align costs with commercial materiality rather than administrative overhead. Second, the 250th anniversary of American independence provides symbolic framing for systemic renewal. Third, an administration explicitly committed to reshoring manufacturing and re-industrializing America creates political will. Either the ‘use it or lose it’ principle should govern monopoly rights wherein patents should be filed in America if one intends to monetize in America else the country will see irreversible decline. The path forward for the USPTO is recognizing that patent governance, corporate materiality, and economic security are the same problem requiring the same solution and evolving from individual-patent architecture to family-based governance; having fee structures that incentivize domestic commercialization; and aligning legal protections and economic contribution.
