The Proposed Patent-Value Tax: Risks, Concerns, and Open Questions

The U.S. Department of Commerce is considering a dramatic change to the patent maintenance fee system: replacing or supplementing the current flat-fee schedule with an annual levy of between 1% and 5% of each patent’s assessed value.

The proposal’s stated goal is to generate substantial new federal revenue, potentially in the tens of billions of dollars annually. However, reaction from patent owners, practitioners, industry groups, and academic experts has been overwhelmingly negative. Critics warn that the change would be impractical to administer, harmful to innovation, and at odds with both U.S. and global IP policy norms.

I. The Current vs. Proposed Systems

Under the current U.S. patent system, maintenance fees are fixed amounts due at 3.5, 7.5, and 11.5 years after a patent is granted. For a large entity, these fees total approximately $14,470 over the 20-year life of the patent. Small entities receive a 50% discount, while micro entities pay just 25% of the full rate. These fees serve primarily as a cost-recovery mechanism for the U.S. Patent and Trademark Office (USPTO) and as an incentive to abandon patents that are no longer economically viable. The system does not differentiate based on a patent’s commercial value — a billion-dollar pharmaceutical patent and a dormant mechanical patent pay the same fees.

The proposed value-based maintenance system would change this approach fundamentally. Instead of a fixed schedule, patent owners would be required to determine the “assessed value” of each patent annually. An annual levy of between 1% and 5% of that value would then be charged until the patent expired or was abandoned. High-value patents could thus become vastly more expensive to maintain, while low-value patents might cost less — at least in theory. The proposal could apply equally to patents owned by U.S. and foreign entities.

II. Key Concerns Raised by Stakeholders

The most immediate concern raised by stakeholders is the feasibility of valuing patents accurately and consistently. Patent valuation is notoriously difficult, depending on variables such as market demand, licensing agreements, litigation risk, and competitive positioning. Commonly used approaches — including income, market, and cost methods — can yield wildly different results for the same asset. Experts such as Stanford Law Professor Mark Lemley have pointed out that most patentees do not know what their inventions are worth, particularly in the early years after issuance, making annual valuation an exercise in speculation.

A second major concern is the effect on innovation incentives. Many patents, especially those owned by startups, universities, and individual inventors, take years to generate revenue, if they do so at all. Imposing significant annual costs during this pre-commercial phase could force premature abandonment of rights that might later prove valuable. This could shift innovation toward trade secret protection, which keeps technology hidden rather than disclosed — undermining one of the core purposes of the patent system.

Smaller entities, including research institutions, could be disproportionately affected. Without substantial exemptions or reductions, these groups may find themselves unable to afford the new fees, leading to a concentration of patent ownership among large corporations with deeper pockets. This could have long-term effects on the diversity and accessibility of innovation in the U.S.

Finally, the administrative burden of implementing such a system is a serious concern. Whether the government were to rely on self-assessment with audits or create a dedicated valuation office, the process would require substantial new infrastructure. Protecting the confidentiality of sensitive business information during valuation and audit would present additional challenges. Without clearly defined audit triggers, appeal processes, and enforcement mechanisms, the system could become a source of continual dispute and litigation.

III. Legal and Constitutional Risks

Adopting a value-based maintenance system would almost certainly require amendments to 35 U.S.C. § 41, which currently authorizes the USPTO to collect fees tied to cost recovery, not asset value. Because the proposal would likely redirect revenue to the general Treasury, it could be challenged as a tax rather than a fee, bringing constitutional questions into play. Critics have argued that such a levy might resemble a wealth tax on intangible property, which could face significant legal challenges under the Takings Clause and other constitutional provisions.

There is also the matter of due process. Patent owners would need clear statutory rights to challenge valuations, along with access to administrative and judicial review. Without these safeguards, the system could invite claims that it deprives owners of property without adequate procedural protections. Given the value and complexity of many patent portfolios, litigation over these issues could be both frequent and costly.

IV. International Competitiveness

From an international perspective, the U.S. would become an outlier among major patent systems if it adopted a value-based levy. Offices such as the European Patent Office, Japan Patent Office, and China National Intellectual Property Administration all use fixed annual renewal fees, sometimes increasing with the age of the patent but never tied to its commercial value. Introducing such a system in the U.S. could make this jurisdiction less attractive for patent filings, particularly for foreign entities that would face higher and more unpredictable costs.

This divergence from international practice could also have trade implications. Foreign governments might view the levy as a barrier to market entry and respond with reciprocal measures targeting U.S. patentees abroad. Moreover, questions could arise under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which requires that patent rules be applied without discrimination as to the nationality of the owner. While applying the levy equally to all patentees could satisfy the letter of TRIPS, the economic effect might still discourage international participation in the U.S. patent system.

V. Known Support and Opposition Landscape

Support for the proposal appears to be confined primarily to the Administration officials who introduced it, including Commerce Secretary Howard Lutnick and USPTO leadership aligned with the Department’s fiscal goals. Some policymakers focused on deficit reduction have expressed openness to the concept as a potential revenue source, but no major external organizations have offered public endorsements.

Opposition, by contrast, has been broad and vocal. The U.S. Chamber of Commerce has warned that the plan would be nearly impossible to administer and would harm the U.S. innovation ecosystem. Legal scholars have called patent valuation in this context “black magic” and “voodoo science.” High-profile business leaders, including Mark Cuban, have derided the proposal as one of the “dumbest ideas in the history of business.” Industry groups across sectors — from biotech to consumer electronics — have raised concerns about both the cost burden and the potential to stifle research and development.

VI. Outstanding Questions

A number of fundamental questions remain unanswered. The proposal does not specify how patent value would be defined or measured, whether valuations would be reassessed annually or at fixed intervals, or who would be responsible for conducting them. It is unclear whether the system would rely on self-assessment, third-party certification, or government valuation, and what the scope and frequency of audits would be. The proposal has not addressed whether exemptions or reduced rates would be offered for small entities, micro entities, or universities. Nor has it clarified whether revenue from the levy would be used to fund the patent system or diverted to other purposes.

Without answers to these questions, it is difficult for stakeholders to fully assess the costs, benefits, or feasibility of the system. The absence of detail also fuels skepticism that the proposal is administratively viable.

VII. Conclusion

The proposed patent-value tax represents a radical departure from the U.S.’s long-established maintenance fee system and from global patent practice. While intended to align the cost of patent protection with the economic value of the rights granted, the proposal raises serious concerns regarding valuation feasibility, innovation-chilling effects, disproportionate burdens on smaller entities, administrative complexity, legal risks, and international competitiveness.

Given the breadth and intensity of opposition — and the number of unresolved design questions — the proposal, in its current form, is unlikely to gain broad legislative or industry support. If policymakers wish to pursue value-based maintenance fees, they will need to address these concerns through careful statutory design, extensive stakeholder consultation, and rigorous economic impact analysis before such a system could be considered a viable alternative to the status quo.