The Failed Promise of User Fees: Empirical Evidence from the US Patent and Trademark Office

In an attempt to shed light on the impact of user-fee financing structures on the behavior of administrative agencies, we explore the relationship between the funding structure of the Patent and Trademark Office (PTO) and its examination practices. We suggest that the PTO's reliance on prior grantees to subsidize current applicants exposes the PTO to a risk that its obligatory costs will surpass incoming fee collections. When such risks materialize, we hypothesize, and thereafter document, that the PTO will restore financial balance by extending preferential examination treatmentthat is, higher granting propensities and/or shorter wait timesto some technologies over others.