U.S. value-based patent tax plans scrapped

Context:

• Since taking office in September, United States Patent and Trademark Office (USPTO) Director John A. Squires has made a series of pro-patent and patent enforcement policy decisions, as well as brought in mechanisms that make it harder to challenge patents (October 16, 2025 ip fray article; October 1, 2025 ip fray article). On his second day in office, Director Squires signed the first two patents of his tenure, signaling the USPTO’s commitment to a “strong, robust, expansive, and resilient intellectual property system”. The USPTO then issued the precedential “In re Desjardins Appeals Review Panel” decision, which the office noted reaffirms that “eligibility must be assessed carefully and consistently, with proper consideration of technological improvements reflected in the claims and specification”. 
• Last July, a proposal by Secretary of Commerce Howard Lutnick to charge a 1%-5% patent “tax” on the value of granted U.S. patents was first reported by the Wall Street Journal. The proposal was not welcomed by the IP community, with a letter sent by 36 conservative organizations in September stating it would be decidedly bad for the United States (September 9, 2025 letter).

What’s new: The proposed value-based patent tax has now been completely scrapped, Mr. Lutnick revealed during a Subcommittee hearing of the Senate Appropriations Committee yesterday. He said:

“That is not a plan – that is not going anywhere. We are totally onside that is not a thing the patent office is going to do […] How in the world could we do that? How in the world could anyone reasonably do that?”

Direct impact: Given the wide criticism that the proposal initially drew, this latest development will be welcomed by the IP community. Mr. Lutnick’s statements came in response to a line of questions posed by Christopher Coons, U.S. Senator for the District of Delaware, who had emphasized that the patent tax was something the entire IP community agreed “would be a real negative”. “And the IP community never agrees,” he said. As Mr. Lutnick confirmed that the plan would not be moving forward, Senator Coons said, “good, it struck me as a completely unworkable proposal”. He also said:

“[It is] very complex and difficult to value a patent. I was in-house counsel to a global company that had a very large patent estate, and figuring out how we would administer our patent system and potentially impose a crushing tax on American innovation – something no other major country does – struck me as puzzling.”

Wider ramifications: Senator Coons also noted in the hearing that he was “impressed” by Squires’s leadership at the USPTO – and that he had even voted for him. He also urged Mr. Lutnick and the U.S. Administration to support the PREVAIL Act (January 5, 2025 bill) so that together they can legislatively support Squires’s efforts to restore the Patent Trial and Appeal Board (PTAB) process as a “faster, cheaper alternative” to going to district courts. “Or these could be reversed with the next director,” he warned.