The proposed US ‘patent tax’ is dead, Commerce Secretary Lutnick admits to Senate hearing

United States Stock photos by Vecteezy

Plans that were being considered by the Trump administration to levy a fee for successful value-generating patents, possibly of between 1% and 5% of their assessed value annually, have been shelved, US Commerce Secretary Howard Lutnick admitted at a US Senate hearing on Tuesday (10/02/26). 

The news that such a levy was being considered was first revealed by the Wall Street Journal last July. The WSJ said then: “The Trump administration is considering a plan to raise tens of billions of dollars with a new fee that would transform the patent system, a radical move that would likely fuel pushback from businesses.” 

According to the WSJ, what was being considered would be an annual fee of between 1% and 5% on the value of patents in force.  

Supporters of such a levy said that it would raise hundreds of billions of dollars in revenue for the US Treasury, through a levy on US patents, which, according to some estimates, have a value of $3 trillion.  

As the WSJ predicted, the IP world and business groups attacked the idea as impractical, not within the President’s powers, and potentially disastrous for American innovation. Many pointed out that patent valuation is highly subjective and can change over time, given that patents are usually granted for a maximum of 20 years. 

Numerous objections were raised. For example, the US bi-partisan Center for Strategic and International Studies (CSIS) had this to say in a website post titled “Don’t Tax Invention”:  

“While the idea of taxing patents is being sold as a creative way to help pay down the nation’s $37 trillion debt, this approach is not only impractical but detrimental to U.S. economic and national security. A patent tax would introduce enormous administrative challenges, distort incentives for both patent holders and the U.S. Patent and Trademark Office (USPTO), and, most importantly, risk undermining U.S. innovation at a time when national competitiveness and security depend on it. Further, it’s unclear if the tax will increase revenue or simply be offset once administrative expenses and damage to innovation are taken into account.” 

The CSIS article goes on to point out that a patent’s ‘value’ is unknowable at the time it is granted; in fact, “most patents never generate any revenue at all. Indeed, because many inventions never mature to successful, marketable products, many patents have negative commercial value, costing their holders thousands of dollars in application and legal fees with no market return.”  

Furthermore, “the USPTO has no experience or infrastructure for valuing patents, nor does any government agency. Creating a bureaucratic system to assign annual dollar values to the 3.5 million currently active patents in the United States would be both expensive and prone to error.” 

An article in Forbes said: 

“The implications of this proposal are far-reaching, especially for the technology sector. Instead of a fixed, predictable cost, the new model exposes innovators to higher and potentially variable annual fees, directly tied to how their IP is valued on the open market. For tech heavyweights—think Apple, Intel, IBM, Amazon, or biotech leaders with sprawling patent portfolios—the new cost could run into the tens or even hundreds of millions annually. For startups and small inventors, already stretched thin, the prospect of higher, value-based fees could become a new hurdle to entry, dissuading filings and R&D investment. Venture capital firms, which often see patents as necessary collateral, may look elsewhere, favoring regions with more predictable costs and friendlier policies.” 

Neither the Commerce Department nor the US Patent and Trademark Office (USPTO) ever clarified how any such revenue-based patent fee structure might work. 

So Lutnick’s admission that the proposed value-based fee is no longer seriously being considered is probably no surprise to many. 

Oddly, though, it came in response to a senator’s question during a hearing on Commerce Department funding for the deployment of high-speed internet (question asked just over an hour into the linked video). Sen. Chris Coons, a Democratic Senator representing Delaware, and a member of the Senate Judiciary Subcommittee on Intellectual Property, said he was “very concerned” with reports about the proposal and asked for an update on the plans and how the Commerce Department “would avoid harming innovation.”  

Lutnick said in response: “We will avoid harming innovation by not doing a valuation, or any valuation fee or tax on patents.” A valuation-based free structure, or a levy, is “not a plan” and it’s “not going anywhere.”