The Price of Patents?
A Value-Based Tax Could Cost More Than You Think

September 5, 2025

A New Cost Model Under Consideration

The U.S. Department of Commerce has floated a proposal to impose an annual 1–5% tax on the assessed value of patents. Unlike the flat filing, issuance, and maintenance fees currently paid to the United States Patent and Trademark Office (USPTO), this would represent a recurring tax tied to perceived asset value, not services rendered.

Though still at the discussion stage, the idea is significant. It would be the first time U.S. patent rights are treated as taxable property based on their value. Businesses that rely on intellectual property as a core asset class should pay close attention.

Legal and Structural Challenges

Valuation Complexity
Patents are inherently difficult to value. Some are commercially transformative, others never yield revenue. Without established valuation standards, assessments would be highly contested. Litigation—over both methodology and amounts—would be all but inevitable.

Statutory Authority
The USPTO’s current fee-setting authority is limited and expires in 2026. Shifting to a tax model would likely require Congressional action. Companies should anticipate both legislative debate and possible transitional uncertainty.

Constitutional Questions
Since the tax resembles a levy on intangible property, critics argue it could be treated as a direct tax subject to apportionment requirements under Article I, Section 9. Even if enacted, litigation over constitutionality could create prolonged uncertainty.

Enforcement Mechanisms
Unlike USPTO fees, a patent tax would almost certainly be administered through IRS mechanisms, introducing new compliance layers for IP holders.

Industry-Specific Impacts

Pharmaceuticals & Biotechnology
Patents tied to Food and Drug Administration (FDA) approvals or blockbuster drugs could be valued in the billions. A 5% tax on a patent portfolio valued at $5B would mean $250M annually in new costs. This could influence pricing, portfolio management, and investment in early-stage research.

Semiconductors & AI
Technology companies hold vast portfolios where thousands of patents underpin a single product. The administrative burden of valuation could drive firms to abandon marginal patents or restructure portfolios, reshaping licensing models and cross-licensing agreements.

Clean Technology
As the U.S. races to lead in renewable energy, a new tax could chill investment. Companies balancing federal incentives for green innovation may face offsetting costs if patents are taxed at high valuations.

Startups & Emerging Companies
Early-stage companies often hold patents that secure funding but have not yet produced revenue. A speculative valuation could create unsustainable tax burdens at a critical stage of growth, potentially dissuading patent filings altogether.

Strategic Considerations for Patent Holders

Portfolio Risk Assessment
Begin evaluating which patents in your portfolio might attract higher valuations. Consider factors like licensing revenue, regulatory approvals, litigation history, and market significance.

Alternative Protection Models
Weigh whether trade secrets may offer viable protection for certain innovations. While not suitable for all technologies, this approach avoids valuation-based taxation.

Corporate Structuring
Large portfolios may consider whether reorganizing patent ownership—through subsidiaries, licensing entities, or joint ventures—could mitigate risk exposure.

Valuation Preparedness
Develop internal valuation frameworks now. Collect data on revenue contribution, licensing terms, and litigation outcomes. This will position companies to respond proactively if tax assessments are introduced.

Global Strategy
If U.S. patent costs rise significantly, companies may rebalance filings toward jurisdictions with more predictable fee structures. Monitoring international strategies will be critical.

What to Watch

Legislative Pathways 

Proposals may surface in USPTO reauthorization bills or broader tax reform measures.

Valuation Standards 

Any Internal Revenue Service (IRS)- or USPTO-issued guidance on how patent value will be assessed will be pivotal.

Industry Coalitions 

Trade groups are already mobilizing to shape outcomes. Companies should consider participating.

Litigation Test Cases 

If enacted, early disputes will shape how aggressively the tax is enforced.

Our Perspective

At Daly Law & Strategy, we see the proposed patent tax as more than a fiscal measure—it represents a fundamental shift in how the U.S. treats intellectual property. Whether or not the proposal advances, the trend is clear: the cost of maintaining patents is under scrutiny.

Now is the time to evaluate portfolios, assess exposure, and build flexibility into IP strategies. Preparation today can mean resilience tomorrow.

If you would like to discuss how this proposal could affect your intellectual property strategy, please contact us.