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The United States Patent and Trademark Office (USPTO) has proposed charging semiconductor patent fees based on “value” rather than a fixed fee, a proposal that has raised many questions.
The USPTO has suggested that the application fee for semiconductor patents will no longer be a fixed amount, but will instead be charged at 1% to 5% of the patent’s “value.” This is clearly influenced by the current semiconductor market bubble, particularly with chip design company Nvidia, which has reached a historic high valuation due to its semiconductor designs over the past 20 years. However, this is also related to the ongoing trade war between the U.S. and China.
Meanwhile, this move by the current government aims to extract more funds from the semiconductor industry, highlighting the lack of expertise within the U.S. bureaucracy regarding the semiconductor sector, including a poor understanding of the industry’s cyclical fluctuations. Additionally, this could stifle the transparency that has been a key advantage in the industry for over 50 years.
For the third consecutive year, semiconductors have topped the U.S. patent rankings, part of a global trend in the increase of semiconductor patent applications. According to the UK intellectual property law firm Mathys & Squire, global semiconductor patent applications rose from 66,416 in 2022/23 to 80,892 in 2023/24, an increase of 22%.
Rupert Bains, a senior executive in the UK semiconductor industry, stated, “The idea of valuing patents is simply absurd.” He previously served as CEO of the startup UltraSoC and is now the chairman of 5G chip design company RANsemi. “When I first heard this, I thought, ‘This can’t be true. I must have misunderstood… How do you assess the value of a patent, and how do you budget for it? This will really stifle innovation.”
There is a significant problem with valuing patents at an early stage. “It’s like asking how long a piece of rope is; it’s difficult to determine,” said Malcolm Payne, a UK semiconductor analyst. “When Nvidia’s GPU intellectual property was first patented, no one would have thought they would be worth such ridiculous prices today.”
This will also affect companies in the U.S., UK, and Europe, which need to establish a strong intellectual property protection system in the U.S. to gain investor support.
Sean Richmond, managing partner of the UK semiconductor accelerator Silicon Catalyst and a board member of the UK Semiconductor Institute, stated that this requires more than just a single patent; startups need to establish a comprehensive intellectual property strategy with multiple patents.
“In the highly complex and fiercely competitive global semiconductor industry, patents are crucial for winning competition. If the cost of patent applications in the U.S. is too high, then our early-stage semiconductor startups will be at a significant disadvantage,” he told European news agencies.
“This could also involve tax issues. And it is double taxation because you have to pay patent fees based on the value of a product and also pay taxes on the revenue generated by that product,” Bains said.
However, there are geopolitical factors involved. Patents are a key weapon in the U.S.-China trade war, as highlighted by recent lawsuits over gallium nitride device patents between China’s Innoscience, U.S. EPC, and Germany’s Infineon Technologies.
This is evident from the fact that most of the companies with the highest number of patent applications are not from the U.S. According to U.S. analytics firm Parola Analytics, the major assignees of U.S. patents in 2024 are:
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Samsung Electronics (South Korea)
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Taiwan Semiconductor Manufacturing Company (Taiwan)
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IBM (U.S.)
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Intel (U.S.)
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Samsung Display (South Korea)
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SK Hynix (South Korea)
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Kioxia (Japan)
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LG Display (South Korea)
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Micron Technology (U.S.)
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Applied Materials (U.S.)
The USPTO’s approach to assessing the “value” of patents is also susceptible to political influence, and the fees could be high enough to deter competitors (whether from China or Europe) from applying. This would give U.S. semiconductor companies an unfair advantage in the global market and could lead to more disputes at the World Trade Organization (WTO).
The Semiconductor Industry Association (SIA), which represents 99% of the revenue of the U.S. semiconductor industry and nearly two-thirds of non-U.S. chip companies, has also pushed back against the proposal.
“Assessing fees based on the government’s ‘valuation’ of patents could pose risks to the fairness, predictability, transparency, and operation of the U.S. patent system,” said John Neuffer, president and CEO of the SIA, who has held the position for ten years.
He pointed out that semiconductor technology is often interrelated and relies on countless other patents; there is hardly any patent in the semiconductor industry that can operate independently, separate from other patents. From semiconductor fabrication plants and the precision equipment used to manufacture semiconductors, to chip design tools and countless materials, chemicals, and gases, every aspect of the semiconductor ecosystem is composed of layers of interdependent innovations, some of which are protected by patents while others are held as trade secrets.
Shifting to a “value-based” system could also encourage more companies to keep their innovations as trade secrets rather than seeking protection through the patent system.
Neuffer stated, “Imposing such fees could hinder patent applications in the U.S., thereby reducing the collaboration and transparency that are crucial for innovation and technological advancement.”
“This will place an disproportionate burden on smaller, early-stage companies, which play a critical role in the semiconductor innovation ecosystem. The exclusivity of patents allows companies to recoup costs, reinvest in future innovations, and grow their businesses. If the government imposes fees based on an unknown assessment of patent value on these entities, it will stifle investment and innovation in the chip ecosystem.”
Maintaining a fair and predictable fee structure is essential for supporting innovation, not only for the U.S. semiconductor industry but also for Europe. European innovation, in turn, supports the development of next-generation technologies, driving economic growth.
Neuffer stated, “We strongly urge the USPTO to reject the proposal to assess patent fees based on the so-called valuation of patents.”
As Bains pointed out, why is this regulation only targeting the semiconductor industry? He said, “If this regulation is truly beneficial, it should apply to all patents.”
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