IP and Business: Managing Patent Costs

Many small businesses forego patent protection because they believe the costs of acquiring and maintaining patents to be prohibitive. This article suggests some practical strategies to minimize the costs associated with managing patents.

Be clear about your IP strategy

An important first step is to put in place a clear and focused IP strategy that serves the overall strategic objectives of the business. Patent applications should not be filed for every patentable invention. Such a strategy could send patenting costs spiraling out of control. Businesses should only obtain and maintain patent protection on inventions that will bring sufficient commercial or strategic benefits. Trade secrets and defensive offer alternatives to patenting that have a much lower cost than patenting publication (see WIPO Magazine articles Trade Secrets Are Gold Nuggets: Protect Them, Issue 4/2002, and Launching a New Product: Freedom To Operate, Issue 5/2005).

If an enterprise determines that patenting is the best option in terms of their strategic objectives, then the direct costs may be considered from a number of perspectives.

Search costs

It cannot be assumed that just because a product is not already on the market, it will meet the patentability criteria of novelty and non-obviousness. A professional prior art search is an essential part of the process to determine patentability. The search moreover provides the applicant with valuable information that may result in substantial savings in the application process and beyond, by, for example:

• helping to anticipate possible objections at the patent examination stage;
• revealing any potential infringement on other people’s patents;
• providing information on other patents in that field, (i.e. the competition), on how useful the granted patent would be from a commercial angle, and whether it would be necessary to ‘license in’ patents owned by others to practice the invention;
• helping the applicant to decide whether to modify the claims to avoid infringement.

Free patent information database services on the Internet can usually be accessed through national or regional patent offices. These offices may also provide information about subsidies or grant schemes and services that might be available to enterprises. These free services will keep preliminary search costs down, but will probably not suffice. Applicants will eventually have to use a commercial, value-added patent information service provider.

Cost-saving patenting options

Filing a provisional patent, a petty patent (short-term patent, innovation patent) or a utility model application, if these options are available under the national law, may be a sensible, low-cost, interim solution which delays the decision, and cost, regarding filing a regular patent application.

A provisional patent is a quick, easy, and cheap way to preserve the possibility to file a patent application for an invention while undertaking further technical refinements. It is particularly suitable for an early stage invention, especially if the scope of the patent claims is likely to change. However, when the scope of the claims is clear, the prior art established, and the invention framed in light of this prior art, a regular patent application is clearly preferable.

Although there can only be one invention in a patent application, more than one invention can be covered under the concept of ‘unity of invention,’ where a group of inventions are linked to form a single ‘inventive concept’ and there is a technical relationship among the claimed inventions. Thus an alternative cost-saving strategy would be to file a series of related provisional patent applications, then to file a regular patent application claiming multiple priorities, within the due dates to sort out any issues concerning unity of invention or single inventive concept. In fact, it is a popular strategy to file a series of related provisional patent applications after each significant technical or commercial milestone in product development, and to file a formal patent application that incorporates them all, within one year of filing the first provisional patent application.

Drafting costs

A patent application drafted and prosecuted without professional assistance will save on drafting fees, but risks resulting in a poor quality patent, which lacks the well-drafted claims necessary to cover all the key business applications. There is little point in being "penny wise and pound foolish" when it comes to patent applications covering inventions that protect the core competencies of a business. However, the national or regional patent office may have a list of reliable local patent agents, attorneys or IP law firms that provide pro bono (free) or reduced rate IP services, including the drafting of the first patent application, to a new client or to a first time applicant. Ensuring that all pertinent information is provided from the start to the patent drafter will also save time and money.

Governments and funding agencies that provide grants for R&D activities may also allow a portion of the funds to be used on patenting costs, sometimes including enforcement and international filing costs. Inquiries should be made with the ministry or agency responsible for administering such funds.

Managing patent office fees

Although some countries have reduced patenting fees for small enterprises, in principle fees are payable in installments throughout the legal life of a patent, often increasing substantially towards the end of the 20-year period. Missing the deadlines for such payments may result in loss of rights or additional, avoidable expenses. An electronic docketing system which sends automatic reminders will aid the efficient management of a patent portfolio.

It is also necessary periodically to review the patent portfolio in order to decide whether to let certain patent applications lapse, or to abandon any granted patents. Questions to consider during the review include the following:

• Is the patent application likely to result in worthwhile patent? 
• Does the granted patent have direct or indirect value for the business?
• Can the patent be sold, donated, licensed to others?
• Is the existence of the patent portfolio or a number of pending patent applications a good marketing tactic in relation to funding agencies, venture capitalists, etc.

International patenting costs

Patent costs multiply with the number of countries in which protection is sought. Choosing prudently the countries in which to apply is evidently key to keeping down costs.

The Patent Cooperation Treaty (PCT) makes it possible to seek patent protection for an invention simultaneously in each of a large number of countries by filing a single "international" patent application. Use of the PCT route will buy time, and may save costs at a later stage, for example if, based on the results of the international search and opinion,0 the applicant decides to seek protection in fewer countries than originally planned. The PCT generally postpones all expenses at the national level by an additional 18 months, beyond the 12 months available under the Paris Convention. Nevertheless, the costs of the PCT application have to be factored in as additional to the final costs of obtaining a national or regional patent.

The PCT offers a reduction of 75 percent of certain fees to natural persons who are nationals of and residents in any State with a per capita national income below 3,000 US dollars. This reduction also applies to any applicant from a country classified by the United Nations as a least developed country. If there are several applicants, each must satisfy the criteria.

Applicants filing international patent applications must also consider translation costs. The PCT process does not shield applicants from translation costs incurred during the "national phase". The London Agreement, when ratified, will decrease translations costs in the European Patent Convention (EPC) member states by requiring that applicants submit a translation of the claims only, rather than the full text of the patent at the time of grant.

Sharing or transferring costs

Another way to reduce costs is to find a partner for licensing the patent or a portfolio of patents. If stipulated in the contract, the partner or licensee may take partial or total responsibility for prosecuting, maintaining and enforcing the patents in the home country or abroad.

Donating patents to a non-profit institution or to a university may provide tax relief in certain countries. The money saved can be used to file or maintain other patents more pertinent to business needs.

There is no getting around the fact that patenting may represent a significant financial investment. A number of the costs associated with filing applications and maintaining granted patents can be reduced or contained with careful management. But cost management must also take into account the need to avoid increasing business risks or lowering the quality of the resulting patents.

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Patent Application Costs

The cost of a patent application depends on a number of factors, such as:

• Field of technology
• Nature of the invention
• Length of the application
• Number of claims
• Hourly rate of the patent agent, and total time to prepare and prosecute the application
• Fees charged by the draftsman for preparing any drawings
• Number of countries to be covered
• Route used for filing in other countries
• Translation costs of foreign filings
• Number and nature of objections raised by the patent examiner, and whether there are any opposition proceedings or appeals

By Christopher M. Kalanje and Guriqbal Singh Jaiya, WIPO Small and Medium Sized Enterprises Division.