Patenting on a budget? You must be joking!

The first of a series of related articles which take a fresh look at the holy grail of the IP world – how to obtain, maintain, use and enforce patents in a cost effective way

By Arnie Clarke

A man walks into a patent attorney’s office and asks for a cheap patent. The patent attorney points the man to a box on his desk marked “invalid” and says “you can have any of those for £10,000.” The man says “But surely they aren’t worth the paper they are printed on?” To which the patent attorney replies “Ah yes, but I am saving you the cost of the validity opinion.”

I know it’s not funny, but the fact is that patenting is an expensive business. There are countless costs that are rarely predictable and which can occur throughout the life of the patent. This can present a significant budgeting headache not only for small or developing businesses, but also for the largest and most established multinationals.

For example, one of the US-based household names that I have worked for has a patent portfolio numbering thousands of patent families. The recent changes in exchange rates has made the translation costs associated with its foreign patent filing program increase by millions of $US per year. This can have a significant knock-on effect for the patent budget and the business as a whole. So how is it possible to patent on a budget? Can and should one cut corners, and if so, which corners and by how much? What happens when the unpredictable or unthinkable happens? This is the first of a series of related articles which take a fresh look at the holy grail of the IP world – how to obtain, maintain, use and enforce patents in a cost effective way.

The costs associated with patents fall into four distinct areas:

1. Patent Acquisition
2. Patent Monitoring
3. Patent Exploitation
4. Patent Enforcement

This article shall deal with patent acquisition, while future articles will deal with monitoring, exploitation and enforcement. Before that, however, I shall mention a few general considerations. It is worth pointing out that no two companies are the same and there is no “one size fits all” approach to creating and handling a patent portfolio. The key to good budgeting is taking a structured approach, and this starts with the company’s business plan. Beware the patent attorney who says he will solve all your problems without reviewing your business plan or at least asking some fundamental questions about how your company works, what its aims are and how it intends to achieve them.

You and your patent attorney need to establish a clear understanding of how a potential patent can support your company and how the patent is going to be exploited to add value (either immediately or in the future). If you are unable to do this, simply don’t file the patent – the chances are that it will be a complete waste of money.

Establishing and maintaining a patent portfolio is not a bean-counting exercise - more does not necessarily mean better. Quality and relevance are of paramount importance.

Patent Acquisition

Patent acquisition involves a number of costs to your company. These costs include patent drafting, filing, prosecution, maintenance and internal costs. There are also patent purchase and licensing costs, but these are beyond the scope of this article.

Drafting

One could argue that the drafting of a patent application is the most significant part of patent acquisition – get this wrong, and you can spend years and a small fortune trying to put it right. However, significant savings can be made in the drafting process. However, one needs to understand the function of the patent and the requirements of the various patent offices and courts around the world. So where is it safe to cut drafting costs?

First, a number of patent attorneys advocate undertaking a search of the prior art. This may be helpful in some cases, but it is not always necessary. Quite often the inventor will already be aware of the most relevant prior art. Furthermore, a comprehensive prior art search and its review by a patent attorney frequently costs more than simply drafting and filing a patent application. If, for example, a patent application is filed at the UK Intellectual Property Office, a relatively cheap search can be carried out by the Office – this should provide at least the same level of comfort as a commissioned search, at a fraction of the cost. On the basis of this search, the applicant can decide whether to pursue the application further and into other geographical locations.

Second, your patent attorney will probably charge by the hour. Therefore, you should try to make his/her life as easy as possible. It is almost certainly the case that your inventor(s) not only understands the invention as well as anyone, but is also a lot cheaper per hour than your patent attorney. Therefore, your inventor(s) should write up the invention as completely as possible. Some patent attorneys will be able to provide you with an “invention proposal” document which should illicit the appropriate answers required to efficiently draft the patent. For example, see our invention proposal form. Alternatively, the invention can be written up as if it were being submitted for peer review or for journal publication. A review of the known documents and information which are relevant to the invention should be provided and, if possible, copies of the documents supplied.

If possible, the write up of the invention should be supplied in editable electronic form, including any drawings or figures that are considered important for the understanding of the invention. The patent attorney will likely charge for retyping and editing, so make it as easy as possible for them to copy and paste.

At this point I would always advocate a face-to-meeting before any drafting by the patent attorney has taken place. The invention proposal document should be submitted before the meeting for an initial review by the attorney. This can then be discussed and the patent attorney should leave the meeting fully understanding the invention. Again, the cost for your inventor or patent liaison to visit the patent attorney is likely to be cheaper than the other way around. This should lead to a more complete first draft which should be sent to your inventor(s) for review.

As the patent attorney comes to understand your company, its technology and its patent portfolio, the drafting process is usually speeded up. It may be appropriate to minimise the meetings required to discuss the invention or to deal with a number of inventions at the same meeting. When you receive the initial patent draft, in some cases the patent attorney may have completely rewritten the initial write up of the invention, or may have simply trimmed it and added some patent claims to the end. This will depend on the initial write-up, the technology area and the patent attorney - there is no right or wrong way.

While the patent draft may include what appears to be repetitive, convoluted and complex language, this will almost certainly have been included for good reason. However, as patent applications do not usually read like a journal publication, inventors who are used to preparing such documents frequently spend an inordinate amount of time trying to reshape the patent draft to look like a journal publication. This is almost always a waste of time. As long as you have employed the services of a qualified patent attorney, they are unlikely to have included unnecessary language. You should bear in mind that the patent attorney will probably charge the same hourly rate for making minor and inconsequential changes to the language of the patent as for any other aspect of their work – if you are arguing over a split infinitive, you are not being cost effective.

The key to reviewing the patent application is to make sure it is factually and technically correct – if you do not agree with the draftsman’s explanation of the invention, you must question it. It is also worth providing as comprehensive a review of the draft as possible. The patent attorney will not thank you for the “and another thing …” approach – this will add to the time spent amending the draft and consequently the cost. Generally, there should be no need for more than a couple of drafts in order to arrive at a document which is ready for filing as a patent application – if you are reviewing the eighth version of a draft, something is probably amiss.

As mentioned above, more is not necessarily better when it comes to patents. While it is sometimes necessary to include a number (and sometimes hundreds) of worked examples in a patent application, this is not usually the case. You should bear in mind that certain countries charge official fees by the page and/or claim, and some require translations of the patent application to be filed. This can be extremely expensive for even a few cases, let alone an extensive geographical filing program. Therefore, if 10 worked examples prove the same thing as 100, choosing the former can save considerable expense. Of course, this should always be discussed with your patent attorney as there may be good reason for the latter.

Try to provide accurate, labelled drawings and figures where these are useful for understanding the invention. While a number of patent offices have special formal drawing requirements, your informal drawings may be used to support an initial application which may be supplemented by formal drawings later, thereby deferring costs. Good informal drawings may also make it easier for both the patent draftsman and drawing draftsman to describe and formalise the drawings.

Patent filing and prosecution

Patents are parochial – if, for example, protection is required in the US, a US patent must be applied for. However, this does not mean that you need to draft a patent application for each and every country in which protection is desired. Thanks to the harmonisation of national patent laws, it is becoming increasingly easy to reliably base all of your related patent applications on the text of a single patent application. A good patent attorney will have sufficient understanding of other national patent systems to be able to draft a single patent application which meets the formal requirements of most patent laws.

However, in most countries it is still necessary to appoint local attorneys to file and prosecute your patent applications. While this is by-and-large unavoidable, it is possible to significantly minimise costs.  

First, it is necessary to consider where your company needs protection. Thus, if your company produces high specification engine parts for Formula 1 racing cars, you are unlikely to need patent protection in Namibia. While this may appear to be obvious, the majority of companies generally consider that patents should be accumulated and presented like medals. This is frequently the wrong approach - if you have won the Victoria Cross, turning up with your Boy Scouts Orienteering badge seems inappropriate when interviewing to be a Chief of Staff. Patent filings should be appropriate to the business both in terms of numbers and in terms of geographical coverage. Anomalies can be uncovered during due diligence of a patent portfolio and can be used to bring the entire patent strategy into question, thereby potentially undermining the value of a company.

When deciding on geographical patent coverage, it is essential to bear company strategy in mind. If the business plan for the company is to be bought out by a multinational firm in two years’ time, it is worth reviewing which countries the multinationals in your field file their applications in. Your company is unlikely to present a good investment or acquisition opportunity if you have no protection in their key markets.

You should also consider whether your company wants an offensive or defensive patent strategy or a mixture of the two. By ‘offensive’ I mean the situation where a company wants to patent a product or process which it intends to exploit itself or to license it to a third party, as opposed to a ‘defensive’ strategy where a product or process is patented simply to prevent a competitor from exploiting the technology.

There are ways in which a company can achieve near blanket geographical patent protection while delaying the major costs and the decision to select final geographic protection by up to about 2½ years from an initial patent filing. This may be attractive for small companies with a limited budget. However, for some companies it may be more important to get quick, enforceable protection in specific localities. Again, the alternatives should be explored by you and your patent attorney. While the overall costs of the alternatives may not be significantly different, their timing can be essential to the budgeting process and the business plan. A summary of some of the various available routes to patent protection is set out in our time-lines document.

Once your company has decided where it needs protection, you should also be discerning about which foreign attorneys are used to file and prosecute your patent applications, and what their standing instructions are. It is worth while finding out on what basis your patent attorney selects foreign attorneys. Some attorneys will select on the basis foreign attorneys who provide a good service at a reasonable cost. Others select foreign attorneys on the basis of reciprocity – they send foreign attorneys work on the basis that they will receive some work back from them. This is not in your interest as it is primarily for the financial benefit of your attorney, not you.

It is cost effective to let your patent attorney coordinate the filing and prosecution of your patent applications abroad. The same legal problems often arise in several jurisdictions, and a well organised patent attorney who knows your patent portfolio will be able to avoid duplication of work. Therefore, do not be afraid to ask that a single attorney coordinate your portfolio – some firms of patent attorneys spread their work among colleagues and assistants. This can lead to an unstructured and inefficient approach which should be avoided.

Foreign attorneys can be given standing instructions which will help to minimize costs. For example, a foreign attorney can be asked to report official letters with a minimum of commentary. As a European patent attorney should be able to understand most of the objections raised by overseas patent offices (assuming they do not require a translation), there is frequently no need for the issues to be considered in depth by both the foreign attorney and your attorney. General instructions can be formulated by your attorney, and the foreign attorney can be instructed to make any minor changes to meet local formal requirements. Where specific legal input from a foreign attorney is required, this can be sought on a case-by-case and issue-by-issue basis.

Maintenance costs

A patent usually lasts for 20 years, subject to the payment of annual maintenance fees. These usually increase over the lifetime of the patent. For example, for a UK patent, the 20th year maintenance fee is 8 times that of the 5th year maintenance fee. Therefore, if your company’s patent budget increase is linked to the rate of inflation, think again!

Your company should periodically review (say every year) its entire portfolio. Clearly the needs of a business may change over time. It may also be the case that technology has moved on - this is frequently true of the electronics business. In either of these cases, if a patent no longer supports your company or can be effectively exploited to add value, why continue to pay for it?

Internal costs

One source of costs often overlooked by companies is their own overheads. The cost to themselves can include manpower, management, materials and internal patent attorneys and legal counsel. One should remember that a patent application may require the production of a number of examples to support the patent application, requiring hundreds of man-hours of laboratory time. This is especially the case with chemical or biotechnological subject matter. However, as mentioned above, it is not usually correct that the production of worked examples be driven by patent requirements. Some patent applications can be speculative and there is no absolute requirement to produce prototypes and the like.

Even some relatively small companies employ a patent liaison who oversees the interaction of the inventors with external patent attorneys, and the management of the patent portfolio in general. While it may appear obvious, companies need to strike a balance between shouldering the burden themselves and outsourcing. For a relatively modest patent portfolio, a patent attorney will usually be the most cost effective approach for handling and coordinating all aspects of the portfolio. However, some decisions will always need to be taken by informed internal management. Therefore, as the portfolio grows in size and/or complexity, there will come a point where it is necessary to appoint a patent liaison or even create a patent department.

One area worth spending some time and money on is in establishing and recording inventorship and ownership of your patents at an early stage. All too often, considerable time and expense is spent trying to establish these issues after the fact. One should remember that inventors can fall out with their employers, or simply move on to pastures new. As it is frequently necessary to have forms signed by inventors, trying to achieve this with a belligerent, absent or even deceased employee can be very difficult!

Summary

While a company understands its business, it is frequently in the dark regarding almost every aspect of patent law. Other than knowing what patents are used for (although this is frequently misunderstood), most companies cannot explain how its patent portfolio bears any relation to its business. Traditionally, patent attorneys have been very good at drafting and prosecuting patent applications, but not so good at investigating why they are needed in the first place.

A lack of communication is usually to blame – the company does not know the relevant questions to ask about patents, and the patent attorney does not know or think to ask the right questions about the business.

Engage your patent attorney in a business conversation, not just a technical one. Get them to understand what your company’s business aims are and discuss budgeting early on. Finally, insist on quality. Patenting on a budget is not a joke and does not mean getting second-rate service or poor patent protection. So spend your money wisely and remember: “The bitterness of poor quality lingers long after the sweetness of cheap price is forgotten”