IP strategists suggest that having a right strategy in place right from the outset of invention disclosure will help companies cut down their overall patent maintenance costs. With a little planning and preparation, you can learn how to manage your costs and achieve significant savings. Established companies, regardless of their assets or market values, look for every possible way to reduce direct and indirect costs.
Patent renewal is one area where innovative companies hunt for opportunities to reduce the maintenance costs as much as possible. Anyone familiar with patent renewals would know how painful a process it can be and at the same time how easily it can go over budget, especially when it comes to dealing with local agents for foreign filings.
Generally, the window period to pay the patent renewal fee varies between countries. Unlike the U.S., some countries have an annual maintenance fee system. There are various quantitative and qualitative aspects that a business should take into consideration ahead of their renewals.
Needless to say, missing a renewal may cost a fortune. In the U.S. it will incur additional surcharges and when that window is also lost, the rights provided by the patent might cease.
Patent maintenance costs money, but there are ways through which costs can be reduced significantly through scheduling and management.
1) IP Audit and timely pruning/abandonment of assets
The value of a patent may not be predictable at the stage of its application, but you should review its usefulness throughout its lifecycle whenever it is due for renewal, to discover what value it contributes to your company’s bottom line.
If you observe some of the top patent filers, such as Samsung Electronics, Fujifilm, Toshiba, IBM, you will notice that patent pruning is part of their IP strategy. The compound annual growth rate of patents they abandon within 4 years of issuance range from 13% to 30%. They keep auditing the value of each patent at regular intervals and make informed renewal decisions.
It is said that just 20% of the patents create 80% of the value to a company, so it is worth analyzing how each patent in a family or a portfolio creates value when used both independently and together as part of a portfolio. A periodic IP audit will help give you a clear picture of your most and least valuable assets to decide whether or not to renew them.
2) Group your patents by its age
At every renewal period, the value of a patent changes and gets influenced by several internal factors such as changes in business priorities, market and technology advancement, consumer demand, etc. Hence, your evaluation is easier when you segregate and analyze your patents that are due for renewal, by age. While it may be too early to judge the complete potential of a patent at the earlier renewals, it is highly recommended to do a 360-degree evaluation at the later stages to see if a patent still has the same potential like it had when it was granted. A technology may not be as crucial to your product line in the 7.5-year mark as it was in its 3.5-year mark. It may be surprising to see how much money can be saved when you prioritize this way.
3) Ensure portfolio alignment
Patents do not carry any inherent value unless or until they create economic benefit to your business. That said, every patent should be well aligned with your company’s overall business strategy and objectives. This becomes particularly critical with foreign filings. It is not worth investing in a landscape where you don’t want to expand your business. It bears investigating and performing a detailed SWOT analysis on your competitors, the current state and maturity of the relevant industry, and the market share the patents can potentially capture, to aid in renewal decisions.
4) Conduct cost forecasting for renewals
From the time a patent is granted, the renewal cost gets doubled and tripled over years as it ages. This trend calls for a forecast of all the associated costs, such as the law firm fee, government fee corresponding to your entity type, and foreign associate and local agent fees in case of foreign renewals. When you fail to renew and there is no justifiable reason for the delay, you may put your patent in risk because some countries do not allow you to renew even if you have delayed the payment for unavoidable reasons. Hence, it is equally important to have the late or penal fee details for each jurisdiction, as this will come handy in case of any unforeseen delays.
5) License of Right or LOR
Another way to reduce the renewal costs in the foreign jurisdictions is the License of Rights (L.O.R.), especially if you are a large entity. Though not many countries allow this method, including EPO, some countries like Germany, U.K., and France to name a few, still allow this with some slight changes. In this way, you can reduce your maintenance costs by as much as 50% in countries like the United Kingdom. When you think that your patents are no more part of your core technology, or they don’t contribute any major value to your key business objectives, you can have your patents endorsed for L.O.R. to any interested parties on those locations.
6) Paying future maintenance fees in advance
If you believe your patents are the crux of your monetization strategy and will continue to be so for the next few years, then it makes sense to pay the maintenance fees at least for a couple of window periods in advance. While countries like India, South Africa, and Canada permit this option to make advance payments, it is not the case with the USPTO. In the U.S., the Secretary of Labor does not permit the advance payment of maintenance fee according to 35 U.S.C. 41(f). It mandates the maintenance fee to be adjusted on October 1 to reflect any fluctuations during the previous 12 months with the Consumer Price Index (CPI).
Despite the fact that these best practices will surely save you a lot of money with your renewals, it is prudent to not to file a patent first if you could not foresee any value out of it. Patent maintenance has always been a challenging and a time-intensive task. Having said that, bringing together the Patent Review Committee, Outside Counsel, and your renewal services provider as and when needed, along with a periodic IP audit will give you a lot of insights and control over your renewal decisions.