Introduction
Use the Patent Office Delays to Your Advantage 
Consider Taking the Long Route Through the PCT
Consider a Snapshot Filing Strategy For Incremental Developments 
Get Better Acquainted with Foreign Patent Office Practice 
Prepare Invention Disclosure Reports with Care
Balance Claim Scope Against the Costs 
Beware Falling Foul of Export Control Regulations 
Comment


Introduction

Even during an economic downturn, the protection of intellectual property will continue to play a key role in the business strategy of innovative companies. However, obtaining patents can be costly and can rely heavily on cash input, which may be in short supply in the current credit squeeze. While the typical reaction in this situation is to scale back patent filing and prosecution efforts, it is important also to make sure that the current economic difficulties do not divert you from making long-term decisions required to create a strong patent portfolio that is ready for the inevitable upturn in the economy. Here are seven things to keep in mind when considering ways to reduce or defer the costs of patent filings during the economic downturn. 

Use the Patent Office Delays to Your Advantage 

While the upfront costs of preparing and filing a patent application cannot be avoided, the costs incurred in the prosecution of the application can be deferred. In the United States, the delay until a first office action is mailed from the US Patent and Trademark Office (USPTO) averages from about one to four years, depending upon the particular technology group. Some of the other major foreign patent offices have similar processing delays. Thus, once the application is filed, this lengthy processing delay can be welcome to an applicant that has cash-flow concerns.

Because of this processing delay, most of the cost in obtaining, maintaining and managing a patent is incurred months or years after the initial filing of the patent application. In many cases the initial expense associated with filing a patent application represents less than one-half of the total cost of obtaining and maintaining a patent. Moreover, when the downstream costs of handling licence agreements, due diligence efforts, infringement reviews and other activities associated with the management of a patent portfolio are considered, the initial filing expense represents only a small fraction of the total cost associated with the patent. Therefore, because most of the patent costs are deferred, a temporary downturn in the economy should not delay the filing of a patent application for an invention that is expected to be a valuable asset to the company. It is critical that at least a provisional patent application be filed as early as possible and prior to the first sale, offer for sale, use, or public disclosure of the invention. 

Consider Taking the Long Route Through the PCT

Many innovator drug companies use the Patent Cooperation Treaty (PCT) system to postpone prosecution for as long as possible while seeking regulatory approval from the Food and Drug Administration. In this holding strategy, the applicant first files a provisional application in the United States. Typically, at the end of the one-year life of the provisional, most applicants will then convert the provisional into a regular, non-provisional US application along with concurrently filing a PCT application.

To maximize the delay, however, the applicant can file a PCT application only, designating the United States and those foreign countries where patent protection is desired. By this route, there can be up to a 30-month delay (sometimes longer) from the initial filing date of the provisional before it becomes necessary to file national phase applications in the United States and the other countries designated in the PCT application. 

Consider a Snapshot Filing Strategy For Incremental Developments 

For inventions that develop incrementally, instead of filing a series of regular non-provisional applications for each new improvement, a more cost-effective strategy is to file a series of related provisional applications over the course of a year in order to obtain a priority date for various embodiments. Within one year of the first filed provisional, a single non-provisional application that bundles all the provisionals can be prepared and filed. When funding is particularly tight, this 'snapshot' filing strategy can spread the cost of preparing and filing a patent application over the course of a year. 

Get Better Acquainted with Foreign Patent Office Practice 

Being aware of the particulars of foreign patent office practice can lead to substantial cost savings and deferment. For example, some foreign patent offices (eg, Canada, Japan, and Korea) allow for deferred examination after filing the patent application. The length of deferment can range from months to years. In Japan, examination may be deferred for up to seven years after filing; and for up to five years in Canada and Korea. Also in Canada, national phase entry from a PCT application can be delayed for an additional 12 months (for a total of 42 months from the priority date) by paying an extension fee of C$200.

Patent practitioners should also be aware of recent rule changes in the European Patent Office (EPO) that affect the cost of patent filings. Historically, patent translations have constituted a major portion of the cost of obtaining a patent in Europe. But as of May 1 2008, under the London Agreement, the EPO has eliminated the need to translate the patent into multiple languages, which dramatically lowers the cost of obtaining patent protection in European countries. Current signatories to the London Agreement include the United Kingdom, France, Germany and Switzerland. In most cases only the claims will have to be translated into the national languages.

However, these cost savings may be partially offset by recent fee increases in the EPO. Under the new fee schedule effective last April 1 2008, applications are allowed 15 claims, with each additional claim over 15 costing an extra €200 per claim. As from April 1 2009, a second tier of excess claims fees is now charged on all claims over 50, with each additional claim over 50 costing an extra €500. 

Prepare Invention Disclosure Reports with Care

The upfront costs of preparing a patent application can be substantially reduced by a clearly written, comprehensive invention disclosure report. The invention disclosure report should contain everything the applicant may have about the invention, including materials, drawings, descriptions and models prepared by the inventors. If possible, to facilitate processing by the drafting attorney, any documents and drawings should be provided in computer-readable formats.

A well-prepared invention disclosure will also guide the drafting attorney away from any unproductive blind alleys. In this regard, the invention disclosure should:

  • provide details about the prior art;
  • explain how the invention is distinguishable over the prior art;
  • delineate the areas that do not fall within the scope of the invention; and
  • specify the critical parts, features or dimensions that make the invention operable.

All this information should be provided at the beginning of the preparation process to put the drafting attorney on the right track. 

Balance Claim Scope Against the Costs 

In the absence of specific instructions from the client, by default, many patent practitioners will pursue claims of the broadest scope during prosecution. However, broad claims are likely to be the most difficult to obtain and expensive to prosecute, and are likely to extend beyond the client's current business needs. During the economic downturn, compromises in claim scope in favour of lower prosecution costs should be considered.

Rather than pursue the broadest allowable claims, a more cost-effective approach is to pursue narrower claims that are specifically targeted to the client's business (eg, those that specifically cover the product implementation or those that are most licensable within the industry). Broader claims could be pursued in continuation applications after the current economic crisis has passed. 

Beware Falling Foul of Export Control Regulations 

To reduce costs, some applicants outsource their patent drafting work to foreign countries, such as India. Having become aware of this practice, the USPTO published a notice in the Federal Register on July 23 2008, warning that it may be illegal to send technical information to a foreign county for the purposes of preparing a US patent application. As such, the USPTO notice advised that applicants which are considering sharing any technology information to personnel abroad for the preparation of patent applications should contact the Bureau of Industry and Security at the Department of Commerce for the appropriate clearances. Before outsourcing patent application preparation abroad, the potentially serious legal consequences of export control violations should be considered, including the possibility of significant fines or impediments to the future enforceability of the patent. 

Comment

Patent costs can be contained during the economic downturn without sacrificing the overall quality of the company's patent portfolio, which will be needed when the economy eventually rebounds. But doing so requires a deliberate and dedicated management effort aimed at cutting unnecessary or avoidable costs in the preparation, filing and prosecution of patent applications. 

For further information please contact Shawn W O'Dowd at Kenyon & Kenyon LLP by telephone (+1 202 220 4200) or by fax (+1 202 220 4201) or by email (sodowd@kenyon.com).

An earlier version of this update was first published in the December 2008 issue of Intellectual Property Today.

This article first appeared in IAM magazine. For further information please visit www.iam-magazine.com