COST-SAVING PATENT STRATEGIES FOR SMALL AND NEW COMPANIES

The pressure to get patents has never been greater for small and new companies. Patents are the hard currency of research-based businesses.
Investors want to see them, competitors have them and companies need them — for licensing, leveraging, litigating and (occasionally) liquidating.
Still, there’s no denying that patents are expensive. On average, a stand-alone patent, drafted and argued to issuance, costs as much as a new car. The cost of getting a portfolio of corresponding applications for a single invention easily exceeds $100,000. Where there are multiple inventions in a company’s pipeline, the costs are multiplied.
There are, however, ways to reduce patenting costs without making huge compromises. Patenting should be approached like any other business endeavour — strategically.

Planning Foreign Filings
One of the appealing aspects of a patent application is that an initial (or “priority”) application can be spun off within one year into a host of countries.
However, foreign filing and prosecution costs can be high. The expenses include not only government fees, but also local agent fees and translations. In some countries, translation costs alone can be staggering.
Many applicants approach foreign filings by picking countries where it would “be nice” to have patent protection. This is most often done in a hurry to respond to the one-year deadline for filing applications within the priority window. The knee-jerk bias is to broadcast foreign filings lest some important potential market be missed.
The upward spiral of patent costs starts here. Within the first year or two, many countries charge a maintenance or renewal fee just to keep a patent application alive. Many countries require powers of attorney, certified copies of documents, forms of assignment, drawing formalities, and other initial interventions. All of these add up to a lot of costs — especially when there are numerous applications pending simultaneously. Of course, there are even bigger costs when substantive examinations start. Arguing to defend a patent application is costly, and because it is difficult to predict when an examination will occur, budgeting for that cost becomes a challenge.

To manage the spiral, many companies with patenting experience take a “less is more” approach to foreign filing. Foreign filing is done strategically rather than by a broadcast approach. A strategic approach means asking tough questions to evaluate each separate country on an invention-by-invention basis. Some points to consider:
l     What does this country mean to me as a market for this invention?
l     Am I willing or able to enforce a patent in this country?
l     Am I willing or able to negotiate or enforce a licence in this country?
l     Are my competitors likely to gain a significant advantage if I don’t have a patent in this country?

It is important to do this assessment initially (at the deciding point for foreign filings after an initial priority application) and as an ongoing evaluation.
Abandoning an application later is an option. Just as in business, there is a skill in knowing when to cut one’s losses.
The best way to approach foreign filings is to be as informed as possible. To plan properly, you need to be able to anticipate the steps in the prosecution cycle in each jurisdiction, the types of formality requirements that will need to be addressed, and any particular local rules (such as those that necessitate claims amendments at the outset).
Finally, if the invention relates to a subject matter that is not traditionally patentable, jurisdictional options may be limited by circumstance, if not by choice. Some examples of these types of subject matter include methods of medical treatment, business methods, software programs, data structures and living matter (especially higher life forms). Many of these subject matters are difficult (if not impossible) to patent outside the United States. These issues need to be addressed on a case-by-case basis. In some cases, there are semantic ways to get around subject-matter limitations, but these sorts of adaptations and amendments (which are country-specific) contribute to higher costs, and may not be successful.

Using Professional Time Wisely
It is fair to say that the bulk of patenting costs arise from professional time. Although some routine services may be flat-rated, most patent lawyers and agents charge by the hour to provide patent assistance. The adage is true — time is money.
Inexperienced clients can get a rude awakening the first time they get billed for what they thought was just a quick phone call, a couple of e-mails or a simple reminder letter. But these are typical billable services for any patent firm.
The best way to curb professional costs is to use professional time efficiently and wisely. Some professional costs are unavoidable, while others depend on the client, their level of engagement with the process, and their level of preparedness. The clients that get the best “bang for their buck” are the ones who figure out early on what the professional needs for the next few steps, and are able to respond in a timely manner. Some clients go to the extent of setting up their own internal reminder systems to alert them in advance to approaching due dates. The professional will usually send out several reminders for each important step. If the client responds on the first notice, the costs of reminding are cut down dramatically.
Another great trick is to deal with things in batches. For instance, in many countries, there is a requirement for filing a signed power of attorney authorizing the agent to represent the applicant before a local patent office. These powers of attorney are always required within the first few months after new applications are filed. Sending out separate reminders on each separate power of attorney can incur a large amount of professional time. A client can save valuable time and reduce cost by arranging one meeting to execute all of the powers of attorney for related applications in different countries.
Batching is also useful for prior art submissions. Many countries welcome, and some require, the submission of prior art that has come to the attention of the applicant. This may consist of journal articles, patents or patent applications. By collecting these and submitting the package simultaneously to various countries, the cost of piecemeal inquiries and responses is eliminated — the prior art may even expedite the examination by saving the examiner some search time.
Another tip for avoiding reminder costs is to use standing instructions, such as an established arrangement to pay maintenance fees. If standing instructions are provided in advance, the professional can simply pay the maintenance fees as they come due and report afterward. This arrangement saves the cost of seeking and noting separate instructions for each maintenance fee. As many countries have annual maintenance fees, this can be a considerable savings. However, one should keep in mind that standing instructions can cause the client to lose some controls over annual patent spending. For reasons discussed above, the applicant should evaluate the possibility of abandoning individual cases or country groups from time to time. Annual maintenance fees do provide an annual opportunity for this evaluation. Also, government fees can progressively increase (steeply in some countries) as a patent application or patent matures. This can result in an unexpected upswing in disbursements if the applicant is not informed of the anticipated costs each year. A standing instruction in four- or five-year increments can be a useful compromise.
There are also a few ways to save professional costs by doing certain steps — such as patent searching and drawing preparations — in-house. The costs of outsourcing these steps are frequently less than clients expect. It is worth getting an estimate before committing to a course of action one way or the other. Also, some clients lack the skills and resources needed to perform these steps themselves. If a client decides to do its own searches or drawing preparations, it is important to review the requirements and parameters with the professional to ensure that there is no need to professionally re-do these later.

Avoiding False Economy
Companies get patenting advice from several sources. Some of that advice can be misleading, or just plain wrong.
As an example, many clients “have heard somewhere” that they can save a lot of money by filing a U.S. provisional application (or any informal application) at the outset. There is a grain of truth to this bit of inherited wisdom, but it needs several qualifications. U.S. provisional filing is a cost-deferring, rather than cost-saving, mechanism. A provisional application gives an applicant a period of one year (while the patent application is considered “pending”) to file a regular application. Unlike a regular application, a provisional application is not examined, either for formalities or to meet the substantive requirements for patentability. Thus, some companies use a provisional filing to “put something on file” that is essentially a rough draft, or a technical disclosure that does not have certain formal patent elements, such as a set of patent claims or formal drawings. This is false economy.
A provisional application already incurs a double expense, as the government filing fees are paid twice — once at the provisional filing stage, and once at the regular application filing stage. Generally speaking, it costs more to fix up an informal provisional than if the application had been initially drafted and filed as a regular application.
There are also some hidden costs of provisional applications. Chiefly, there is a loss of potential scope of patent rights if the application has sloppy beginnings.
On the other hand, a provisional application has some strategic uses. These include situations in which an otherwise perfect application is deliberately filed without claims to defer examination, extend patent term, and/or pursue a daisy chain of successive provisionals to capture ongoing experimental data. These strategic uses are best carried out under the guidance of an experienced patent professional to ensure that each provisional has adequate scope and technical disclosure.
As a final note on this subject, most patent lawyers and agents are used to dealing with budget-conscious clients. The professional can be very helpful in identifying the best ways to save costs, defer costs and when to cut one’s losses.
Patents are a central part of companies’ business strategy and, as such, should be approached strategically. Small and new companies are faced with a challenge in pursuing patents without blowing their budgets. Although patent costs are high, they can be contained by careful planning and preparation.
Lenni Carreiro (left) is a patent lawyer and experienced litigator at Deeth Williams Wall LLP. She has a background in molecular genetics and works with a number of life sciences clients.

Jennifer Jannuska is a patent lawyer and registered Canadian patent agent in the Toronto, Ont. firm of Deeth Williams Wall LLP. She has substantial experience advising clients new to the patent process.