Cheaper Patenting: Why Patents Cost Money

When I talk to small businesses and start-ups I often hear:

“We would like to obtain patent protection but the process is too expensive.”

“You need millions to enforce a patent, why bother?”

“Where are we going to get thousands of pounds from to pay for an application?”

“The fees are so high!”

Patenting an invention is expensive. But so is doing business. Performing an audit, paying taxes, filing accounts, commissioning an advertisement, complying with employment legislation and paying for an office; these all cost money. Running a business is an expensive process, the idea is to earn enough revenue to pay for the expenses, while also making a profit.

Return on Investment

Similar to marketing and PR, patenting can increase revenue. A company can receive monthly and /or annual payments for licensed technology. You can think of this as a rent on intangible property.  A company can also increase sales of a product by offering a feature that cannot be provided by competitors without the fear of possible legal action.

Patents can also help a business by increasing investment, increasing a company’s valuation and/or increasing the amount of money that is paid for a company if it is acquired.

If the net financial benefit of a patent is greater than the costs of obtaining that patent, then obtaining a patent is likely a good idea.

Long Term Thinking

Patents require long term thinking. They last for 20 years from the date of filing.  A patent may only be granted after 3 to 5 years of prosecution before a national or regional patent office. The process of drafting, filing and prosecuting a patent application may cost between 10k to 30k pounds (15k to 40k dollars), over those 3 to 5 years. Renewal fees may then cost between 100 to 1500 pounds (150 to 2000 dollars) annually, depending on location.

If you can license your patented technology for 50k pounds (70k dollars) a year for at least 5 years following grant, you can easily cover that initial investment and add to your bottom line. You just have to plan up to 10 years into the future. This may be difficult if your business plan changes every 6 months.

Who Sets the Fees?

Obtaining a patent costs money for two reasons: official fees and professional fees. Typically, about 20-30% of total costs will be official fees. The rest are professional fees.

Patent attorneys typically operate on an hourly billing system – their fees are equivalent to other professionals, e.g. private doctors, lawyers and accountants.

A patent attorney, at least in the UK and Europe requires a science or engineering degree, potentially a Masters or Doctorate, plus between 4 to 8 years on the job legal training. The legal training consists of multiple sets of exams with 40-50% pass rates. A patent attorney’s charges, plus any service charges, must also cover business running costs such as office charges, paralegal charges, insurance, the cost of banking as well as other miscellaneous business costs. Hence, professional fees are predominantly set by the market. If the market requires, and pays a premium for, engineers, this will be reflected in professional fees. Patent offices also need scientists and engineers to perform examination, which sets official patent office rates.

Helping Reduce Costs

There are ways in which companies can make patenting more affordable. There are ways to reconcile short-term business demands with long-term thinking. There are also ways they can reduce professional and official fees.

Over the next few months I will set out some of these under the “Cheaper Patenting” series. Some suggestions are common sense. Most require a little thought and time. I hope they will help stack the odds in your favour.

EP & US Excess Claims Fees

Patents can be an expensive business. However, there are a number of ways you can reduce the fees for a new application.

Today: claims fees.

Many national patent offices punitively price excess claims fees to make their jobs easier during examination. It is fairly easy to be caught out by this practice and see your official fees double for fairly little return.

Stack of Euros with thanks to Andres Rueda
Stack of Euros with thanks to Andres Rueda

In Europe excess claims fees are due for all claims over 15.  The 16th to 50th claims have fees of 210 euros each. Each  claim over 50 has a fee of 525 euros. (Correct as of 6 August 2010 – see here for current fee schedule).

In the US excess claims fees are due for all claims over 20. Each claim over 20 has a fee of 52 dollars.  Independent claims in excess of 3 have a fee of 220 dollars. Multiple dependent claims get hit with a 390 dollar fee. (US fees are reduced by half for a small entity – correct as of 6 August 2010 – see here for current fee schedule).

If you are thinking about filing a patent application in Europe or the US, and the issue has not been raised, ask your patent attorney about whether there are any claims fees payable on your application. If there are you may wish to reduce the number of claims within your claim set, remove multiple dependencies or reduce the number of independent claims. Often dependent claims of limited value can be cut (e.g. claims of the form: “and the result is displayed on a display device…”).

If possible aim for a maximum of 15 claims in Europe and a maximum of 20 in US.

If further possible aim for no multiple dependencies and a maximum of 3 independent claims in the US.

Changes to UKIPO Fees

The UKIPO, in typical “under-the-radar” mode, have released a press release setting out fee changes from 6 April 2010.

As expected the required information is spread over several pages and tables:

As well as changes to fee amounts, a number of new fees are introduced:
PF4 – £350 – Continuation of patent proceedings before the Comptroller
PF21 – £50 – Recording assignments, licences and security interests
PCT Application – £150 – Request for restoration of a right to claim priority
Reductions for filing forms PF9A and PF10 online increase from £10 to £20.

In the press-release you’ll be pleased to see my Tottenham neighbour Dave get his mandatory soundbite.

EPO Updates – Extension State Grace Period & Changes in EP-PCT Fees

Extension State Grace Period:

Where the deadline for paying designation/extension fees (i.e. the “normal period”) expires on or after 1 January 2010:

If the fee for an extension state has not been paid within the normal period, the applicant can pay the extension fee in combination with a 50% surcharge:

a) within two months of expiry of the basic period (“re-introduced grace period”) or

b) within two months of notification of a communication of loss of rights with regard to the omitted payment of a designation fee (applies at present).

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Changes in EP-PCT Fees

From 1 January 2010, there are minor changes to the International Fee and E-Filing reductions for PCT applications filed at the EPO:
International filing fee: from EUR 848 to EUR 878
Fee per sheet in excess of 30: EUR 10 (unchanged)
* Electronic filing (the request being in character coded format) from EUR 128 to EUR 132
* Electronic filing (in character coded format) from EUR 191 to EUR 198
Handling fee: from EUR 121 to EUR 132

Minor Changes to UKIPO PCT Fees from 15 Oct 09

From 15 October 2009, there are minor changes to the International Fee and E-Filing reductions for PCT applications filed at the UKIPO:

International Fee:
a) For the first 30 sheets: changes from: £808 to £753;
b) For each sheet over 30: changes from: £9 to £8;

Reductions for E-filing:
Electronic filing (not character code): changes from £122 to £113;
Electronic filing (character code): changes from £182 to £170;

Transmittal / search / priority-doc-prep fees are unchanged.