planning an international patent filing strategy : cost

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Planning an International Patent Filing Strategy : Cost, Cash-Flow andCapacity to Succeed - Brian Cronin, European Patent Attorney

Presented for ESC at the European Patent Office, Munich 13 March 1996

Preliminary Remarks : Planning an International Patent Filing Strategy

Users Inside Costs

Relative Costs

Where to File?

Cash Flow : Fluctuation of Costs in Time

Timing

Budgeting for a Patent Filing Strategy : Strategy-Generated Budget Vs Budget-Limited Strategy

The Time Point of Planning/Budgeting

Cost Control

Getting Good Value From Your Foreign Patents

Individual Inventors and Small Companies

What Capacity is Required to Succeed with an International Patent FilingStrategy?

Extended Summary

Note 17 June 2004:The general discussion in this Article (presented 13 March 1996) remains upto date, apart from changes in the EPC and PCT fee structures.

Planning an International Patent Filing Strategy : Cost, Cash-Flow and Capacity to Succeed

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Planning an International Patent Filing Strategy : Cost, Cash-Flow andCapacity to Succeed - Brian Cronin, European Patent Attorney

Preliminary Remarks : Planning an International Patent Filing Strategy

International patent filing is a strategic operation for everyone, from privateinventors to large corporations.

It is also costly : The system for international patent filing is complex, and issustained solely by cash which is input by the users in proportion to their use ofthe system.

Planning for international patent filing involves formulating a strategy : Why file?What, where and when to file? The filing strategy will depend on the driving forcefor obtaining patent protection : to protect new technology, manufacturinginterests, or possible licensing activities.

Implementing this strategy involves cost considerations : How much? How do thecosts evolve? A budget must be established, or an existing one expanded to meetthe necessary funding. Inevitably, the cash flows one-way, from the users into thesystem, with costs fluctuating in time but ever increasing until the budget isexpanded, or the patent activity is limited. This leads from a "Strategy-GeneratedBudget" to a "Budget-Limited Strategy", involving cost controls based on asubjective assessment of the patents value.

In the end, what represents success? Achieving the expected benefits? Limiting thelosses and diverting resources to new strategic aims? Or both? And, lastly, what isthe capacity to achieve this?Cost

The cost of filing international patent applications has been dealt with at length inseveral articles listed below. These articles deal in general with patent filing costs inparticular giving different viewpoints of the costs of filing patent applications atthe EPO. The EPO view is that its fees are reasonable and represent only a modestfraction of the applicants' costs, whereas translation fees and patent attorneycharges are singled out as being too high. A FICPI survey contends that Europeanpatent attorneys fees are reasonable and in the same range as US and Japanesepatent attorneys fees, whereas the EPO fees are exceptionally high compared tothose of other offices. A US attorney concludes that the European patent systemhas the highest costs for filing and maintaining a patent anywhere in the world.

The main factors influencing the costs incurred for the international filing of patentsdepend on the patent application itself, administrative charges and "externalfactors" :

The Patent Application :• Length (translations)• Difficulty (mainly Patent Agents' time)• Unity of Invention (number of patents needed for a given product).Administrative matters :


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• Agents filing charges• Priorities claimed/assignments etc.External Factors :• Official Fees (particularly those of the EPO!)• Territory (number of countries at filing/grant)• Duration (how long the patent is maintained).

The unit cost - how much it costs to file one patent application - varies greatly as afunction of length and difficulty. The fluctuation of unit cost is mainly (but notalone) due to the amount of work, especially patent attorney time. In mostcountries, official fees vary only slightly as a function of difficulty/length. Mostorganisations can estimate their own average unit cost for their countries ofinterest.

How fixed costs and variable costs occur at different points of time is discussedbelow. It suffices to note that fixed charges (like filing fees) often occur atpredictable times, whereas variable charges (like studying and replying toobjections raised by Patent Office examiners) often occur over a broad time span.

For multiple filings, the overall costs are also proportional to the number of newpatent applications filed per year, and the total number of pending patentapplications and granted patents making up an estate.

Unity of invention is an important factor in determining how much coverage can beobtained in one patent and how many patents are needed to cover any product.This directly impacts overall costs. Despite efforts at harmonization, we stillencounter situations where unity is assessed differently in different patent offices.

Costs are also a direct function of the territory covered. The more countriescovered, the greater the expense. Since the advent of the PCT and the EPC, it ispossible to obtain initial broad territorial coverage at reasonable cost and defermajor costs. For the PCT, this means moderate costs on filing or after 12 months,and major expenses for national/regional completion at about 30 months, withmoderate costs for international preliminary examination in-between. Using theEPC, there are moderate-to-high costs for filing depending on the number ofdesignations and claims. Then the official examination fee and agents costs forexamination are spread over several years, and the expensive grant formalities aredeferred usually for 3 to 6 years, sometimes more.

One reason for the continuing growth in use of the PCT is surely the possibilities itoffers both for planning and budgeting.

Once a basic patent application is filed, the likely costs can be predicted for 30months, i.e. over 2 annual budgeting periods, and the costs for going ahead in eachcountry at that time are fairly predictable. Even if difficulties arise, a PCT patentapplication can be kept alive for 30 months without exceeding budgeted costs,because there is no loss of rights even if the applicant does not participate in theInternational Preliminary Examination procedure.

Costs in the EPO and national offices - especially agents charges for dealing withobjections - are more difficult to preview both in timing and in amount.


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Users Inside Costs

Users costs also include their own overheads, particularly the costs for running thecompany patent department.

In international filing it is commonplace to split between the "home" costs (or insidedepartment costs) and "foreign" costs including local agents charges and localpatent office fees, because home or inside costs are relatively stable in that they donot vary in direct proportion to the workload or number of patent applications.

Many companies who regularly file patent applications find it necessary tomaintain their own patent department with employed patent attorneys handling atleast the drafting and filing of their patent applications. Whether or not this leads toa cost saving, or what workload represents the break-even point for maintaining anin-house department, is a matter of debate. However, one thing seems certain: itfacilitates budgeting. The cost of an employed agent can be included in overheads,i.e. the in-house costs in preparing and prosecuting patent applications do not haveto be charged in direct proportion to the work done at a rate covering overheads,which is the case for most outside agents. For European companies, this means thatthe inside department can handle basic patent filings as well as PCT and EPCfilings. Outside agents are used on an as-needed basis and for non-European filingsvia PCT or not. For an in-house patent department, budgeting for this part of thecosts - drafting and basic filings, PCT and EPC filings - is thus easier to present in away which is acceptable to the organisation.

Relative Costs

An international patent filing strategy will often be budgeted alongside relatedcosts like patent information, legal fees, monitoring competitors activities, licensing,trademarks, etc. or it can be included in an overall legal budget or technical (R&D)budget.

The patent filing budget may be in competition with itself (budget restrictions mayinduce a selection of cases to be filed/maintained) or with other budgets (R&D,sales etc.). The patent budget, however large, can usually be justified as a smallproportion of R&D expenses.

Where to File?

Where to file is not determined primarily for cost reasons, but for strategic reasons :why the applicant wants protection in a given country. Most patent filing isconcentrated in the USA, the EPO and Japan which is where filing and obtainingpatents is most important but also most expensive. Just because filing a patentapplication in other countries is relatively inexpensive seems to be no incentive forfiling patent applications there.

Total costs, on the other hand, will direct attention to those countries perceived asmost important, to the detriment of secondary choices.

Where to file is determined by a number of factors which each applicant will weighup according to the particularities of its own needs and the industry concerned.These factors are mainly market/ production/competitor related :


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• Markets to protect for :- Freedom to use- The need to control competition (manufacture and/or sale)- The need to control partners/affiliates/licencees- Future markets to be secured

• Competitors location/stronghold (especially manufacturers)• Licensing considerations

Generally speaking :

• Licensing usually implies broad territorial protection.• Large manufacturing companies are satisfied with narrow territorial protection.• Inventors/small companies need broad territorial coverage, initially.

Many companies have a defined home market, principal markets in certaincountries, secondary markets in other countries and further potential markets. Theopening of the single European market and the general lowering of trade barrierswith GATT/WTO, combined with the minimum standards for protection underTRIPS, are all expected to lead to a need for patent protection on a widergeographical scale and to provide a context where such protection is potentiallyavailable. This should create pressure for more patenting, at the same time makingcountry selection all the more critical.

Patenting on a broader geographical scale could become a trend. However thecosts of obtaining patent protection in numerous countries will remain a deterrent,even for countries which are not individually expensive. The problem will be thesheer number of countries with patenting potential.

This could also lead to a countertrend for "overprotection" in the home market andmajor markets, by multiple filing to create "impenetrable" patent barriers to thesemarkets, leaving the lesser countries in a substantial non-patent zone except for afew major inventions which have proven themselves (usually in the PCT 30-monthperiod) and which will be protected widely.

This reflects the present situation, and is likely to become more exaggerated. Evenin Europe today, the lack of a Community patent and the high costs of obtainingnational patents in the Community, via the EPO or directly via national offices, isdriving many companies to patent only in key countries or even only in their homecountry. In particular the "stockpiling" of home patents and utility models can be aformidable nuisance in what is supposed to be a uniform market. This means thatcompetitors are free in part of the market but run into trouble in one country or keycountries. Such "homebase" protection is valuable and should not be neglected,particularly if a company has too many inventions to protect all of theminternationally.

Many patents in a few countries, and a few patents in many countries is a timetested policy which is here to stay, perhaps on a larger scale.

As mentioned, the territorial coverage directly influences costs, but using the PCTand the EPC it is possible initially to file covering many countries, and to limit if


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necessary when large expenses arise at the PCT 30 month period and when theEuropean patent is granted.

When using the PCT, it is commonplace to initially designate all countries (80 or so)for the blanket designation fee. The PCT country list and map look so impressive itis easy to forget South Africa, Argentina, India.... When using PCT, make a point ofchecking interest in non-PCT states at the 12-month or 18-month point. It's usuallynot possible to catch up later.

Cash Flow : Fluctuation of Costs in Time

The costs for an individual patent application occur at different points of time.Patent filing strategies and the resulting patent filings also fluctuate as a function oftime, for example :

• Isolated first filing• A series of complementary first filings during an active period• A forerunner patent followed by a series of improvements• Bursts or groups of first filings• A series of patents surrounding an "old" product• Niche or fringe patents in or around a competitor's territory• Regularly-spaced first filings (usually coming out of research and filed at a rate

compatible with human resources and budget)• Cyclic stop-go as a function of rising costs/competitive situations.

As time goes by, the policy will also vary as a function of various factors which willaffect decisions and costs :

• Technical and market success/failure of the invention• Obsolescence (replacement of earlier filings with later improvements)• Developments regarding patentability (search/examination : no or poor prospect

of obtaining valid or useful protection)• Reaction to changes in the competitive situation such as competitors "evasive"

activities or patent applications.

All these fluctuations in filing rate and changes of pace for tactical reasons lead todifferent cost patterns.

The time relationship of a series of patent applications can have a substantial impacton budgeting. When several patent applications are filed together, they all proceedin step : PCT filing at 12 months, PCT national phase at 30 months, creating peaksin workload and expense at these points of time.

The EPO grant phase, though expensive, is less problematic because the applicantcan accelerate or slow grant if needed for budgetary purposes.

If early cases reach the EPO grant stage when the next wave of cases reaches PCTnational completion just as a subsequent wave becomes due for PCT filing,obviously this could lead to a situation where resources may be insufficient to goahead. To "load-level" the budget, some cases may have to be trimmed or sacrificed,others advanced in time.


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Groups of cases filed on the same date, or series of seasonal filings, can also lead toannual peaks in renewal fees.

Such waves or peaks in costs can be predicted in the previous budgeting year,therefore brought under control.

Costs which arise at random times can also usually be budgeted for on the basis ofreasonable expectations both as to timing and level of expense. In the case ofproblems of patentability, or an appeal or opposition which have not beenbudgeted for, this calls for a decision to exceed budget, or abandon. In most cases,there is a lead time of a month or more, and sometimes extensions of time areavailable.

Timing

Timing is one of the most critical parameters in patent filing. Obtaining a first filingdate is sometimes a race to the patent office, to avoid loss of rights. Once inside thepatent office things tend to slow down, which is very often welcome to bothapplicant and attorney. The time span over which the patent application remains inthe office is important in cost planning, especially in the EPO where major costsawait the patentee at the grant stage. As a result, the majority of applicants at theEPO are happy with the conveniently slow procedure, and some make ample use ofthe fee-less extensions of time to defer work and hence costs. Not only are grantcosts deferred, but the single EPO annuity - even though substantial - is less thanmaintenance costs in several countries.

For those who are not content for their file to remain unattended in the Officevaults, the availability of the EPO's PACE programme provides an option which,although not frequently used, may prove strategically important. Obviously,obtaining a patent quickly will advance costs, but this can be justified by marketconditions or by the competitive situation.

The PCT also provides an interesting timing device. The "early" InternationalPreliminary Examination provides the applicant with a reasonable basis fordecisions regarding the countries to maintain at the 30 month limit. The majority ofapplicants (about 75%) aim for and obtain a Yes-Yes-Yes examination report,which in many cases means they have got to grips with patentability at an earlierstage than they would have done so, say in the case of a direct EPO application.Many applicants count on the fact that this report will influence the Examiners inthe later national procedures. Usually it does, but even if it doesn't the PCTprocedure is still used as a reference, which on average simplifies the discussion andreduces prosecution costs.

Once the PCT procedure is over, the applicant can speed through the EPO, orproceed at the usual snail's pace, as he wishes.

In all cases, the applicant retains some control on timing. The luxury of having abrake and an accelerator makes no difference to most applicants, but in planningand making cost projections these possibilities must be known.


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Budgeting for a Patent Filing Strategy

Budgeting for a patent filing strategy requires a consideration of cash flow and,more generally, the interaction between the costs generated by the filing strategyand the limiting effect these generated costs have on implementation of thestrategy. Budgeting is going to depend on :

• The purpose of the patent filing strategy• The time point of budgeting• Who is in control• The resources available• The driving force

Strategy-Generated Budget Vs Budget-Limited Strategy

Where patent filing is decided for strategic reasons, initially the filings will bedecided to meet the strategic objectives. The budget will then be established as afunction of the cost of the means to implement the strategy, and the necessaryfunds allocated. This is a "Strategy-Generated Budget".

As time goes by, costs for examination, grant and maintenance escalate and exceedbudget, or up-coming costs will exceed the perceived value. As a result, resourceswill be insufficient to sustain the patent estate, and cuts will be made.

In a steady state operation, such as with a company having a patent departmentwith fixed staff/budget (such as a % of R&D costs), the budget will limit theactivity and may for example lead to filing a certain number of new applicationsand international applications per year, corresponding to the work output of thedepartment. Here we have a "Budget-Limited Strategy".

The type of situation depends on the driving force :

Research/Technology Driven : Patent filing is a measure of the productivity ofR&D and is done early to secure protection for potential technology. Patent filingcosts can be computed as a fraction of R&D costs.

Production Driven : Patent filing is confined almost exclusively to protectingmanufacturing interests, usually in a limited number of countries.

Market Driven : Patent filing is geared to protecting all worthwhile markets. Filingcosts are deemed low compared to the market potential and to other expensesnecessary to secure these markets.

Legal/Patent Driven : Patent filing is usually confined to the major patent offices,especially those with developed facilities for patent litigation. Protection must beobtained first, market value can be established later. Main concern is for legalsecurity, parallel imports, etc.

In turn, the type of strategy depends on who is in control :


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• General Manager/Entrepreneur : Strategy generated budget, where the strategylater becomes limited by budget.

• R&D/Technical Manager : Budget limited strategy, where the strategy tends tostretch the budget.

• Production Manager : Strategy generated budget which remains belowfinancial capacity.

• Financial Manager : Budget-limited strategy.

The Time Point of Planning/Budgeting

Planning/budgeting may take place at the outset - before initial filing - or at variouspoints of the procedure.

For individual inventors and small companies, a plan-cum-strategy-cum-budget maybe made before the first filing. For this, the PCT provides an excellent means ofpresenting a clear picture for the first 30 months, with clear decision points before12 months, 19 months and 30 months. Beyond 30 months a new plan will be set updepending on the situation at that time.

In an established patent department, typically each year's budget will be projectedfrom last years costs taking into account last years first filing activity (number ofcases coming up for international filing after 12 months, say via PCT), the number ofcases coming up for PCT preliminary examination (18-24 months), the number ofcases coming up for PCT completion at 30 months, the number of cases coming upfor EPC grant, etc. Expenses for national phase examination procedures etc. can beestimated as the expected deviation from last year's costs. Maintenance fees for asizeable patent estate will usually be computer managed and may be budgetedseparately.

As a rule, a budget can be proposed based on the deviation (increase) over lastyear's budget as a function of the immediate impact of the recent activity. Also as arule, the expenses for possible of new filings of inventions yet to be made can beaccommodated in a budget based on a projection of last years activities orexpectations based on the R&D activities.

Also as a rule, even the most established routines are from time to time disturbed byan invention or new product of great promise which commands its own specificstrategy. Typically this will occur in the priority interval, and a tailor-madeinternational filing strategy can be set up taking into account the relationship withthe applicant's existing patents and with the general state of the art andcompetitors patents.

Based on this, a plan can be worked out on the number of patent applications to befiled to secure comprehensive and overlapping protection, some perhaps withbroad geographic spread, others narrow. The need for follow-up patents can beanticipated before competitors find out about the developments throughpublication of the first series of patent applications. A first follow-up wave ofimprovement patents will come shortly before the 18 month publication, followedpossibly by a second wave perhaps 18 months later, until the area is saturated bythe leader's patent applications and later modifications from the competition.


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If meanwhile the patent leader has captured the market, the patent estate willprovide a formidable protection. If not, the estate can be trimmed back to a sizemanageable within the budget.

Cost Control

As the filings progress, costs evolve. In most cases it is necessary to monitor costs.Here are several common strategies for containing costs :

Step-by-Step : A decision is taken at each step of the procedure for each patentapplication, based on the incremental cost (or expected cost) for the next stage.This is usual for individuals or small companies filing through an outside patentagent.

Automatic Go-Ahead : The procedure automatically goes ahead except for anunusual occurrence (refusal/appeal, filing a divisional) when a decision may betaken to abandon.

Main Decision Point Review : A decision is taken at the points when majorexpenses occur: first filing; international filing at 12 months; PCT completion at 30months; national completion at the EPO grant phase.

Periodic Review : The patent estate is reviewed periodically, say every year. Allpatent applications and patents at all stages of procedure are reviewed (possiblywith cumulated costs and future cost projections) and decisions taken for eachcase, country-by-country.

Maintenance Review : Patent maintenance expenses are reviewed separately,annually or whenever costs need to be contained. This is usual for computer-maintained patent estates.

The type of review mechanism adopted will depend on the applicant's structureand in particular how cost responsibility is shared : sharing of patent costs bybusiness area/profit centre according to a distribution key; charging of businessarea/profit centre with full costs or a proportion of costs, etc.

When making reviews, present or incremental costs are often compared withaccumulated or past costs and possibly compared with future or projected costs.Forward momentum - keeping going with a patent application or a group of patentapplications - is often sustained by the relatively modest amount for the next step(replying to an objection or paying a maintenance fee) compared with theaccumulated or "invested" costs. On the other hand, where a case is liable to beabandoned for loss of interest or problems of patentability, the decision to abandonis greatly facilitated when the total projected costs to patent expiry are revealed.

Cost comparisons can thus be used as justifications for going ahead or stopping, asthe situation may require.


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For the user, the successful implementation of the patent filing strategy meansgetting good value from the resulting patents. In short, good value for money. Theassessment of "good value" from foreign patents involves a cost/value comparison.

In this context, the costs are those for obtaining/maintaining the patents plusincidental costs for defending the patents. At any point of time, value can bejudged compared to the accumulated costs and projected costs.

Value assessment is subjective: different people who make the value judgementmay have different points of view :

• Perceived Value:- Effect on competitors- Prestige- Bargaining chip

• Commercial Value:- Royalty income- Volume of protected sales- Book value/asset value

• Comparative Value:- R&D costs- Legal costs- Marketing costs

• Value at Cost:- Accumulated costs- Incremental cost- Projected costs

• Plus-Value:- Marketing tool- Technical advance- Part of a package

• Legal Value:- Patent strength- Scope/coverage- Remaining term

A proper assessment requires evaluation of the past, present and future value fromthese various viewpoints. In case of change in a company's management or policy,these values can change radically.

When looked at from the patent standpoint, getting good value from foreignpatents means avoiding errors or excessively costly prosecution, needlessly payingexcess claims fees or useless designation fees, and getting good scope per dollar -not being bullied into filing unnecessary divisionals, as can happen in the USA andJapan.Last but not least, the costs of obtaining foreign patents and their value depend onthe quality of the basic application. This is particularly so when PCT is usedbecause you can't count on a foreign associate picking up errors or adapting theapplication to local practice when filing or making the translation. Use of the PCTimplies working to and above the minimum standards for all countries.

Individual Inventors and Small Companies

International patent filing is mostly reserved for larger companies, but the conceptof a filing strategy coupled with a budget is familiar to individuals and smallcompanies.

A small company holding a patent on an important invention may grow into amultinational during the patent lifetime. A small company holding several patents


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on promising inventions which do not succeed in the marketplace can bebankrupted by patent costs.

Planning its international patent filing strategy can be of paramount importance forindividual inventors and small companies.

As mentioned previously, PCT offers individual inventors and small companies amore-or-less fixed budget for a 30 month period, beyond which they should goonly in case of success.

The EPC is also attractive for successful individual inventors and small companies,as it enables protection in the main countries of Europe at an affordable costaveraged over several countries. With a "strong" European patent, a small entitycan be a serious threat to big companies.

But the EPC is not so attractive if, at the end of the procedure, the applicant wantsto retract just to 1 or 2 countries in order to have something for all the moneyinvested, for example if available funds have to be redirected to later inventions. Ifthe EPO grant fee and the filing of claim translations in the other two languages(neither of which may be an official language for the "residual" countries) happento come just after the nth European annuity (probably greater than the annuitiesfor the "residual" countries), it can be seen that to salvage a minimum residualprotection the incremental cost is dissuasive and the accumulated cost isdisproportionate.

The EPO has expressed concern that patenting in Europe is considered tooexpensive by small European companies. This hardly seems surprising.

What Capacity is Required to Succeed with an International Patent FilingStrategy?

Here, in my opinion, are the seven most important requirements of the capacity tosucceed in planning an international patent filing strategy :

First, it's necessary to have a strategy which relates to commercial reality. Without arealistic strategy, how could there be success?

Second, to have definite aims coupled with flexibility in achieving them. A patentfiling strategy involves proceeding through a complex system which requiresdecision taking at various points. Decisions have to be taken as they come, neverlosing sight of the overall aim.

Third, persistence/determination.

Fourth, the ability to stop in time and redeploy resources. Filing patent applicationsis not an end in itself but is a means towards an end. You must know when a patentor patent application has outlived its purpose.

Fifth, luck in having a good product and luck in the marketplace. Without this luckthe invention will have little value. With this luck, the patent will be serving auseful purpose.


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Sixth, timely financial resources, which may be "inherited", borrowed or selfgenerated. Many companies finance their new patent applications based onsuccessful patenting in the past. Those counting on future success need deeppockets.

Seventh, the ability to reconcile past costs with future benefits and vice versa.Patent costs are seldom in tune with income : (A) The initial patent costs usuallyrepresent a substantial part of a large investment counting on future success; (B) Incase of success, patent upkeep costs may be a small fraction of income. Thecapacity to succeed requires the implementation of the above six points in theunswerving belief of going from (A) to (B).

That summarises what I believe are the most important requirements of the capacityto succeed with an international patent filing strategy, from the standpoint of costand cash-flow, in the context where implementing the strategy inevitably involvescost limitations leading from a "Strategy-Generated Budget" to a "Budget-LimitedStrategy". Doubtlessly, there are many more requirements for success, includingskillfully drafting the patent applications, steering them safely through the patentoffices, and upholding the patents in case of opposition or in Court. But these endscan only be achieved if the means for achieving them are planned for and budgetedas part of the strategy.

Brian Cronin, European Patent Attorney

References:• "The Cost of Patent Filing in Europe", The European Patent Office, IIC, 1995• "Actual Costs of Patenting in European and National Procedure - Results of a FICPI

Study", J. Beier, EPI Information 2/1995, p.57• "Patent Filing Costs Around the World", S. Helfgott, Journal of the Patent Office Society,

July 1993, p. 567• "Why Must Filing in Europe be so Costly?", S. Helfgott, Journal of the Patent Office

Society, October 1994, p. 787• EPO Script, VOL 3 "Utilization of Patent Protection in Europe", published 1994 by the

EPO


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Planning an InternationalPatent Filing Strategy :

Cost, Cash-Flowand Capacity to Succeed

• Preliminary Remarks : Planning an International PatentFiling Strategy

International patent filing is a strategic operation for everyone, from privateinventors to large corporations.

It is also costly. The system for international patent filing is complex and expensive,because it is solely sustained by cash which is input by the users in proportion totheir use of the system.

Planning for international patent filing involves formulating a strategy : Why file?What, where and when to file? The filing strategy will depend on the driving forcefor obtaining patent protection : to protect new technology, to protectmanufacturing interests, to protect markets or possible licensing activities.

Implementing this strategy involves cost considerations : How much? How do thecosts evolve? A budget must be established, or an existing one expanded to meetthe necessary funding. Inevitably, the cash flows one-way, from the users into thesystem, with costs fluctuating in time but ever increasing until either the budget isexpanded or the patent activity is limited, leading from a "Strategy-GeneratedBudget" to a "Budget-Limited Strategy".

Cost controls must be set up and the patents' value assessed - a rather subjectiveexercise. In the end, what represents successful planning? Achieving the expectedbenefits, or limiting the losses and diverting resources to new strategic aims. Finally,what is the capacity to achieve this?


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• Cost

• Users Inside Costs

• Relative Costs

• Where to File?

• Cash Flow : Fluctuation of Costs in Time

• Timing

• Strategy-Generated Budget Vs Budget-Limited Strategy

• Budgeting for a Patent Filing Strategy

• Strategy-Generated Budget Vs Budget-Limited Strategy

• Cost Control

• Getting Good Value From Your Foreign Patents

• What Capacity is Required to Succeed with anInternational Patent Filing Strategy?


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The main factors influencing the costs incurred for theinternational filing of patents depend on the patent applicationitself, administrative charges and "external factors" :

The Patent Application :

• Length (translations)

• Difficulty (mainly Patent Agents' time)

• Unity of Invention (number of patents needed for a givenproduct)

Administrative matters :

• Agents filing charges

• Priorities claimed/assignments etc.

External Factors :

• Official Fees (particularly those of the EPO!)

• Territory (number of countries at filing/grant)

• Duration (how long the patent is maintained).


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Where to file is not determined primarily for cost reasons,but for strategic reasons: why the applicant wantsprotection in a given country.

Where to file is determined by a number of factors whicheach applicant will weigh up according to theparticularities of its own needs and the industryconcerned.

• Markets to protect for :

- Freedom to use

- The need to control competition (manufacture and/or sale)

- The need to control partners/affiliates/licencees

- Future markets to be secured

• Competitors location/stronghold (especiallymanufacturers)

• Licensing considerations

Generally speaking :

• Licensing usually implies broad territorial protection.

• Large manufacturing companies are satisfied with narrowterritorial protection.

• Inventors/small companies need broad territorialcoverage, initially.


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• The opening of the single European market• The general lowering of trade barriers with GATT/WTO• Combined with the minimum standards for protection

under TRIPS could lead to :

• A need for patent protection on a wider geographicalscale while providing a context where such protection ispotentially available.

• This should create pressure for more patenting, at thesame time making country selection all the more critical.

• Patenting on a broader geographical scale could becomea trend. However the costs of obtaining patent protectionin numerous countries will remain a deterrent.

• This could lead to a countertrend for "overprotection" inthe home market and major markets, by multiple filing tocreate "impenetrable" patent barriers to these markets.

• This will leave the lesser countries in a substantial non-patent zone except for a few major inventions whichhave proven themselves and which will be protectedwidely.


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• The "stockpiling" of home patents and utility models canbe a formidable nuisance in what is supposed to be auniform market.

• This means that competitors are free in part of themarket but run into trouble in one country or keycountries.

• Such "homebase" protection is valuable and should notbe neglected, particularly if a company has too manyinventions to protect all of them internationally.

• The time tested policy :

"Many patents in a few countries, and a few patents inmany countries"

seems here to stay, but perhaps on a larger scale.


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Budgeting for a Patent Filing Strategy

Requires

• A consideration of cash flow and, more generally :

• The interaction between the costs generated by the filingstrategy and the limiting effect these generated costshave on implementation of the strategy.

Budgeting is going to depend on :

• The purpose of the patent filing strategy

• The time point

• Who is in control

• The resources available

• The driving force


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Strategy-Generated Budget Vs Budget-Limited Strategy

The type of situation depends on the driving force :

Research/Technology Driven :

• Patent filing is a measure of the productivity of R&D andis done early to secure protection for potentialtechnology. Patent filing costs can be computed as afraction of R&D costs.

Production Driven :

• Patent filing is confined almost exclusively to protectingmanufacturing interests, usually in a limited number ofcountries.

Market Driven :

• Patent filing is geared to protecting all worthwhilemarkets. Filing costs are deemed low compared to themarket potential and to other expenses necessary tosecure these markets.

Legal/Patent Driven :

• Patent filing is usually confined to the major patentoffices, especially those with developed facilities forpatent litigation. Protection must be obtained first, marketvalue can be established later. Main concern is for legalsecurity, parallel imports etc.


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The type of strategy also depends on who is in control :

General Manager/Entrepreneur :

• Strategy-Generated Budget, where the strategy laterbecomes limited by budget.

R&D/Technical Manager :

• Budget Limited Strategy, where the strategy tends tostretch the budget.

Financial Manager :

• Budget-Limited Strategy.


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Cost Control

Step-by-Step :

• A decision is taken at each step of the procedure for eachpatent application, based on the incremental cost (orexpected cost) for the next stage. This is usual forindividuals/small companies.

Automatic Go-Ahead :

• The procedure automatically goes ahead except for anunusual occurrence (refusal/appeal, filing divisionals)when a decision may be taken to abandon.

Main Decision Point Review :

• A decision is taken at the points when major expensesoccur: first filing; international filing at 12 months; PCTcompletion at 30 months; national completion at the EPOgrant phase.

Periodic Review :

• The patent estate is reviewed periodically, say everyyear. All patent applications and patents at all stages ofprocedure are reviewed (possibly with cumulated costsand future cost projections) and decisions taken for eachcase, country-by-country.

Maintenance Review :

• Patent maintenance expenses are reviewed separately,annually or whenever costs need to be contained. This isusual for computer-maintained patent estates.


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Value assessment is subjective: different people who makethe value judgement may have different points of view :

• Perceived Value:- Effect on competitors- Prestige- Stimulation of developments

• Commercial Value:- Royalty income- Volume of protected

sales- Book value/asset value

• Comparative Value:- R&D costs- Legal costs- Marketing costs

• Value at Cost:- Accumulated costs- Incremental cost- Projected costs

• Plus-Value:- Marketing tool- Technical advance- Part of a package

• Legal Value:- Patent strength- Scope/coverage- Remaining term

planning an international patent filing strategy : cost

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