The patent process – making the most of your window of opportunity

Obtaining granted patents in a number of countries around the world can be a long, complex and expensive process. Here are a couple of features of the process which are particularly important to note for individuals, start-ups, small companies and universities, which may not have a large amount of money available to support the entire process, particularly for multiple inventions.

Patent timeline and costs

I previously reported on a presentation I gave at the annual general meeting of the Consultancy Group of the Royal Society of Chemistry (RSC). The presentation provided an overview of the patenting process and included a typical timeline and associated costs at each major stage of the process.

The overall costs are quite high — of the order of £100,000 for a single patent family granted across a typical country spread, including the US, Europe, China, Japan and Korea. Costs will increase further for wider country spreads and/or multiple patent applications.

Clearly, for many individuals, start-ups, small companies and universities, these levels of cost can be problematic at best — and at worst, completely prohibitive in terms of pursuing a reasonable scope of patent protection for inventions around the globe. So, what can be done?

Options for cost reduction

Don’t file in the first place

One option to consider is just not to file a patent application in the first place. Certain inventions, particularly in the method of manufacturing a product, may be difficult to identify in the final product and could potentially be retained as trade secrets or so-called know-how.

There are several benefits to this approach:

• Costs associated with patent filings are avoided.
• While patent protection is limited to 20 years, a trade secret can, in principle, have an indefinite lifetime.
• Competitors cannot copy your invention if they don’t know about it — while a patent can be used to sue a competitor who infringes the patent, it can be better to avoid having to sue in the first place (and the associated time and cost).

While that all sounds well and good, trade secret protection is not suitable for inventions which are evident in the final product and which can readily be reverse-engineered by competitors. Furthermore, if the invention is not disclosed to the public, there’s nothing to prevent a third-party from seeking patent protection for the same invention at a later date.

As such, keeping the invention a secret comes with considerable risk. You could, of course, merely disclose the invention to prevent others from patenting and retain freedom-to-operate. However, the market is then open for larger competitors to copy your invention and reap the rewards. Large competitors with deeper pockets, a larger network of sales channels and manufacturing facilities providing economies of scale for production will make it difficult or impossible to compete without patents to protect your interests.

Another shortcoming associated with not filing for patent protection of your inventions is the reduced likelihood of obtaining external investment to bring the inventions to market. Investors are reticent to invest in a start-up company based on a new technical innovation without the start-up company having filed one or more patent applications in order to protect the new innovation.

Alternatively, in the case of universities and other non-practising entities which have no intention of commercialising their inventions in a mass-manufacturing sense, patents provide a means of obtaining revenue through the licensing or sale of IP assets. While trade secrets and know-how also have value, these IP assets are usually bundled with registered patent assets in licensing and sales agreements to support the implementation of the patented inventions.

So, in many cases, the filing of patent applications is not a ‘nice to have’ but a ‘must have’, in order to successfully commercialise new innovations in the highly competitive global marketplaces of the modern world.

File, but seek to reduce overall costs

If filing for patent protection is a ‘must have’, but you don’t have stacks of cash, what are the alternatives for filing but keeping costs low?

One seemingly attractive option is to draft and file the patent application yourself. However, this is likely to be a false economy and result in a patent application which is essentially worthless. A patent application is a complex document to draft, being a combination of a legal, technical and commercial document. Inventors may be of the view that they understand their invention better than any patent attorney and can describe it perfectly clearly in a patent application without an attorney’s help. While this may be correct, merely describing the invention clearly does not lead to a patent application with any value.

The value of a patent application lies in the scope of the legal claims at the end of the specification, and these need to be carefully crafted to meet various legal requirements for patentability. This, among other things, is the reason it takes several years of post-university training and a raft of additional patent exams to fully qualify as a UK patent attorney… and then some more exams for good measure to qualify as a European Patent Attorney. As such, winging it on your own is likely to lead to disaster. Furthermore, winging it on your own will not save on the vast majority of the overall costs. This is because, while anyone can draft and file a patent application in the UK, qualified foreign patent attorneys will still be required for national phase processing of applications in other countries. This accounts for a significant proportion of the overall costs and cannot be avoided merely by drafting and filing the initial UK priority application on your own.

Another, perhaps more well-trodden path, is to seek out a really cheap patent attorney. Again, this is likely to be a false economy because:

• the attorney is very poor and does not prepare a patent application which correctly protects the invention,
• the experienced patent attorney you initially talk to palms off the low-cost drafting to an inexperienced trainee, or
• the seemly low upfront charges for drafting are compensated for by downstream charges (beware the loss-leader!)

Furthermore, as previously stated, the cost of foreign patent attorneys for national phase processing of applications in other countries is a significant proportion of the overall costs and this cannot be avoided merely by using a cheap attorney in the UK for the initial priority filing. It is, of course, sensible to seek value for money — but selecting an attorney based purely on cost is likely to lead to the generation of IP assets which are not nearly as valuable as they should be, if they’re of any value at all.

So, you need a good attorney. Are there any other options for reducing costs?

One possibility for cost reduction is to reduce the country filing spread. Two-and-a-half years into the patent application process, an international application must be split into individual country applications where protection is sought. Costs at this stage, and for the remainder of the process, are dependent on the number of countries in which you seek protection. This is the reason there are large ranges in the cost estimates included in the above timeline from two-and-a-half years onwards. A small number of countries are much less costly than a large number of countries. Of course, pursuing protection in a smaller number of countries means that less comprehensive global protection is obtained and competitors are free to exploit your inventions in the other countries where you haven’t sought protection.

The usual approach is to assess where the main markets are and where the main competitors reside and do business, and pursue a filing strategy which captures most of the global market at the minimum cost. The timeline example covering US, Europe, China, Japan and Korea represents a typical country spread, although the specific countries will vary a little according to the nature of the invention and the associated markets. Making further reductions in country spread means that significant portions of the global market are not covered and the value of the IP assets are correspondingly reduced.

A window of opportunity

Given a lack of deep pockets, is there any way you can seek to reduce overall costs while not severely compromising the value of your IP assets?

The answer lies in the way that the patent process is designed. While overall costs are quite high, they’re spread over 20 years — and the system is designed so that large costs don’t kick-in for two-and-a-half years from first filing. As such, there’s a window of opportunity in which to obtain investment and/or assess commercial potential prior to spending significant funds on patent applications around the world, abandoning the patent application or significantly reducing its global coverage. The key for individuals, start-ups, small entities and universities is to work hard within this two-and-a-half year window of opportunity to obtain commercial traction. This may take various forms, including:

• earning revenue from initial sales of product to fund the further prosecution of a patent application
• obtaining external investment to progress a patent application in parallel with commercialisation of the associated product
• licensing the patent application with agreement terms for the licensee to pay for the further costs of the application
• assignment/sale of a patent application prior to the two-and-a-half year deadline.

It may be noted that many universities follow a strategy that, if there is no commercial interest in a patent application by the end of the two-and-a-half year window, the patent application is abandoned — however brilliant the academic insists the invention is. After all, if nobody has been willing to invest in the invention after two-and-a-half years, the question may be asked as to whether it’s quite as brilliant as first thought.

Timing is critical

The two-and-a-half year window starts ticking from the first filing of the priority application. As such, prior to filing, you should think carefully about the current status of the invention and whether you’ll be in a position to obtain commercial traction within the next two-and-a-half years. If the answer is no, then it may be sensible to consider holding off on filing the initial application until the timing is right.

Of course, this comes with its own risk — that someone else will get in there first with a patent filing. An alternative would be to file the priority filing and reassess within the first priority year. If, towards the end of the first year, it’s considered unlikely that you’ll be able to obtain commercial interest within a further one-and-a-half years, it’s also possible to withdraw the patent application without any rights outstanding and then re-file to set the clock ticking from zero. The main point is that timing can be critical and the desire for the earliest priority date must be tempered by the timeline for commercialisation and the ramp-up in costs at two-and-a-half years from the initial patent filing. Some strategic thinking is required to get the timings right.

Multiple inventions in one application

A complimentary way to minimise up-front costs within the two-and-a-half year window when you have multiple inventions is to incorporate the inventions into a single initial patent application. It’s certainly possible to do this, although it can make the application somewhat messy and unfocused — so this isn’t desirable unless costs are a prohibitive factor. In certain cases there may be no other option if protection is desired for a number of invention but there is simply insufficient funds to file several different patent applications. As such, while not ideal, this is an option worth considering.

While this can save on initial costs, a single application will be required to be split-up into several separate applications during examination in each country. Furthermore, from a commercialisation perspective, it can sometimes be useful to have different aspects of the invention covered in separate patents, as the different aspects may have different strategic uses which are dependent on commercial strategy. That said, the requirement to split can be delayed until after the two-and-a-half year deadline, giving you the opportunity to push costs downstream while retaining the potential for covering all the inventions while investment, licensing, or sale of the IP assets is pursued.

My advice for new clients

For those clients new to the patent process, my initial advice is always that obtaining a patent does not, in itself, make you any money. Rather, it costs you a significant amount of money. To make money, you must first have an invention which is commercially desirable. This usually requires technical benefits at a price point which is acceptable to the marketplace, or cost reduction without an undue degradation in technical performance when compared to the incumbent technology.

This still doesn’t guarantee success. There’s a huge chasm between a good invention and a successful commercial product. This chasm usually isn’t easy to cross and many good inventions will fall by the wayside — often to be picked up by others when patents are allowed to lapse and the way becomes clear for existing big players to take up the reigns.

Time, money, hard work, persistence, the development of contacts and market channels, the development of commercial strategy and market know-how are generally all required in bucket loads to make an invention a commercial success. The filing of a patent application is the starting line where the hard work really begins… and the first two-and-a-half years from the initial filing are critical to achieve commercial traction while the patent application process remains reasonably affordable for the shallow pocketed.

Be realistic and know your core interests

One final point worth mentioning — be realistic about the value of your invention in its current state and the level of effort and investment still required to cross the chasm to make it a commercial success. My experience is that many inventors overestimate the value of the invention in its current, early state and vastly underestimate the level of effort and investment still required to make it a commercial success.

A related issue is to consider carefully what your core interest really are. This is particularly relevant for universities which have distinctly different core interests to commercial entities. A university’s primary interests lie in teaching students to a level at which that they can secure jobs and contribute to society, and in progressing groundbreaking research to add to the sum of human knowledge.

While money is required to achieve these goals, the question should be asked as to whether maximising the amount of money that’s paid up-front for an IP asset is really in the university’s best interests. Successful university-industry partnerships that I’ve been involved with haven’t had this aim. Rather, the most successful collaboration agreements have sought to secure studentships, PhD projects, industrial placements and access to industrial materials, facilities, and know-how. Successful collaborations have fostered a long-term partnership which is beneficial to both parties. This results in the university being able to achieve cutting-edge research over the long-term. Furthermore, very often the students involved end up progressing to jobs with the industrial partner, further enhancing the relationship between university and company.