The cost of acquiring patents, particularly with the help of outside counsel, can quickly escalate for companies, straining resources and potentially diverting funds from other critical business areas.

Yet, the protection patents offer for intellectual property is essential, underpinning a firm’s competitive position and future viability.

Therefore, understanding the financial dynamics of patent procurement and how to effectively manage these expenses is of paramount importance.

Brief Overview of the Cost of Patent Procurement

Patent procurement is a multi-layered, complex process with several cost dimensions. These include the legal fees for patent lawyers or agents, government fees for patent examination and issue, and potential additional costs for international patenting. Furthermore, post-grant costs such as maintenance fees and possible litigation expenses add to the financial burden.

The Need for Outside Counsel and Its Associated Cost

Outsourcing patent work to specialized law firms, or outside counsel, is a common practice due to the complex nature of patent law and the expertise required to navigate it successfully. However, this choice comes with substantial financial considerations. Legal fees account for a significant portion of overall patent costs, and while these expenses are justified by the specialist knowledge and skills brought to the table by outside counsel, they can still present a heavy burden.

The Importance of Cost-Effective Patent Management

Given the potential drain on resources, efficient management of patent costs is crucial. By applying strategic thinking and practical solutions, companies can achieve a balance between protecting their intellectual assets and maintaining financial health. This balance is key to sustainable growth and continued innovation.

Establishing A Patent Strategy

Creating a comprehensive patent strategy is paramount in managing costs. This strategy should dovetail with your larger business scheme and objectives.

A. Understanding Business Needs and Goals

To foster a robust patent strategy, it’s crucial to comprehend your business’ needs and goals.

  1. Aligning with Business Model: Does your potential patent align with your business model? Does it offer a competitive advantage or is it a supporting technology? These considerations can help to decide if investing in a patent is the right choice.
  2. Considering Future Objectives: Consider your company’s long-term goals. Is the patentable technology likely to be central to your product or service in the coming years? If not, patenting might be an unnecessary expense.
  3. Reviewing Financial Constraints: Analyze your financial condition before committing to the patent process. Patenting can be a costly process, and it’s crucial to assess whether the benefits outweigh the costs.

B. Prioritizing Patent Applications

Selectively choosing which ideas to patent can result in substantial savings.

  1. Evaluating Strategic Relevance: Assess each potential patent based on its strategic importance. Is it a cornerstone of your business or a minor addition? Prioritizing essential patents can help you make the most of your resources.
  2. Assessing Commercial Potential: Scrutinize the commercial potential of each potential patent. Will it drive revenue growth? Will it deter competitors? If it holds significant commercial promise, it may be worth the investment.
  3. Considering the Strength of Protection: Consider how strong and broad the protection each patent might offer. If a patent isn’t likely to offer significant protection, it might be worth rethinking the application.

C. Filing Provisional Applications

Submitting provisional applications can be a cost-effective way to secure a priority date for an invention, while providing additional time to evaluate the invention’s commercial potential.

  1. Securing Priority Date: By filing a provisional patent application, you can secure a priority date for your invention, providing an early effective filing date for a later-filed non-provisional patent application.
  2. Time for Assessment: The provisional application affords a 12-month period to assess the invention’s market potential, its alignment with your business strategy, and to decide whether to proceed with a more expensive non-provisional patent application.

D. Pursuing Patent Cooperation Treaty (PCT) Applications

A PCT application can offer a cost-effective route to international patent protection, deferring the decision (and associated costs) of entering individual countries for up to 30 months from the priority date.

  1. Extending Timeline: The PCT process extends the time before national phase costs must be incurred. This extra time can be used to seek licensing partners or additional funding, thereby mitigating the out-of-pocket costs.
  2. Assessing Market Viability: During the PCT process, you can better assess the commercial viability of your invention in different markets, enabling a more informed decision about where to seek patent protection.
  3. Saving Translation Costs: By delaying the entry into national phases, you can defer (and potentially avoid) the translation costs associated with patent filing in non-English speaking countries.

Rethinking Your Patent Filing and Prosecution Approaches

Adjusting the way you approach the patent filing and prosecution process can lead to significant cost savings.

A. Choosing the Right Jurisdictions

Deciding where to file your patent applications can have a significant impact on costs.

  1. Evaluating Market Size: Filing patents in jurisdictions with significant market size can increase the patent’s value. However, the cost of filing and maintaining patents in such jurisdictions might be higher.
  2. Considering Enforcement: The enforceability of patents varies across jurisdictions. Filing in jurisdictions with robust patent enforcement mechanisms might be costlier but could lead to better protection.
  3. Assessing Cost: The cost of obtaining and maintaining a patent can vary greatly from one jurisdiction to another. Therefore, carefully consider the jurisdictions in which you wish to seek protection.

B. Streamlining Prosecution

Reducing the number of Office actions can significantly lower the cost of patent prosecution.

  1. Clarity and Completeness: Ensuring clarity and completeness in your patent applications can help reduce the number of Office actions, saving time and money.
  2. Engaging in Examiner Interviews: Regular communication with the patent examiner can help expedite the patent prosecution process and potentially decrease the number of Office actions.
  3. Utilizing the Patent Prosecution Highway (PPH): The PPH allows for accelerated patent prosecution by sharing information between patent offices, which can lead to quicker patent grants and cost savings.

C. Leverage Continuation Practice

Continuation practice can be a strategic way to pursue additional claims related to an invention that has already been disclosed in an earlier filed application.

  1. Ensuring Broad Protection: A well-planned continuation strategy can help you protect various aspects of your invention, ensuring broad coverage.
  2. Gaining a Competitive Edge: Continuation practice can help you adapt your patent protection in response to market changes, competitors’ products, and potential infringement scenarios.

D. Utilizing Accelerated Examination Programs

Several patent offices offer accelerated examination programs that can expedite the grant of a patent.

  1. Advancing Business Objectives: An accelerated patent grant can provide early protection for your invention, offering a competitive advantage.
  2. Reducing Pendency: Reduced pendency can lead to cost savings, especially in technology fields with short product lifecycles.
  3. Attracting Investment: A granted patent can be an attractive asset for investors and may facilitate fundraising efforts.

Enhancing Your Internal Patent Management Process

An effective internal patent management process can help control outside counsel costs by reducing reliance on external resources.

A. Develop a Strong In-House Team

A robust in-house team can perform several tasks that would otherwise need to be outsourced.

  1. Skilled Personnel: The right blend of technical and legal expertise can handle the majority of patent tasks, thereby minimizing the need for outside counsel.
  2. Continuous Training: Regular training on the latest patent laws, regulations, and practices can ensure that the in-house team remains current and efficient.
  3. Balanced Workload: Ensuring a balanced workload can help prevent burnout and maintain high-quality work.

B. Invest in Patent Management Software

Patent management software can streamline patent-related tasks and offer better visibility into the patent portfolio.

  1. Automating Routine Tasks: Patent management software can automate tasks such as docketing, thereby reducing the time spent on manual work.
  2. Managing Deadlines: Software solutions can provide reminders for important deadlines, ensuring timely actions and preventing costly fees associated with missed deadlines.
  3. Analytics: Patent management software often comes with analytical tools that can provide insights into the patent portfolio, helping in strategic decision-making.

C. Establish a Patent Review Committee

A patent review committee can make strategic decisions regarding the patent portfolio, reducing the need for outside counsel involvement.

  1. Composition: The committee should include representatives from legal, technical, and business departments to ensure a balanced perspective.
  2. Regular Reviews: The committee should conduct regular reviews of the patent portfolio to make decisions on filings, prosecution, enforcement, and monetization.
  3. Strategic Decisions: The committee can decide on matters such as patent filings, prosecution strategies, enforcement actions, and monetization options, thereby reducing reliance on outside counsel.

D. Implement Effective Communication Channels

Clear and regular communication with outside counsel can reduce misunderstandings and unnecessary work.

  1. Regular Updates: Regular updates from outside counsel can ensure that the in-house team is aware of the progress and can make timely decisions.
  2. Detailed Instructions: Providing clear and detailed instructions to outside counsel can reduce the chances of unnecessary work and rework.
  3. Feedback Mechanism: A feedback mechanism can help improve the performance of outside counsel and ensure alignment with the company’s objectives.

Optimizing Your Relationship with Outside Counsel

Effective management of your relationship with outside counsel can lead to considerable savings.

A. Negotiating Billing Rates and Arrangements

It is essential to negotiate favorable billing rates and arrangements with outside counsel.

  1. Competitive Billing Rates: Researching the market rates and negotiating competitive billing rates can result in significant cost savings.
  2. Alternative Fee Arrangements: Considering alternative fee arrangements such as fixed fees, contingent fees, and capped fees can offer predictability and potential savings.
  3. Avoiding Unnecessary Costs: Clearly communicating what expenses should and should not be billed can avoid unnecessary costs.

B. Implementing a Matter Management System

A matter management system can offer better visibility into legal matters handled by outside counsel and enable more effective cost control.

  1. Tracking Matters: A matter management system can track each legal matter, the work done, the time spent, and the costs incurred.
  2. Evaluating Performance: The system can provide data for evaluating the performance of outside counsel based on parameters such as cost, efficiency, and outcomes.
  3. Forecasting Costs: Based on historical data, the system can forecast costs for similar matters in the future.

C. Regularly Evaluating Outside Counsel Performance

Regular evaluation of outside counsel performance can ensure value for money and identify areas for improvement.

  1. Performance Metrics: Defining clear performance metrics can offer an objective basis for evaluation.
  2. Feedback and Improvement: Based on the evaluation, feedback can be provided to outside counsel for continuous improvement.
  3. Changing Counsel: If performance is not satisfactory despite feedback and opportunities for improvement, consider changing the outside counsel.

D. Promoting Collaboration and Communication

Promoting collaboration and effective communication with outside counsel can enhance efficiency and reduce costs.

  1. Shared Goals: Defining shared goals can ensure that outside counsel is aligned with your business objectives.
  2. Regular Meetings: Regular meetings can provide opportunities for discussion, clarification of doubts, and course correction.
  3. Using Technology: Using collaboration tools and platforms can make communication more efficient and productive.

Utilizing IP Management Software

Embracing IP management software can streamline patent processes, ensure accuracy, reduce manual efforts, and ultimately reduce costs.

A. Streamlining Patent Processes

IP management software can automate routine tasks, thereby increasing efficiency and reducing time and costs.

  1. Automation of Routine Tasks: Tasks like docketing, form filling, and patent tracking can be automated, freeing up your team’s time for more strategic activities.
  2. Reduction in Errors: Automated processes can reduce errors that may lead to increased costs or lost opportunities.

B. Ensuring Accuracy in Patent Data

Accurate patent data is vital for strategic decision-making and cost control.

  1. Centralized Database: IP management software provides a centralized database where all patent data is stored and easily accessible.
  2. Data Integrity: Automated data entry and validation features can ensure the accuracy and consistency of patent data.

C. Facilitating Collaboration and Communication

IP management software can provide collaboration and communication tools that make teamwork more efficient.

  1. Collaboration Tools: These tools can facilitate the sharing of information and collaboration among team members and with outside counsel.
  2. Communication Tools: These tools can ensure effective communication among all stakeholders, leading to reduced misunderstandings and delays.

D. Enabling Informed Decision Making

With rich data and analytics features, IP management software can support strategic decision-making.

  1. IP Analytics: Analytics features can provide insights into your IP portfolio, helping you identify cost-saving opportunities.
  2. Reports and Dashboards: Customizable reports and dashboards can present relevant data in a clear and actionable way, supporting informed decision making.

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Investing in Patent Analytics

Patent analytics can provide insights into patent trends and competitive activities, supporting strategic decision-making that can potentially reduce costs.

A. Understanding Patent Trends

Patent analytics can reveal trends in patent filings and grants, informing your patent strategy.

  1. Filing Trends: Analysis of filing trends can help you understand which technologies are gaining traction and where the competition is heating up.
  2. Grant Trends: Analysis of grant trends can give you an idea of the probability of obtaining a patent in a particular technology area.

B. Tracking Competitive Activities

By tracking the patent activities of competitors, patent analytics can provide valuable competitive intelligence.

  1. Competitor Patent Portfolios: Analysis of competitor patent portfolios can reveal their R&D focus and potential future products.
  2. Patent Litigations: Tracking patent litigations can alert you to potential patent risks.

C. Informing Patent Strategy

Based on the insights gained, patent analytics can inform your patent strategy.

  1. Filing Decisions: Patent trends and competitive activities can influence your decisions about where and when to file patent applications.
  2. Licensing Opportunities: Understanding the patent landscape can identify potential licensing opportunities, providing a source of revenue and reducing patent costs.

D. Guiding R&D Activities.

Patent analytics can also guide your R&D activities, reducing wastage of resources and enhancing ROI.

  1. R&D Focus: Insights from patent analytics can help align your R&D activities with current trends and future opportunities.
  2. Avoidance of Patent Risks: By identifying potential patent risks, patent analytics can help steer your R&D efforts away from potential patent infringements.

Negotiating Fee Arrangements with Outside Counsel

One direct way to control outside counsel costs is to negotiate favorable fee arrangements. Rather than accepting standard rates, consider discussing alternative fee arrangements that can provide more value and predictability.

A. Understanding Fee Arrangements

Before you can negotiate fee arrangements, you need to understand the common types of fee structures that law firms offer.

  1. Hourly Billing: This is the traditional model where firms charge an hourly rate for their services. While this method is straightforward, it doesn’t provide cost predictability.
  2. Fixed Fee: With fixed fee arrangements, you agree on a set fee for a particular service. This model provides cost predictability but may not always provide the best value.
  3. Contingency Fee: In a contingency fee arrangement, the law firm only gets paid if they win the case or achieve a favorable outcome. This arrangement aligns the firm’s interests with yours, but it’s not commonly used in patent matters.
  4. Blended Rates: Blended rates provide a middle ground between hourly billing and fixed fees. In this model, firms charge a uniform hourly rate for all attorneys regardless of seniority.

B. Negotiating Rates

Negotiating rates involves more than just asking for discounts. It requires a clear understanding of your needs and the value that the firm can provide.

  1. Assess Value: Consider the complexity of your patent matters and the value that outside counsel brings to your business. High-stakes matters may justify higher fees, while routine tasks can be handled at lower rates.
  2. Leverage Volume: If you have a significant volume of patent work, you can leverage this to negotiate volume discounts.
  3. Discuss Alternatives: Discuss alternative fee arrangements that could provide more value and cost predictability. Be open to innovative fee models that align the firm’s incentives with your business goals.

C. Implementing Cost Controls

Negotiating rates is only the first step. You also need to implement cost controls to ensure that fees stay within the agreed limits.

  1. Budgets: Establish budgets for each patent matter and regularly track expenses against the budget.
  2. Billing Guidelines: Implement billing guidelines that specify what types of expenses can be billed and at what rates.
  3. Regular Reviews: Conduct regular reviews of billing statements to ensure that they comply with the agreed fee arrangements and billing guidelines.

D. Reviewing Fee Arrangements

Fee arrangements should not be set in stone. As your patent needs evolve, you should review and adjust your fee arrangements accordingly.

  1. Regular Reviews: Conduct regular reviews of your fee arrangements to ensure that they continue to provide value.
  2. Benchmarking: Benchmark your fees against industry norms and the fees of other firms to ensure that you’re getting a fair deal.
  3. Feedback and Adjustments: Provide feedback to your outside counsel about the value you’re getting from their services. If necessary, negotiate adjustments to the fee arrangements.

Wrapping it up

In the current business landscape where intellectual property plays a vital role in maintaining a competitive edge, it’s more important than ever to manage patent costs effectively. Businesses are increasingly recognizing the financial burden that patent-related expenses, particularly those related to outside counsel, can pose. Consequently, it’s critical to devise strategies to reduce these costs without compromising the quality of your patent portfolio.

In this guide, we’ve highlighted various strategies that can be employed to reduce outside counsel patent costs.

These include establishing a robust patent strategy, focusing on high-quality patents, conducting regular patent reviews, negotiating fee arrangements, and developing in-house patent expertise. Each of these strategies requires careful planning and execution, but when implemented effectively, they can lead to significant cost savings.

Moreover, it’s important to remember that reducing costs is not just about saving money. It’s also about creating value. A more cost-effective patent strategy can free up resources for innovation, increase the return on your patent investments, and ultimately contribute to your business growth.

Reducing outside counsel patent costs isn’t a one-time exercise but rather an ongoing effort that requires constant vigilance and adjustment. But with a systematic approach, clear objectives, and a commitment to continuous improvement, it’s an effort that can yield significant benefits.

Published by Adhip Ray

Adhip is the founder of the startup advisory WinSavvy. He is a lawyer based out of India with specialization in intellectual property law. He is a member of the PowerPatent family since 2021.