Patenting Your Invention: the Ugly Truth – Page 5
Patent renewal fees
The most unfair and arguably immoral element of patenting costs is the annual renewal fee charged from Year 5 by each national patent office. Each country’s fee may ‘only’ be the equivalent of a few hundred pounds, but for a product needing multinational protection, the total annual renewal bill can soon climb into the thousands. Renewal fees of £15-20,000 a year to keep a single patent going are not untypical.
Officially, patents stay in force for up to 20 years. It would be more accurate to say instead that patents remain in force for five years, after which you have to pay annually if you want to keep your patent for up to 15 more years.
Renewal fees are legalised extortion. If you don’t pay the renewal fee for a particular country, you lose your patent in that country. Which means, in effect, that you lose your invention too, because anyone in that country can then use your idea without paying you a penny. And they know exactly what it is, because details remain permanently on public patent databases such as Espacenet.
(One of the benefits of the internet is that everyone now has free access to patents. In pre-web days it was almost secret knowledge. You’d normally have to travel a good distance to your nearest patent library to consult documents manually – a whole day of a job just to look at a few patents. Now you can sift through hundreds of them very rapidly without having to go anywhere. A godsend for inventors, but also for those with less positive motives.)
Thus, the renewal fee is an annual tax on owning an idea. An added twist of the knife is that renewal fees increase with time, supposedly to encourage commercial use. (Most inventors don’t need encouragement, while rich companies are unlikely to be influenced by the increase.) If you don’t pay, you effectively no longer own that idea. Applying for a patent is, for many inventors, the first step towards losing their idea. That is grossly unfair. Do novelists, playwrights, musicians and film-makers have to pay fees every year in many countries to retain ownership of their own creations? No. So why should inventors be treated differently? The patent system should not be in the business of holding inventors to ransom. That’s a massive disincentive to innovation – the unacceptable face of a system supposed (remember?) to encourage innovation.
The official justification for renewal fees is that they encourage patentees to abandon patents that they are not exploiting or ‘working’. In other words, they help clear out the dead wood. (Nothing to do with raising revenue for patent offices, of course.) But how does the patent system know that attempts are not being made to exploit a patent? It doesn’t. It can’t. And what business is it of the patent system anyway?
The bottom line is that the patent system is much more interested in getting money off you than in helping you to exploit your patent. Even large companies now complain about renewal fees, but they impact disproportionately on inventors and very small companies. As mentioned earlier, it’s quite normal for an invention to take several years to get to market after a patent application has been filed. Those will not be years of inactivity and indifference. They will often be years of determined, dedicated, urgent, even frantic activity.
But the patent system doesn’t see that. And it doesn’t care. All it wants is your money. And it is likely to want it at a time when you can least afford it. By Year 5, other more productive costs – testing, marketing, manufacture, premises etc – will be bearing in. And competitors know this. Some will wait, like vultures, until you run out of funds to pay the renewal fees. Then they will pounce on your idea and take it for nothing, or force you into a deal that pays you a derisory amount.
That’s our wonderful patent system at work.
The unpredictable cost of patenting
Some authorities seem almost in denial of patenting costs. For example, and without wishing to pick on him personally – he’s probably a very nice bloke – it’s worth looking at part of a letter written in 2009 by Dave Bradley, the then President of the Chartered Institute of Patent Attorneys, and published in Growing Business, an online magazine for entrepreneurs. He was responding to a complaint from an engineering company MD about the high cost of patenting. Dave’s letter contained this:
‘The typical cost of applying for and obtaining a UK patent, using the services of a qualified patent attorney, is £3,000 to £4,000 […]. Renewal fees in the UK are also relatively modest. Costs can start to go up once you opt for wide-scale international patent protection, but such costs are generally only incurred once the product or invention has proved that it is worth protecting in international markets. […] Intellectual property is very often a company’s most valuable asset and no sensible director should neglect to protect the company’s assets: insurance premiums for plant and premises are likely to cost a lot more than the cost of obtaining and renewing patents.’
Let’s unpack that extract. The first two sentences are fine. The second two, less so. ‘Costs can start to go up’ ought to read: ‘Costs climb steeply’. And the claim that ‘such costs are generally only incurred once the product or invention has proved that it is worth protecting in international markets’ glosses over a fact of IP life that is nowhere near as reassuring as Dave Bradley makes it sound.
This is that the patent system, and not the invention or product, dictates application timescales. Many inventors must decide whether to patent internationally before the invention or product has had time to prove anything. Many inventions will still be in their R&D phase, and destined to remain there for some time. Market research may indicate good commercial potential but cannot prove it. Crucially, the invention is unlikely to be providing a healthy income stream to pay for its own patent. At the points where key patenting decisions have first to be made, then (later) paid for, the typical invention or new product is more likely to be consuming money than earning it. Thus, what the CIPA President says is well meant, but at the very least it needs heavy qualification.
In his last sentence, we would agree that IP (of all types, not just patents) may be among a company’s most valuable assets. But as for the claim that ‘insurance premiums for plant and premises are likely to cost a lot more than the cost of obtaining and renewing patents’… Not sure. All we can say is that you might need to be running a lot of plant and premises before their insurance premiums outstrip the cost of international patenting.
And to revisit a point made earlier: the cost of patenting isn’t just the cost of the patent. It’s the potentially destructive cost of having to defend it should anyone infringe or challenge it. It might never happen – you just don’t know. But if you’re a small company, your risk of being targeted is likely to be higher because you’ll be seen as easy meat. And there are no guarantees whatsoever that if you are ever forced to defend your patent, you will win.
If you don’t have the kind of money needed to defend your patent, you’ve lost before you start. In which case, you have to seriously question the point of having a patent at all.
Patenting Your Invention – the Ugly Truth © 2012
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