Cost-Effective Patent Prosecution and Portfolio Management
Introduction
Whether a result of financial performance, a cyclical market downturn or a global crisis such as the COVID-19 pandemic, at some point, every IP decision maker will have to plan for cost reductions.
When it comes to an IP portfolio that takes time to build, and time to generate an ROI, however, it can be difficult to navigate cost reductions as a short-term measure, without negatively impacting a longer-term outlook.
Over-reactive measures may inadvertently harm competitiveness, increase risk exposure, limit recovery time frame, or limit some future innovative advantages. Under-reactive measures may fail to meet the budgetary guidelines to keep organization finances on track.
In this webinar, Cognition IP patent attorneys provide their insights into best practices for cost-effective patent prosecution and portfolio management to reduce intellectual property costs while maintaining an innovative edge.
Part I: Cost-Effective IP Counsel
Before taking a deeper look at intellectual property strategies, the most immediate opportunity for cost savings might be to evaluate your current relationship with counsel.
Firm Choice
Expertise and reputation are often considered the most important factors when choosing IP counsel, followed by cost. However, the cost of finding expertise and reputation need not be a barrier. While some larger firms have a great reputation, they can be more expensive. Boutique firms can often be an excellent source for discovering attorneys who have gained highly-specialized expertise with larger firms earlier in their careers, at a more reasonable cost.
Larger full-service firms can also be attractive for the breadth of legal support they provide. However, often their service fees are generally higher than smaller firms focused in a particular practice area. For example, smaller firms that focus in the area of intellectual property, such as patent and trademark prosecution, often provide high quality work within a budget-friendly fee structure. Also, one may look to alternative service legal providers (ALSP) for help. Fractional or part-time intellectual property counsel are a flexible way enterprises can achieve their desired intellectual property protection results.
Fees & Budget Allocation
Regardless of the size of the firm you work with, you’ll want to ensure the pricing model makes sense for your anticipated needs. If your enterprise is facing financial pressure, are you able to scale down as needed, or are you stuck in an expensive relationship?
Negotiating with your current counsel can be an effective means of reducing costs without compromising your intellectual property portfolio. Alternative fee arrangements (AFA) to consider include: portfolio fees, which are lump sum amounts paid for bulk legal work; handicaps, which are billed hourly yet cannot exceed an agreed upon amount; flat fees or fixed fees, which are set prices for specific services not to exceed the agreed upon amount; and blended rates, which mix the fees of partners and associates of a law firm into one fee. Decide which type of arrangement is best for your enterprise in terms of expected volumes, and go to bat with your interests in mind.
When budgets are in question, it is often a question of how much to allocate for IP planning. As a general rule, Pre-Seed and Seed stage startups should think about putting aside 5% of their overall budget. Later stage startups or early enterprises in Series A, Series B, or Series C, should consider 2-5%. Aggressively growing early enterprises can plan up to 10% of their overall budget for IP if their innovations can quickly advance market share. For established enterprises or publicly traded companies, the percentage becomes less of a guide; the focus is covering the bases of the core business, including the underlying technology and key innovations, as well as applications of that underlying technology across all product areas.
Legal Tech & Data
Even without the pressure of lean times, every legal team is trying to do more with less. Legal tech is absolutely booming with new tools to streamline IP processes, improve productivity, and modernize each step from budgeting to filing and reporting. When considering how the IP budget will be spent, it is worth considering what legal tech can do for your operations. When looking for outside support, choosing a tech-powered IP firm is another way to capture the benefit of legal tech efficiencies and cost savings with fewer attorney hours being spent on achieving the same results.
As a last point in evaluating counsel, gone are the days when a firm should be hired or maintained on namesake alone. In previous eras, enterprises lacked access to big data for evaluating performance, so personal relationships and recognizable brand names were everything in terms of reputation. In today’s age, it’s quite possible to evaluate a firm before signing or even during engagement to be sure you’re receiving the results your enterprise deserves. It may be useful to compare firms in terms of statistics such as USPTO allowance rate, average number of office actions, success with examiners, number of RCEs, or other metrics which illustrate the level of the firm’s quality and your eventual costs as a client.
Part II: Cost-Effective IP Portfolio Management
Building an intellectual property portfolio takes time, financial investment and other valuable resources from your enterprise. The IP assets represent the core business value, competitive advantages and defensible positions against costly infringement.
When challenged with budget cuts, it’s a worthwhile reminder that your portfolio is a long-term investment which should not be compromised by short-term thinking, if possible. Each asset is a dynamic piece of the overall business strategy, with consequences if removed.
Ask yourself, “Will cutting costs compromise a competitive stronghold in the market? Dilute business value? Increase potential risks of litigation? Discourage key innovative stakeholders? What unforeseen circumstances could play out in a worst-case scenario?”
The implications are best considered with sufficient time to evaluate and a strategy that can suit the circumstances at hand. The following framework, while typically used in deciding what to patent, can be just as helpful in deciding how to triage and what to eliminate.
Invention Cataloging & Scoring
Knowing where to prune the IP portfolio first requires knowing what it includes. If cataloging the IP hasn’t been a practice, it takes some inquiry to understand what assets exist, what may be in planning, and what is currently in process with the USPTO.
Smaller companies typically designate one person to oversee the intellectual property agenda and cataloging. Larger companies may form a committee of relevant stakeholders, or hire outside counsel to facilitate the program. Regardless, inventive developments should be tracked and collected with invention disclosure forms for evaluation. Once the cataloging process is underway, the inventions can be ranked with weighted scale, making it easier to decide what to cut, what to keep and perhaps what to license or sell. The focus is always on quality rather than quantity.
To rank the inventions, a formula can be used that reflects your enterprise’s innovative position. As a suggestion, we use two main categories, Business Value and Leverage Value, with subcategories for each. In ranking Business Value, we attribute a higher score for inventions that are central to the business, critical to product, and significant for technological leaps. In ranking Leverage Value, we attribute a higher score for inventions that are of high interest to competitors, easier to detect if infringed upon, broad in claim scope, and of course, inventions that are more likely to be patentable.
The combined score of Business Value and Leverage Value provides a formal metric to prioritize your IP catalog and make budgeting decisions with confidence. If the executive team questions the IP budget or patenting activity, this system can be used to defend the logic behind these longer-term investments.
Part III: Competitive Search
In any intelligent strategy, accurate data is key and your IP strategy is no different. IP searches can surface valuable preemptive insights on where, and where not, to spend.
A general patentability search may be an obvious, yet a worthwhile exercise in determining whether or not to pursue a particular patent. By surfacing prior art that potentially blocks your filing, you’ll have a sense for your chances of allowance and issuance. The cost of a patentability search is a fraction of the patent, so it can be a cost savings if you decide it’s better not to file. The search may also uncover other obstacles or potential pivots so you can rework your patent claims in advance, rather than paying to do so later in the prosecution process.
Landscape searches are a more dynamic and sometimes underestimated tool for budgeting, strategy and overall competitive intelligence. Landscape searches include portfolio insights of your key competitors. By understanding what they’ve filed, what they haven’t filed and what has been patented, you can better evaluate your own investments.
A landscape search can help you decide whether your patent portfolio isn’t extensive enough, what areas might need more coverage, what areas to capture with a competitive priority and what to anticipate with your competitors’ innovative directions. This can prepare you in advance for any patent rights your competitors may ultimately be granted and then shore up your own portfolio and business efforts. If you discover a gap in their strategy, it may provide an opportunity to exploit that gap, and gain leverage with a competitive advantage. It may also reveal competitor assets they haven’t yet commercialized, which you may find interesting to acquire, especially during lean times when it might come with a discount. These examples of IP intel can be quite helpful to present when advocating for budget needs with an executive board or decision makers.
Part IV: Cost-Effective Patent Prosecution
After reviewing your current IP representation, and choosing the critical IP to protect, these strategies will help you get the most value out of the patent prosecution process.
Continuation Applications
Starting Narrow
Although the end goal is capturing broad claims, with more protection and potentially more asset value, it isn’t always the best starting strategy. Starting with broad claims can put you in an immediately challenging position with the patent office, as their interest is to narrow the scope of the innovation.
Prosecution with the USPTO can include multiple rounds of office actions and responses, which may entail interviews with the examiner, amendments, potential rejections of claims, and new arguments. All the while, the agenda is to become increasingly more specific in the claim set and each additional stage in the process can be costly.
An alternative strategy is to start with a relatively narrower set of claims and to build upon them with continuation applications. Although the end game is still to capture a broad and robust set of claims, starting narrow may lead to quicker initial momentum with an examiner, with fewer adversarial costs. In this way, you’ll be working with the agenda of the USPTO, rather than against it. During the examination, you have the benefit of honing in on what the examiner thinks is innovative. Later, filing continuation applications can widen the scope with broader claims of the innovative elements most likely to succeed. This reduces the overall cost of prosecution and can lead to speedier approvals.
Layered Protection
When starting with a parent application, a layered or tiered approach leaves the door open for unique continuation applications to follow. By layering additional claims, in effect, you can piggyback additional protection which costs a fraction of the outlay for the parent, while potentially paying large dividends relative to the investment.
You can also file continuation applications after allowance is granted for an application but before the issuance fee is paid. This period comes with a strategic advantage, in which you’ll be privy to the patent examiner’s reasons for allowance of your particular patent application. By understanding what worked during the course of your prosecution, you can craft a set of claims that laser focus on only the convincing amended provisions of your claims, avoiding what ended up not being material. This way, you end up with a stronger set of claims for relatively less cost.
In these later stages, you might also develop a better sense of competitor offerings. You can then craft continuation claims that laser-focus on addressing their particular solutions and distinguish your features, emphasizing that your idea was filed first. This can be a keen way of generating valuable IP assets, which may ward off potential infringement cases, be used against potential infringers, and even be of potential interest to your competition in licensing from you. The bottom line is that the preparation and filing of a continuation application is a fraction of the cost of the original parent patent application. Following the continuation filing approach adds significant value and overall intellectual property coverage with a reduced investment in the continuation patents.
Getting to Allowance Faster
USPTO Accelerated Examination
As mentioned above, obtaining an allowance faster can reduce the overall costs of prosecution. Another way to achieve this is the USPTO Track One or Prioritized Patent Examination option, which, for an additional fee, can expedite the completion of the prosecution within one year.
Track One can provide an early indication of whether you want to file internationally. In some cases, it might be even better than filing a PCT application, because you have a full prosecution history of a parent application completed within a year. By that point, you’ll have an understanding of the types of prior art that will be asserted against an analogous patent application in a different country. We’ve sometimes received allowances in as early as a few months, even for a robust application, which we were able to file multiple continuations for.
The information learned from the expedited examination process provides valuable insights allowing earlier planning and control of prosecution costs. If the results of expedited examination are favorable, one may decide to seek early international projection, or alternatively decide to forgo international filings where the results are unfavorable.
International IP Strategy
Filing internationally can carry significant costs, so the reasons for filing should be sound. It can be an important decision in reducing overall spend.
The most obvious questions are: where do you want to protect, and is seeking protection reasonable for that market? The value of the patent will be different in each country, depending on:
- Location of manufacturing
- Potential customer base
- Where stronger legal enforcement systems exist
- Where competitors are
- Where infringement is most likely
If you intend to protect revenue generation in a specific country, or if it makes strategic sense for the larger global picture, it can be justifiable to file in that country. If the strategy is questionable, it may be an area for cost savings by not pursuing.
Once you determine where you’d like to file, you can obtain an early read of patentability. Filing a PCT application gives you a preliminary examination by a patent examiner in a designated patent office. From this preliminary examination, you can develop an understanding of the likely patentability of the claimed invention. This can be quite valuable if you have a high-tiered innovation you want to protect and want to evaluate whether or not to file in other countries.
If the examination process is completed quickly by an examiner, you can get an indication of prior art and the possibility of patenting in other countries.
It’s not a fool-proof strategy, even if you get a favorable examination decision by an examiner through the international or US examination process. You may get different results depending on the countries involved, but filing the PCT application is a good way to receive an international search report and then use that as a decision point to be used with respect to other countries.
Part V: Conclusion
When it comes to your IP portfolio, it’s important to weather the storm rather than making abrupt changes in planning or hasty decisions.
Focusing on what matters most can help your enterprise overcome any financial challenge, remain on track, and position itself for a successful recovery.
By staying close to the process, or collaborating with an IP firm that maintains direction, when lean times come, you’ll be positioned to cut costs in meaningful ways that preserve your innovative edge.
It’s helpful to remember that timelines for filing patent applications may not always match up with a company’s goals of cost cutting. During lean times, there may be pressure to increase product releases and development, or focus on research and innovation to bring new products to market. Patent filings are often tied to innovation, with companies aiming to get ahead of competitors in the market. It’s crucial to file a patent application before making any product announcements or going public, as the US and most other countries operate on a “first to file” system. Neglecting to file a patent application within the proper timelines can harm a company’s patent portfolio, especially if they are accelerating their product roadmap. Therefore, it’s important to communicate the importance of timely patent filings to relevant decision makers, as it may not be obvious to them. Fortunately, it’s usually possible to quickly file a provisional application and then later fill it out into a comprehensive non-provisional application over the coming months. It’s worth noting that shortchanging patent application timelines does not serve the company’s goals of budgeting, cost savings, or cost reduction.
As a few last reminders:
- Remember to incentivize key innovative stakeholders when possible. They are the spirit of your innovation and ultimately, your competitive advantage.
- Look for opportunities to monetize IP to benefit from asset value. What can be launched, licensed, acquired or sold that might create additional revenue streams?
- Look for ways to maximize your patent portfolio with creative prosecution approaches.
- Advocate with good data for strategic IP moves. Learn what you can from past challenges. How did your enterprise handle previous challenges? How did competitors handle similar challenges? What strategic moves were made which eventually hurt or improved the bottom line?
With these considerations in mind, you’ll be prepared to turn challenging times in your favor.
