16 Patent Portfolio Budgeting

AuthorThomas D. Franklin
Published in Landslide, Volume 14, Number 4, 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion
thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the
American Bar Association.
Image: Getty Images
Published in Landslide, Volume 14, Number 4, 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion
thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the
American Bar Association.
By Thomas D. Franklin
Many enterprises prioritize securing patents to protect their
technologies, but accurate cost predictions remain elusive.
The decision to pursue a patent may lead to more than
a decade of costs beyond the initial application. Drafting the
application and subsequent arguments, government fees, and the
enterprise’s administrative costs accrue throughout the life cycle.
Compound this with a portfolio of applications, and perhaps
some foreign patent protection, and quickly the patent-protection
budget can get out of hand. Knowing up front what costs to expect
will help enterprises decide on the best strategies to pursue.
As an initial matter, the cost of securing even a single utility
patent domestically is estimated. There are legal fees and govern-
ment fees typically invoiced by outside counsel, but internal costs
to the enterprise cannot be ignored. We will start our analysis with
the impact of the patent procurement within the enterprise before
turning to outside patent counsel costs and government fees.
Once the costs are broken down for an individual domestic
application, building a family of patents in foreign jurisdictions is
discussed. Foreign ling ambition amplies the budget as a family
expands overseas. How costs stack with multiple families in the
patent portfolio is estimated. Very quickly, costs grow with your
patent portfolio. Pruning less strategic or hopeless efforts is crucial
for cost containment. Strategies change for different products and
levels of litigiousness, as do the geographic aspirations protected
with foreign patent lings. A clear understanding of costs will help
you design the best value into your patent portfolio.
Design patents, provisional patents, and plant patents are not
addressed here. Some companies may have internal patent attor-
neys or agents, but we presume retention of outside counsel as is
far more typical to help prepare drafts of applications and amend-
ments during prosecution. With respect to the estimates presented
below, we presume that a patent attorney is hired, although patent
agents can do some of these tasks.
Internal Costs
Often, there is a presumption that internal resources are free
compared to law rm-provided resources. However, inventors
are some of the brightest minds in the most demand to keep a
company successful. An experienced patent attorney with a rele-
vant technical background burdens the inventor’s time the least.
With outside counsel typically charging hourly, a slow-learning
patent attorney is doubly expensive in billings while a drain on
the inventors. Selecting a patent attorney with an understanding
of the technology limits the time wasted by the inventors.
When developing an idea for patenting, there are invention
disclosure forms (IDFs) and disclosure meetings to gather suf-
cient detail on the innovation. If segued with normal product
development, much of the engineering and scientic documen-
tation can be repurposed to provide a head start to the patent
attorney. Consider asking about patent prospects during design
reviews and annual reviews to make patent protection part of the
normal development process. By asking, the IDF can be readily
completed by the inventors while going about their normal prod-
uct development. Periodic brainstorming sessions facilitated by
counsel can be utilized where there is unmined innovation.
After gathering ideas for patenting, many enterprises have
a patent committee or something less formal to select the ideas
Thomas D. Franklin is cofounder of Triangle IP, which
manages patent portfolios with deep learning to eciently
guide your patent strategy. He can be reached at thomas@
Published in Landslide, Volume 14, Number 4, 2022. © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion
thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the
American Bar Association.
deemed to be more strategic for patenting and that thus best warrant
use of the legal patent budget. There are many strategies for pick-
ing patents to pursue, but exploring such strategies is beyond the
scope of this article. Sufce to say that having more ideas than are
selected will allow applying strategic vision to the patent portfolio.
A keen understanding of costs throughout the life cycle of a patent
will help guide this selection. Enterprises pursuing an overly aggres-
sive patent portfolio strategy may be forced to abandon much of
the effort as costs snowball down the line.
Many enterprises incentivize participation in the patent process
with inventor bonuses. At various stages in the process, the inventor is
given a reward. In some cases, a set amount of money is split between
the multiple inventors on the patent. There is no standard on the size
of reward, but different parts of the country and industries tend to
have similar bonuses, with one example in table 1. Companies that
don’t have a formal bonus program might encourage participation
by asking about patent program participation in the annual review or
requiring patent strategy to be part of approval of a project or prior
to expansion into new lines of business. Most programs only pay for
ling of new patent applications and not continuing applications.
Foreign patent prosecution is largely done without inventor input,
so offering bonuses for that effort is not typical.
Event Inventor Bonus
Max for Multiple
Submission of Idea $200 $600
Filing of Patent $2,000 $6,000
Issuance of Patent $2,000 $6,000
Table 1
Once the patent portfolio has been established, there are admin-
istrative costs in managing the program. Outside patent counsel
typically have a docketing system and provide reports or perhaps
an extranet to identify the status of prosecution of various patent
applications and patents in the patent portfolio. There is a busy
stream of correspondence between the outside patent counsel,
in-house patent counsel, and potentially inventors, with various
questions or follow-up and with much of the correspondence relat-
ing to complex issues that may be difcult to understand for the
uninitiated. For small portfolios, internal management can be done
by an attorney or paralegal in the legal department, or perhaps
someone on the technical side who can dedicate some time to the
effort. There are some large patent lers that have tens to hundreds
of employees working on various aspects of their patent strategy.
Good outside counsel can be used to ofoad some of this burden.
In summary, internal patent costs include the burden on the
inventors lling out IDFs and reviewing drafts. Sometimes pros-
ecution requires help from the inventors to develop argument
strategies. Managing the portfolio includes a patent committee
or equivalent with stafng to deal with the back-and-forth with
your patent counsel. For the purposes of our budgeting exercise,
we estimate internal costs of $20,000 for each domestic patent
application and $10,000 for each foreign patent.
Outside Counsel Fees
Selection of outside counsel who is keenly aware of your patent
strategy and technically procient with your products is crucial.
For large enterprises with disparate technologies, a larger rm with
multiple patent attorneys with different specialties might be a good
t. However, fewer outside counsel will be easier to manage and
require less fees to train up an unnecessarily large team. Depend-
ing on deadlines and availability of counsel, the number of people
on your account will vary. Training time invested in that team will
lead to better patents but could burden the inventors.
Patent attorneys tend to have higher billing rates than many
other areas of law as you are paying for both an attorney and an
engineer/scientist. Firms with higher billing rates tend to offer
discounted rates or even at fees. Some companies provide at-
fee schedules of varying detail but commonly have xed amounts
or caps for patent drafting, responding to ofce actions, paying
issue fees, etc. These xed fees can depend upon complexity and
technology area, with chemical and life sciences typically being
the highest, mechanical typically being the lowest, and software
and electronics in-between. Table 2 gives some typical legal fees
in the software area. Table 2
Activity Flat Fee
Patent Draft $12,000
Responding to Oce Action $3,000
Examiner Interview $1,500
Issue Fee Payment $1,500
End-to-End Miscellaneous $2,000
Table 2
Although at fees might give predictability for certain costs,
patent prosecution is unpredictable, so one can expect some vari-
ability. For example, there might typically be two or more rounds
of argument, but in some cases, the ofce-action count may far
exceed the average, requiring paying for additional responses.
There are also fees charged for preparing reporting letters, ling
assignments, providing various advice, etc., that are a normal
part of procuring a patent application (denoted in the table as
end-to-end miscellaneous fees). Sometimes an all-in at fee is
negotiated for these other miscellaneous fees, but otherwise these
fees hit the budget unpredictably over time. Flat or xed fees for
different tasks provide better predictability but also incentivize
cursory effort.
Government Fees
All patent ofces nance themselves through user fees. The U.S.
Patent and Trademark Ofce (USPTO) is self-sufcient, with fee-
setting authority to avoid any burden on the taxpayers.
Government fees happen throughout the process but are
largest at ling, issuance, and periodic maintenance fees after
issuance. Additionally, these fees vary with the size of the busi-
ness, with large entities paying full fees but small entities having
many fees cut in half. Recently, micro entities were given even
smaller fees to encourage new business development. The USPTO
allows fast-track handling of a patent to get a decision within a
year from ling, which has an additional government expedite
fee but generally saves attorney fees with the compressed time-
line. Table 3 lists some large-entity fees from the USPTO’s current
schedule as of April 2022.1

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