16 Patent Portfolio Budgeting

• Author: Thomas D. Franklin
• Pages: 16-61

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.

16

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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.

17

Patent

Portfolio

Budgeting

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@

triangleip.com.

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.

18

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

Inventors

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