Earlier this year, the United States Patent and Trademark Office (USPTO) issued a report, International Patent Protections for Small Businesses, examining how the capacity for American small business to create jobs is at risk due to the high costs of acquiring, maintaining and enforcing patents outside of the United States. This article will arm entrepreneurs and solo inventors with knowledge and practical tips for navigating the complexities of foreign filing in an effort to protect their innovations from competitors, attract investor capital, build market share and boost local economies.
High patenting costs a risk to innovation
Startup companies typically create an average of three million jobs a year. Innovation is at the crux of startup creation and enables them to grow, build market share and ultimately create jobs. In order for small businesses to compete on a global scale and to protect their intellectual property from foreign competition, they must secure international patent protection, which can come at a high cost.
Filing a PCT (Patent Cooperation Treaty) application, which reserves the applicant’s right to file into more than 140 countries that are members of the PCT, can range from $3,000-$10,000. Added to this, PCT national stage entry, the step where the applicant lodges individual applications in their desired countries or regions, can run anywhere from $10,000 to $400,000+, depending on the number of countries/regions entered and the size of the patent specification.
These are staggering costs for young, cash-strapped companies and the risks can be significant. Some companies have even been forced to shut down entirely because they failed to file internationally – leaving them exposed to foreign competitors.
These expenses occur early in the life of businesses and can be difficult to fund. Adding to the financial burden is an additional layer of complexity – the America Invents Act also enacted a change from the previous “first-to-invent” system to a “first-to-file” system. While this change moved the U.S. patent system closer in line with the rest of the world, it gives startups less time to raise funds or obtain a licensee before proceeding with the patent filing.
In regard to the change to first-to-file, one respondent interviewed by the USPTO commented:
“Moving expenses up for an early-stage small life science company is more difficult and the probability increases that these early inventions are not adequately protected.”
The USPTO’s report acknowledges these challenges, along with other findings:
- Patenting by U.S. small businesses is relatively uncommon and is concentrated in high-tech sectors.
- Small businesses may be obtaining patent protection abroad less frequently than large companies.
- Foreign countries largely take a different approach than the United States in assisting small businesses to acquire patent protection.
Understanding the international patenting process
According to the USPTO’s report, the biggest hindrance to startups and small companies seeking international patent protection may be knowledge. The international patenting process can be complex, especially if an applicant is seeking broad protection.
Generally, applicants can take one of two routes in order to gain international patent protection. The first is via the Paris Convention, which enables applicants to file directly into each foreign jurisdiction where protection is sought within one year of the application’s priority date in the United States. The second option is via the Patent Cooperation Treaty (PCT). The PCT is often a more cost-effective method when an applicant plans to file into multiple jurisdictions. Under the PCT process, the applicant can defer the decision of which foreign countries to file into up to a period of 30/31 months from the application’s priority date, so long as a PCT application was filed within 12 months of the priority date.
For applicants seeking patent protection in individual European countries, the process is even more complex. Applicants can file into the EPO either via the PCT or directly. Once their European patent is granted, applicants then have a few months to validate the patent in the individual European countries, which involves lodging translations and paying applicable fees.
Given these complexities, the USPTO acknowledges that education and training sessions are needed so that startups and small businesses have the knowledge they need in order to gain proper protection of their innovations. There are also other places that applicants can go for information; inovia, for example, offers a number of resources outlining these processes on its website/.
Cost-effective patenting strategies
In light of these findings, there are a few tips that startups and small businesses should keep in mind in order to cost-effectively maximize their patent protection:
- When filing an initial patent application at the USPTO, take advantage of “small entity” status, which provides a 50 percent fee discount to qualified entities, or “micro entity” status, which provides a 75 percent discount. The “micro entity” is a new class of inventor that was created per the America Invents Act. The USPTO report points out that most countries do not offer this or similar discounts, with Canada and Mexico being notable exceptions.
- File a provisional application with the USPTO. A provisional application is a relatively inexpensive way to get an earlier priority date while simultaneously buying some time to raise additional funding or license the invention.
Unfortunately, there are no small entity discounts in most jurisdictions outside of the United States and excess claims fees, particularly in the EPO, can add significantly to the cost of international patent filing.
When considering international patent protection, startups may find these tips helpful:
- Get familiar with the patent process. Applicants can save a lot of time (and money) with even just some passable knowledge of the patent process. For example, knowing when deadlines are approaching helps you to plan ahead and avoid any unnecessary time extensions and late fees.
- Minimize the role of your law firm. Of course, most applicants need outside counsel to handle the substantive prosecution of their applications. However, many smaller clients have arrangements in place where they get “first crack” at any incoming matters. Even producing a rough outline for a response to an Office Action, for example, reduces the work for their attorney, which cuts the cost for the applicant.
- Consider outsourcing certain parts of the patent process. Applicants can find cost savings by outsourcing certain parts of the patent process to specialist providers such as those that handle annuities or foreign filing. In the case of foreign patent filing, specialist providers leverage technology and buying power in order to offer applicants favorable rates, allowing them to maximize protection at a lower cost. The scenario that startups and small businesses should avoid when it comes to their international patenting strategy is cutting countries in order to save money, as this can be a risky tradeoff.
The USPTO report makes one thing certain: international patenting, while complex and expensive, is a critical element of growth and cannot be ignored. While the USPTO works through further recommendations and support programs, I recommend that startups, inventors and small businesses do their research so that they are better informed about the international patenting process and can identify ways to cut their costs without stripping down their protection.
Jeffrey Shieh is a senior patent attorney at inovia, counseling the company and its clients in all facets of the international patent process. Prior to joining inovia, he was a patent attorney at the law firms of Cooper & Dunham LLP and Amster, Rothstein & Ebenstein LLP. At both firms, he specialized in the prosecution of biotechnology and pharmaceutical patents in the USPTO and globally. Jeffrey is a registered U.S. patent attorney and holds a JD from the Boston University School of Law and a BA in Biology from the University of Pennsylvania. Contact him at firstname.lastname@example.org.