Keeping patent renewal costs under control while promoting a safer decision-making process

Cost reductions, lowering risks, and process optimization are subjects that are consistently at the top of the agenda of senior and middle-level executives in IP law firms and companies.

We will show how patent renewal payments can further be improved for IP law firms and companies alike, lowering the total costs of patent portfolio maintenance and decrease its associated risks.

By reading this article, you will be made aware that:

  1. Patent holders and IP law firms have a lot to gain from understanding the complexity of patent renewals in detail.
  2. There are workflow improvements to promote a better overview of the patent portfolio and to lower the risks of taking decisions based on the wrong assumptions.
The importance of total patent renewal costs

You are probably familiar with the recent trend of decreasing patent renewal fees in a “race to the bottom”. Likewise, some IP law firms have been pushed out of the intellectual property renewals market due to the fierce competition from legacy patent renewal providers. With an aggressive go-to-market strategy targeting companies directly, and with pricing schemes as low as $6 per renewal, priced-out firms are finding themselves faced with a challenge too hard to take on. The cost and associated risks simply outweigh the benefits. What if by changing perspective there was a way to shift the paradigm? This is where total renewal costs come into play.

Typically, there are nine types of fees when analyzing competing service providers. The fees are tough to discern because it is common practice to consolidate these expenses into one annual fee. The nine most typical fees are:

  • Official fees
  • Surcharge fees
  • Local (foreign) law firm fees
  • Postal fees
  • Service fees
  • Interest fees
  • Transaction fees
  • Recipient bank fees
  • Foreign exchange deposit (a deposit to protect against  currency fluctuation)

Firstly, these cost elements may seem accurate. They could theoretically be actual costs that are passed on to the client. However, these hidden cost items are so large that they raise questions. In the table below, you will find a typical case where the total renewal costs of three providers are compared. The first two are traditional players in the industry, while the third has implemented a shortened version of the same value chain.

There are several interesting features in this table:

  1. The official fees are not the same. Provider 3 charges $20.801 while providers 1 and 2 charge $22.154 – $26.852. That is a big difference where there should not be any. The difference can only be explained as hidden profits or large inefficiencies in costs like bank fees and sub-par currency exchange rates.
  2. Providers 1 and 2 seem to employ a higher number of local agents. However, with a shorter value chain, it is possible to use local agents in only seven out of the 32 jurisdictions above. This is possible through direct payments to the patent offices when it is allowed by legislation.
  3. Provider 3 is charging $553 for local agent services while the competitors range from $1.221 to a whopping $10.512. That is a 2-19x cost increase paid by the patent holder, suggesting hidden profits or massive inefficiencies.
  4. The renewal fee for the renewal service is modest: the range is from $992 to $1.681. Compared to the other cost items, this is a small range.

So, the service providers’ official “renewal service fee” is negligible while the total cost, in this case, ranges from $24.367- $39.047 per year for the same portfolio. The picture is the same for bigger portfolios. This is why we urge patent holders and IP law firms to evaluate the total costs their clients pay.

What are the implications?

It is not known if the differences above can be explained by inefficiencies in the value chain or hidden profits on top of the transparent “renewal service fee”. However, it is evident from a quick look at the data in the table that it is far more expensive for patent holders to maintain a patent than is necessary.

An industry with substantial inefficiencies or opaque profits is an easy target for technological disruption. If patent owners decide to buy renewals directly, then IP law firms will lose a valuable connection to the patent owners and a substantial revenue stream.

How to address the problem?

Technology can solve the inefficiencies described above. Renewing patents is all about knowing national legislation, tables of figures and deadlines. Machines are much better and reliable at executing rules than people are. The trends are also pointing towards more and more jurisdictions allowing for online filing and payments. This trend will continue and allow even more automation. Lastly, changes in fintech allow for reduced transaction cost, bulk transfers, and competitive currency rates. The value chain will become even more efficient over time.

The second part of the solution is to teach the industry to focus on “total renewal cost”. IP law firms are trusted advisers that can help their clients by finding the provider that offers the lowest total cost and the lowest risks of malpractice.

Workflow improvements

Below is a summary of a careful analysis of the top challenges that clients are facing when it comes to patent renewal management. Addressing them would ensure optimized workflows that increase knowledge sharing and promote a clearer overview of the patent portfolio. The risk of malpractice is lowered as is the likelihood of decisions being made based on wrong assumptions.

Faulty audit trail

Important decisions to renew are often made on the basis of excel files sent by email or by telephone call, leaving the audit trail spread across different files and formats, some of them undocumented. This adds to the opacity of renewing and clouds the decision-makers’ ability to make sound decisions based on clear data and a portfolio overview.

Implementing an SOP that enables a clear, standard audit trail will ensure certainty and expeditiousness in renewal operations. One way to do this is to establish one interface for collaborative working and double confirmation to certify each renewal instruction.

From a legal standpoint, in terms of responsibility and in terms of strategic position, not knowing who did what and when can lead to a lot of scenarios that an IP law firm and their respective clients want to avoid getting themselves into.

Working with an inefficient process culminates in inadequate data and frustration when having to take strategic decisions on a patent portfolio. Indeed, it can be very stressful when combined with upcoming deadlines.

Make the portfolio accessible and understandable to all relevant stakeholders

Most renewal setups are customized for administrators from IP Law firms. However, those who sit on the client side have various levels of expertise in IPR and they are typically not administrators. They might not be familiar with technical terms like reference numbers, publication numbers, etc.

Clients would prefer to access their patents using the more well-known labels and group identifiers such as markets, product categories, subproducts, etc.

Enabling freedom and the feeling of ownership

Clients would benefit from establishing a collaborative environment that allows for custom levels of access. For example, executives need an overview, while middle management and support staff require an expeditious service that caters to their needs and that streamlines their routine tasks.

Defining privileges around specific areas of responsibility lowers the risks of making mistakes and adds to the level of comfort.

Accessibility to real-time, verified data

Renewing a patent is all about trusting the process because the consequences of an error can be significant. Clients want to see the real live status of a patent renewal process in order to feel safe.

Being able to check when the provider receives funds, see the amount sent, etc. in real-time is a great way to build confidence. This is similar to package delivery.

In addition, patent holders wish to do simulations of their portfolio cost without having to continuously request specific sets of data from their IP law firm. In short, they want to be in control of their data and information, in real-time. These labels enable administrators and clients to better understand the portfolio and grasp its commercial value.

For instance, client executives, R&D, sales, and finance look at a portfolio from different viewpoints. Some prefer to view their patent portfolio in relation to the specific market while others would rather segment by product division. This is an important element in understanding the commercial value of each patent and making the right decision when it comes to renewing them.

Shortening the value chain

The first part of the article described the monetary advantages of leveraging a shorter value chain. Furthermore, a shorter route to renewal entails fewer steps in the process, and thereby lowers the risk of malpractice as the money has to move through fewer actors.

I hope that this article has served you to better understand what to look out for when digesting patent renewal information surrounding costs and how to improve your patent renewal service ever further, resulting in a growing business with more satisfied, loyal clients.

by: Jesper Juel Jensen, Managing Director at patentrenewal.com

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