08/10/2012

By Mark Cohen

The changing macro-economic environment has challenged traditional views on patenting and patent portfolio management. Traditional or ‘developed’ markets are experiencing significantly slower growth rates than emerging markets, but it is the developed markets that most organisations understand best. While emerging markets present the greatest volume growth opportunity, traditional markets still offer higher margins and, for now, the largest revenues.

For any company concerned about its future, it is vital to ensure that its key intellectual property rights are secured not just in the countries it currently operates in, but also in those that may be important over the next 20 years (typical patent lifetime). Securing these intellectual property rights can be expensive though: the estimated lifetime cost of maintaining a small patent family with a single US, European and Japanese filing is in the region of $60,000 in patent office fees alone . Legal fees and additional geographies can add significantly to this figure and it is easy for even a small patent portfolio to require annual funding of many tens of thousands of pounds.

For SMEs, protecting intellectual assets can be problematic even in their home markets. As well as the cost, there are issues with identifying the ‘right’ level of protection and what to do should IP rights appear to be infringed. Once overseas and emerging markets enter the equation, matters become even more complex and expensive. Fortunately, the Patent Cooperation Treaty (PCT) helps to manage some of these concerns and there are further advantages that can be gained from using features in the system in an intelligent way. Briefly, the PCT allows a single international patent application to be filed that can be carried forward to most geographies around the world.

The patenting system has many fixed-length and variable-length delays between the initial filing and the grant of a patent in a particular geography. These delays provide advantages in identifying what to pursue, where to pursue it and cost management.

So how best to use these delays to reduce both cost and risk? For SMEs, we suggest filing an initial patent application as late as possible, typically close to any product’s launch date. This gives the greatest flexibility when choosing international geographies. It does carry the risk that a competitor may be able to file in the same area beforehand, and this should be borne in mind in areas where there is much competition. With the initial application filed and before the first anniversary, this application should be modified to add supporting detail to strengthen the application; claims will also need to be added to fully define the coverage of the patent. There is also the possibility of generating related patent applications for wholly new material.

Once claims are added and the application finalised, it should be carried forward into a PCT application. With PCT applications, the final choice of geographies does not need to be made until 18 months after the application has been filed. Companies should use this time to determine which markets will offer the most revenues for the new product and pursue patents in only the potentially profitable geographies. Long term decisions need to be made based around the lifetime of the product, the lifetime of the patent (typically 20 years) and which geographical markets are going to be most important in this time.
SMEs can find enforcement of patent rights a challenge.

Typically, there are two main ways of enforcing patent rights: negotiated exchanges or patent litigation. Both methods require the engagement of lawyers but litigation is much more expensive than negotiation and should only be used once negotiation has failed. Historically, litigation has been too expensive for SMEs which gives large corporations an advantage when SMEs try to enforce their patent rights. Whilst there is some indication that the patenting system may change to make patent enforcement easier for SMEs, there are two recent options that may provide assistance. The first option is through the use of ‘no win, no fee’ legal support – such companies assess whether there is a valid case to be made and, if there is, seek to enforce the patent rights and claim damages, taking a proportion of the damages as their fee. The second option is through patent enforcement insurance, although care should be taken when selecting these insurance products as they may be limited by geography and may not cover enforcement in emerging markets.

In summary, despite the current economic conditions, companies should prepare for a recovery, be this in traditional markets or emerging markets. Such preparation must include securing IP rights in markets based on current and predicted value and ensuring that these rights are enforced accordingly. Done correctly, both cost and risk can be reduced and valuable lines of business can be comprehensively protected.

Mark Cohen is Head of Intellectual Property Services at Sagentia, a technology and product development company. Learn more at www.sagentia.com