Patent Process: For a businessperson to be able to make an informed investment decision, he needs to know the cost and timeframe the investment will require and compare them to economic benefits. Today I am going to present the costs associated with obtaining a patent in a traditional patent acquisition timeline. After this, I will discuss how these costs can be deferred to lower the risk of an investment in a patent.
The first task in the traditional timeline for obtaining a patent is to have a patentability search and opinion. This costs between $1,000 and $2,500. It takes about a month to obtain. The next step is to prepare and file the patent application. This costs between $5,000 and $12,000 and takes about 2 months. The patent application is published 18 months after it is filed. It usually takes the patent office at least a year and up to 3 years to provide you with the substantive response on whether your invention is patentable. This starts what I call the negotiation phase, where we dicker with the patent office over what is patentable. This stage takes from 3 – 6 months on average. The patent application is then allowed issuance. The total cost of the patent averages $10,000 to $30,000 based on the complexity of your invention. The total time from filing to issuance varies from about 1 year to 3 years.
Let’s go back and expand a little. The most common first step in acquiring a patent is to perform a search and obtain a patentability opinion from your patent attorney. The search looks for prior art patents and other prior art material that may limit the scope of your patent or even prevent you from obtaining a patent. Prior art is anything that may be used to prove that you are not the first inventor. The opinion evaluates the prior art and gives you an informed legal opinion on whether your invention is patentable.
A search and opinion has two functions. One is to reduce the risk that you will not obtain a patent. Note that the cost of the search and opinion is usually significantly less expensive than filing for a patent. The second function is to help the patent attorney prep better claims for your patent. The claims of a patent define exclusive rights to an area of technological. Using the search, your patent attorney is able to increase the likelihood of defining the largest technological area in the claims of the parent without stepping on the prior art.
Claims are like the boundaries of your land. All things being equal, you want the largest area of land possible. A patent search can help your patent attorney determine these boundaries. The value of a search depends on a number of factors. If you are an expert in your area of technology and the related market, the search is unlikely to provide you with additional information. This is particularly true for fast changing markets, where the published patents or patent applications have a lag time of at least 18 months. Examples of such technology areas include internet related technology, and telecommunications inventions. On the other hand, a search is very helpful and important in slow moving areas of older technologies. For example, door latches, cranes and hand tools.
It is possible for you to perform a search yourself online using the United States Patent and Trademark Office’s website, www.uspto.gov. Note that the USPTO stands for United States Patent and Trademark Office. The database allows you to perform word searches on US patents back to 1976. As a result, these searches are less useful for technologies that existed before the 1970’s. You should consult with your patent attorney on whether a search and opinion makes economic sense in your case. Note that you are not required by law to perform a search. The cost of obtaining a search and opinion varies from about $1,000 to $2,500. It usually takes about 1 month to obtain a search and opinion.
Traditionally if the search and opinion stated a patent could be obtained, the next step was to file a patent application. The out of pocket cost of filing a patent application varies from about $5,000 to $12,000 depending on your technology and the complexity of your invention. A simple mechanical invention with no moving parts, would be in the $5,000 area. While a complex electrical, software, or biotech patent would be in the $10,000 to $12,000 range. An example of a simple mechanical invention would be an improved float for cement. An example of a complex electrical invention would be a new memory circuit for an integrated chip. The time required to prepare and file a patent application is highly dependent on the availably of the inventers. On average it takes 2 months to prepare and file. However, this time can vary from under a week to over six months. I should also tell you that the quality of the patent application is also dependent on the inventors input. The inventor must stay actively engaged in the patent application process to obtain a top quality patent. This is similar to your tax return. Your accountant cannot prepare an accurate tax return unless you provide him with good accounting information.
Once the patent application has been filed, there is a delay of 1-3 years on average before you hear a substantive response from the patent office. By law, the patent office has to give us the first substantive response within 14 months of our filing the patent application. The only compensation if the patent office does not make this goal is the life of your patent is extended for any delay. A patent is valid for 20 years from the date of filing. For many electronics and software companies the extension in the life of the patent is not seen as much compensation. However for pharmaceutical companies the extension can be very important.
The next stage in obtaining a patent is the negotiation stage. This starts with the first substantive response from the patent office. The first response you receive commonly rejects most of the claims the patent application, and provides the legal reasons and prior art for the basis of the rejection. Now you might think that we want all the claims allowed in the first response. However, if you put an offer on a piece of real estate and the seller immediately accepts the offer, you would probably wonder if the real estate could have been bought for less. Similarly, if the first response, commonly called the first office action, allows all the claims, your patent attorney may advise you to file new broader claims. This is like asking for more land or a bigger house. Unfortunately, you cannot ask the patent office to lower their price.
As I said, commonly all the claims are rejected in the first office action. After reviewing the material from the patent office, we can argue they are incorrect or modify one or more claims, or both. This is normally done in a written response. This exchange of offers can go back and fourth commonly from one to four times. If you cannot get an agreement, by which I mean allowance of your claims after four exchanges, you need to appeal the case or drop the patent application.
Your experience with the patent office and the time it takes varies significantly on the patent examiner assigned to your case. It is not possible to select the patent examiner. So be aware that the patent process is a human process with all its variations. Once we receive the first office action from the patent office, we have 3 months to respond without paying an extension fee. The patent office then has 4 months to respond back to us. The total time from filing to allowance, which is the end of the negotiations stage can be from just under a year to over 3 years, depending on the technology. Simpler, older, and less active technologies take less time on average. Consult with your patent attorney to find out the likely timeframe in your case.
The cost of the negotiation stage, the issue fee, and any publication fee commonly is about the same as the cost of filing the patent application. Thus if you spend about $10,000 to file your patent application, you spend about $20,000 in total to have your patent issued. Obviously, you can spend more or less depending on the situation. However, you can always stop spending money on your patent application if you no longer believe the cost makes sense. In summary, the total cost of obtaining a patent can vary between $10,000 and $30,000 and the timeframe can be between 1.5 years and 3 years. This cost must be balanced against the market advantage the patent will provide over its lifetime. While $30,000 is not chump change it is often significantly less than your company will spend on sales and marketing of your invention. If the patent provides you a market advantage or the other benefits of obtaining a patent exceed the cost by a factor of three or more, then the patent is a very good economic deal.
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