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The Costs of Obtaining Patent Protection

Patent Cost Figure Updated

While the cost of obtaining a patent can be substantial, knowing what those costs are and when they are incurred can allow startups to appropriately fundraise and budget.

A patent can provide an entrepreneur numerous advantages. The most obvious advantage is a patent’s right to exclude (35 U.S.C §271(a)) that prevents a potential competitor from using the patented technology. Consequently, potential investors have greater confidence in investing in the new business.  However, obtaining a valid patent is a lengthy and costly process. [1] This post provides an overview of that process and the associated costs.

Provisional Application

As an entrepreneur having a great idea just starting a business, the cost of a full patent application can be daunting. A potentially cheaper alternative is to first file a provisional application. [2] If the startup is fortunate enough to have the Entrepreneurship Clinic, or another pro bono service provider, representing it in drafting a provisional application, it will only have to pay the United States Patent and Trademark Office (USPTO) the provisional application filing fee, which is $65 for a micro entity. [3] The USPTO does not examine provisional patent applications.  If the provisional patent application sufficiently describes and enables the technology that is eventually claimed in the full application, then the date of the provisional filing will count as the filing date for the full application.

Full Application Preparation and Filing

After filing the provisional application, the startup has 1 year to file a corresponding full application. A full application will likely cost significantly more than a provisional application because it must have formal drawings, claims, and other aspects requiring substantive input from a patent attorney.  Depending on the amount of time and effort placed in one’s provisional application, a full application will likely cost in the neighborhood of $10,000 to prepare. Accordingly, the filing of a provisional application often starts the clock ticking for an entrepreneur to raise funds to finance the preparation and filing of a full application.  Of course, the entrepreneur also has to pay the USPTO $365 for the filing fee, search fee, and examination fee. [4]

Patent Prosecution

In the unlikely event that the application is granted and issued without any examiner rejecting the application nor any need to amend, the entrepreneur will simply pay the $240 issue fee; and the patent will expire twenty years from the full application filing date conditioned on the payment of maintenance fee. If the patent gives the startup competitive advantages over its competitors, paying the maintenance fee of $400/$900/$1,850 due at 3.5/7.5/11.5 years after issuance should not be a problem.

However, no matter how well-drafted the application is and how innovative and nonobvious the technology is, the entrepreneur should not expect the PTO to grant the patent without making any amendment to the application. After all, the average pendency of a patent application from filing till issuance is more than 30 months. And, examination lasting for more than 10 years is not unheard of. [5] During examination, the examiner will likely reject claims on various grounds, such as the invention is not new (35 U.S.C §102), the invention is obvious (35 U.S.C §103), and the application does not satisfying the enablement and written description requirements (35 U.S.C §112). [6]

Fortunately, not all is lost when an application is initially rejected by the examiner. When the examiner issues the first rejection, the applicant can argue to rebut the rejection or can amend the claims without adding new matter to the specification.  A second rejection may be final though. When facing final rejection, the applicant can petition for reconsideration. And if the reconsideration is denied, the applicant can appeal to the Patent Trial and Appeal Board, previously known as the Board of Patent Appeals and Interferences. [7] The back and forth of rejections and amendments may cost the applicant in the range of $5,000 to $20,000 in attorney fees.

Foreign Applications

In order for an entrepreneur to obtain patent protection overseas, the entrepreneur has to consider filing a foreign application claiming priority to the US application under the Paris Convention within one year of the filing of the first US application, whether the first US application is a provisional or a full application. An entrepreneur has to file such a foreign application in each country where patent protection is sought. This is a costly process, in part because of translation cost, filing cost, and the cost of foreign counsels for each application in a foreign country. Also, such foreign filings are required before the US patent is even granted and is likely before the entrepreneur even receives the first office action from the PTO.

An alternative is for the entrepreneur to file an international/Patent Cooperation Treaty (PCT) application claiming priority of the US application within one year of the filing of the first US application.  Under the PCT, the applicant then has another eighteen months (nineteen for some countries) to evaluate whether and where to file national phase of the international application, thus delaying the associated costs. The entrepreneur may also be able to raise more money in the eighteen month period. One disadvantage of this alternative is that the additional cost of the international application (which is close to $1,000).

 

[1] Furthermore, the exclusionary right a patent grants requires a company to resort to litigation to recover monetary damages and to obtain injunction stopping competitors from infringing the patent. The US government will not proactively enforce a company’s patent rights. In addition, the exclusionary right a patent grants is not an affirmative right to practice an invention. It is possible, especially in the field of software inventions, that a company may have a patent on an improvement of an existing technology and yet is still unable to practice its invention without infringing another patent. The company is said to have a subservient patent and the patent on the existing technology is called a dominating patent.

[2] See The Risks of Using Presentation Slides as Your Provisional Patent Application for a discussion of what not to do when filing a provisional patent application.

[3] The blog assumes the startup qualifies as a micro entity for the rest of the post. The micro entity status entitles the startup to receive 75% discount for most of the USPTO fees. See Current Fee Schedule – Effective January 01, 2014 for all the current USPTO filing fees.

[4] The blog post assumes a utility patent is filed.

[5] For example, the first patent with Google as the assignee, aka the owner, was filed in 1999. It was only issued in 2013 as US Patent US 8,538,886. Even though a patent will expire 20 years from its application date, the patent term may be extended by “Patent Term Adjustment” because of certain USPTO delays. In the case of US Patent US 8,538,886, there is no patent term extension though.

[6] See Is Your Idea Patentable? for a discussion of what is and is not patentable.

[7] The renaming was necessary because interference proceedings are no longer available under the America Invents Act.

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