Feature Article - The Cost of a Patent
by Eugene R. Quinn, Jr.
, Associate Director, NYS Science & Technology Law Center
Obtaining a patent is frequently seen as an essential step to commercializing any technology. Now this statement is hardly a newsflash, however, in practice it is not always so easy to decide whether obtaining a patent is the best business decision. It is easy enough to see that Xerox probably should have patented its early versions of the mouse, you know, the ubiquitous device that moves your cursor and sits on the desk of everyone who owns a computer. Hindsight is always 20/20 though. The trick is knowing when a patent should be obtained or when a trade secret is appropriate. Still further, if the election is made to obtain a patent how much should one spend on the patent? Although most would probably think a patent is a patent, that is simply not true. The more you spend on preparing and prosecuting an application the stronger the protection will be that ultimately results.
Unfortunately, for businesses trying to decide whether to go down the patent route and/or whether to expend substantial resources on any one particular patent, there is no bright line rule that can be implemented in a formulaic kind of way. Deciding whether to expend resources depends so much on considerations unique to the business and industry. As discussed later on in this newsletter in the “Having Fun With Patents” article, you not only need to know what the market for your invention is, but whether there are people or companies that would find your particular invention to be a substantial enough investment so that they will make a purchase. This is, of course, complicated by considering not only exact substitutes, but also substitutes that may be good enough, perhaps even cheaper. Still further, in the technological age, a critical consideration absolutely must be switching costs. Sure, your invention may be better, but if it is not easy to use and learn then the end-user may not see the wisdom in purchasing your product over what they are currently buying. Customers do not like change for the sake of change, and your invention either needs to offer the same features at a significantly discounted price, or needs to offer a real (or perceived), substantial improvement in performance, enough to warrant both the change and the monetary outlay.
While there is not really any kind of formula that can be employed that will result in an absolute answer, there are some critical pieces of information that every decision maker should have when trying to determine how best to move forward with protecting and, ultimately, commercializing technology. One of these critical pieces of information is some understanding about what you can expect the cost of obtaining a patent to be. Many individual inventors, entrepreneurs and start-up businesses do not have any idea about the cost and are frequently shocked to learn that applying for a patent is not a simple procedure that costs maybe only a few hundred dollars. Despite what advertising on the Internet suggests, it is impossible to obtain a patent for a few hundred dollars.
As a result of legislation that became effective on December 8, 2004, the fee structure at the Patent Office has changed. The filing fee to the Patent Office for an individual inventor or a small company that qualifies for small entity status (i.e., companies with fewer than 500 employees) is now $150. For those who are familiar with the fee structure prior to December 8, 2004, you will remember that the filing fee for small entities was formerly $395. It would be a mistake, however, to believe that the Patent Office has decreased its fees in such a significant way. The Patent Office has always liked to charge a la carte fees, and now they have taken that tendency to new heights. In addition to the basic filing fee, the patent fee legislation enacted on December 8, 2004, requires payment of a Search Fee ($250 for small entities) and an Examination Fee ($100 for small entities). Therefore, the total fee due to the Patent Office for a small entity to successfully launch a non-provisional utility patent application is $500.00. It is also important to realize that this initial fee covers only three independent claims and 17 dependent claims. If you have more claims, it costs more.
In addition to the various filling fees, if the applicant is successful and a patent is issued, there will also be an issue fee due before any patent will be granted by the Patent Office. The current issue fee for a small entity is $700. So, even without any attorney fees, the absolute lowest you could pay for a single patent is $1,200. In reality, what happens is that during prosecution (“prosecution” in the context of applying for a patent doesn’t mean “prosecution” like you’ve seen on TV, it means the preparation and filing of the various components of a patent and the process, including filing of responses and interviews with the Patent Office, the inventor goes through to obtain his/her patent) often the examiner will allow some claims but not all claims. If that happens you may decide to let the allowed claims issue, at which point the issue fee would become due. Then you may decide to continue fighting over the rejected claims in hopes of getting some of them through the office. That would require another patent application, which would lead to additional filing fees.
Additionally, you might want to make amendments after a final rejection. Amendments after final are extremely common because one of the reasons you can file an amendment after final rejection is to accept an examiner’s suggestion. Examiners will frequently tell you in a final rejection that they would allow something if you made a specific change. Most applicants will want to make the change, obtain a patent, and then consider filing a continuation to continue to fight for broader claims. What this means is that, at the very least, an additional charge of $395 paid to the Patent Office will be due for filing amendments after final rejection. Because amendments after final are so common this additional $395 should be considered to be a likely necessary expense.
If things are not going well during prosecution with the examiner, the applicant can always decide to appeal, which means additional attorney time preparing the appeal, which also carries fees of between $500 and $1,000 for a small entity, and at least $15,000 (and likely much more) in attorneys fees. The lesson here is that fees can and do add up quickly.
Another cost associated with filing and/or issuance is the preparation of formal drawings. You will either need to be able to create drawings that are acceptable to the patent office or hire someone who can. Informal drawings are initially allowed, but formal drawings must be made before the patent can issue. Filing formal drawings initially creates a broader initial disclosure, which can be most helpful. Drawings for something relatively simple may only cost in the range of $75 to $200 per drawing sheet, but usually multiple sheets will be necessary. Given the complexity of the drawing rules and the comparatively small charge for professional drawings, it is usually better to hire someone who specializes in patent drawings.
With respect to attorney fees, these are going to vary quite significantly depending upon the geographical market and the attorney’s experience and expertise. Based on 2001 economic data, the national average is $252 per hour, the national median is $240 per hour, the 25th percentile is $198 per hour and the 75th percentile is $300 per hour. Cities like Boston and New York tend to be the most expensive (add about $75 to each number), with California close behind (add about $50) to each number. Texas, Chicago and Washington, D.C., also tend to be more expensive than most other parts of the country, but not as significantly so when compared to Boston, New York and California.
The estimate of how many attorney hours it would take to prepare, file and prosecute an application is difficult without a good deal of information about the invention and/or what if any other, similar inventions are in the prior art. Notwithstanding, here is an idea of what you might expect.
The first step in the process is usually undertaking a patent search to determine whether moving forward make sense. A U.S. patent search itself usually runs at least $500, with the price depending upon how detailed you want in the search. Normally a pre-application patent search will run from $500 to $1,000. If both a US and an international patent search is desired, the cost goes up. It is important to understand that in many cases, the cost of a patent search is a fixed, non-negotiable cost because the patent attorney will routinely outsource the search to firms who specialize only in finding prior art. This practice is much like what is commonly done in real estate transactions, where attorneys hire title search companies to provide the information necessary for the attorney to review.
Upon receiving the patent search, the patent attorney will review the search and issue a patentability opinion (either verbal or in writing, depending upon your preference and other considerations). The price of the patentability opinion can range quite a bit depending upon the complexity and volume of prior art found. Additionally, a patentability opinion can and frequently is influenced by the complexity of the inventors’ inventions itself. The low range ballpark figure for a patentability opinion/review would be $500 to $1,000. Fees go up exponentially from there, and it is not unusual to pay up to $2500 for this service. Remember, you’re looking for the proverbial “needle in the haystack” here, and while a thorough search is recommended, you don’t want to go overboard and spend a lot of money on a patentability/opinion. It’s also important to remember that the complexity of the field of invention and number of related patents greatly affects the likely expenditure.
After the search and the patentability opinion/review it is up to you, the inventor (or the employer of the inventor), to decide whether to proceed. These days, it would be very rare for a review to result in an opinion that nothing could be patented. There is likely something that can always be protected. The question you will have to address is whether the likely protection that can be achieved is worth the expense of filing a patent application.
If a decision is made to proceed, the patent attorney will start working on the application. It is very difficult - if not impossible - to give a ballpark estimate without knowing a good bit about the invention, but here are some rough guidelines regarding what you can expect to pay in attorneys fees:
• Relatively simple invention - $3,000 to $5,000
• Invention of minimal complexity - $5,000 - $10,000
• Invention of moderate complexity - $10,000 - $20,000
• Invention of intermediate complexity - $20,000 - $30,000
• Relatively complex invention - $30,000 and up
Again, these are just ballpark figures, and patent fees can certainly go well above $30,000, depending on complexity of invention and/or the need for and ability to acquire broad patent protection. Some of the largest companies, for example, spend upwards of $100,000 on a single patent application. A lot will depend upon what it is that you want to do with the patent and whether there are realistic market opportunities. In the event there are realistic market opportunities, you may spend more than suggested above on something that is simple, just to make sure that you have covered the invention enough to have a strong resulting patent. By way of example, you could probably get a business method or computer software patent quite cheaply (maybe $5,000 to $10,000), but a cheap computer related patent would not be nearly as strong as a patent costing $20,000 or more. The devil is always in the details. Getting a stronger patent requires more claims and more attention to providing both a detailed and broad disclosure. This, of course, requires greater attorney time and higher filing fees, which in turn requires more time spent working with the patent examiner to get the patent issued.