Does Low-Cost, Volume-Based Patenting Really Save Money?

Many companies have built substantial patent portfolios by filing large numbers of patent applications.  In many cases, the decision about how to prepare and file the application is based largely – and sometimes solely – on cost.  When measuring the results of a corporate patent department’s activity, the corporation’s assessment largely relies on simple metrics such as “How many patent applications did we file?” and “How much did each application cost?” 

This strategy ignores the quality of each patent application, as quality is not easily measured across a portfolio of recently-filed application.  Rather, patent quality is typically not understood until the patent issues and an enforcement or licensing opportunity arises.  At that point, companies often find that a low-budget filing strategy resulted in a very narrow patent or a potentially invalid patent. 

Corporate patent departments already know that a low-cost filing strategy is risky, but they may have difficulty convincing financial executives of those risks.  a new report provides another reason to reconsider low-cost patent strategies:  in the long term, a low-cost, high-volume strategy actually costs more.

In the December/January 2008 issue of Intellectual Asset Magazine, Craig Opperman and Carina Tan of Morgan Lewis provide a valuable analysis of the risks of focusing solely on “low cost” and “high volume” when filing patent applications.   As the authors explain:  post-issuance maintenance fees are a significant expense in a high-volume patent portfolio.  If a company cuts its patent filing volume in half but demands much higher quality from those applications, its costs may increase slightly (by 10% or so) in the first year, but its per-year maintenance fee costs can be up to 31% less as the patent potfolio matures.  Thus, a company can actually save money by focusing on the long term and developing a smaller but higher-quality patent portfolio, rather than just filing as many applications as possible within a fixed budget

Of course, the long-term view is entirely consistent with how a company should view its patent assets.  Higher quality patents are much more likely to yield licensing revenues in the future than low-quality patents that can easily be designed around. 

To view the full report, Craig Opperman has included it in his list of recent publications, available here.

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