The Foreign Patent Money Trap

You may well need patents in many countries, but that doesn't mean you can afford them

Illustration: Mick Wiggins

A lot of people simply assume that a U.S. patent provides protection outside of the United States or that there is some kind of a ”European patent” or even a ”world patent.” These beliefs are dead wrong. Your U.S. patent gives you no legal recourse should a company based overseas sell your invention overseas; in fact, it even provides that competitor with a free blueprint of your technology.

A recent U.S. Supreme Court decision not only showed how short the arm of U.S. patent law can be, it shortened it a bit more. AT&T had alleged that Microsoft had violated its U.S. patent for speech-processing software. While the question inside the United States was uninteresting—Microsoft’s U.S. sales were indeed found to be a violation—the real issue was Microsoft’s supplying the code to non-U.S. manufacturers for installation on computers sold abroad. Those non-U.S. activities, the Supreme Court held, were beyond the reach of AT&T’s U.S. patent.

The upshot is that your U.S. patent provides you essentially no protection beyond U.S. borders. Other countries’ patents also have little force outside their own domains.

So, you say, why not just go out and get a passel of international patents? The catch is the cost. A 2002 report by the U.S. Government Accountability Office, supplemented in 2003, estimated that getting a single patent in the United States and maintaining it for 20 years would cost a small business about US $10 000, and that extending that same patent to nine other countries would add between $160 000 and $360 000. That’s why an engineering manager has to know how patent laws vary between countries.

The first key point has to do with filing deadlines. Most countries don’t let you publicly disclose your invention before filing for a patent on it. International treaties, however, allow you to file in the United States, then disclose your invention or sell a product based on it, and then take up to a year to file in other countries.

The second point is the cost of filing and when it will be incurred. You have to know this before beginning the process, or you may find out too late that you can’t afford to complete it. Typically, the costs are low to moderate at the beginning, and then they ramp up. An application filed under the Patent Cooperation Treaty (PCT) can designate numerous countries for just a few thousand dollars. A year and a half later, however, when the PCT application must be filed in all the countries where a patent is desired, the cost can run $50 000 or more for only a handful of countries.

Third, be very careful where you file, considering for each country the level of patent protection, the total cost, the size of the market, the number of potential licensees, whether your company will manufacture or sell a product incorporating the patented invention in that country, and whether competitors will likely do the same. You need to know all these things to calculate whether you’ll get a return on your patent-investment dollars.

Also, consider the quality of the patent. Only a small fraction of all patents provide any real return on investment. Therefore, you must analyze the strength of the patent you are likely to obtain—which may well not be as broad in its coverage as the patent you have in the United States—and check your analysis with an expert.

Suppose, for example, that the deadline for international filing is fast approaching (remember the one-year rule) and you have two U.S. applications pending. Application A broadly covers the core technology underlying your flagship product, but application B narrowly covers only one functional feature of the product. You might file A in numerous countries, but if competitive products can likely compete using functional features other than yours, then B might be filed in only a few, if any, non-U.S. countries.

In the end, the non-U.S. filing decision carries some risk, because you can’t always know what you need to know when you need to know it. For instance, a non-U.S. filing decision must sometimes be made before a market is clearly defined or a product is actually ready for production. Also, the filing decision must sometimes be made before you know whether the effort and cost will bear fruit. Of course, such uncertainty also applies to anyone filing for a patent in his or her home country, but there the timing is easier and the market far more familiar.

This leads us to one final point: things change. As time marches on, all of the above considerations have to be reevalu­ated. A patent portfolio needs to be weeded out from time to time, freeing up money that would have gone to maintenance fees for better use elsewhere, perhaps even for new non-U.S. filings.

About the Author

KIRK TESKA, adjunct law professor at Suffolk University Law School, Boston, is managing partner of Iandiorio & Teska, an intellectual-property law firm in Waltham, Mass. His book Patents for the Too Busy Manager is scheduled to be published in the spring by Nolo, in Berkeley, Calif.

To Probe Further

The Web sites of most intellectual-property law firms contain helpful tutorials regarding non-U.S. patent filings. The GAO’s reports mentioned above are free, at http://www.gao.gov, appearing under the labels GAO-02-789, July 2002, and GAO-03-910, June, 2003.

Kirk Teska’s own Patent Savvy for Managers (Nolo, 2007) covers these issues in greater depth; it is available online and at most major bookstores.

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