Business Law & Compliance

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Getting to grips with your IP costs

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However, although the importance of IP is far more widely recognised among SMEs today, the short and long-term cost to a business of maintaining its IP is not as readily understood. That’s because identifying and managing the costs involved in securing, protecting and maintaining IP rights is a highly complex, time-consuming process, fraught with difficulties and many variables.

Moving target

A single patent application, for instance, will generally extend into a family of granted patents in several markets where the applicant seeks to protect their invention or restrict competitors. Each jurisdiction in which the application is filed may have different fees, requirements, prosecution times, time to grant, and ongoing renewal or maintenance costs – all of which add further complexity to the task.

The time to grant varies widely from country to country – and even within the same patent office. One of our clients filed two applications in closely-related technology areas within a month of each other: one was granted two-and-a-half years after filing; the other was still under examination five years after filing.

With so many variables and unknowns, IP costs remain a moving target – and, for many companies, their IP budgeting can end up being well off the mark. This can have implications not only for a company’s IP strategy, but also its approach to and investment in R&D, and, indeed, its overall financial performance.

Cost-benefit analysis

It is critical for IP owners, big or small, to be in a position to apply a realistic ‘cost-benefit’ analysis to their IP assets. Only with such analysis can they make a truly informed decision about their IP portfolios – identifying the IP assets that are most valuable to the ongoing success of the business as well as those that may no longer be core to the company’s strategy and that would benefit the business more, financially, by being licensed or sold to another party.

The starting point is to establish a clear understanding of how individual IP assets are aligned with the business strategy and the relative strength of these assets in the market. Such insights will enable you to assess and prioritise the procedural and management costs – internal and external – related to maintaining aspects of your IP.

This is easier said than done, especially as, with the increased focus on the importance of IP, corporate IP professionals continue to be under pressure to do more with less. In CPA Global’s ‘State of the IP Industry Survey‘, published in October 2014, 77 per cent of corporate IP professionals said growing volumes of work were a key threat to the efficiency of their IP team, while 63 per cent reported that increased pressure on budgets and resources was having a significant impact on their productivity.

In order to establish a truly meaningful value proposition, it is not only important to know how much you are spending currently on IP, but also what the likely costs will be over the lifetime of that IP. This will have a major influence on IP strategy. For example, you may be looking to patent as many inventions and innovations as possible, but are you happy to continue paying the maintenance fees on these assets? Perhaps your business would be better off focusing on key strategic IP assets, while monetising non-business critical IP?

By identifying the key drivers behind IP costs, you will be able to create more accurate forecasts for your IP spend and run reports on a more-timely basis for your various stakeholders within the business. This, in turn, can better inform corporate decision-making – whether relating to how best to direct R&D investment, the priority focus for IP, or the broader commercial strategy of the organisation.

Jon-James Kirtland is  an expert in IP budgeting at CPA Global and is also a member of the Chartered Institute of Patent Attorneys.

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