Salvaging millions that would otherwise go to waste

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By David J FrenchPatent

It’s true: Millions of dollars in investment opportunities go to waste on a daily basis. This is happening as opportunities to file for patent rights around the world expire. Let me give you an example that is not so hypothetical.

An inventor makes a good invention and follows all the proper patenting procedures to create an application under the Patent Cooperation Treaty. An advantage of the PCT is that a unitary single application can be filed that is good for over 145 countries worldwide. Additionally, the PCT allows an applicant to delay for at least 30 months before making filings in individual countries. The PCT route is not a procedure for obtaining a single international patent; no such thing exists. Rather, it is a pipeline for the central processing of a single patent application that can be broken up into multiple national patent applications after a 30-month delay. Those national applications under the PCT are called National Entry filings.

So where are the investment opportunities that are going to waste?

It would normally cost an inventor around $3,000 to file an initial priority application, typically, a provisional application in the United States. This has to be replaced after one year with a non-provisional, final patent application made within 12 months of the initial priority filing date at a cost of $10,000 – $15,000 for a simple invention. Entry into the PCT procedure is permissible up to this 12-month deadline. The 30-month national entry deadline for exiting the PCT counts from the initial priority filing date. Eventually, the inventor must face the reality that the deadline to make national entry filings is approaching. Ideally, he or she should have been thinking about this long before the 30-month deadline.

To effect national entry filings, foreign patent-agency firms have to be contacted and arrangements made for translations into local, national languages. This should be done well before the national entry deadline. Two months is a reasonable deadline to initiate arrangements for such national filings. Two weeks is painful, but tolerable for such foreign firms; however, you may have to pay penalty fees for burdening a foreign patent firm with a rush requirement to produce the required documents, including the translations.

What do national entry filings cost? Here’s an exemplary list (for a small entity) that is very approximate:

Canada $1,200 South Korea $6,000
United States $1,500 Brazil $6,000
European Patent Office $8,000 India $2,500
Japan $10,000 Australia $2,500
China $6,000 United Kingdom $2,000

This list could be extended. Costs will vary greatly with the size of the application, the number of claims, and the firm used to affect the foreign national entry filing. Generally, translation costs dominate the total expense. It is difficult to avoid paying such translation costs since a patent translation document must be prepared with great care by persons who understand the process. Many foreign agency firms may be reluctant to file a prepared translation without being paid to effect a verification of the accuracy of the translation.

What is the promise of the situation for investors looking for opportunities?

Individual inventors and many small firms cannot generally afford to file patent applications in numerous foreign jurisdictions. Where to file is often a confusing issue. Certainly, you should file where you think you can sell your product. It’s cheaper to file in countries that do not require a translation: e.g. Canada, United States, Australia, India or the European Patent Office. But follow-through patent-examination prosecution charges should also be considered. Patent examination could amount to $3,000 – $5,000 per country, but in the case of the European Patent Office, the European patent application may cost 50 percent more than that. And, once the European patent is granted, it must be recorded and translated in a number of countries which the applicant or grantee can choose to select or ignore (40 available). Each such country may cost $3,000 – $5,000.

Even if you do not plan to market in an individual country, but instead look forward to eventually having your world-wide patent rights purchased by some larger company, then you have to consider which countries or territories would be of concern to such a purchaser. Probably the United States, Europe and Japan would be essential to meet this requirement for most technologies. Next and close behind, based on reviewing a list of world populations, would be China and India because of their size. Then South Korea might be relevant to cover the home market of many potential world producers in the field of electronics. And then there is Brazil, if the protected product has appeal for the mass consumer market. Surprisingly, Brazil has the fifth largest population of any country in the world – 200 million. This compares with Russia as ninth in the world with 143 million people.

When cost is a consideration, sacrifices have to be made. The tragedy is that, in the case of a meritorious invention, valuable patent rights might become abandoned. This is where the investment opportunity arises.

There’s virtually no system in place for investors to review candidate patent applications in order to choose those that have potential. There’s no marketplace where inventors or small firms that have products with potential can post requests for support in obtaining foreign patent rights. These are the patent applicants who have not yet established a large success in their home market. Their products look promising, but their cash flow is tight. Foreign sales offer great potential, but not just yet.

For a company that is prepared to distribute abroad, it’s important to obtain patent rights in foreign markets. Distributors are comforted to be told that patent rights are in place that will protect them from interlopers who will try to take advantage of their marketing investment. But for many firms at the early stage of their growth, paying for foreign patent rights is a major strain on their budget.

What is needed, at the very beginning, is an awareness on the behalf of potential investors that real opportunities may exist in this area. Then a mechanism should be established to search out and filter foreign patenting investment opportunities. Inventors would have to register and post their propositions considerably before the 30-month deadline that they face under the PCT. They would provide a presentation that can be easily understood and will hopefully justify further investigation by venture capitalists. Venture capitalists should watch the Billboard for special opportunities. That would be the institutional scenario that would ideally exist, a system that has not yet been put in place.

However, one such specific opportunity now exists in the Ottawa area. Inquiries from those who wish to learn more can be initiated by visiting www.getGoPad.com.

Investors interested in discussing how a marketplace in such opportunities could be created are welcome to contact David French at David.French@secondcounsel.com.

David French is the principal and CEO of Second Counsel Services, which provides guidance for companies that wish to improve their management of Intellectual Property. For more information visit www.SecondCounsel.com.

Image: The International Patent System in 2006 – World Intellectual Property System

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