Foreign Filing Beyond the U.S. Patent

Foreign counterpart patents are an important tool in the hands of a company or inventor with a well thought out patenting strategy. In contrast, they can be an expensive, unproductive and time-consuming diversion for companies that address the matter of foreign filing protection in an ad hoc manner. The following analysis describes the problem in some detail, and then describes a structured approach to making foreign filing decisions that some companies are effectively deploying.

The Problem

A United States patent grants its owner an exclusionary monopoly in the U.S. The patent owner has the right to prevent any other party (with the exception, in
certain cases, of agencies of the U.S. government) from practicing the invention covered by the claims that were allowed. Patent owners have the right to stop the manufacture, sale or use of infringing products and services. Although U.S. law also provides the important additional right to prevent the import of infringing products, the patent owner has no other control with regard to foreign manufacture, sale or use. The only way to secure this protection is to obtain a patent in every jurisdiction where there is a risk or likelihood of economic damage from patent infringement.

The cost of obtaining a U.S. patent on a simple invention starts at $5,000-$10,000, which covers attorney or agent fees for drafting the application, any fees for drafting drawings and the comparatively small filing fees. Where there are multiple office actions and the attorney charges by the hour, additional costs can quickly mount. If the patent is granted, the cost of maintaining the patent through its term can also be significant. For a complex patent with many claims, many drawings and a complex specification, the out of pocket cost can easily triple. If the inventor is an employee, it is appropriate to add the cost for any time he or she spends assisting the patent professionals, starting with the time needed to write an effective invention disclosure. One estimate of the cost of a patent (basically taking all the costs of the IP organization, adding to them an accurate estimate of inventor and reviewing management time, and dividing by the number of patents) came up with a total estimate of $50,000 per United States patent.
This particular estimate included the significant added cost of obtaining needed foreign counterparts. When they are broken out and counted separately, the initial cost of an EPO filing (including at least Great Britain, France, and Germany)
is approximately $8000, and over $40,000 for the life of a patent. Add comparable expenses for coverage in  important Asian countries and elsewhere, and the numbers become even less affordable. As patent practitioners are well aware, this expense includes, apart from the cost for any foreign office actions, both filing fees and translation charges. Although the latter, at least, are being challenged by a well-organized movement to provide patent coverage with only a single language specification (Americans, of course, prefer English), the budgetary benefits of filing fees are such that reductions are unlikely. Even the U.S. Congress has seen fit to deduct some of the fees earned by the supposedly independent and self-supporting USPTO for other purposes.

It is important to keep in mind the fact that the costs are procedural as well as financial and will continue to be so, as long as there is no single worldwide patent code. In particular, some countries (Germany is noteworthy in this regard) are much less tolerant of pre-filing divulgation than the U.S., where an inventor typically has a year of grace after a divulgation to file his application with the USPTO Thus, an inventor or an organization that makes foreign filing decisions on an interrupt-driven ad hoc basis may find that it is completely unable to obtain foreign coverage in one or more important jurisdictions due to an inadvertent divulgation, such as a technical or sales presentation at an open forum.

This pre-filing freedom (of sorts) to divulge an invention prior to filing ' at the risk of losing foreign rights ' is complemented by the absolute requirement that any counterpart applications must be filed within twelve months of the U.S. filing.
Thus, a complete foreign filing process must begin with managing pre-filing divulgation and be followed up by a foreign filing decision-making process that manages the decisions in a timely manner, so that appropriate translations and other paperwork will be completed in time.

The Process

IBM, which files more than 3000 U.S. patent applications a year, obviously has to make a comparable number of annual foreign filing decisions. Assuming this can be done thoroughly in an hour per patent on average, and remembering that these decisions require experienced input by legal, technical, and business organizations, the IBM foreign filing decision process alone could cost as much as $500,000 per year, the equivalent of two full-time professionals. Needless to say, this is
an exceptional case. IBM manages it with the help of a simple computer program, supplemented by human review of the decisions. However, even a company well down on the list of U.S. patent awardees, with only 300 U.S. applications a year, will find that determining which patents to protect in which countries can cost the equivalent of several person-months of highly skilled professional time. Moreover, this time will be needed without considering whether or not the process leads to quality choices.

Busy IP professionals of course have developed a variety of rules of thumb to minimize the cost of the process (if not necessarily to maximize the quality of the results). A common criterion for deciding whether or not to file for a U.S. patent has long been own use. We discuss below the limitations of this criterion in the domestic context; its failings are even more evident in the foreign filing question. Other companies solve the problem by unilaterally declaring themselves to be U.S.-only, and making the default decision to file no foreign counterpart applications. Some lucky companies, which have an international presence, or only a few known international competitors, make a similar kind of decision, and (almost) always file for counterpart patents, but only in the one or two countries where they have decided such coverage is helpful. Many other multinational companies, which have lots of patents in many fields, have to bite the bullet and make a decision of some sort on every patent.

Needless to say, few see any value in computerizing the decision process. Instead, they convene monthly or quarterly meetings where every patent gets at least a cursory review by professionals from IP law, licensing, patent engineering and the affected business unit, with input from the inventor(s) and technical management. In the following section we discuss how this intrinsically labor-intensive process can be simultaneously streamlined and result in better business decisions regarding foreign filing.

The Exclusionary Monopoly

There are only a few valid reasons for a company to pursue obtaining patent coverage on an invention. Nearly all of them are based on the principle that a patent is worth very little if no one else wants to practice the claimed invention. One common reason is to utilize the patent to forestall competitors from copying a successful innovation. A second contrasting reason is to encourage others, who may be competitors, to copy the innovation, but to pay the innovator a fee for the use ' a royalty. Sometimes, a patent can prevent a competitor not only from copying a successful innovation, but even from copying a potentially viable alternative. There are other less financially rewarding reasons, such as bragging rights, keeping R&D personnel job satisfaction high or even politics. Note that one's own use is only an important consideration insofar as it contributes to one of these other reasons. These same criteria apply to foreign filings, modified as in 'to forestall competitors in country A from copying a successful innovation,' etc. In addition, the decision has to allow for the unavoidable fact that the foreign filing budget is constrained; there is a cost for every additional country in which protection is desired and the corporate entity responsible for that cost may not consider the patent protection to be worth the expense.

Own Use

Very often, even in sophisticated high tech companies, the decision on whether or not to file on an invention for a U.S. patent is almost entirely based on whether or not the company uses or plans to use the invention in one of its own products or services. We believe that, for the most part, this is based on a fundamental misunderstanding of the use of a patent. As noted above, a patent is an exclusionary monopoly ' it confers no rights whatsoever with respect to the patent owner being able to use the invention himself. Such own use rights are always subject to the possibility that an earlier patent has claims that dominate the claims in the subject patent. In the absence of any dominant claims, the least expensive method to assure freedom of action to use a particular invention is a simple defensive publication or other public divulgation, such as a posting on the company's Web site.

The primary (if not the only) reason for filing for patent protection is the likelihood that another party will want to use the patented invention. In that case, the patent owner can either prevent such use, or obtain a payment for such use through a licensing agreement. That is not to say that one's own use is irrelevant. For example, if the patent owner is a company like IBM, known for being able to establish de facto standards and thus promote the appearance of clone makers, then patent protection ' on selected inventions ' is warranted. However, simply because IBM, or Boeing, or Siemens or Microsoft is using an invention is not sufficient grounds for patenting it. Undiscoverable or easily avoided infringement substantially diminishes the value of a patent, as does use with negligible economic value.

Where the question at issue concerns foreign filing, the matter is more specific: simply because the patent owner is using the invention in the U.S. does not necessarily mean that anyone can or will use the invention in a country where foreign filing is under consideration.

Foreign counterpart patents are an important tool in the hands of a company or inventor with a well thought out patenting strategy. In contrast, they can be an expensive, unproductive and time-consuming diversion for companies that address the matter of foreign filing protection in an ad hoc manner. The following analysis describes the problem in some detail, and then describes a structured approach to making foreign filing decisions that some companies are effectively deploying.

The Problem

A United States patent grants its owner an exclusionary monopoly in the U.S. The patent owner has the right to prevent any other party (with the exception, in
certain cases, of agencies of the U.S. government) from practicing the invention covered by the claims that were allowed. Patent owners have the right to stop the manufacture, sale or use of infringing products and services. Although U.S. law also provides the important additional right to prevent the import of infringing products, the patent owner has no other control with regard to foreign manufacture, sale or use. The only way to secure this protection is to obtain a patent in every jurisdiction where there is a risk or likelihood of economic damage from patent infringement.

The cost of obtaining a U.S. patent on a simple invention starts at $5,000-$10,000, which covers attorney or agent fees for drafting the application, any fees for drafting drawings and the comparatively small filing fees. Where there are multiple office actions and the attorney charges by the hour, additional costs can quickly mount. If the patent is granted, the cost of maintaining the patent through its term can also be significant. For a complex patent with many claims, many drawings and a complex specification, the out of pocket cost can easily triple. If the inventor is an employee, it is appropriate to add the cost for any time he or she spends assisting the patent professionals, starting with the time needed to write an effective invention disclosure. One estimate of the cost of a patent (basically taking all the costs of the IP organization, adding to them an accurate estimate of inventor and reviewing management time, and dividing by the number of patents) came up with a total estimate of $50,000 per United States patent.
This particular estimate included the significant added cost of obtaining needed foreign counterparts. When they are broken out and counted separately, the initial cost of an EPO filing (including at least Great Britain, France, and Germany)
is approximately $8000, and over $40,000 for the life of a patent. Add comparable expenses for coverage in  important Asian countries and elsewhere, and the numbers become even less affordable. As patent practitioners are well aware, this expense includes, apart from the cost for any foreign office actions, both filing fees and translation charges. Although the latter, at least, are being challenged by a well-organized movement to provide patent coverage with only a single language specification (Americans, of course, prefer English), the budgetary benefits of filing fees are such that reductions are unlikely. Even the U.S. Congress has seen fit to deduct some of the fees earned by the supposedly independent and self-supporting USPTO for other purposes.

It is important to keep in mind the fact that the costs are procedural as well as financial and will continue to be so, as long as there is no single worldwide patent code. In particular, some countries (Germany is noteworthy in this regard) are much less tolerant of pre-filing divulgation than the U.S., where an inventor typically has a year of grace after a divulgation to file his application with the USPTO Thus, an inventor or an organization that makes foreign filing decisions on an interrupt-driven ad hoc basis may find that it is completely unable to obtain foreign coverage in one or more important jurisdictions due to an inadvertent divulgation, such as a technical or sales presentation at an open forum.

This pre-filing freedom (of sorts) to divulge an invention prior to filing ' at the risk of losing foreign rights ' is complemented by the absolute requirement that any counterpart applications must be filed within twelve months of the U.S. filing.
Thus, a complete foreign filing process must begin with managing pre-filing divulgation and be followed up by a foreign filing decision-making process that manages the decisions in a timely manner, so that appropriate translations and other paperwork will be completed in time.

The Process

IBM, which files more than 3000 U.S. patent applications a year, obviously has to make a comparable number of annual foreign filing decisions. Assuming this can be done thoroughly in an hour per patent on average, and remembering that these decisions require experienced input by legal, technical, and business organizations, the IBM foreign filing decision process alone could cost as much as $500,000 per year, the equivalent of two full-time professionals. Needless to say, this is
an exceptional case. IBM manages it with the help of a simple computer program, supplemented by human review of the decisions. However, even a company well down on the list of U.S. patent awardees, with only 300 U.S. applications a year, will find that determining which patents to protect in which countries can cost the equivalent of several person-months of highly skilled professional time. Moreover, this time will be needed without considering whether or not the process leads to quality choices.

Busy IP professionals of course have developed a variety of rules of thumb to minimize the cost of the process (if not necessarily to maximize the quality of the results). A common criterion for deciding whether or not to file for a U.S. patent has long been own use. We discuss below the limitations of this criterion in the domestic context; its failings are even more evident in the foreign filing question. Other companies solve the problem by unilaterally declaring themselves to be U.S.-only, and making the default decision to file no foreign counterpart applications. Some lucky companies, which have an international presence, or only a few known international competitors, make a similar kind of decision, and (almost) always file for counterpart patents, but only in the one or two countries where they have decided such coverage is helpful. Many other multinational companies, which have lots of patents in many fields, have to bite the bullet and make a decision of some sort on every patent.

Needless to say, few see any value in computerizing the decision process. Instead, they convene monthly or quarterly meetings where every patent gets at least a cursory review by professionals from IP law, licensing, patent engineering and the affected business unit, with input from the inventor(s) and technical management. In the following section we discuss how this intrinsically labor-intensive process can be simultaneously streamlined and result in better business decisions regarding foreign filing.

The Exclusionary Monopoly

There are only a few valid reasons for a company to pursue obtaining patent coverage on an invention. Nearly all of them are based on the principle that a patent is worth very little if no one else wants to practice the claimed invention. One common reason is to utilize the patent to forestall competitors from copying a successful innovation. A second contrasting reason is to encourage others, who may be competitors, to copy the innovation, but to pay the innovator a fee for the use ' a royalty. Sometimes, a patent can prevent a competitor not only from copying a successful innovation, but even from copying a potentially viable alternative. There are other less financially rewarding reasons, such as bragging rights, keeping R&D personnel job satisfaction high or even politics. Note that one's own use is only an important consideration insofar as it contributes to one of these other reasons. These same criteria apply to foreign filings, modified as in 'to forestall competitors in country A from copying a successful innovation,' etc. In addition, the decision has to allow for the unavoidable fact that the foreign filing budget is constrained; there is a cost for every additional country in which protection is desired and the corporate entity responsible for that cost may not consider the patent protection to be worth the expense.

Own Use

Very often, even in sophisticated high tech companies, the decision on whether or not to file on an invention for a U.S. patent is almost entirely based on whether or not the company uses or plans to use the invention in one of its own products or services. We believe that, for the most part, this is based on a fundamental misunderstanding of the use of a patent. As noted above, a patent is an exclusionary monopoly ' it confers no rights whatsoever with respect to the patent owner being able to use the invention himself. Such own use rights are always subject to the possibility that an earlier patent has claims that dominate the claims in the subject patent. In the absence of any dominant claims, the least expensive method to assure freedom of action to use a particular invention is a simple defensive publication or other public divulgation, such as a posting on the company's Web site.

The primary (if not the only) reason for filing for patent protection is the likelihood that another party will want to use the patented invention. In that case, the patent owner can either prevent such use, or obtain a payment for such use through a licensing agreement. That is not to say that one's own use is irrelevant. For example, if the patent owner is a company like IBM, known for being able to establish de facto standards and thus promote the appearance of clone makers, then patent protection ' on selected inventions ' is warranted. However, simply because IBM, or Boeing, or Siemens or Microsoft is using an invention is not sufficient grounds for patenting it. Undiscoverable or easily avoided infringement substantially diminishes the value of a patent, as does use with negligible economic value.

Where the question at issue concerns foreign filing, the matter is more specific: simply because the patent owner is using the invention in the U.S. does not necessarily mean that anyone can or will use the invention in a country where foreign filing is under consideration.