Do you know how much patent renewal services cost?
Since founding Patentrenewal.com I have talked to a large number of leading IP law firms around the world in order to develop and market our product.
Based on an in-depth comparison of the leading IP law firms, we quickly realised that pricing is often not transparent or easy to understand. We therefore believe that patent renewals need much more attention from partners in IP law firms because their renewal services are ripe for disruption.
This article intends to shed light on the hidden costs and the lack of transparency in patent renewals, and why it matters to patent holders and IP law firms.
Who cares about patent renewals?
Renewal patents are often seen as a practical task that don't require much attention. The less we hear about it the better.
Quality of service is, however, vital and the costs associated with it are also strategically important for patent holders. Bank fees, local agent charges etc. are passed along in the value chain and ultimately paid by the patent holder. Patent holders typically only see the total renewal costs because they would have a hard time understanding all of the cost items in the value chain. Even IP law firms are unaware of the real cost of the value chain.
Therefore, it is important for patent holders to trust that the costs passed along are legitimate and the value chain is cost efficient. If maintaining a patent gets too expensive innovative firms will file fewer patents and even consider cancelling existing ones.
So what is the real cost of renewing a patent?
It should be quite easy to answer how much the patent holder pays for the renewal service. The official fees are listed in each jurisdiction and logically the rest of the patent holders bill is simply for the renewal service. However, few if any can tell how much is added to the official fees in their own portfolio.
The primary cost item that all patent holders and IP law firms care about is the ‘renewal service fee’ because it is visible and transparent. However, we came to realise that the ‘renewal service fee’ is negligible compared to other cost elements when using a renewal service.
We want to help patent holders and IP Law firms alike to understand what they pay for with their existing providers. Typically, we run into nine types of fees when analysing competing service providers. The fees are tough to discern because it is common practice to consolidate these expenses into one annual fee. The nine most typical fees are:
- Official fees
- Surcharge fees
- Local (foreign) law firm fees
- Postal fees
- Service fees
- Interest fees
- Transaction fees
- Recipient bank fees
- Foreign exchange deposit (a deposit for protection againast currency fluctuation)
At first look, these cost elements may seem fair. They could theoretically be actual costs that are passed on to the client. However, these hidden cost items are so big that it raises questions.
Below you will find a typical case where Patentrenewal.com has compared two competitors on a real portfolio.
You will see several interesting features in this table:
- The official fees are not the same. Patentrenewal.com charges $20.801 while competitors charge $22.154 - $26.852. That is a big difference where there should not be any. The difference can only be explained as hidden profits or large inefficiencies in costs like bank fees & sub-par currency exchange rates.
- Competitors seem to use too many local agents. In the specific case, Patentrenewal.com uses a local agent in only 7 out of 32 jurisdictions above, because we do direct renewals when the jurisdiction allows for it.
- Competitors, in this case, use local patent law firms in 13–32 jurisdictions. Patentrenewal.com charges $553 for local agent services while competitors range from $1.221 to a whopping $10.512. That is a 2–19x cost increase paid by the patent holder. Again, the difference can only be explained by hidden profits or massive inefficiencies.
- The renewal fee for the renewal service is modest: The range is from $992 to $1.681. Compared to the other cost items, this is a small range.
- IP Law firms add a fee on top. The patent owner will often pay the IP law firm a renewal fee on top. This is not part of the table above.
So, the service providers official ‘renewal service fee’ is negligible while the total cost, in this case, ranges from $24.367–$39.047 per year for the same portfolio. The picture is the same for bigger portfolios. This is why we urge patent holders and IP law firms to evaluate the total costs their clients pay.
What are the implications?
We do not know if the differences above can be explained by inefficiencies in the value chain or hidden profits on top of the transparent ‘renewal service fee’. But we do know that it is far more expensive for patent holders to maintain a patent than is necessary.
This is a problem for the industry and IP-law firms because high renewal costs lead innovators to reduce the number of ideas they will try to protect. Secondly, patent owners get an incentive to do less renewals and take the cost saving instead. This is not great for IP law firms either.
Thirdly, it is evident that any industry with substantial inefficiencies or opaque profits is an easy target for technological disruption. If patent owners decide to buy renewals directly, then IP law firms will lose a valuable connection to the patent owners and a substantial revenue stream.
How do we solve it?
Technology can solve the inefficiencies described above. Renewing patents is all about knowing national legislation, tables of figures and deadlines. Machines are much better and reliable at executing on rules than people are. The trends also point towards more and more jurisdictions allowing for online filing and payments. This trend will continue and allow even more automation. Lastly, changes in Fintech allows for reduced transactions costs, bulk transfers and competitive currency rates. The value chain will become even more efficient over time.
The second part of the solution is to teach the industry to focus on ‘total renewal cost’. IP law firms are trusted advisers that can help their clients by finding the provider that offers the lowest total cost and the lowest risks of malpractice. As part of this effort Patentrenewal.com has decided not to compete on the ‘renewal service fee’ but to deliver lower ‘total renewal costs’.
We charge a relatively high renewal service fee but in turn we use technology to improve transparency and remove inefficiencies along the value chain. We make our money on the renewal fee only.
Nevertheless, it is not all about cost. It is only a hygiene factor that IP law firms choose the renewal provider that offers the lowest total cost. Technology also allows IP law firms to improve substantially on the service that they deliver to their clients. We will dig into this in another post.
At Patentrenewal.com, we use usability and intuitive design to allow for productive dialogues between clients and IP law firms. Gaining portfolio visibility, Managing Directors, patent directors, and paralegals can have much deeper control and insight into their patent portfolios, thereby successfully easing the management and allocation costs and largely decreasing the chances of malpractice.