How Much Does A Patent Cost?  The Real Truth

In this article, we look at many different factors regarding the cost of patents:

How much does a patent cost?

What are the costs to just file a patent application?

Is micro entity worth it?

Is a provisional patent application really cheaper than a non-provisional application?

What are the costs of a software patent?

What can affect a patent's cost?

What does it cost to patent an idea worldwide?

My attorney says they can do the patent for much less...

Should I pay my attorney by the hour or fixed fee?

Is it better to have a Big Law Firm do my patent?

Is there any difference between a patent agent and a patent attorney?

A detailed breakdown of patent costs.

Financing the costs of getting a patent.

Download an infographic of the patent process and associated costs.

Note:  this article was published on Medium.

How much does a patent cost?

The US average just to file a patent is about $12,000, but the total cost of a patent is closer to $60,000.  About 20% of the total cost are fees paid to the USPTO.  All the rest are attorney's time. 

Filing the patent is just the beginning.  The real cost is the back and forth between the examiner and the attorney.  Sometimes, there can be 1 or 2 office actions, but it is not uncommon to have 6, 8, or even 10 or more.  The US average is about $18,000 for the back-and-forth, otherwise known as "patent prosecution" in the trade.

The Real Truth: patents are expensive and the first patent represents so much risk, that we avoid providing any financing for the patent on the "Grand Idea" of a company.  Our approach is to build a business case that the patent will be valuable - by getting customer feedback and validating your assumptions - before justifying the spend on a patent.

Our view is that 95% of all patents are worthless.  They are worthless for many different reasons, not the least of which is that the patent is filed too early.

What are the costs to just file a patent application?

Filing a patent application will cost you about $8000 to $15000 for the attorney, and $780 (approximately) for the USPTO filing fees, assuming a "small entity."  (I recommend NEVER filing as a "micro entity," as there are some loopholes that are not worth the tiny cost savings.)

Some attorneys will charge significantly less, sometimes $4000-6000 to write a patent application.  Is this a good bargain?  Do you shop around for the lowest cost surgeon when you have a critical operation?

Do I want to file as a "micro entity"?

I do not like the "micro entity" option that the USPTO offers.  It has some problems that are not worth the risk.  In the end, shaving a few pennies puts your patent at risk of being invalidated by a simple error.

The key to micro entity is that you have to notify the Patent Office when you no longer qualify. Most people qualify for micro entity because they have low income AND have filed only a patent or two.  At some point, you will have more patent applications in process or your income might exceed the threshold.  If you forget to change the entity status - and it is very easy to forget - you may save a couple hundred dollars on a filing fee but can be accused of committing fraud on the USPTO.  This will invalidate the entire patent.

Is it worth the risk to invalidate a patent (which is supposed to be worth millions) just for a few hundred dollars?  No.

The caveat: some entities, like universities, have "micro entity" status that never changes.  For them, they should always take advantage of the program.

Is a provisional patent application cheaper than a non-provisional patent application?

Not overall, plus there are huge risks with provisional patent applications.  Some attorneys will charge as little as $2000 to "write" a provisional patent application, but then charge you much, much more to write a non-provisional application a year later.  The filing fees for a provisional patent application are less than a non-provisional, but you will still have to pay the non-provisional filing fees a year later.  Your net expense will always be higher if you file a provisional.

Provisional patent applications are always - without exception - the wrong thing to do for a startup company.

It is common practice to sell an inventor on the idea of a "cheap" patent application.  Even the USPTO actively promotes a provisional application as something that a startup or independent inventor should do.

The real reason why a provisional patent application exists is that it is a way for Big Companies to extend the life of their patents.  By filing a provisional application then waiting a year to file a non-provisional, the US created a way to extend the 20 year life of a patent to year 21.

Who cares about having a patent that goes from year 20 to 21?  Big Pharma companies.  They make all their money at the end of the patent life.  

Do startups care about patent life in year 20?  NO!  They are worried about year 2.

What are the costs for a software patent?

Many attorneys charge $15,000 or more for patent applications for software, but the truth is that they are actually easier than so-called "simple" mechanical inventions.  Software patents get the high price tag because that is what the market will bear, not because they are any harder than other technologies.

The overall cost of a software patent might be higher because the field can be very crowded, in which case there is a lot of back-and-forth between the examiner and the attorney.

Software patents have received lots of attention over the years.  But "software" always has been - and always will be - patentable.  There are roadblocks that need to be navigated, but it really is not a big issue when you have competent counsel.

What can affect a patent's cost?

The single biggest factor in reducing a patent's cost is:

1.  Doing a good search and refining the invention based on the prior art.

2.  Designing the patent - intentionally - to avoid the prior art.

Many people skip the patent search, or do only a cursory search.

It is true that the only search that matters is the one that the patent examiner does.  But if you do not know the prior art before filing, you are shooting in the dark.  There is always a good chance that someone has already thought of your idea.

What does it cost to patent an idea worldwide?

The basic process for "world-wide" patent coverage is to file a Patent Cooperation Treaty ("PCT") application, then enter each and every country a couple years later.  This is very expensive, and it is not uncommon to spend $500K or more to get patent coverage in a large number of countries.

In general, the US is one of the best bargains for the cost of patent, since a single patent that may cost $60,000 covers a population of 300M+.  For covering the same population in Europe, the cost may be ten times as much.

The biggest cost in international filing, aside from the one-time translation costs to each language, is the annual annuities.  These fees can easily exceed $1000 per year per COUNTRY.  With 190 countries as part of the PCT, the lifetime cost of a "world-wide" patent can reach into the tens of millions.

My attorney says they can do a patent for much less.

Have you been quoted much less? There are plenty of patent attorneys who quote much, much less than $12,000 to draft a patent application. But beware. One of the standard practices is to quote a much lower fee to draft the patent application, but make it all up with the back-and-forth with the patent examiner.

Some attorneys will quote as little as $2000 to $6000 to write a patent application. But don't be fooled. The dirty little secret is that the worse the initial patent application is, the more money the patent attorney can make by all the "patent prosecution," which is the arguing between the attorney and the patent examiner. 

Should I pay my attorney by the hour or fixed fee?

There are two schools of thought about legal work: billing by the hour or a fixed fee per project.  Neither one is perfect, but the advantage goes to fixed fee billing - at least for patent work.

The simple fact is that billing by the hour encourages an attorney to work very slowly, while billing by the project encourages them to work very fast.  A worker paid by the hour can "pad the bill" to inflate an invoice, and it is impossible to tell that it happens.  A worker paid by the project can cut corners to get something out the door quickly.

Which is best?

I began my career in patent law as an inventor.  I went to a patent attorney that I knew, and he billed by the hour.  Every conversation was slow, methodical, and he went over everything multiple times, mostly to fill the air time and run up the meter.  I later learned that he would tape record invention disclosure sessions and would replay the tape while he drove to and from work just so that he could bill the time - even while he had the radio playing full blast.

When I went out on my own, I began billing by the project.  I felt that I could do a good job for my clients and not need to cut corners because I was charging a fair price.  I tend to write very quickly and without a lot of errors, so I would consistently under-bill projects when I worked in a bill-by-the-hour law firm.

My personal preference is the fixed fee, both as a client and as a service provider.  The bills are known and do not have surprises in them, and since I happen to be efficient, I can focus on quality without feeling like I am losing money on a project.

Is it better to have Big Law Firms write my patent application or smaller firms?

Many inventors and entrepreneurs like to tout their relationship with a Big Law Firm.  It is too bad they do not know how the sausage gets made.  However, small firms are not without their problems, too.

Big Law is all about churning work through the machine.  In general, partners bring in the work, then feed it to the associates.  The partner is the client-facing person and gets paid a percentage of the billings, but the real work is done in the windowless back room.

Big Law makes most of their money with Big Clients.  The Big Clients often are smart enough to tell the partner that they want to vet every attorney who touches their work.  When I did a lot of patent work for Microsoft, they wanted to run every attorney through a qualification process, and if they found out someone who was not qualified by them was working on their matters, the entire law firm was fired.

So, how does a first year associate get any work to do?  It is from the small clients - especially when the small clients want to "save money."  If you think your work is being done by the big partner in the Big Law Firm, you are mistaken.  The partner may "review" the work, but it is essentially the chum that they use to train their associates who are too unqualified to work for the firm's real clients.

I am being somewhat facetious here, but you get the point: it is a factory at Big Law and your work is probably not getting the love it deserves.

What about small firms?  Some are fantastic, where you talk to the actual person who is doing your work, and they are small, nimble, and have great customer service.  In many cases, the attorneys have exceptional experience and can be a big value.

On the other hand, you might run across a small firm with virtually no real-world experience.

How to find a good attorney?  Use the process in this blog post entitled "How to Find a Good Attorney." 

Is there any difference between a Patent Agent and Patent Attorney?

The difference between a patent agent and a patent attorney is merely that the patent attorney went to law school.

Both the patent agent and the patent attorney have to have engineering or science degrees, and both have to pass the same Patent Bar Exam.  Both of them have the same rights, privileges, and responsibilities before the USPTO.

I began as a patent agent, then went to law school and became a patent attorney.  My joke was that I spent three years in law school and wound up doing the same work for the same clients for the same amount of money.

Functionally, there is no difference (although the patent attorney can get you out of your speeding ticket, too.)  Patent agents can be every bit as good as patent attorneys - and every bit as bad sometimes.  

Practically, patent agents are treated as second class citizens, but mostly by the attorneys.  The American Bar Association - who has a monopoly on how the legal system works - has put local laws in place that prohibit non-attorneys from being partners with attorneys.  So, a "law firm" run by an attorney cannot be co-owned by a patent agent.  

This is purely an artificial constraint that forces people to go to law school (accredited by the ABA) then join the local bar (and pay their dues to the ABA).

Detailed cost breakdown for patents:

The average US patent cost between $30,000 and $60,000.  The data below are derived from the American Intellectual Property Lawyers Association Bi-Annual Economic Survey, available here. 

The patent process involves two major phases. Patent “preparation” is when the patent is originally drafted and filed with the patent office, and patent “prosecution” is the back and forth that happens with the examiner. Typically, the patent preparation phase is what an attorney will quote a client, but it is often only 25% or so of the total.

Patent Cost Pie Chart V1.1

Here is a breakdown of the average patent cost from the report:

Preparing and filing a typical patent (relatively complex): $12,000
Office action responses: $4000
Novelty search: $4000

Other things we need to consider:
USPTO filing fees: $800-1600 (depends on small/large entity status)
PCT filing fees: $2500-3500 (depends on page count for application)

An average patent takes 4.2 office actions to get allowed. Yes, some patents are allowed sooner, but many are allowed after 6-10 office actions. Also, remember that for every 2 office actions, a Request for Continued Examination (RCE) fee of $800/$1600 is incurred.

A pre-appeal conference is often useful in moving cases towards allowance, and this is approximately the cost of an office action response. This occurs in about one out of every two cases, but sometimes two or more times per case. My experience is that I use it almost one time per case on average. This adds a $800 appeal fee as well.

There is a possibility of a full appeal, which costs $10,500, but this only occurs in about 12% of the cases based on my personal experience of about 1000 cases.

The office actions is where a significant amount of expense is incurred.

Total costs:
Filing (including a search and USPTO/PCT fees): $22,250
Prosecution:
4.2 office actions plus RCE fees: $17,550
Pre-appeal conference: $4,000 (75% likelihood)
Full appeal: $10,500 (25% likelihood)
Total prosecution costs: $24,175
Issue fees: $1800 (includes both attorney fees and USPTO fees)
Maintenance fees: $7600 (small entity prices)

Total: $60,525 (average patent cost)

Infographic of Patent Costs:

You can download our infographic that shows the patent process and the costs associated with each step:

infographic---what-patents-cost
Click to download PDF

Financing the Costs of a Patent

BlueIron is an alternative funding source for startup companies.  We provide $50-100K investments for developing patent portfolios for startups.  What is the catch?  We only invest when we believe the patents are going to be in that sliver of super-valuable patents.

Our due diligence focuses on the potential value of a company's patents, but also on whether the company will be able to turn those ideas into actual value.  If you pass our due diligence, you know those patents are going to be very high value.

You can apply for funding here.

 

Posted in Patent Basics, Patent Myths, Patent Costs

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BlueIron Invests in Startups

Pre-revenue startups can apply for BlueIron's patent financing, which is typically a $50-100K investment initially, with appropriate follow on investments.

For Series A/B or later stage companies, BlueIron can provide $2-5M loans, using patents as collateral.

Patent enforcement and defense insurance are also available, giving you pre-paid legal fees for enforcing your patents against competitors, or surviving patent lawsuits from trolls.

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