The purpose of this memorandum is to answer many questions of interest to an inventor seeking patent protection for his invention. Perhaps the best way to commence such a memorandum is to discuss briefly the nature of patent property, and then discuss patenting procedure and costs step-by-step.

I. NATURE OF PATENT PROPERTY

A patent is a governmental grant giving the patent owner the right to preclude others from making, using and selling the patented invention for a limited period of time. In this regard a patent is not a monopoly, as a patentee may be precluded from practicing his/her own patent by an earlier issued patent of another (See IV. D below).

It should be understood that some patents are broad and some are narrow; some patents are strong and some are weak, i.e., likely to be held invalid by the courts. Those patents which are narrow and weak frequently offer no substantial patent protection, and the expense of seeking them must be justified, if justifiable at all, on secondary values other than patent protection. The amount of work required to obtain a broad and strong patent is usually greater than the amount of work required to obtain a narrow patent.

The value of a patent is influenced by the factors of breadth and strength, but the value is not solely determined by these factors. The commercial value of an invention, which the patent protects, of course, underlies all other patent evaluation factors. While many broad and strong patents do not earn the cost of obtaining them, sometimes a narrow patent from a claim construction viewpoint may be worth much more than it costs because the narrow feature that it protects has great commercial value or because of its secondary values.

For example, a patent or patent application that offers little or no substantial patent protection may still be of value for its advertising effect, may support an exclusive dealership contract which would be in violation of the antitrust laws in the absence of a patent, may support a manner of doing business or contract by which tax money is saved, may add strength to a know-how license to a foreign concern, may be of value in a cross-licensing arrangement, or may constitute the foundation of a defense against a charge by a third party of infringement of a patent. Of course, it is also true that many narrow patents often discourage competition for months while the competitor investigates the strength and coverage of the patent, thus giving the patent owner the advantage of a head start on competition which may later develop in spite of a patent which is of limited scope.

Consistent with the above, the decision to file or not to file an application for patent should not be founded merely upon the strength or breadth of expected claims of the invention, but also upon consideration of the commercial potential of the invention itself, the various different values of the particular type of patent that can be obtained, and the uses to which it may properly be put in the industry to which the particular invention relates.

II. GENERAL OBSERVATIONS ON COST OF PATENTS

The cost of patent work varies tremendously with the complexity of the invention. A two-room shack can be built more easily and less expensively than a 25-room mansion. Likewise, a fingernail file can be described and claimed in a patent application more easily and at less expense than one of the new computer systems.

There are other complications in the cost structure of patents, which are beyond the scope of this memorandum. Suffice to say that exact figures cannot be quoted as to the cost of obtaining a patent on an invention. The estimates contained in the following discussion, therefore, should be understood to be only estimates and to relate to reasonably simple cases which are subject to routine prosecution and which do not get involved in interference or other unusual procedures.

III. PATENTING PROCEDURE AND COST

A. The Preliminary Patentability Search

First, the invention must be disclosed to the attorney. A written disclosure on a form attached is strongly preferred. The form is designed to elicit certain information from the inventor that will help the attorney in his evaluation. After reviewing the disclosure, the attorney may advise against spending any more money and may advise that no application be filed.

The attorney commonly renders a bill for perhaps $1,500 for general conference time incidental to the disclosure of the invention, to cover the time expended in studying the invention and, where appropriate, rendering his opinion, and to cover the time required to prepare a disclosure adequate for use by a patent searcher, if a patentability search is to be performed and the written disclosure provided by the client is inadequate for the purpose. This bill is rendered following the initial conference and, where appropriate, the ordering of the patentability search.

If the invention appears to fall within one of the general classes of patentable subject matter, the attorney, in most circumstances, recommends the performance of a limited novelty search or patentability search. Thereafter, the attorney prepares a patentability opinion based upon the references found in that limited search, and a rule of law which may be oversimplified to read: Nothing is patentable which is "obvious to the ordinary man familiar with the art" (within the peculiar meanings of the law) from the teachings of the previously existing references. The advice may be to stop at this point; the advice may be to proceed with the patent application.

Because the search involves out-of-pocket expenditures by our firm, it is customary to ask for an advance retainer on the order of up to $5,000 prior to the performance of the limited patentability search to be applied toward the cost of the search and the opinion rendered thereon. Frequently, a reasonable, limited patentability search can be performed and opinions rendered for about $1,000-$3,000. Other more abbreviated searches are not normally recommended because they lead where relevant art was not found, too frequently have to be duplicated or expanded to adequately define the invention, wasting money on hopeless patent applications, and because a good job of drafting a patent application requires that the attorney be familiar with the closest references it is economically feasible to find.

Even when the inventor thinks he knows the art, the limited novelty search is normally still advisable for two reasons. First, the inventor usually does not know all the published art that exists even when he does know what is in the marketplace; second, the marketplace art is not as convenient for the attorney to use for his study needs, as are prior patents and publications.

This $1,000-$3,000 search is a very limited search, and only 70%-80% reliable at best. The cost of thorough searching is high and becomes of decreasing value for purposes of preparing an adequate application. In the event the invention will soon be marketed, a thorough search to determine if there are any blocking patents may be justifiable. The costs for more searching may be $5,000 or more, but well worth not having to junk tooling and production of a product a clocking patent. It is recommended for pioneer inventions and inventions having significant commercial impact that both computer and hand searches be conducted in the USA, Europe and Japan. Hence thorough searches are not normally undertaken when the exposure is on the order of magnitude of patent application costs.

The limited novelty search and related patentability opinion generally require some four or five weeks, and any charges on either side of the advance retainer are adjusted or billed upon rendering the patentability opinion.

B. The Application for Patent

In presenting a patent application to the patent office, a number of fees required by the patent office are encountered. In setting the fees, the patent office distinguishes the independent inventors, nonprofit organizations and small business concerns as a separate class by themselves with a 50% reduction in fees. For purposes of discussion, all fees discussed hereinbelow will be referenced to this class. A small business concern is defined with reference to the Small Business Administration Regulations, a discussion of which is beyond the scope of this memorandum.

We charge for preparation of a patent application according to the time
required to adequately cover the particular invention.

The preparation and filing of a patent application on single invention normally comes to perhaps $10,000 to $20,000, including attorney's fees, Patent and Trademark Office filing fees, draftsman's fees, and other incidentals to the preparation and filing of the application. As of this writing (May 1998) the basic filing fees for a "large entity" is $790, with marginal independent claims in excess of three at an additional $82 each, and total claims in excess of 20 at $22 each. "Small entities" (generally with 500 or less employees) who have not licensed the technology to "large entities" pay half as much. On complicated inventions, the cost may be $20,000 or substantially more, excluding Patent and Trademark Office fees. This charge is in addition to the charge for the limited patentability search and opinions rendered thereon. It is customary to ask for at least a $10,000 retainer before work on a patent application is commenced. This advancement covers expenses, which must be advanced to the patent drawing draftsman and to the Patent and Trademark Office, and applies also toward the legal fees incidental to the preparation and filing of the application. The remainder of the charges for the preparation and filing of the application, if any, are normally invoiced when the application is submitted to the inventor for execution prior to mailing to the Patent and Trademark Office.

The preparation and filing of a patent application requires, in the normal routine course of events, from one to three months, although the time may be reduced when the circumstances demand it.

To aid the Examiner, the Applicant is required to file an Information Disclosure Statement describing relevant prior art which is known by the Applicant. The cost for preparing and filing of an Information Disclosure Statement varies with the amount of prior art submitted, but generally runs between $600-$800.

When the patent application has been filed, the Patent and Trademark Office Examiner performs a search. He renders an "Office Action", i.e., he writes a letter, citing the references he is applying to the claims. Often these references are ones found in the preliminary search. This first Office Action is usually rendered more than a year after the application is filed. The attorney obtains copies of the references cited in the Office Action and studies them. The Examiner's search, which is more exhaustive than can be afforded in a limited search prior to filing an application may turn up closer references than were found in the preliminary search of the type above recommended, in perhaps only one-out-of-four or -five cases. If an applicant turns in paperwork late, he or she may have to pay additional fees up to $1840.00

Based upon the Examiner's references, the attorney may recommend that the application be abandoned at this point. Based upon his judgment that the Examiner's references can be distinguished and upon an assumption of the client's continued commercial interest in the invention, the attorney may recommend that application be further prosecuted. However, it often happens that during the year or more between first filing of the application and the first Office Action, the client finds he has developed a new idea that is better than the one disclosed in the patent application, or the client finds that he has proved the market potential of his invention to be markedly less that earlier thought, and for these or other reasons determines that the application should be abandoned even though at least some scope of patent protection may still appear to be available.

C. Further Prosecuting the Application

Sometimes the Examiner may feel he has a "prima facie" case of obviousness of certain of or all of the claims of application over one or more prior articles or patents and may indicate that comparative testing is needed for the "applicant" to overcome this art whether by surprising results or for inoperativeness as combined. The cost of the comparative testing may become extremely expensive when undertaken by the patent applicant. Chemical and pharmaceutical applications and highly advanced areas of technology often require testing. Often the cost of comparative testing exceeds the costs of professional fees in filing patent applications.

If it is decided to further prosecute the application, the attorney prepares a document to the Examiner which is usually referred to as an "Amendment." This document may amend the application to better distinguish the references cited by the Examiner. It may amend the application to comply with the Examiner's editorial taste. It always includes a discussion of the differences between the references cited by the Examiner and the applicant's invention, and in appropriate cases, it includes a legal argument as to why this particular application should be allowed.

The attorney and the Examiner continue to exchange "actions" and "amendments" of this nature until the application is either allowed or "finally" rejected. This further prosecution of the application after the filing of the original application requires, on the average, about three years, although the time may range anywhere from a year upward. Most of that time lapse is spent awaiting actions by the Patent and Trademark Office.

The further prosecution of the patent application may, in routine cases or simple inventions, cost anywhere from $5,000-$25,000 in fees, perhaps more, depending upon a number of unpredictable circumstances. In involved cases, this prosecution cost can run to $25,000, $50,000 or more. During prosecution, approximately $2000-$4,000 for the docketing and administration of the file may be incurred, even if no counterpart foreign application have been filed.

Many times in prosecution procedural errors occur on the part of the Examiner for a number of reasons. In these instances one may want to file a petition to the commissioner for further review. These types of petitions often entail writing a Brief with expenses up to several thousand dollars. We find that petitions are often filed where the Examiner is seen as unfairly splitting up the claimed subject into several inventions which would result in the payment of several sets of annuities absent successful traversal. Filing and prosecuting petitions may involve several thousand dollars.

The charges for this further prosecution are billed as the work is performed. If the Examiner finally rejects the application, appeals may be taken. An appeal to the Board of Appeals and Interferences may take several days of briefing time and may involve a trip to Washington D.C. for oral argument. Appeals to the Board of Appeals are, statistically speaking, successful only one time in three although the lawyers of our firm have been successful more frequently than this. It is not unusual to spend $10,000-$15,000 for the combination of preparing and filing a Brief and Reply Brief together with a trip to Washington D.C. for oral argument. A further appeal to the Court of Appeals of the Federal Circuit to the District Court of Washington, D.C. may involve considerable additional expense if that becomes necessary. Almost without exception the Court of Appeals for the Federal Circuit is the court of last resort for appeals in patent prosecution appeals.

Upon allowance of all claims, issue fees of $1320.00 for "large entities" and $660.00 for "small entities" are due, in addition to the previous fees which have been charged for filing.

D. Summary of Patent Procedure and Cost

In summary, it may be stated that the attorney's fees, including government fees, for a moderately simple invention covered by a patent application which is subject to routine prosecution can be patented for a figure somewhere between $20,000, including government fees and $40,000. Perhaps half of all simple cases of routine nature are handled within that estimate. But a more nearly average total cost for "average" inventions derived from corporate industry is about $30,000. Note that this sum does not all fall due at any one time, but rather it is payable over a period of years. The average total time which elapses between the disclosure of the invention to the attorney and the issuance of the patent is about five years. It has been our experience that a patent in ex parte may cost anywhere from $20,000, including fees to $250,000 prior to final resolution with the average of $30,000 being the usual. (1998 figures)

E. Maintenance Fees

Upon issuance of a patent, the Patent Office now requires certain renewal fees to be paid during the lifetime of the patent. These occur at 4, 8 and 12 years during the 17year lifetime of the patent. To maintain the patent, fees are due at 3 1/2 years, 7 1/2 years and 11 1/2 years, respectively, from issuance of the patent. In 1998, for a large entity, such maintenance fees for a "small entity" are $525.00, $1,050.00 and $1,580.00, and respectively twice that for a large entity. It is our experience that marketability of a patented idea is determined well before the first maintenance fee is due. The life of the patent cannot be extended beyond the 20-year from filing period, except in limited situations (generally involving new drugs) where governmental agencies delay introduction of the invention into commerce.

IV. OTHER PATENT LAW POINTS OF INTEREST

A. Design Patents

In addition to the usual utility patent that most inventors seek, the patent laws also provide for a design patent. A design patent protects ornamental designs for articles of manufacture. Among the articles of trade which are commonly the subject of design patent applications are apparel and haberdashery, household articles, furnishings, weaving, lamps, packages and containers, games and toys and jewelry. The novelty and non-obviousness requirements of utility patents apply with equal force to design patents. The term of a design patent is 14 years. The cost of filing an uncomplicated design patent application, including formal ink drawings and our services, will normally run between $3,000-$4,000. The filing fee paid to the U.S. Patent Office is $225.00 for a small entity and $450.00 otherwise.(1998)

B. Protection During Pendency of Application

It is unusual for infringement of a patent to develop during the pendency of an application. In view of the recent GATT treaty adoption by the United States (June 1995), the life of a patent usually extends 17 years from the date of issuance of the patent, or 20 years from U.S. filing, whichever is less, speedy prosecution of the application to at least the first granted patent is usually in the client's best interest. It is recommended that continuations, and, where appropriate, continuations-in-part, be used to obtain broader protection after primary protection covering the inventor's commercial device/process is covered by an active grant.

The law affords no protection during the interim period in which the application is pending. But by one of the non-routine procedures, the law does permit a patent applicant who finds that infringement has developed to "make the application special." By this procedure, and oral interviews with the Patent Examiner which are normally undertaken when cases are made special, the application can normally be brought to issue in a few months, rather than a few years, and thus the applicant is usually protected from any long extended term of infringement during the pendency of his application.

Further, if a competitor does undertake infringing manufacture and sales during the period of pendency of an application, he runs a risk of loss of the cost of his tooling-up production, loss of the value of his advertising and loss of value of his inventory on the date the patent issues, which date is normally unknown to him. Thus, if the competitor knows an application is pending covering his proposed operation, he is discouraged from undertaking the potentially infringing operation. It is for this reason that most patent applicants mark and advertise their own products with the notice "Patent Pending" when an appropriate application is on file in the Patent and Trademark Office. It should be observed that there are rather stringent penalties for marking a device or other materials with the notation "Patent Pending" or equivalent expression if an application has not been actually filed. Accordingly, clients should be warned to avoid such marking unless they have been notified that the application has been filed.

But all factors considered, including the value of getting a new invention into commercial development promptly, the owner of the invention should not await the issuance of the patent before undertaking commercial exploitation of it.

C. Deadline for Application Filing

No United States patent application can be filed on an invention which has been disclosed in a printed publication, on sale, in public non-experimental use or in commercial use for more than one year.

In the case of process inventions, the invention is considered to have been on sale or in public use whenever the product of the process has been offered for sale, placed on sale, or in public use, as well as when the process itself has been publicly or commercially used. Accordingly, care should be taken to assure that this grace period of one year for the United States does not expire before the application is filed. If protection is desired in foreign countries, the client must hold up publication and commercialization efforts until after the application is filed since all other ma or countries follow a rule of requiring an application be filed before the invention has been publicly disclosed.

If there has been a disclosure in a publication, a sale of the subject device, or a public or commercial use of the invention, the complete circumstances including the dates of publication, sale or use should be disclosed to the attorney along with the disclosure of the invention.

Most foreign countries lack the U.S. one year grace period in which to file an application after publication, sale, or commercial use. Therefore, if foreign filing is desired, the U.S. application should be filed before the first publication, sale, or commercial use. The application can then be filed in most countries within a year following the U.S. filing date (6 months for design patents) while maintaining the benefit of the U.S. filing date.

D. Infringement of Patents Belonging to Others

Contrary to popular belief, it is possible to obtain a patent on an invention and, at the same time, infringe someone else's patent by the practice of the invention. The limited patentability search discussed above is very limited and does not cover all patents that the subject invention might infringe. The subject matter of an infringement search is different from the subject matter of a patentability search.

Accordingly, if an inventor is contemplating immediate investment in or use of his invention on a substantial scale, then a patent infringement search, as well as a preliminary patentability search, should be performed. On a simple invention, a combination infringement and preliminary patentability search can sometimes be performed for a figure of several thousands of dollars, but thorough infringement studies often cost much more.

E. Evidence of Conception

Occasionally, controversies arise wherein proof of an inventor's conception and the date of his first disclosure to others are required. Excellent evidence of these matters is obtained by making a photocopy of the following disclosure form, and having the photocopy of it read by a friend or lawyer capable of understanding it and executed by him with some phrase such as: "Read and understood, February 30, 1980, Joe Jones," using the correct date, of course. The execution may be on the back or the front of the sheets but should be on each sheet of written description or drawing constituting the disclosure. This procedure has some points of preference over the oft-used idea of the inventor writing a letter disclosing the invention to himself.

It should be emphasized that neither this procedure nor the widely used (but less desirable) procedure of the inventor's mailing a copy of his disclosure to himself, affords any liprotection" in the sense of giving rights to preclude others from use of the invention. This procedure only provides one item of evidence which is always important in priority context cases wherein another person is being asserted to be the first inventor.

Further, all invoices for purchase of materials and parts used in the developmental effort, and other documentary evidence of the continuance and progress of the work on the invention should be preserved. Further, a person who is not a co-inventor should be asked to observe enough of the work and all of the tests so that he can corroborate the entirety of the developmental story. If the corroboration of the development story by a non-co-inventor and documents written by one other than the inventor adequately proves a continuous course of diligence in work upon the invention, then the inventor may get credit for the date of his disclosure to others in a contest as priority of invention.

F. Disclosure to Attorney

Any attorney can work most efficiently, with less expenditure of time and hence at lower charges to his client, if he has the best possible written description from his client upon which to found his work. The best written disclosures to the attorney are those which contain the information requested by the attached disclosure form.

More abbreviated disclosures are, of course, acceptable but when the attorney must work from abbreviated disclosures, he frequently spends more time in conferences and in drafting the application and hence must charge larger fees.

V. CONCLUSION

While the observations made above are quite general in order to keep the memorandum brief, they should suffice to assist in advising an inventor or his employer on the general principles of patent law, as failure to comply with some of the mentioned requirements can result in loss of patent protection.