25 February 2018

How Much Should a Patent Application Cost?

Juggling DollarsI recently wrote about IP Australia’s new Engaging an Attorney Toolkit, which is an online ‘guide on how, why, what and when to engage your patent attorney’ that is intended primarily to assist people and businesses with minimal knowledge and experience of the patent system in preparing to engage with an attorney.  The toolkit includes a section entitled ‘6 Myths about getting a patent’, the first of which is that ‘a patent will cost me hundreds of thousands of dollars’.  The myth-busting reality, according to the toolkit, is that ‘prices vary, but the cost of drafting and filing an initial patent application (known as a provisional application) for your invention typically costs somewhere between $3000 and $6000.’

Is this information correct?  Or – as one commenter suggested – is a price range of $3000-$6000 liable to create unrealistic expectations, particularly for those prospective clients looking to engage with a major attorney firm?

The toolkit’s estimate is not, in fact, unreasonable, in the sense that the median cost to have a patent specification drafted by an Australian patent attorney is almost certainly somewhere in the range given.  But it is also true that costs for a substantial proportion of all specifications drafted in Australia would fall outside this range.  There are individual attorneys and small firms that might be willing to draft a patent specification for a technically simple invention for as little as $2000.  At the other extreme, an experienced attorney at a top-tier firm might end up charging $12,000 or more for a specification for a complex invention in a sophisticated and challenging field of technology.  Since many attorneys charge by time, and hourly rates vary significantly with experience and across different firms, there are no hard-and-fast rules about what a patent application may cost.

There are, however, hard-and-fast rules about what a patent attorney must tell a client up-front about who they are, how they work, and how much they will charge.  It is timely to mention this, because the new Code of Conduct for Trans-Tasman Patent and Trade Marks Attorneys 2018 just came into effect, on Friday 23 February 2018.  All registered patent attorneys in Australia and New Zealand are subject to the Code, which requires (among other things) that they inform each new client, in writing:
  1. that they are, in fact, registered as a patent attorney, and are bound by the Code;
  2. that they have appropriate competency to perform the work required by the client, including suitable expertise in the technology of the invention;
  3. whether the attorney works for an incorporated firm and, if so, whether it is privately or publicly owned;
  4. whether the firm for which the attorney works is part of a group of commonly-owned firms and, if so, the identity of the other members of the group; and
  5. the procedures, timing and estimated cost of doing the work required by the client.
(With regard to registration, prospective clients should also be aware that Australian law effectively prohibits anybody who is not a registered patent attorney from drafting patent specifications on behalf of others.  In particular, under subsection 201(1) of the Australian Patents Act 1990 only a registered patent attorney or legal practitioner may act as a patent attorney in Australia, and section 202 further provides that, other than in very specific circumstances, ‘a legal practitioner must not prepare a specification, or a document relating to an amendment of a specification’.)

So any prospective client can be assured of being made aware of anticipated costs before any work commences, and can, if they wish, shop around for the best deal.  But how is a newcomer to the patent system to determine what is reasonable, given the very wide range of cost estimates that may be provided?

Patent Attorneys are Highly-Qualified Professionals

Australian patent attorneys are required to possess a high level of academic qualification that provides detailed knowledge (both in breadth and depth) of a patentable field of subject matter.  In practice, this generally means the completion of at least a bachelor-level qualification in either science or engineering, with a major relevant to at least one field of patentable technology, at a reputable tertiary institution.  Many attorneys also have postgraduate qualifications and/or a number of years of commercial or research experience before coming to the profession.  The purpose of the technical requirements is, of course, to ensure that a patent attorney has the necessary skills and knowledge to understand a client’s invention sufficiently well to ensure that it will be adequately described and protected in a patent specification prepared by the attorney.

Patent attorneys also have to satisfy knowledge requirements in relation to relevant aspects of intellectual property law and practice.  For most attorneys these days, this involves completing a further course of tertiary study roughly equivalent to a masters degree – many in fact now obtain a Masters in IP Law from either the University of Melbourne or the University of Technology Sydney.

Prior to registration, a patent attorney must also gain at least two years of practical experience under the supervision of one or more registered patent attorneys.

When comparing attorneys and costs, prospective clients should therefore keep the following factors in mind.
  1. Becoming a patent attorney involves a significant commitment, in terms of time, study, and lost earning opportunities in other roles for which the attorney is already highly-qualified.  Do not, therefore, expect any patent attorney to be ‘cheap’!
  2. While a patent attorney must have appropriate technical knowledge, there may be little additional value in over-qualification.  For example, if the invention is a simple mechanical device, an attorney’s PhD in nuclear physics is probably not a relevant consideration.  It would be an entirely different matter, of course, if the invention were a containment system for a fusion power generator.
  3. On the other hand, experience as a patent attorney is highly relevant, regardless of the technology of the invention.  There are good reasons why a minimum period of supervised practical experience is required prior to registration, and while it may take only a few years to become a patent attorney, it takes many more to become a good patent attorney.
Choosing an attorney on the basis of a low price alone is therefore unlikely to be a wise idea.

Patent Attorneys and Firms are not All Created Equal

In Australia, clients have a variety of choices when it comes to different types of patent attorney practice/firm, and service styles.  As I recently discussed, there are eight trans-Tasman firms that employ 25 or more attorneys.  At the other end of the scale, there are over 100 firms and solo practices employing three or fewer registered attorneys.  Among the mid- to large-sized firms, there are choices between incorporated and unincorporated structures, as well as between wholly ‘independent’ firms, and firms that provide independent attorney services while being held within common ownership groups.  Currently, all of the group structures are operated by publicly-listed entities, although these is no reason why similar structures could not be privately-held.

In any event, all of these different arrangements exist for a reason, and each potentially offers different advantages, disadvantages, and levels of service. 
  1. Larger firms generally have higher overheads, and therefore may charge higher rates.  On the other hand, these overheads generally include various in-house support services that allow attorneys to focus more on what is most important to their clients and leave the day-to-day operation of the business and its infrastructure to others.
  2. Mid- to large-sized firms are generally more able to provide a team-based approach to client service, ensuring continuity when individual attorneys are absent due to business, holidays, or illness.  Less experienced attorneys in such firms also have the benefit of being able to consult with more experienced attorneys when trying to find the best solutions to their clients’ problems.
  3. Clear benefits to clients of group ownership arrangements may not yet have had time to emerge.  However, one typical objective of such structures is to consolidate shared infrastructure and non-attorney services within the group, and therefore to reduce overhead costs to the individual attorney firms.  All else being equal, therefore, in a competitive market a firm within an ownership group may be able to offer a better deal than an equivalent ‘independent’ firm.
  4. On the other hand, for some clients complete independence of their patent attorney firm may be an important consideration in itself.
  5. Solo practitioners and attorneys in small firms with lower overheads may be able to provide cheaper services.  They may also endeavour to provide a more ‘personalised’ service to small clients.  On the other hand, more of their time and attention may be occupied by business operations, and they may be unavailable at times due to absences.  Small practices may also offer a more limited range of services compared to some large firms.  However, these factors may be of lesser importance to clients such as small businesses and individual inventors.
Accordingly, there are potential service benefits associated with the larger firms, which generally charge higher rates.  However, these service benefits do not hold the same value to all clients.  While a bigger firm, with its fancier offices, and more prestigious name, may well offer advantages that justify a higher price tag, choosing an attorney on this basis alone could be just as bad an idea as going for the cheapest estimate.

Conclusion – Keep an Eye on the Future, not Just the Price

As a case study in the Engaging an Attorney Toolkit reveals, the process of obtaining patents in Australia and other markets of interest is complex, and takes many years.  Indeed, the relationship between a client and their patent attorney may last longer than many marriages!  (And, equally, when they do not work out, client-attorney relationships have been known to end with a similar degree of acrimony.)  Choosing a patent attorney is therefore about much more than the cost of the initial patent application.

As an expected range of ‘typical’ costs to prepare a patent specification, $3000-$6000 is not unreasonable.  However, a prospective client should not be at all surprised if they receive a cost estimate that falls outside this range.  I have been working with a company that recently accepted an estimate of US$10,000 (A$12,750 at the current exchange rate) to have a specification drafted by a US patent attorney.  This estimate was reasonable in view of the technical background, skill, and experience that the attorney brought to the work, and the importance of the invention to the company.

There is no ‘right price’ for a patent application.  But whether the estimate is $2000 or $12,000, a prospective client needs to understand why the cost is what it is.  In Australia, under the current Code of Conduct, a patent attorney is obliged to provide much of the basic information necessary to enable the client to understand the likely costs and benefits of engaging the attorney/firm.  Other sources of information, such as the attorney’s web site and/or their LinkedIn profile, may help to fill in additional details of their knowledge, skills, and experience.

At the end of the day, however, if someone is looking to engage a patent attorney, and they cannot work out why the attorney is worth what they are proposing to charge, by comparison with alternative service providers, then the thing to do is just to ask!  If a patent attorney cannot justify their charges, then that is surely telling in itself.


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