How to cut the budget without losing the intellectual asset farm

In these times of financial uncertainty, many enterprises are obliged to review costs, minimise expenditure (at least in the short term) and try as best they can to preserve the strategic assets of the business for better times. Intellectual assets are not immune from these demands. This article looks at some of the issues and provides some guidance on how to approach this in a rational, structured way.

Strategy, strategy, strategy
A pillar of any intellectual asset management (IAM) system is to assess the strategic value of the assets to the defined business strategy and look at alternative mechanisms for realising value from non-aligned assets. This applies to all businesses, large and small.

If you do not have an IAM strategy or a clearly articulated business strategy that can be applied to assess IP assets, now is an excellent time to develop one. Otherwise, any pruning will be done on guesswork. If you are later asked to explain why a key asset was abandoned, “gut feeling” will not be the answer that anyone wants to hear.

If your company has a variety of IP assets, assessing their criticality against implementation of the strategic plan before making any decisions is valuable and will ensure that valuable assets are not lost inadvertently. One approach is to work through all the assets and score them against how critical they are to strategy (eg, from one to five). A specific set of questions to assess this can be developed. When looking for cost savings, cuts can start at the assets that scored one or two and go deeper only if required.

The nature of IP protection means that some aspects will be cost intensive for certain periods, followed by a period during which nothing occurs. Other assets (eg, registered trademarks) require only infrequent expenditure. If an asset is not currently incurring expenses, or is unlikely to incur costs for the timeframe concerned, for cost minimisation purposes you can ignore it. It may be that some of these assets are not strategic, but could be used to bolster the company’s position by disposal or some other form of exploitation.

In Australia, patent applications are typically pending for some years, irrespective of whether examination has been requested. Abandoning patent cases for which no direction to request examination has been issued or where there is no official action will save no immediate costs. Similarly, registered trademarks that are not coming up for renewal do not incur costs.

Delay may be your friend
Some IP protection steps inevitably require substantial expenditure at a single point in time. In many cases deadlines set out by treaties and in legislation are fixed and sometimes cannot be avoided. International filing mechanisms, such as the Patent Cooperation Treaty for patents and the Madrid Protocol for trademarks, offer an alternative to high national costs, or at least a deferral of them in the case of the treaty.

One Australian example allowing deferral of costs relates to the use of the modified examination system. Once a direction has issued requiring the applicant to request examination, it is possible to defer this for a further nine months, provided that a corresponding case in certain jurisdictions (the United States, the European Patent Office, Canada or New Zealand) is still pending. After this time, a regular examination can still be requested. This can be a cost-effective way to defer examination expenses and push out further prosecution expenses.

What not to do
It can be tempting to operate on the basis of “if I just delay making any decisions, maybe things will get better and I can avoid making this difficult decision”. The problem is that certain costs will increase once extension fees are incurred. Delay in those cases can mean that the cost of action doubles or more. As a result, the limited resources can stretch to only half as much actual productive action as when the decision to lapse or retain is made early. This applies in particular to renewals and extensions of time for responding to the examiner.

Paying Australian patent renewals with a six-month extension, compared to paying on time, will at least double the cost of renewal. This is an expensive way to buy a six-month delay.

What you cannot put off
There are some things on which you should economise only as a last resort, recognising that you are significantly increasing the risk of major future costs. Key examples are freedom to operate searches and advice for a product which is about to be launched, and filing an initial patent application prior to disclosure. These cannot be fixed later and can create a disaster.

In general, decisions made on the run often end up being regretted later. A planned, tiered approach will provide the best answers and should allow the costs to be pruned in the most effective way.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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