What are patent renewals all about? And how do they work?

Once a patent is granted, its story is far from finished. Patents require maintenance to keep them ‘alive’ so that the rights in the invention can be enforced. A large part of that maintenance includes payment of renewal fees, also called ‘annuities’ or ‘taxes’ in some parts of the world, and even ‘continuation’ fees under certain circumstances. The timing of their commencement, deadlines for payment and amount differ greatly among countries, so it’s important for patentees to understand renewal requirements for budgeting purposes and to avoid causing a patent or application to lapse.

Here in Australia, annual renewal fees are payable on both granted patents and pending applications to keep them alive. The official renewal fee increases in amount payable as a patent ages. For example, the current renewal fees payable for each of the first three years of an innovation patent are half the amount of those set for each of the last three years. Similarly, the cost of renewal fees for standard patents increases substantially approximately every five years.

Renewals have an important policy role in the innovation ecosystem

There is an important economic rationale that drives both the existence of renewal fees as well as their increase in amount as a patent ages. The fees partly exist to keep the register of patents ‘clean’ meaning unwanted patents or patents that protect less commercially viable inventions do not remain in force for their full term thereby preventing the public’s access to the invention despite a lack of exploitation by the patentee. It has been said that the fees also aim to reduce the strategic use of patents such as by the creation of patent thickets and so-called patent ‘trolling’ – although the strategic use of patents is perfectly legitimate, and in fact in some industries, definitely recommended.

Increasing fees throughout the life of a patent assists in achieving these outcomes, as well as acting as a progressive tax on patents (like rates on a piece of real estate), applicable to those aging patents that are theoretically delivering a commercial benefit to their owners. This policy is perhaps best exemplified by the comparatively high cost of renewals payable on pharmaceutical patents extended beyond their 20 year term. The annual renewal fee on extended pharmaceutical patents in Australia exceeds that payable for each of the last five years of its standard 20 year term by more than $1000.

Portfolio management through renewals

Even after the patent examination process has concluded, because of the significant costs associated with keeping granted patents in force, both in the resources required to manage them and the renewal fees themselves, good patent portfolio management is essential. When a number of renewals become due simultaneously, or perhaps when an aging patent ‘jumps’ to a higher cost bracket, it’s a good time to assess the value in patents. Nobody wants to throw good money after bad, so maintaining a patent in force simply because of the original investment in achieving patent grant is also unwise. Three possible considerations are these:

  • Is the protected invention a commercial success? If so, does the income generated outweigh the cost of renewals?
  • Is a patent worth maintaining for a competitive advantage over a rival operating or innovating in a similar space? While the product covered by the patent might not be in commercial use, is it wise to make it available to others?
  • And on that note, although the patent may not be commercially viable in one business, it might be attractive to another. So before a decision is made to abandon the patent altogether, consider whether income could be generated through sale or licensing of the patent.
What does it cost? Comparison of countries

It’s a good idea to use a reminder system to ensure that renewals fees are not inadvertently missed because, generally speaking, it’s one aspect of patent practice that is not at all the same from country to country. The following covers some key countries for Australians:

 

 

 

 

 

 

 

New Zealand patentees take note: renewal fees are soon to increase in New Zealand. It is expected the new fees will be implemented in the third quarter of 2019 and they will be at least double the current figures. We will keep you advised of developments on this topic.

What happens if you miss a payment by mistake?

There are grace period provisions in Australia and many other countries allowing renewal fees to be paid up to six months after the deadline. However, each month or part of a month the fee is late, an additional late fee is incurred. Interestingly, the six-month grace period (and surcharge) provisions appear in an International Treaty, the Paris Convention, which is well over 100 years old. This means that all countries party to that Convention must allow for late payment of maintenance fees. About 190 countries therefore allow late payment.

As well as a grace period, the Paris Convention also contains provisions for the restoration of patents that have lapsed through non-payment of renewal fees. These apply generally where payment of a renewal was unintentionally missed. Rules and regulations vary country to country and, in some are very tough, so care is required.

Specialist Renewal Providers

Due to the complexity of requirements for patent renewals and the risks associated with making an error, many patentees and attorney firms use the services of specialist external renewal companies, with many such providers on offer. These companies assume responsibility for timely payment of applicable renewals fees in each jurisdiction of their client’s patents. External renewal providers, which do not provide additional attorney services, can be a very cost-effective solution for ensuring payment of renewals.

Renewal Scams

One last thing: patentee and applicant name and address details are readily available on various public patent databases, as are relevant dates and thus expected renewal deadlines. Unfortunately, there are some who take advantage of this information and run very profitable businesses praying on the uninitiated by sending an ‘invoice’ for attending to renewal of rights. Sometimes the renewal fee is legitimately paid by these parties, however their charge for doing so is exceedingly high. IP owners should scrutinise correspondence from unfamiliar parties carefully, especially when the invitation to pay the fee is a long time in advance of the deadline, a tactic used by unscrupulous businesses to bypass ‘normal’ services.

If you need help….

Effective portfolio management is made no less simple by the different renewal obligations in different countries. Watermark works with foreign associates and renewal providers to ensure client’s rights are maintained cost-effectively. Should you have any patent portfolio management needs, including renewals or would like more information, please contact us.

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