As the number of global patent applications continues to increase, we can gain a deeper understanding of how patent holders utilize or abandon these extensive patent assets through studying patent abandonment rates.
Let’s start by understanding the regulations regarding patent annuities. In both the United States and Europe, the protection period for patents is 20 years, but the key is to pay maintenance fees on time. Remember, timely payment of maintenance fees is the “key” to keeping patents valid. Missing the payment deadline can lead to patent invalidation!
In 2014, the United States and Europe lost 86,459 and 37,172 patents, respectively, due to failure to pay maintenance and renewal fees. The patent abandonment rates in these two jurisdictions increased by approximately 35% compared to ten years ago. With the surge in patent applications and grants, the patent abandonment rates have also been on the rise. From 2005 to 2014, patent applications in the United States increased by 47%, grants more than doubled, and the abandonment rate increased significantly. In Europe, the increase in patent abandonment over the past decade (39%) has exceeded the increase in patent grants (21%) due to the increase in application volume.
Next, let’s delve deeper into the reasons for patent abandonment and the latest impact of this trend.
Reasons for Patent Portfolio Reduction
The most common reasons for companies to reduce their patent portfolios include cost control, responding to fluctuations in market demand, and ensuring compliance with the latest regulations. Additionally, some large transactions, such as mergers or large portfolio transactions, bundle a few key patents with less important ones, triggering such changes.
Maintaining aging patent portfolios is relatively costly, so companies are more inclined to retain newer ones. In the United States, maintenance fees for patents are $1,600, $3,600, and $7,400 at the 3.5th, 7.5th, and 11.5th years from patent grant, respectively. In Europe, annual renewal fees must be paid to the national offices of European Patent Convention contracting states. The annual cost depends on the number of countries where the patent is maintained, which can be substantial. With all 38 countries contributing, the cost in the 20th year will exceed €20,000. The purpose behind this increasing fee structure is to encourage patent holders to abandon patents that are no longer in use.
Companies also monitor changes in demand for their patented products or services in the market. Changes in demand may stem from technological advancements, adjustments in market geography, or obsolescence of products and services. Factors influencing patent maintenance decisions include the nature and value of the protected products and services, and the cost and revenue of each patent are typically evaluated on a per-jurisdiction basis. The company’s development goals and commercialization strategies often determine the reduction of the patent portfolio.
Companies also respond to changes in patent office regulations. In recent years, there has been an increasing number of lawsuits filed by patent assertion entities, leading to a series of changes in the U.S. patent system. The latest regulatory reforms have made challenging granted patents easier. Although these changes are positive, the increase in the U.S. patent abandonment rate in 2013/2014 indicates their impact on patent portfolio management practices.
Patent Abandonment Rates
In terms of the total number of valid patents, the 10-year average abandonment rates in the United States and Europe reached 1.3% and 5.9%, respectively. Europe’s abandonment rate is relatively high, possibly because of the higher maintenance costs there, and patent holders are only willing to maintain patents in a limited number of member states. Currently, the total renewal fees in the three major European Patent Convention contracting countries (Germany, France, and the United Kingdom) are approximately $28,300, while the total maintenance fees in the United States are only $12,600. Additionally, maintaining a patent in European Patent Convention contracting countries becomes more expensive in the later years. In the three major contracting countries, 83% of the total costs are concentrated in the last nine years of the patent’s lifecycle.
Maintenance costs are the primary consideration for companies when choosing which patents to continue maintaining and which to abandon. This involves the company’s operational goals and intellectual property budget. Overall, the United States remains the most important patent market because of its relatively low patent maintenance fees, so abandoning a patent there could mean missing out on many potential opportunities. In European jurisdictions, the cost-effectiveness of patents is not as attractive.
Conclusion
Maintaining and abandoning patents are both part of corporate strategic decisions. While continuous payment of maintenance fees is required, abandoning a patent could mean missing out on many potential opportunities. Each decision represents a combination of corporate wisdom and strategy.
(Translation from the original source: IAM. Original article link: https://www.iam-media.com/regionindustry-guide/iam-chinese/3/article/pinggumeiguoheouzhoudezhuanlixuzhanjuece)