Foreign Patents: Necessary for your business?
"Should I patent my invention outside of the United States?" As a patent attorney, this is one of the questions I get asked the most by clients. While each of their situations is different, most of the time my advice to them is the same. Let's explore the issue.
Foreign patents are expensive. Broadly protecting an invention worldwide is incredibly difficult, not only because of the sheer number of countries involved but also because of the burden of having to deal with multiple law firms, patent translations, and often incomprehensible local customs and government bureaucracies in foreign jurisdictions. Over its 20-year life, a typical foreign patent will cost approximately $30,000 to file in English speaking countries and $40,000 to file in countries where translations are required. These costs, of course, assume that the patent application has already been written and formalized for filing in the United States Patent Office.
Over my years of practice, I have developed a set of three questions that I ask clients when advising whether they should invest in foreign patents. My questions are these:
- Do you expect to sell more than $5 million worth of the inventive product in any foreign country?
- Is the product manufactured in a foreign country?
- Is there a contract or other business relationship that requires a patent in any foreign country?
If the answer is YES to any of these three questions, then patent protection in a specific foreign country might be warranted. If the answer to all of these questions is NO, then foreign patent coverage is probably a waste of money.
Let us examine these questions in a little more detail. The first question is “Do you expect to sell more than $5 million worth of the inventive product in any foreign country?” The $5 million threshold is based on the cost of patent enforcement. The average United States patent lawsuit costs on the order of $2 million. If the infringement is in a foreign venue, foreign counsel will need to be hired, translations made, and travel and lodging will be required, along with a host of additional logistical expenses. If the revenue generated is not significantly more than several million dollars, any patent in that country is probably not worth enforcing and not worth owning.
The second question asked when considering whether to file a foreign patent application: “Is the product manufactured in a foreign country?” When foreign manufacturing is involved, there is an increased risk that manufacturing tooling might be misused or trade secrets related to the manufactured products misappropriated. Without patent protection in that country, there is little to stop copied products from proliferating.
An example of this occurred several years ago when a client was having one of their products manufactured in Singapore. Because the product was manufactured specifically for use in Europe and the United States, there were no sales in Singapore. However, after a profitable year or so of production, my client began to notice counterfeit goods finding their way into the Italian marketplace. After hiring a private detective in Singapore, we discovered another Singapore company that was building and exporting exactly identical counterfeit goods. The copies were so exact that a blemish on the inside of one of the plastic panels was copied from the original to the counterfeit. Having a patent in Singapore would have been extremely useful in this instance. As it was, my client, in an effort to save costs, had not filed a patent either in Italy or in Singapore and was thus unable to stop the counterfeiting.
The third threshold question is relationship-based. “Is there some partnership or other business relationship that might require patenting in a foreign country?” For instance, one of my clients sells products in Australia but the amount of sales in Australia is well under the $5 million threshold for any single patented product, and the Australian sales as a portion of total company sales are minuscule. However, as part of the distribution agreement the client has with its sales representative in Australia, the client is required to maintain patent protection in Australia to protect the efforts of the sales representation. The representative believes the only way it can make money by distributing the product is by excluding other competitors from the Australian market through patents.
by Aylin Demirci, Senior Counsel, Carr & Ferrell LLP
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