International Trade: Experts' Advice for Small Businesses Seeking Foreign Patents
Published: 2003-06-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Small businesses, which are important to the U.S. economy for their roles in job creation and technological development, must be able to protect and profit from their innovations. One way to protect their innovations on a global basis is to obtain U.S. and foreign patents. These businesses, however, face numerous impediments when trying to patent their goods or processes abroad. These impediments, which GAO identified in a July 2002 report, include high costs, limited resources, and limited knowledge among small businesses about foreign patent laws and systems. Because of concern that small businesses, particularly high technology firms, were not obtaining patent protection abroad and thus were losing potential sales in foreign markets, GAO was asked to (1) identify the factors that patent law experts believe small businesses should consider as they decide whether to seek patent protection abroad and provide information on how small businesses viewed these factors and (2) identify the steps that small businesses should take to improve their foreign patent efforts, according to our survey of patent law experts.
section_title: What GAO Found
paragraphs: According to the expert panel of patent law attorneys that GAO surveyed, small businesses that are considering whether to seek patent protection abroad should identify and assess the full "cradle-to-grave" costs of acquiring, maintaining, and enforcing foreign patents. Other considerations should include the locations where small businesses intend to sell or manufacture their invention and whether the range of benefits obtained from foreign patents, such as increased sales or higher company value, is sufficient to justify their cost. Furthermore, small businesses should try to understand foreign patent laws and systems and the quality of foreign patent enforcement, the expert panelists said. The small businesses that GAO surveyed agreed that foreign patent costs, benefits, and potential locations were important factors in their decisions to patent abroad. However, some small businesses did not properly evaluate long-term costs and could not determine whether foreign patent benefits outweighed the costs. The most important step that small businesses could take to improve their foreign patent efforts, according to GAO's survey of patent law experts, is to avoid disclosing information publicly about an invention before filing a U.S. patent application. The United States permits such disclosure, but doing so can invalidate an applicant's right to patent protection abroad. The second most important step is to be aware of filing deadlines, which are specified in foreign laws and international patent treaties. Other important steps included integrating foreign patents into long-range business planning and seeking patents in countries where meaningful protection is available and a return on investment is likely.

section_title: Letter
paragraphs: Small and start-up businesses are important to the U.S. economy for their  roles in job creation and technological development. Small businesses,  particularly those in high-technology industries, must be able to protect  and profit from the innovations that flow from their research and  development expenditures. One way to protect innovations on a global  basis is to obtain U.S. and foreign patents. However, in July 2002, we  reported that small businesses face numerous impediments when trying to  patent their goods or processes abroad. These impediments include high  costs, limited resources, and limited knowledge among small businesses  about foreign patent laws and systems. We concluded that such  impediments affect small businesses more negatively than large businesses  and may discourage or prevent small businesses from seeking global  protection for their innovations. In that report, we recommended that the  federal government (1) assess the advantages and disadvantages to small  businesses of making further progress toward patent law harmonization  and (2) make information about foreign patent laws, requirements,  procedures, and costs available to small businesses.
Because our July 2002 report indicated that small businesses that lack a  sufficient understanding of foreign patent laws, processes, and costs may  have difficulty making appropriate foreign patent decisions for their  companies, you asked us to (1) identify the factors that patent law experts  believe small businesses should consider as they decide whether to seek  patent protection abroad and provide information on how small businesses  viewed these factors and (2) identify the steps that small businesses should  take to improve their foreign patent efforts, according to our survey of  patent law experts.
The information in this report is based on the results of a Web-based expert  panel and a small business survey that we conducted for our July 2002  report. The panel was comprised of 39 U.S. patent attorneys whom we  selected based on their experience in obtaining foreign patents for both  small and large businesses. We asked these experts to identify factors that  are relevant to foreign patent decisions and actions that small businesses  can take to improve their foreign patent efforts. We also administered a  questionnaire to a random sample of small businesses that had obtained or  considered obtaining foreign patents in the last 5 years. The 38 businesses  that participated in our survey ranked the importance of various factors to  their foreign patent decisions. Much of the information in this report was  not included in our July 2002 report. (App. I provides further details about  our scope and methodology and the methodology’s limitations. App. II lists  the members of the expert panel.)
subsections: section_title: Background
paragraphs: A patent is the grant of a property right that a national government or an  international intergovernmental authority issues for an invention. Patents  cover inventions of new products as well as new processes to make or use  new or existing products. While patent rights vary by country, a patent  typically gives an inventor the right to exclude others from commercially  making, using, offering to sell, or importing the invention in the country  that granted the patent during the patent term, usually a 20-year period  from the application date. Any violation of that right is considered a patent  infringement. Patent owners that wish to address the infringement of, or to  “enforce,” their patent rights must initiate a legal action in the country or  countries where the infringement occurred.
U.S. companies and inventors that seek patent protection in the United  States file patent applications with the U.S. Patent and Trademark Office  (USPTO). They are typically represented by a patent attorney, who drafts  their patent application and responds to USPTO questions about the  application. Before granting a patent, USPTO will search for relevant “prior  art” (all patent and nonpatent literature that helps determine whether a  new patent will be granted). USPTO will also examine patent applications  to, among other things, determine whether the claimed invention is “new  and nonobvious.” USPTO provides information about the U.S. patent  system to independent inventors that are considering whether to obtain a  U.S. patent, but it does not provide any information about foreign patent  systems.
U.S. companies and inventors that seek foreign patent protection must file  applications with foreign patent offices. These applications must conform  to the patent laws and requirements in the countries where protection is  desired. Foreign patent offices also conduct prior art searches and examine  applications in accordance with their own laws. They generally require  patent applications to be filed in the host country language or translated  into this language at some point after the initial filing. U.S. companies and  inventors typically must be represented before the foreign patent office by  a foreign patent attorney or agent.
section_title: Small Businesses Should Consider a Complex Array of Factors Before Investing in Foreign Patents
paragraphs: Small businesses must weigh a complex array of factors and long-term  issues before deciding whether an investment in foreign patents is  appropriate for their company, according to the patent attorney experts on  our panel. Factors they identified include costs, benefits, location of  foreign markets and manufacturing sites, and foreign patent laws and  enforcement, among others. Our analysis shows that businesses cannot  assess individual factors in isolation but must instead weigh the multiple  factors’ combined effect on their foreign patent decision. Making the  decision more complex, many attorneys said, is the need for small  businesses to assess many long-term issues at the time of their decision,  such as future outlays they will incur and possible changes in current  market or legal conditions over the patent’s life span. Many small  businesses we surveyed recognized the importance of these factors and  incorporated them into their decision-making process. However, some  businesses lacked a basic understanding of the foreign patent process and  failed to adequately assess long-term issues. (App. III contains more  detailed information about the range of factors the experts identified. App.  IV provides information on how the small businesses ranked the  importance of various factors.)
subsections: section_title: Small Businesses Should Identify and Assess Long- Term Costs
paragraphs: Most of the experts said that it is important for small business owners to  understand the full “cradle-to-grave” costs of holding and enforcing foreign  patents and weigh whether such an investment is appropriate for their  company. Several of the experts said that small businesses should try to  estimate the full costs before making any investment in foreign patents,  noting that they have observed that some small businesses make initial  investments in foreign patents, perhaps filing multiple applications abroad,  only to realize that they cannot afford to continue the process. Small  businesses face challenges in learning about foreign patent costs, however.  Many types of costs are involved, foreign fees structures change frequently,  and small businesses typically have limited resources to devote to staying  abreast of these developments, according to several experts. A number of  experts suggested that if a small business cannot afford the long-term costs  of foreign patents, it should probably look for other ways to protect its  innovations or focus solely on the U.S. market.
Foreign patent fees are numerous, and because comprehensive patent law  harmonization is lacking, many fees may be incurred for redundant  purposes, according to our patent law experts. Table 1 shows some of the  source, nature, and purpose for some costs that are typically incurred. The  experts noted that foreign patent office fees often exceed comparable U.S.  fees and are sometimes charged for work that USPTO has already done,  such as searching for relevant existing patents and other literature.  Moreover, although small businesses are allowed to pay reduced USPTO  fees compared with their large business counterparts, they receive no  similar reductions from most foreign patent offices. Patent applications  have to be translated into other languages, and the cost of these  translations can be significant. Business also incur both U.S. and foreign  patent attorney costs, the latter being necessary because U.S. patent  attorneys are typically not allowed to represent clients before foreign  patent offices. Finally, because foreign patent applicants can also file their  applications through certain regional patent offices that cover multiple  countries, such as the European Patent Office, or in accordance with an  international patent treaty (the Patent Cooperation Treaty, which enables  applicants to file an international patent application and delay certain  national patent office charges), additional cost types exist beyond those  shown in table 1.
The total cost of obtaining a set of foreign patents to extend a company’s  U.S. patent protection abroad, and of maintaining those patents over their  possible 20-year life span, is quite expensive, according to our expert  panelists. Depending on the scope of protection desired, each U.S. patent  taken abroad can cost several hundred thousand dollars. (In our July 2002  report, we developed a hypothetical, relatively straightforward patent  scenario to estimate the U.S. and foreign patent costs that a small business  might incur. The results of this analysis are reproduced in this report in  app. V.) The experts advised that small businesses should understand and  examine the various methods that exist to file for foreign patents, as well as  the cost differences between the various methods. Moreover, they should  examine the full life-time costs to hold and enforce their patents, not just  the up-front costs to obtain them.
Among the small businesses we surveyed, foreign patent costs were a  significant factor in, and often the biggest impediment to, their decisions to  patent abroad. The companies collectively identified all cost components,  including foreign patent office fees, translation costs, and U.S. and foreign  attorney charges, as being particularly expensive. Several of the companies  had explored different methods for obtaining foreign patents and many  used the Patent Cooperation Treaty. Despite the importance of cost,  however, we noted that several of the businesses began the foreign patent  process without fully understanding and budgeting for the types and  amounts of costs they would incur in the future. For example, one  company that was attempting to patent abroad for the first time spent  about $80,000 applying for several European patents but said it could not  allocate any more funds to the process and might have to abandon its  applications. Another business described applying for a Japanese patent  without knowing what each step of the process would cost and was  surprised each time its patent attorney said additional payments were due.  This company ultimately asked its patent attorney to fully disclose all steps  and associated costs so that it could better plan for the expenses. Another  company said that ignorance about foreign patent costs is prevalent among  small businesses.
section_title: Small Businesses Should Weigh Potential Benefits and Carefully Select Patent Locations
paragraphs: In addition to cost, the experts said small business should assess the  benefits that foreign patents may provide and should review various  marketing, manufacturing, and competition issues before selecting the  locations where they will seek patent protection. Given the significant  expense of foreign patents, the experts said that small businesses should  only patent abroad if doing so fits with the company’s overall business plan  and if the potential benefits will likely outweigh the costs. Small business  should also develop long-term plans for how they will maximize the benefit  and limit the costs of their global intellectual property portfolio.  Unfortunately, in the experts’ view, many small businesses do not  sufficiently analyze the costs and benefits, do not understand strategies to  minimize cost, and may overestimate or underestimate the value of their  innovations.
One key to maximizing benefits and minimizing costs is the appropriate  selection of foreign patent locations, according to our experts. Many of  them recognized that small businesses may lack the resources to patent in  as many locations as they desire (this was a predominant view among the  small businesses we surveyed). In this situation, the experts advised small  businesses to target their patent resources to carefully chosen locations  that will provide the most appropriate and useful protection they can  afford. Ideally, businesses should seek protection in locations where they  expect to sell or manufacture, as well as possibly import, distribute, use, or  transport their products or services, according to the experts. Businesses  should be mindful of where future markets may develop during the patent  term, an assessment that is admittedly difficult to make, several experts  said. Competitive concerns, such as where current competitors market or  manufacture their products or services, would also be relevant. Other  factors, such as the nature of foreign regulatory environments or the extent  of nonpatent barriers to market entry, would further influence the choice of  foreign patent locations.
Despite this potentially long list of locations to consider, several experts  advised that businesses may be able to select a few key countries from  among their ideal list and achieve sufficiently effective patent protection  for less cost. One expert panelist advised that adopting an overall foreign  patent strategy should aid in the selection of locations, noting that possible  strategies will fall within a spectrum ranging from competitor-driven to  market-driven. According to this expert’s advice, “if non-patent barriers to  market entry are high and the number of competitors is discrete, this is  particularly favorable toward the adoption of a competitor-driven strategy  in which patent applications are filed in countries where the home and  manufacturing bases of the competitors are located . . . protection solely in  countries of competitors is effectively worldwide patent coverage because  manufacturing or sale of all products has been covered. If nonpatent  barriers to market entry are low and competitors are liable to spring up  anywhere on short notice, this militates toward a market-driven strategy in  which patent applications are filed in the most relevant or major markets.”
Among the small businesses we surveyed, the most important decision- factor in patenting abroad was the location and size of foreign markets.  Some distinct patterns emerged among the businesses regarding location.  Pharmaceutical and biotechnology companies, whose products have long  development cycles, generally sought to obtain broad global coverage for  their products, based on future market expectations. Others, including  those in the automotive parts, machine tools and equipment, oil, and  environmental cleanup areas, tended to focus on current markets in a few  countries were their industries were prevalent or their technology was  valued.
While benefits were highly relevant to many small businesses’ decisions,  assessing them was more difficult. Several businesses said that patents  generally offer exclusive rights to market a product or service, thus  supporting high prices to recover research and development expenses.  However, some businesses that had commercialized products could not  identify any measurable benefits that their foreign patents had provided.  One business official said he thought his company might have done just as  well abroad without holding any foreign patents. Finally, other businesses  noted that, due to long commercialization cycles for their products, they  were forced to proceed with the foreign patent process and incur the costs  without knowing whether their products would succeed and produce any  return on investment.
section_title: Small Businesses Need to Understand Foreign Patent Laws and International Treaties
paragraphs: In addition to commercial concerns, the nature of foreign patent laws and  systems is also important in selecting foreign patent locations, many  experts said. Because foreign patent laws differ, small businesses should  consider targeting their resources toward the countries that offer  appropriate patent protection and meaningful enforcement, the experts  said. To do so, small businesses need to understand how differences  between U.S. and foreign patent laws may affect the kind of patent  protection they can obtain abroad. For example, certain types of  technology can be patented in the United States, but not elsewhere, and  other countries’ patent laws may not offer the same breadth of protection  that a corresponding U.S. patent affords. In addition, small businesses need  to understand how foreign patent systems function to avoid developing  unrealistic expectations about the timing, difficulty, or cost of their efforts.  In our July 2002 report, the experts identified the lack of sufficient  knowledge among small businesses about foreign patent laws and systems  as a significant impediment to these businesses’ efforts to patent abroad.
The panel of experts identified several key aspects of foreign patent laws  and systems and of international patent treaties that small businesses  should understand. For example, they specified these four factors:  The priority principle – In the case of competing applications for the  same invention, the United States awards the patent to the individual or  entity that can demonstrate it was the first to invent. All other countries  award the patent to the individual or entity that was the first to file a  patent application.
The grace period – The United States allows patent applicants a 1-year  grace period between the first public disclosure of an invention and the  patent application date. Many other countries, however, will not grant  patents in cases where public disclosure precedes the patent application  date. Because of this difference, companies that take advantage of the  U.S. grace period may find themselves ineligible to receive foreign  patent protection.
The availability or nature of patent protection – Some  technologies or processes that can be patented in the United States,  such as business methods and certain software processes or  biotechnology inventions, cannot be patented elsewhere. In addition,  some countries only allow claims (the part of a patent application that  defines the invention) that are more narrow or restricted than what the  United States typically allows.
The strength of enforcement – Various issues, including the strength  of patent enforcement law and the nature of foreign court systems,  affect the degree to which a company can enforce a patent abroad. The  experts noted that some countries have weak or nonexistent  enforcement laws, while others have acceptable laws but slow or  ineffective enforcement processes. Further, the remedies available in  some countries to address patent infringement, such as injunctions to  stop infringement or damages to compensate a company for its losses,  differ from what is available in the United States and may not be  sufficient to counteract the effects of infringement. Finally, differences  in civil litigation, such as whether special courts exist to hear patent  infringement cases or the extent of pretrial discovery, may affect the  ease or quality of enforcement abroad. Table 2 shows a 2003 assessment  by one of our expert panelists of the practical value of patents  (determined according to multiple factors including level of patent  enforceability and sophistication of court systems) in various countries.
Among the small businesses we surveyed, the nature of foreign patent  enforcement was a more important factor to their patent decisions than the  nature of foreign patent laws and systems. Many businesses acknowledged  that foreign patent laws and systems were difficult to understand, causing  them to rely on their patent attorney to tell them what they need to know.
Several businesses indicated important ways in which they had initially  misunderstood foreign patent laws and international patent treaties—such  as believing that their U.S. patent provided them global protection.  Regarding patent enforcement, many businesses said that they avoid  seeking patents in countries with weak patent enforcement, despite the  belief in a few instances that those countries held potentially lucrative  markets for the companies’ products. A few companies’ foreign patents had  been infringed, leading some to take enforcement actions and others to  back out of the market. One company said that, because enforcement  proceedings are so prohibitively expensive, it seriously examines  enforcement regimes and costs as it makes foreign patent decisions.
section_title: Experts Identify Key Steps for Small Businesses to Improve Their Foreign Patent Efforts
paragraphs: Given the challenges that small businesses face in acquiring foreign patents  and the limited resources (including time) that some small businesses  have, we asked the patent law experts to identify and rank various steps  that these businesses could take to improve their foreign patent efforts. In  their role as advisors to small businesses, the experts had many years of  experience observing the foreign patent behavior of small businesses. Of  the 20 items that they ranked, more than 80 percent of the experts  identified six steps that they viewed as the most important actions small  businesses need to follow. As shown in table 3, these included actions  related to the disclosure of an invention, the timing of foreign filing actions,  the way the business incorporates intellectual property into its operations  and manages it, and the selection of countries in which it seeks protection.  (App. VI contains details on all of the steps the experts identified and  ranked.)
The experts gave their highest rankings to two steps related to businesses’  knowledge of foreign patent laws and international patent treaties,  underscoring their view that insufficient knowledge of these issues may  cause small businesses to inadvertently impair their ability to protect their  inventions abroad. First, the experts were unanimous in stressing the  importance of not divulging information about an invention before filing for  U.S. patent protection. Several attorneys noted that small businesses  sometimes disclose information about their invention to assess its market  value or otherwise attract interest in the company or product, only to learn  later that they can no longer obtain foreign patent protection in countries  that do not offer a grace period between such disclosure and the act of  filing a patent application.
Second, the experts also held strong views about the need for small  businesses to understand the steps required under international treaties or  foreign laws and the associated deadlines and to act accordingly.  Applicants or patent holders that fail to observe these requirements risk  losing their patent rights, the experts said. For example, an international  treaty requires patent applicants to file for foreign patent applications  within 1 year of the date of their domestic patent application. Missing this  deadline causes businesses to lose the “priority” rights that an international  treaty conveys and complicates their efforts to get foreign coverage. In  addition, maintaining patent rights abroad requires that patent holders pay  maintenance fees by specified deadlines (these are usually due annually in  other countries, whereas U.S. maintenance fees are due only three times  over the life of the patent). Finally, some countries require patent  applicants to take certain steps that are not required in the United States.  For instance, patent applications in the United States are automatically  examined, whereas in Japan an applicant must request the examination.
Finally, the panelists suggested that small businesses should thoroughly  analyze their long-term business plan and their interest in expanding  abroad, as well as the company’s commitment to holding and enforcing  foreign patents. They recommended that small businesses treat their  patents as assets that should be shed as their value decreases. Specifically,  businesses should regularly review their foreign patent portfolio to  determine whether it makes business sense to maintain each of their  patents given the costs involved.
section_title: Observations
paragraphs: For a number of small businesses, the decision to expand their businesses  by selling abroad is a significant step in the progress of their firm. As part of  that decision, many of these firms must consider the methods available to  protect their innovations, and one of those methods is by obtaining foreign  patents for their products. The processes and costs involved in obtaining  and enforcing foreign patents are complex, however, and often not well  understood, which can negatively affect foreign patent decisions. For  example, the complexity and expense may deter some small businesses  from expanding their business abroad altogether. Others begin the foreign  patent process with limited or insufficient knowledge and make costly  mistakes that they can ill afford. Not surprisingly, we noted that a learning  curve exists—some companies that were patenting abroad for the first time  lacked full knowledge of the foreign patent process, whereas companies  with more foreign patent experience described having learned from  previous mistakes that they had made while seeking foreign patents.
We believe the information in this report is potentially helpful to small  businesses that are considering foreign patents. Even with complete  information about the foreign patent process, the patent decisions are  complex due to the need for information such as product-specific  projections on potential sales in foreign markets. However, the experiences  of other firms and the guidelines from our expert panel should enable small  businesses to better understand the importance of key factors and make  their decisions about foreign patents more systematically.
As agreed with your office, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  issue date. At that time, we will send copies of this report to the Ranking  Members of the Senate Committee on Small Business and  Entrepreneurship and the House Committee on Small Business, and other  interested congressional parties; the Administrator of the Small Business  Administration; and the Director of the U.S. Patent and Trademark Office.  Copies will be made available to other interested parties upon request. In  addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions concerning this report, please call  me at (202) 512-4347. Key contributors to this report were Shirley  Brothwell, Jason Bair, Jeffrey Larson, Rona Mendelsohn, and Elizabeth  Sirois.
section_title: Objectives, Scope, and Methodology
paragraphs: After we issued a July 2002 report on foreign patent impediments that small  businesses face, the Chairman of the Senate Committee on Small Business  and Entrepreneurship and the Chairman of the House Committee on Small  Business asked us to (1) identify the factors that patent law experts believe  small businesses should consider as they decide whether to seek patent  protection abroad and provide information on how small businesses  viewed these factors and (2) identify the steps that small businesses should  take to improve their foreign patent efforts, according to our survey of  patent law experts. We collected information on these objectives in two  ways. First, we solicited information from a panel of 39 U.S. patent  attorneys that we selected because of their expertise in obtaining foreign  patents for large and small businesses. Second, we surveyed a sample of 60  small businesses that had obtained or had considered obtaining foreign  patent protection and received 38 responses. We formulated the questions  in our small business survey based on the information we obtained from  the panel of patent law experts.
subsections: section_title: The Expert Panel
paragraphs: We selected our expert panelists using criteria that included years of  experience in obtaining foreign patents and a record of publishing articles  in professional journals. Based on these criteria, we invited 39 patent  attorneys to be on our expert panel. All accepted. About half of the  panelists were in-house counsel for large or small companies, while the  other half were outside counsel. The combined expertise of the attorneys  on our panel covered a broad spectrum of technologies, including  electrical, mechanical, chemical, pharmaceutical, biotechnology,  semiconductors and computers, consumer products, medical products,  manufacturing, and oil.
We obtained the experts’ views through an iterative Web-based panel that  consisted of three phases. In the first phase, we asked the patent attorney  experts to respond to open-ended questions about broad issues concerning  foreign patents and small businesses, including factors that small  businesses should consider in deciding whether or not to patent abroad  and possible things that small businesses could do better when they decide  to patent abroad. We then performed a content analysis that identified  major themes within the question posed and grouped the themes into  several categories. To maintain standards of methodological integrity, two  coders independently performed the content analysis and then met to  reconcile differences. Any issues that the two original coders could not  reconcile were referred to other independent coders for a final  determination.
In the second phase, we asked the panelists to respond to about 40 close- ended questions that we crafted based on our content analysis. In the third  phase, we asked panelists to expand upon their close-ended responses to  some questions. All 39 attorneys participated in the first phase, which ran  from July 19 to August 28, 2001; 36 attorneys participated in the second  phase, which ran from November 5 to 26, 2001; and 32 attorneys  participated in the third phase, which ran from January 14 to February 8,  2002.
section_title: The Small Business Survey
paragraphs: To answer our two report objectives, we also conducted a survey of small  U.S. businesses. Because we wanted to understand how small businesses  make decisions about whether or not to obtain foreign patents, we  surveyed businesses that had patented inventions in the United States and  had also obtained or considered obtaining foreign patents.
As there is no database of U.S. small businesses that have obtained patents  overseas, we had to identify these businesses using USPTO data on U.S.  patents granted to applicants that had claimed small entity status. To do  this, we screened the patent owners to find out if they were (1) small  businesses, (2) U.S. companies, and (3) interested in patenting overseas.  Given that there were more than 10,000 patents issued to small entities in  1997, the year for which we considered USPTO data, we realized that it  would be impractical to conduct a large, generalizable survey. Instead, we  decided to conduct a small, randomly selected sample of small businesses  that had obtained or considered obtaining overseas patents during the last  few years.
We developed the small business survey based on the patent attorneys’  responses to the second phase of the patent attorney panel survey. We  faxed the survey to 60 businesses in December 2001. In all, 38 of the 60  companies we surveyed responded. We conducted follow-up telephone  interviews with 18 of these small businesses to obtain more detailed  comments about their answers and to understand more about their foreign  patent decisions.
Although we initially randomly selected the sample of small businesses, the  number we ultimately consulted was limited because information was not  available for a substantial number of our sample. Therefore, the  information in this report does not represent the overall set of small  businesses that seek foreign patent protection.
In this report, we present (1) the results of the content analysis of the  attorneys’ open–ended responses about the factors that small businesses  should consider, (2) the results of the attorneys’ close-ended responses  about what steps small businesses should take to improve their foreign  patent efforts and, (3) information and illustrative examples from the  survey of small businesses.
The information presented in this report is based on expert opinion and  secondary sources. We did not independently analyze foreign patent laws  to verify the information provided. The information in this report is not  intended to represent legal advice.
We did our work from May 2001 to June 2002 in accordance with generally  accepted government auditing standards. The information provided during  the expert panel was not time-sensitive, but we did update certain  information where appropriate. For a fuller description of our  methodology, see International Trade: Federal Action Needed to Help  Small Businesses Address Foreign Patent Challenges (GAO-02-789),  appendix I.
section_title: Members of GAO’s Patent Attorney Panel
paragraphs: Andrew C. Aitken, Partner, Venable, Baetjer, Howard & Civiletti,  Washington, District of Columbia.
Robert A. Armitage, Vice President and General Patent Counsel, Eli Lilly  and Company, Indianapolis, Indiana.
Charles Berman, Partner, Oppenheimer, Wolff & Donnelly, Los Angeles,  California.
Robert P. Blackburn, Vice President and Chief Patent Counsel, Chiron  Corporation, Emeryville, California.
Margaret A. Boulware, Shareholder, Jenkens & Gilchrist, Houston, Texas.
Michael J. Buchenhorner, Esq., PA, Palo Alto, California.
Jay L. Chaskin, Of Counsel, Cantor Colburn LLP, Norwalk, CT; Retired  Associate International Patent Counsel, General Electric Company,  Fairfield, Connecticut.
Q. Todd Dickinson, Partner, Howrey Simon Arnold & White, Washington,  District of Columbia.
Mary Ann Dillahunty, Partner, Burns, Doane, Swecker & Mathis, LLP,  Redwood Shores, California.
James A. Forstner, Esq., Private Consultant, Arlington, Virginia.
Kathleen Fowler, Senior Patent Counsel, Immunex Corporation, Seattle,  Washington.
J. William Frank, III, Partner, McCracken and Frank, Chicago, Illinois.
Gary L. Griswold, Chief Intellectual Property Counsel, 3M; President, 3M  Innovative Properties Company, St. Paul, Minnesota.
Samson Helfgott, Director of Patents, Katten Muchin Zavis Rosenman, New  York, New York.
Max D. Hensley, Vice President of Intellectual Property, Gilead Sciences,  Inc., Foster City, California.
David W. Hill, Partner, Finnegan, Henderson, Farabow, Garrett & Dunner,  L.L.P., Washington, District of Columbia.
John H. Hornickel, Chief Intellectual Property Counsel,  Bridgestone/Firestone Americas Holding, Inc., Akron, Ohio.
Alan J. Kasper, Partner, Sughrue Mion, P.L.L.C., Washington, District of  Columbia.
Irwin M. Krittman, Vice President for Patent Administration, Thomson  Multimedia Licensing Inc., Princeton, New Jersey.
Maria C.H. Lin, Partner, Morgan & Finnegan, L.L.P., New York, New York.
Nancy J. Linck, Senior Vice President, General Counsel, and Secretary,  Guilford Pharmaceuticals Inc., Baltimore, Maryland.
Doug Luftman, Corporate Counsel, CIENA Corporation, Cupertino,  California.
Gregory J. Maier, Senior Partner, Oblon, Spivak, McClelland, Maier &  Neustadt, P.C., Arlington, Virginia.
Michael Meller, Partner, Anderson Kill & Olick, P.C., New York, New York.
Ann M. Mueting, Mueting, Raasch & Gebhardt, Minneapolis, Minnesota.
Stephen L. Noe, Assistant General Patent Counsel – Europe, Caterpillar  Inc., Peterborough, England.
Michael J. Pantuliano, Counsel, Clifford Chance Rogers & Wells, L.L.P.,  New York, New York.
John B. Pegram, Principal, Fish & Richardson, P.C., New York, New York.
John H. Pilarski, Group Technology Counsel, Illinois Tool Works, Glenview,  Illinois.
Peter W. Roberts, Founding Member, Roberts, Mlotkowski & Hobbes, P.C.,  Fairfax, Virginia.
Bernard F. Rose, Ph.D., Partner, Lyon & Lyon, L.L.P., San Jose, California.
John M. Sanders, Sughrue Mion, P.L.L.C., San Diego, California.
Victor Siber, Partner, Clifford Chance Rogers & Wells, L.L.P., New York,  New York.
Liza K. Toth, Vice President for Intellectual Property, Matrix  Semiconductor, Inc., Santa Clara, California.
Ann S. Viksnins, Esq., Shareholder, Schwegman, Lundberg, Woessner &  Kluth, P.A., Minneapolis, Minnesota.
Michael Walker, Associate General Counsel, Intellectual Property, E.I. du  Pont de Nemours and Company, Wilmington, Delaware.
Harold C. Wegner, Partner, Foley and Lardner, Washington, District of  Columbia.
Elizabeth C. Weimar, Esq., Of Counsel, Morgan, Lewis & Bockius, L.L.P.,  Washington, District of Columbia.
Daniel N. Yannuzzi, Vice President, Chief Intellectual Property Counsel,  Conexant Systems, Inc., Newport Beach, California.
section_title: Factors Related to the Decision to Seek Foreign Patents
paragraphs: The patent attorney experts on our panel identified numerous factors that  small businesses should consider in deciding whether or not to seek,  obtain, and maintain foreign patents. We analyzed their input and  developed 13 broad categories that we believe captured the experts’  advice. These categories include the location and size of foreign markets;  the benefits of foreign patents; the costs of foreign patents; the nature of  the technology, invention, or product; the attributes of a patent and its  “claims”; the issue of foreign patent infringement and enforcement; the  composition of a company’s patent portfolio; the location of  manufacturing, assembly, and research and development sites; the nature  of foreign patent laws and systems; the regulatory environments of other  countries; the timing of patent applications and relevant deadlines; the  nature of competitive concerns; and the issues of demographics and  cultural differences. In our small business survey, we asked respondents to  rank the extent to which the categories we developed were important to  their foreign patent decisions.
This appendix discusses the various factors that the patent attorney  experts identified, organized into the categories and presented in  descending order of importance as ranked by the small businesses.  Linkages exist among many of the factors and categories, meaning that  small businesses that are making foreign patent decisions probably cannot  and should not assess the factors in any given category without, at the  same time, considering the influence of factors in other categories.
subsections: section_title: Location and Size of Foreign Markets
paragraphs: The experts said that small businesses should consider obtaining foreign  patents in the countries where the current or potential markets for their  product or technology are located. Some experts expanded the list of  considerations beyond markets, saying businesses should consider holding  patents in any country where they plan to import, sell, license, distribute,  use, or transport their invention. They stressed that small businesses  should conduct market analyses in support of their decision and identified  the types of questions that such analyses should address, which included  the following:  How large is a country’s population? Countries with large populations  may be worthwhile targets for many kinds of products or technologies  because of the increased potential for a return on investment.
Is there a match between a country’s consumer base and the item or  technology being patented? For example, one expert observed that  seeking patents on marine engines or boats might not make sense in a  landlocked country without lakes, regardless of population size,  because there would be no real consumer base.
Is the consumer base’s level of technological development sufficiently  advanced to use the item or technology being patented? Small  businesses may wish to avoid countries where the consumer base  cannot use or manufacture or does not value certain types of  technology. (See section on “Nature of the Technology, Invention, or  Product” for further discussion of this issue.)
Are there competing manufacturers already serving this market? (See  section on “Location of Manufacturing, Assembly, and Research and  Development Sites” for further discussion of this issue.)
What is the nature of host country regulation over the item or  technology being patented? For example, do host governments require  regulatory approval for certain items or are they able to impose price  controls? (See section on “Regulatory Environments of Other  Countries” for further discussion of this issue.)
What is the tendency for patent piracy and how strongly are patents  enforced? (See section on “Foreign Patent Infringement and  Enforcement” for further discussion of this topic.)
The experts held varying views about the correct number of markets in  which small businesses should seek foreign patents. According to them,  some small businesses typically patent in too few foreign locations, while  others tend to patent in too many overseas locales. Recognizing the high  cost of foreign patents and the need for small businesses to focus their  resources, several experts said that small businesses should only patent in  the countries where their major markets are located or in a select number  of countries that will give effective patent rights within a region. However,  some patent attorneys held a different view, saying that small businesses  should also consider obtaining patents in countries where markets don’t  currently exist but might develop in the future. One attorney acknowledged  that at the time that foreign patent applications must be filed, it can be  difficult to predict the future direction of foreign markets and the  likelihood of any significant market developments occurring during the  time that a foreign patent is still in force (typically a 20-year period from the  time of application). For example, one panelist said that recent revisions in  China’s patent laws, a country where patent enforcement has generally  been regarded as low, now make China a location where patent protection  should be considered for certain inventions.
section_title: Foreign Patent Benefits
paragraphs: The experts pointed to a broad range of financial or competitive benefits  that foreign patents can provide for small businesses. One expert said that  small businesses need to identify which benefits they hope to achieve by  obtaining foreign patents in order to better focus their decisions. Potential  benefits include protecting the company’s technology, increasing the  company’s value and visibility, making the company more attractive to  investors, and rewarding the inventor or raising the inventor’s profile.  Holding foreign patents can also help small companies secure financing or  possibly be acquired by another company. In addition, foreign patents  enable businesses to demand higher prices, at home and abroad, for their  products or services, expand their market share, and earn revenue from  foreign sale or manufacture activities. Similarly, businesses that hold such  patents can further earn revenue by licensing to others, the right to sell or  manufacture the company’s products or services. Several experts also  highlighted the possibility of enhancing a company’s competitive position  through holding foreign patents. Holding patents abroad may help disrupt a  competitor’s activities, discourage infringement, or provide the company  leverage in future negotiations with private sector or government officials  in other countries.
Many experts emphasized that small businesses should carefully evaluate  potential benefits in order to assess whether these will outweigh the costs  of obtaining foreign patents. Several experts expressed their belief that for  many small businesses, with their often limited budgets, foreign patent  benefits would frequently not exceed costs. In evaluating benefits, one  expert said that the amount of money spent to protect intellectual property  internationally should be commensurate with the amount of expected  international sales. If there are very limited foreign sales, and limited  foreign business, there need not be much investment in foreign patents.  Another expert argued that unless foreign patents can generate a revenue  stream or provide a competitive advantage, their cost is hard to justify. A  third expert stated that, if a company’s main purpose in seeking foreign  patent protection is defensive (that is, to prevent competitors from  obtaining corresponding patents that block the company’s ability to  operate freely), then foreign patents are probably not necessary. If,  however, a company intends to license and receive royalties or hopes to  prevent competitors from entering the market, then a well-planned foreign  patent strategy is essential.
section_title: Foreign Patent Costs
paragraphs: The experts discussed foreign patent costs at length and urged small  businesses to develop an overall strategy for their foreign patent filing and  maintenance activities so that costs can be minimized. Overall foreign  patent costs are comprised of a variety of national patent office,  international, and private sector fees, which when combined represent a  significant expense for large or small businesses. Although understanding  these various fees can be challenging, the more informed a small business  is about the costs, the better able it is to perform a cost/benefit assessment  and to discern whether foreign patents are an appropriate investment.  Some experts explained that many foreign patent costs are incurred at the  front end of the patent life cycle, during the application process, but that  significant costs also continue to be incurred throughout a patent’s lifetime.  The experts identified ways that small businesses can defer costs by taking  advantage of regional or international patent filing options and provided  some cost-saving suggestions for small businesses to consider.
subsections: section_title: Types and Significance of Costs
paragraphs: U.S. companies and inventors that seek to patent abroad incur costs to  apply for, obtain, maintain, and enforce their patents. For example,  national patent offices typically charge fees when patent applications are  filed as well as when they search for prior art (the body of information,  including patent and nonpatent literature, that is consulted to determine  the patentability of an invention), examine applications, and grant patents.  In addition, patent applicants may incur costs to have patent applications  translated into other languages. National patent offices also charge fees,  called “maintenance fees” or “annuities,” to keep a patent active after it has  been granted, typically for a period of up to 20 years. Whereas in the United  States, most Patent and Trademark Office fees are reduced by half for small  entities (defined as a small business, independent inventor, or not-for-profit  entity), most foreign patent offices do not offer similar fee reductions. In  addition to varying national patent office charges, patent applicants must  pay for the services of U.S. and foreign patent attorneys or agents  throughout the process, particularly if they take any enforcement action  related to their patents.
Acquiring foreign patent protection is expensive, regardless of company  size. Companies that patent abroad typically seek patents in several other  countries simultaneously and incur the full range of costs in each location.  According to the experts, many of these costs are redundant or  disproportionate to the benefit they provide—for example, companies may  have to pay each patent office to conduct a patent search, even though  much of the literature searched may be the same. Also, companies may  have to pay for multiple patent examinations, because each country  examines patent applications in accordance with its own laws. Some  foreign patent offices charge fees that do not exist in the United States, and  some fee amounts are substantially higher than corresponding U.S. Patent  and Trademark Office (USPTO) charges. For example, most patent offices  levy annual maintenance fees that increase steadily over the 20-year  lifespan of a patent, whereas USPTO assesses only three maintenance  charges during that time. Finally, several experts said that requirements to  translate patent applications into foreign languages result in significant  expenses that may have little practical value. One expert cited a study that  translations are seldom used and a few experts believed that most parties  who are qualified to read and understand the technical descriptions in a  patent application are able to do so in English or another prominent  language. Another expert noted that a significant benefit of the European  Patent Convention is that all paper work can be processed in English (or  another recognized language), and translations can be delayed until the  very end of the application process.
Given the significant expense, many experts thought it important for small  businesses to be well informed about the full cost of foreign patent  protection, stating that many small businesses focus on the initial costs but  fail to think about long-term costs. Unless small businesses consider the  full “cradle-to-grave” costs of foreign patents, then any cost/benefit  assessments they perform will be misleading. However, one expert said it is  difficult for most U.S. companies to obtain good information about foreign  patent costs and may be particularly hard for small businesses. Moreover,  foreign patent costs change frequently. Another expert recommended using  a software package, known as “Global IP Estimator,” that is designed to  help businesses perform foreign patent cost calculations. Despite such a  tool, however, several experts acknowledged that fully anticipating the true  lifetime costs of holding foreign patents is difficult.
section_title: Strategies to Reduce Costs
paragraphs: The experts also thought that small businesses should strive to understand  and explore the various strategies that exist to reduce foreign patent costs.  First, these businesses need to understand the different methods for filing  patent applications and determine whether one method is more cost- effective than another. Business can file patent applications directly with  each individual patent office in the countries where protection is desired,  or they can file patent applications with regional patent offices that cover  multiple countries (such as the European Patent Office). Businesses can  also file patent applications under an international treaty—the Patent  Cooperation Treaty—that covers 120 countries and is designed to help  streamline the initial patent search and examination functions and  expenses. In the first method, all fees are due directly to the national patent  offices, in accordance with their procedures, within 1 year from the time a  U.S. patent application was filed. In the latter two methods, additional  upfront fees are incurred, but national patent office requirements are  streamlined and costs are delayed. The most cost-effective means will vary  according to patent strategy, including the number and identity of countries  where protection is sought and the nature of the patent application itself.  (See app. V for a more in-depth discussion of filing procedures under the  Patent Cooperation Treaty.)
In addition to exploring patent filing methods, small businesses can  minimize costs in other ways. For example, businesses can try to avoid  incurring translation expenses by focusing their efforts toward countries  where English applications are accepted (that is, Canada, England, Hong  Kong, India). They can limit the inventions they patent or the number of  countries in which they seek protection—one expert suggested carefully  choosing a few countries in which to spend all available patenting money  on getting well-prosecuted, broad patents in those countries rather than  getting narrow patents in many countries. This expert also suggested that  small businesses concentrate their foreign patent efforts on the key  features of a technology that competitors will need in order to be  competitive. Finally, many experts advised small businesses to routinely  examine the foreign patents they hold to determine whether any are no  longer commercially valuable. Such patents could be allowed to expire,  potentially saving the business thousands of dollars in annual maintenance  fees. Several attorney experts advised that small businesses should  evaluate, at every step of the foreign patent process, whether expenditures  could be better spent on other things.
section_title: Nature of the Technology, Invention, or Product
paragraphs: Several experts said that the nature of a company’s technology, invention,  or product needs to be assessed when making the foreign patent decision.  Businesses should consider the importance of a technology, invention, or  product to the company, its competition, or the marketplace, as well as an  invention’s technical complexity and life span. In many foreign  jurisdictions, some types of technology are not considered patentable  material, including business method inventions and some types of software  or biotechnology (see discussion below in section on “Foreign Patent Laws  and Systems”). Furthermore, according to several experts, some  technologies, inventions, or products might be better protected as a trade  secret than covered by a patent.
If the technology, invention, or product that a company seeks to patent is a  core item or is very important to the company’s business, this would argue  in favor of seeking foreign patents, according to several experts. In  addition, if the technology, invention, or product is substantially novel or  more advanced than what is available in the marketplace or is particularly  relevant to a competitor’s business, seeking patents abroad would be  warranted. Some experts said it may be desirable to patent inventions that  are readily detectable (that is, reverse-engineered based on simple  inspection of a product). Similarly, products that can be easily or cheaply  brought to market (that is, where barriers to market entry are low) may  benefit from a broader patent strategy. Some experts said that companies  should also evaluate whether the item they seek to patent is a substantive  versus a marginal addition to their own patent portfolio, suggesting that  foreign patent costs may be warranted in the former case but not the latter.
The experts identified issues related to the technology, invention, or  product that might dissuade companies from filing for foreign patents for  certain items or in certain cases. First, several experts advised that patents  may not be necessary for inventions for which use or manufacture is not  easily detected, and a few well-targeted patents may be sufficient for  products that require substantial capital or expertise to produce. Second,  experts said that small businesses should be aware that in most foreign  locales, the patent application is published at some point after application  but prior to granting a patent (typically 18 months after application). This  creates a window of opportunity, before the company actually has a patent,  for potential infringers to learn about and begin copying the company’s  item. This may be a greater risk in some countries than others. One panelist  suggested that if trade secrets are contained in a patent application, the  invention may be of more value when held as a trade secret (and not  disclosed) for a potentially unlimited time period. Third, one expert  advised against obtaining foreign patents on technologies, inventions, or  products for which there are competing items in the market that already  serve the same function.
When weighed against the amount of time required to obtain foreign  patents, the life span of a technology, invention, or product may either  encourage or discourage companies from seeking such protection. Some  items have a valuable life span of only a few years, such as those in the  telecommunications and software industries, and will produce licensing  revenue only in the early years of a patent. Others, such as those in the  pharmaceutical or biotechnology industries, are in development for many  years and are monetarily valuable only in the latter years of a patent. The  technology, invention, or product’s life span needs to be compared with the  amount of time required to obtain a foreign patent. On average, U.S. patents  are granted about 2 years from the date of application, but patents in  Europe are granted about 6 years from the application date; one panelist  said obtaining a Japanese patent can take up to 10 years. A product with a  shorter life span would be obsolete at the time of patent grant, whereas a  longer-lived product would still be valuable. Investing substantial funds in  foreign patents is naturally more warranted in the latter case.
section_title: Attributes of a Patent and Its “Claims”
paragraphs: Several experts said that small businesses should consider the nature of the  patent itself, including its claims (descriptions or definitions of the subject  matter that the applicant regards as his or her invention or discovery), as  well as its scope and application. Several of the panelists explained that the  broader a patent’s reach (meaning claims with broad coverage), the more  value it will add to the business that holds that patent. This is particularly  true if the claims will likely block a competitor’s ability to develop a  competing product. In contrast, as one panelist said, if claims are narrow  and only provide a limited scope of protection, a patent might be less  significant, and the need for foreign patent protection would be reduced.  Also, the nature of what claims cover is relevant, according to one expert.  For example, if claims cover a product that will be marketed to end-users,  the patent should be pursued. However, if claims cover a research tool or a  key process used to make a final product, it might be better to hold these  items as trade secrets than describe them in a patent application.
Several experts cautioned small businesses to be aware that patent regimes  vary from country to country. As a result, not all foreign patents on a single  invention will contain claims of the same breadth and value, and the  specific nature of what is protected abroad may vary by country. Some  countries do not permit applicants to obtain a meaningful scope of  protection for their inventions by granting only very narrow claims.  According to one panelist, in such cases, the claims are easily “designed  around” by competitors and make patent protection essentially  meaningless.
section_title: Foreign Patent Infringement and Enforcement
paragraphs: Many experts argued that foreign patents are only valuable to the extent  that they can be enforced. Therefore, small business owners should find  out how effective patent enforcement is in the target countries and if laws  and competent infrastructure exist to deal with infringement. This includes  an assessment of the injunction and remedy provisions contained in foreign  law, as well as the capabilities of a foreign government and judicial system  to enforce overall respect for patent rights, particularly for nonnationals.
Additionally, several experts stressed that small companies should assess  their own ability and willingness to enforce patents overseas, because  doing so is complicated and expensive. One important aspect of enforcing  patents is the ability to detect infringement. However, it can be challenging  for small businesses to detect infringement on foreign patents if they do not  have operations overseas. Foreign operations, branch offices, or licensees  can all provide effective means for detecting infringement.
Several experts noted that variations exist in the degree to which patents  are respected and enforced abroad. One expert listed three questions  regarding the quality of patent enforcement in another country: 1. Do infringers know that if they infringe a patent they could be forced by  a court to stop the infringement and pay damages? 2. Are the courts sophisticated enough in patent matters to reliably  enforce patents?
3.
Is it possible to obtain an injunction against infringers, and are  significant damages available?
Because enforcement is an expensive option to pursue, several experts  noted that the outcome needs to be sufficient to make the patent owner  whole. One expert explained that litigation costs are generally high in  Japan, the United Kingdom, and the United States; but only the latter two  countries also award damages that are intended to compensate the  patentee for loss suffered due to infringement, such as lost profits. The  extent of damages awarded in other countries, including many European  countries, is not sufficient to make the patentee whole and bears little or no  relation to the loss incurred. However, another expert countered that the  U.K. and U.S. judicial systems are cumbersome and excessively procedural,  whereas in the German court system, for example, technically trained  judges dispatch cases fairly and promptly. Several experts noted that many  countries are beginning to improve their enforcement of patent rights and  these developments may make certain countries worth considering,  particularly if they present major foreign market potential.
Even if the proper systems are in place, foreign court systems may exhibit  overt or covert discrimination against nonnationals. In one instance, an  expert explained, a client tried to enforce a patent in India against a local  company, but the judge, believing foreign-owned patents to be of limited  social value, developed a hearing schedule that was so tedious, the client  gave up the case.
section_title: Composition of Company’s Patent Portfolio
paragraphs: Small businesses should think about the number of foreign patents they  already hold in a given country, or abroad in general. Some experts  cautioned businesses against having too many foreign patents in their  patent portfolio as this may become unmanageable or may not produce a  return that is worth the substantial investment made. As several panelists  explained, patents can sometimes be outdated if the technology is no  longer in use or has become insignificant. Therefore, several experts  highlighted the importance of periodically reviewing a company’s foreign  patent portfolio. If circumstances have changed, appropriate action (for  example, termination of an application or abandonment of a patent) might  be necessary. Further, one panelist suggested that small businesses should  seriously consider the fact that obtaining and maintaining foreign patents  will significantly increase the workload of the staff involved in looking after  the patent portfolio. For comparison, the panelist noted that many large  companies have substantial numbers of staff solely charged with looking  after their foreign patent portfolio.
However, according to another expert, some businesses are hoping to  become more attractive to larger, international entities by holding as many  foreign patents as possible. The strategy is that larger, presumably  multinational, entities are more likely to buy out the smaller business if it is  holding a large portfolio of foreign patents.
section_title: Location of Manufacturing, Assembly, Research, and Development Sites
paragraphs: Many experts on our panel stated that small business owners should  consider obtaining patents in any country in which they conduct research  and development, or assemble or manufacture all or part of an invention or  product. In this same vein, business owners should also consider the  location of their competitors’ research, assembly, or manufacturing sites.  Further, businesses should consider where the main manufacturing centers  for similar products or technologies are located and seek protection there  to stop unauthorized third parties from manufacturing their invention or  product. Patent protection in such locations is important, because  manufacturing capabilities already exist and unauthorized production  could be quickly and cheaply initiated. At the same time, business owners  need to think about whether new manufacturing sites could emerge  because the nature of their technology, product, or invention is easily  detected, and the cost of setting up a manufacturing process is low. The  level of technical competence among a country’s population is a relevant  factor in making this assessment.
section_title: Foreign Patent Laws and Systems
paragraphs: Small business owners need to understand the nature of foreign patent  laws and systems as they make their foreign patent decisions. Many  differences exist among foreign patent laws, and other countries’ laws are  different from U.S. patent law. Also, the systems set up throughout the  world to process applications and award patents are not the same. Many  experts stated that some small businesses are not well informed about  these differences and how they can affect a business’s ability to obtain  foreign patent protection that is comparable to its U.S. patent protection.  Because patent law is an area under constant development, one expert said  it is important to occasionally review recent procedural, legislative, and  judicial developments in foreign countries to ensure that all current  relevant factors are known and understood. Moreover, small businesses  that understand how foreign patent systems function are less likely to  become frustrated by the foreign patent process.
Foreign patent laws can differ from U.S. patent law in many important  respects. For example, other countries differ from the United States in how  they award patents in the case of competing applications for the same  invention. This is referred to as the “priority principle.” All countries except  the United States award patents to the first inventor to file a patent  application, a method called “first-to-file.” The United States awards  patents to the inventor that can demonstrate it was the first to invent the  item in question. These two systems engender very different patent filing  approaches. One encourages rapid use of the patent system, while the  other does not.
Another key difference between U.S. and foreign patent regimes further  exacerbates the different approaches in the timing of filing patent  applications. Small businesses are accustomed to the provisions in U.S.  patent law that allow patent applications to be made within 1 year of public  disclosure of an invention. But such disclosure may render an applicant  ineligible under many foreign patent laws, which require “absolute novelty”  as a condition of patent grant—in other words, disclosing an invention  publicly before applying for a U.S. patent and securing a “priority date,”  which is sometimes done to attract interest or financing, can violate the  absolute novelty standard applied in other countries. Thus, U.S. patent  applicants that are accustomed to the protections in U.S. patent law that  enable them to move more slowly in filing patent applications should  consider modifying this approach if they desire foreign patent protection.
In addition to these key principles, the types of inventions or technologies  that patents can cover differ among countries. For example, business  method inventions and certain software processes and biotechnological  inventions cannot be patented outside of the United States. Experts also  noted that some developing countries have been slow to grant patents for  pharmaceutical products, and some countries will not allow patent  coverage for methods of medical treatment. One expert said the limits on  patent coverage for cutting-edge technology can be particularly  problematic for small businesses, which often excel in this area. Foreign  patent laws may also differ from U.S. patent law in terms of the degree of  protection that issued patents provide (whether measured by the exclusive  rights granted to the holder or by the breadth of claims that are allowed);  therefore, the nature of protection obtained in each country where patents  are held on a single invention may not be identical.
Further, some small businesses may not understand key international  treaty provisions that affect the timing of their foreign patent filings. In  order to preserve their rights under the Convention for the Protection of  Industrial Property (known as the Paris Convention), small businesses  must file all foreign applications related to the inventions they seek to  patent abroad within 1 year from the date on which their U.S. application  was filed. If they do not file within this 1-year period, they lose certain  international treaty rights. This may, in turn, affect their ability to obtain  foreign patent protection.
Finally, according to one panelist, many countries require compulsory  licensing if a patentee does not commercialize the patented product within  a certain period of time (frequently 3 years). A small business may be  forced to give a license to a competitor to use a technology in which the  small business has made a considerable investment but may only be able to  demand a “reasonable royalty” under the host country laws. In addition,  another expert noted that some developing nations grant patents for much  less than the standard 20 years, which can be a major problem with  products that may take many years to bring to market.
Regardless of the nature of a host country’s patent laws, small businesses  should also understand the strength and competency of the national patent  office and the degree of difficulty that dealing with a national patent office  presents. The strength of the national patent office may be gauged, in part,  by the technical expertise of its examiners, the consistency and quality of  its patent examinations, and the amount of time it takes to grant a patent.  Several experts stated that some foreign patent offices lack sufficient  numbers of qualified examiners. In Taiwan, for example, patent law is not  always properly applied, because examination of patent applications is  contracted out to part-time examiners who are not trained in law, said one  expert. Also, major patent offices, such as the European Patent Office and  the Japan Patent Office, have tremendous workloads and significant  backlogs in processing patent applications (this is also true of USPTO).  Several panelists stated that patent pendency times outside of the United  States range from 3 to 7 years; the average patent pendency period in  Europe is about 6 years. Finally, several experts noted that meeting the  formal requirements of multiple patent offices and dealing with their  bureaucracies is quite challenging. Some experts expressed the belief that  some foreign patent offices practice subtle discrimination against  nonnational applicants. For example, one expert said that foreign  applicants in Japan are not familiar with the use of particular “code” words  and phrases that are used to favor domestic applicants.
section_title: Regulatory Environments in Other Countries
paragraphs: Small businesses should also consider the broader regulatory institutions  within a country and how government policies could influence their  decision to patent in certain countries. One panelist noted that a vast array  of products, including pharmaceuticals, agricultural chemicals, and  telephonic equipment may not be marketed without government approval.  Therefore, the interaction between the regulatory system and patent laws  in a country will affect the extent to which patents are commercially  meaningful and should be considered when evaluating the prospect of  obtaining foreign patent protection. Several panelists said that policies of  protectionism for local industries within a country could also be an  important element to consider, because products might face additional  barriers to market entry despite having been awarded a patent in that  country.
section_title: Timing of Patent Applications and Relevant Deadlines
paragraphs: Small businesses need to understand the timing of foreign patent  application filing and other deadlines and act in accordance with these  deadlines. These include filing foreign patent applications within 1 year of  the time a U.S. application was filed in order to protect an applicant’s Paris  Convention rights and following the time frames and actions established in  the Patent Cooperation Treaty (if applicants file under this treaty). It also  includes taking actions in accordance with the expectations of national  patent offices, such as paying maintenance fees in a timely fashion.
section_title: Competitive Concerns
paragraphs: The expert panelists identified a range of competitive concerns that small  businesses should evaluate when thinking about foreign patents. In  addition to examining the company’s own patent portfolio, some experts  said businesses should try to assess the composition of any competitor’s  patent portfolio. One panelist said that a business owner can judge the  extent to which he or she should patent overseas based on a competitor’s  foreign filings, since companies frequently use patents to trade with other  companies. Another panelist said that the location of a competitor’s patents  may reflect its future business plans.
In addition, as mentioned previously, several on our panel agreed that  business owners should also consider the location of their competitors’  research and development, manufacturing, and assembly sites when  deciding on a foreign patent strategy. One panelist suggested it may be  worthwhile to patent an invention in countries where companies do not  intend to develop or produce their product just to prevent their  competitors from doing so. For example, a small chemical company may  not have a plastics manufacturing plant in Spain, but if the large company  competitor’s plastics manufacturing plant is in Spain, the small company  should protect its innovation in Spain.
section_title: Demographics and Cultural Differences
paragraphs: Small businesses should also consider the population, wealth, size, and  other demographic aspects of target countries when deciding whether or  not to apply for a foreign patent. For example, countries with large or  wealthy populations are worth considering if the potential market size  would be larger or sales more lucrative. However, this would only be true if  the population was likely to use the product. Likewise, some panelists  explained that other demographic elements—such as the level of  industrialization, the degree of technological development, and the  prevalence of political or economic stability and development—could be  useful tools for assessing a country’s potential patent value. Finally, social  or environmental attitudes may be useful indicators of potential patent  value.
section_title: Small Business Views on the Relevance of Certain Factors to Their Foreign Patent Decisions
paragraphs: For our July 2002 report, we asked the 38 businesses that responded to our  survey to indicate the extent to which their company typically considered  certain types of factors when making decisions about foreign patent  protection. Businesses were asked to rank 13 types of factors on a scale  ranging from “little to none” to “very great.” This appendix contains the  survey results and shows the percentage of businesses ranking the  importance of a given factor at each of the five levels on the scale.
section_title: Processes and Costs Involved in Obtaining Foreign Patent Protection: A Hypothetical Scenario for 2002
paragraphs: Companies may obtain foreign patent protection in several ways. The costs  associated with obtaining such protection vary depending on the process  followed, the nature of the patent sought, and the extent of global patent  coverage desired. This appendix presents a hypothetical scenario that we  developed for a small business seeking to patent a single invention abroad.  Our goal was to illustrate a common foreign patent process and to estimate  the costs that a small U.S. business might incur when filing for, obtaining,  and maintaining foreign patent protection in the United States and nine  other countries. We based this hypothetical scenario, in part, on what  several patent attorneys advised us could be considered a “typical” small  business patent application and process.
Our scenario depicts a small company filing for foreign patent protection  for one of its products in six European countries (France, Germany, Italy,  Ireland, Sweden, and the United Kingdom), Canada, Japan, and South  Korea. Patent laws in each of the nine countries cover the technology for  this product, which can be protected with a single patent. The hypothetical  company has already filed its U.S. application for this product. The U.S.  patent application on which the company will base its foreign applications  was relatively short and straightforward, consisting of 25 pages, 5  drawings, and 15 claims (claims define the invention and are what make  the patent legally enforceable). Patents will ultimately be issued in each  country where the company is pursuing protection. In order to keep its  patents in force, the company must pay recurring fees (referred to as  “maintenance fees”) to each national patent office. In our scenario, the  company opts to keep each patent in force for its full term, which is 20  years from the date of patent application filing. (Additional information  about our scenario and methodology can be found at the end of this  appendix.)
Given this scenario, the estimated cost of the U.S. patent, maintained for a  period of 20 years, is about $10,000 (in 2002 current year dollars). The  estimated cost of the foreign patents, maintained for a similar length of  time, would range from about $160,000 to about $330,000 (in 2002 current  year dollars). These are minimum estimates that include patent application  filing and issuance fees, translation fees for applicable foreign patent  offices, maintenance fees, and estimates of attorney and foreign patent  agent fees associated with work related to the filing and paying of these  fees. Actual patent costs for a patent filing strategy similar to our scenario  could be far higher because we assumed that the patent application would  not face a difficult examination process in any of the countries. Thus, our  scenario eliminated many patent office and legal costs that companies  incur in trying to obtain a patent. Actual patent costs would also vary if  certain key assumptions were modified. For example, filing applications in  more than nine countries would increase the cost of obtaining foreign  protection. Also, if a patent application was longer or more complex than  the one in our scenario, the cost to obtain patent protection abroad would  rise because translation expenses and some foreign patent office charges  would be higher. Conversely, if patent protection was not maintained for  the full 20-year term in each of the countries, official fees and attorney fees  to maintain the patent would decrease. The latter condition would reduce  the overall cost of foreign patent protection relative to the U.S. cost.  Finally, these estimates do not include costs that could be incurred from  legal fees payable for litigation associated with possible infringement and  defense of a patent.
subsections: section_title: Estimated Cost of U.S. Patent
paragraphs: The scenario assumes that the small business has already filed its U.S.  patent. As shown in table 4, the minimum cost to obtain that patent would  be about $6,412. This includes U.S. Patent and Trademark Office (USPTO)  small entity filing and issuance fees, as well as attorney charges to prepare  and file the patent application and obtain the issued patent. The minimum  cost to maintain the patent for a 20-year term would be about $3,528. This  includes USPTO maintenance fees that are charged 3 times during the 20- year term after the patent is granted, as well as attorney charges to pay  those fees. In this scenario, 65 percent of the costs are incurred to obtain  the patent and 35 percent to maintain it.
section_title: Filing for a Foreign Patent
paragraphs: A company can acquire foreign patent protection in two ways: (1) by filing  separately in each country or region where protection is desired or (2) by  filing for patent protection in 120 countries at the same time through an  international application established by the 1970 Patent Cooperation Treaty  (PCT), as amended.
Companies may file separately in each country where protection is desired  under the rules established by the 1883 Paris Convention, as amended. Also  known as the Convention for the Protection of Industrial Property, this  treaty is adhered to by 163 countries and gives limited recognition to one  another’s country patent application filing dates. Applicants choosing this  route must file foreign patent applications within 1 year of the date on  which they filed their domestic patent application (known as the “priority  date”). Applicants will face the requirements and costs that each country  imposes upon filing their patent applications. As a result, filing separately  may be cost-effective for those interested in holding patents in only a few  countries.
The second process for foreign filing is through an international patent  application under the Patent Cooperation Treaty (PCT), which the World  Intellectual Property Organization (WIPO) in Geneva, Switzerland,  administers. This treaty is adhered to by 120 countries and facilitates the  international filing of patent applications by centralizing filing procedures  and standardizing the application format. The PCT enables applicants to  obtain an international search report or “prior art search” and preliminary  examination. This is commonly called the “international stage” of a PCT  application. Following this stage, PCT applicants then decide in which  countries they want to hold patents and enter processes in these countries  to obtain such patents. This is commonly called the “national stage” of a  PCT application. Applicants incur PCT fees during the international stage  and national patent office fees during the national stage. However, by filing  through the PCT, applicants can delay paying the national stage fees for up  to 30 months from their patent priority date. This delay allows applicants  more time to assess the value of their invention and the likelihood of  obtaining a patent in a particular country before incurring the costs  associated with obtaining patent protection in that country.
If an applicant desires patent protection in a region such as Europe,  Eurasia, or Africa, the applicant may file with a regional patent office or, if  filing through the PCT, designate a regional office. The European Patent  Convention and the Eurasian Patent Convention are examples of regional  patent treaties that allow applicants to file one single application for the  contracting states within those regions. For instance, the European Patent  Convention and its associated office, the European Patent Office, consist of  27 member states.
section_title: Obtaining a Foreign Patent Using PCT
paragraphs: In our scenario, the company uses the Patent Cooperation Treaty process  for filing its foreign patents. We chose to illustrate the PCT process because  it is a widely used and “typical” method for obtaining foreign patent  protection, according to patent attorneys we interviewed. The PCT process  consists of two main phases, the international stage and the national stage.
subsections: section_title: International Stage: PCT Processes and Costs
paragraphs: The international stage of the PCT process is comprised of several steps, as  shown in figure 1. First, applicants file a PCT application and pay  associated filing fees to a PCT receiving office, as shown in box 1 of figure  1. The receiving office, which is a contracting state, is the authority to  which nationals or residents of that state submit their international  applications. Second, applicants select an International Searching  Authority to prepare an international search report that will provide  information on relevant prior art based on the claims of the application.  The International Searching Authority conducts a prior art search and  issues a search report for the applicant’s review, as shown in box 2 of figure  1. Based on the results of the report, the applicant may decide to continue  or discontinue the patent process in certain countries. Discontinuing the  patent process because of an unfavorable search report allows the  applicant to save on the costs of processing the application in various  countries. However, the applicant may amend the claims of his or her  application and maintain only those that are favorable and likely to result in  the grant of a patent.
Once WIPO publishes the international application, as shown in box 3 of  figure 1, the applicant has the option of obtaining an international  preliminary examination report. The preliminary report provides an initial  and nonbinding opinion about whether the claimed invention appears to be  novel, nonobvious, and industrially applicable. If the applicant decides  not to obtain this preliminary report, the applicant will enter the national  stage of the patent process. If the applicant decides to obtain an  international preliminary examination report, he or she must file a “PCT  chapter II demand.” The issuance of the international preliminary  examination report, as shown in box 4 of figure 1, allows the applicant to  assess the chances of obtaining a patent in a particular country before  incurring the costs associated with pursuing patent protection in that  country.
The costs associated with the international stage include fees payable to  the receiving office for work related to filing the international application,  obtaining the international search report, and designating the national  patent offices where applicants may decide to file during the national stage.  Applicants will also incur U.S. patent attorney fees for filing and any  applicable work corresponding to the PCT process. We will address these  costs in the final section of this appendix. The receiving office sets the  transmittal fee. This fee is payable for the tasks associated with the receipt  and checking of the international application. The fee also covers the  transmittal of application copies to WIPO and the International Searching  Authority. The International Searching Authority sets and receives the  search fees for establishing the international search report. The  international fee accrues to WIPO and is the sum of the basic fee and the  designation fees. The basic fee is for tasks that include the publication of  the international application and the communication of notifications to the  applicant, the receiving office, the International Searching Authority, the  International Preliminary Examination Authority, and national and/or  regional offices. The designation fee is payable for the first five national or  regional offices designated in the application. There is no charge for  designations beyond five.
Our scenario assumes that the United States operates as the receiving  office, as well as the International Searching Authority and the  International Preliminary Examination Authority, for the hypothetical  company’s patent application. Table 5 shows the fees associated with the  international stage of the foreign filing process through the PCT. The  company would pay four designation fees: one each for Canada, Japan,  South Korea, and the European Patent Office. In our scenario, the company  chooses to pursue national stage entry after chapter II processing. This  means that the business will incur the additional costs of having  preliminary examination conducted by an International Preliminary  Examination Authority to further assess the chances of obtaining a patent  for its invention in the desired countries or regions. The additional costs  include two fees payable to the International Preliminary Examination  Authority. The first of these is a preliminary examination fee that accrues to  the International Preliminary Examination Authority for carrying out and  establishing the international preliminary examination report. The second  is a handling fee that accrues to WIPO for carrying out various tasks related  to the international preliminary examination report. The estimated total  cost of the international stage, given this scenario, is $2,100.
section_title: National Stage: National Patent Office Processes and Costs
paragraphs: The national stage is the second of the two main phases of the PCT patent  procedure. For official entry into the national stage, the applicant will be  responsible for paying the required fees to each national or regional patent  office elected, along with the fees associated with furnishing a translation  of the international application where applicable, as shown in box 5 of  figure 1. The applicant may also be required to appoint a patent attorney or  agent in each of the designated offices. (A patent agent is a nonattorney  with technical training who is legally permitted to draft, file, and prosecute  patent applications on behalf of inventors.) Such appointment may be  required if the applicant is a nonresident of the designated office’s  respective country. The deadlines for these requirements are generally by  month 30 after the priority date, but some PCT contracting states may  extend this deadline to month 31. Once these steps are completed, the  company will officially enter the national stage via chapter I or chapter II.  Next, the designated offices will carry out an examination of the  application and either issue or deny the national or regional patent based  on their respective national laws, as shown in box 6 of figure 1.
The costs associated with the national stage include official fees payable to  each designated office for filing the patent application, examining the  application, and granting the patent. The applicant may also incur fees for  the translation of the patent application. In addition, the applicant will  incur costs for any work involving a U.S. patent attorney or a foreign patent  attorney or agent (hereafter referred to as “foreign representatives”). We  will address these costs in the final section of this appendix.
Our scenario assumes that the company will be pursuing patents through  three national offices—Canada, Japan, and South Korea. The company is  also pursuing patents in six European Patent Office member states— France, Germany, Ireland, Italy, Sweden, and the United Kingdom. Table 6  shows the fees associated with the national stage of the foreign filing  process through PCT. Official fees include the filing fee, state designation  fees in the case of the European Patent Office, examination fees, and  patent granting fees. The company will incur translation fees for Japan,  South Korea, and the non-English speaking countries designated in the  European Patent Office; namely, France, Germany, Italy, and Sweden. The  total estimated cost of the fees associated with the national stage, given our  scenario, is $13,417. This does not include costs associated with either U.S.  attorney or foreign representative work.
section_title: Maintaining a Foreign Patent
paragraphs: Maintenance fees, also referred to as “annuities” or “renewal fees,” are paid  to each patent office where a patent has been obtained. Maintenance fees  would be applicable if the business decided to keep a patent granted to it in  force, regardless of how the company filed. Maintenance fees keep the  patent in effect and must be paid on a recurring basis, usually annually for  up to 20 years after the priority date, as shown in box 7 of figure 1. Patent  holders can expect an annual increase in fees charged by each national  patent office for maintaining the patent. If a business decides not to  maintain any of its patents and therefore not enforce them for a full term,  the maintenance fees for each patent would cease from the last year during  which the patent was kept in force.
Our scenario assumes that the company seeks to keep the patent it  obtained through the PCT process in force in each of the nine countries for  a term of 20 years from the priority date. Table 7 provides the total  maintenance fees over 20 years that would be payable to the patent offices  in our scenario, not including attorney fees. The fees would be payable to  Japan, Canada, South Korea, and each country that the company  designated through the European Patent Office. The total estimated cost to  the business for full-term foreign maintenance is $83,543. This does not  include costs associated with either U.S. attorney or foreign representative  work.
section_title: U.S. Attorney and Foreign Representative Fees
paragraphs: Throughout the foreign patent process, the company will incur fees for U.S.  attorneys and foreign patent representatives. Unlike national patent office  fees, which governments typically publish in fee schedules, U.S. attorney  and foreign representative costs may vary widely, depending on a number  of factors. Therefore, they are difficult to estimate reliably. For example,  items such as the nature of the patent sought, the extent of global patent  coverage desired, the foreign patent process followed, and the amount of  time patent attorneys spend modifying patent applications to meet the  expectations of individual patent offices will affect the cost of U.S. patent  attorney and foreign representative services. U.S. patent attorney fees will  also vary throughout the United States. For these reasons, our estimates of  U.S. patent attorney and foreign representative costs are, at best,  approximate.
We presented our foreign patent scenario to, and obtained cost estimates  from, four of the patent attorneys on our panel. We asked them to  estimate the U.S. attorney and foreign representative fees that the  hypothetical company might incur at the international and national stages  and throughout the maintenance phase. Their estimates for the U.S.  attorney and foreign representative charges during the international and  national stages were similar, but their estimates of these costs during the  maintenance phase covered a broader range. As shown in table 8, the total  cost of U.S. attorney and foreign representative fees for the company could  range from under $60,000 to $230,000.
section_title: Total Scenario Costs
paragraphs: The total estimated foreign patent costs to the company in our scenario  ranged from about $160,000 to about $330,000, as shown in table 9. In this  scenario, the company would incur about 35 percent of the lifetime costs to  file and obtain the foreign patents and about 65 percent of the costs to  maintain the foreign patents for their full 20-year term.
section_title: Scope and Methodology
paragraphs: To estimate the U.S. patent costs that a small business might incur, we  obtained relevant fees from the USPTO schedule of patent fees, effective  October 1, 2001. We used the small entity fees because the company in our  scenario would be eligible to pay these lower fees. We obtained estimates  for attorney costs from the American Intellectual Property Law  Association’s Report of Economic Survey 2001. This survey is done every 2  years and, among other things, provides statistics on billing rates and  typical charge for representative intellectual property services. The data in  the 2001 report is based on 1,829 responses. We used the median costs  contained in the survey for actions that corresponded to our scenario.
To estimate the foreign patent costs that a small business might incur, we  developed our hypothetical foreign patent scenario based on information  that we obtained from our small business survey and patent attorney panel,  as well as on input from several patent attorneys. We took this route  because few of the studies that we analyzed about foreign patent costs  were tailored to small businesses. Moreover, because many caveats exist in  the foreign patent process, a scenario enabled us to better estimate costs.  Based on this information and input, we developed what the patent  attorneys advised was a reasonably typical foreign patent scenario for a  small business. This scenario included filing a patent application of average  length and complexity in a limited number of important countries,  reflecting the choices that small businesses have to make because of cost  considerations. We also chose to illustrate the PCT process because it is a  commonly used process that small businesses might follow.
The scenario included a range of assumptions to help narrow the scope of  cost estimates as much as possible, particularly for the patent attorneys  who estimated U.S. and foreign patent attorney charges. These  hypothetical foreign patent scenario assumptions are as follows: 1. The U.S. application consists of 25 pages, 5 drawings, and 15 claims,  including 2 independent claims. 2. Prior art is relevant to the first independent claim and its dependent  claims, but not the other independent claim. 3. The first independent claim and its dependent claims are ultimately  allowed after amendment. 4. One office action occurs. 5. No appeals, opposition, invalidation, scope trials, or the like occur. 6. The issued patent contains 15 claims. 7. The company keeps each of its patents in force for 20 years. 8. The PCT application is filed in the United States. USPTO acts as the  receiving agent and conducts the search and examination.
We included the nine countries in our scenario for various reasons. We  selected Japan because it is an important market, and because we wanted  to illustrate the higher costs that companies face when they seek patent  protection in Japan. We selected Canada because U.S. small businesses are  eligible for lower fees there and can file their applications in English,  thereby avoiding translation charges. We selected South Korea to represent  developing markets where companies may wish to obtain patent  protection. We opted to include six European countries to represent  reasonable but still limited protection in this major foreign market.
We obtained information about the cost of filing a PCT application in the  United States from the USPTO schedule of PCT fees. We used the Global IP  Estimator software published by Global I.P. Net to obtain information on  patent fees in each country included in our scenario. This software  provides estimates of national patent office fees for countries throughout  the world, including translation costs where applicable. We obtained  information about these fees and costs from Global IP Estimator in January  2002. We validated the information in the Global IP Estimator by examining  the WIPO’s PCT applicant guides and published fees and the various  national patent office Web sites. We obtained information about  maintenance fees from WIPO, the European Patent Office, and the national  patent office Web sites. Since many of these sources presented the fees in  the national currency of the respective patent office, we used average  exchange rates for years 2001-2005, and 2006-2020, provided by DRI-WEFA,  an economic consulting firm.
To obtain information about the cost of U.S. and foreign patent attorney  services throughout the process, we surveyed four patent attorneys who  were members of our patent attorney panel. The attorneys estimated,  within ranges of $10,000, the U.S. patent attorney and foreign  representative costs for the international and national stages and the  maintenance phase of our scenario. Although the American Intellectual  Property Law Association’s Report of Economic Survey 2001 contained  data on U.S. patent attorney charges for these services, we did not use this  data because it did not include foreign representative costs.
We have expressed all costs in 2002 current dollars due to a lack of  information about the timing and amount of future expenditures for patent  maintenance and attorney fees. We collected information on the patent  maintenance fees for the United States and foreign countries for the patent  scenario described in this appendix. However, we do not have a breakdown  of the costs on an annual basis, which would enable us to convert this  stream of payments into present value terms. Since a larger share of foreign  patent costs in this scenario accrue in the later years as compared to the  U.S. costs, a present value calculation will result in a greater percentage  reduction in foreign costs than in U.S. costs. Nevertheless, foreign patent  costs still remain substantially higher than U.S. costs.
We also shared our analysis with USPTO officials, who provided assistance  and technical comments.
section_title: Patent Law Experts’ Views on Steps That Small Businesses Should Take to Improve Foreign Patent Efforts
paragraphs: We asked the patent law experts: “What could small businesses do better as  they consider whether or not to seek, obtain, and maintain foreign patent  protection?” We analyzed their responses and developed a list of 20 steps.  We then asked the experts: “How important are each of the following  suggestions for small businesses to consider?” Response options ranged  from “least important” to “most important.” The steps are presented in rank  order in table 1 based on the combined percent of experts rating a step as  “important” or “most important.”
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