IP Maintenance Agreement Best Practices – Part I

annuity and renewal contract

We’ve been working with several companies who are switching maintenance providers, and a common question we receive is “What should we include in our IP maintenance agreement to ensure control of our costs?“. 

If you have the same question, you’re in luck – we’ve put together a two-part series to provide you with everything you need to take control of your maintenance agreements. 

This week, we cover the important cost elements you need to consider and dive into currency. 

Let’s take control!

Take Control of your IP Maintenance Agreements

Switching IP payment providers is time-consuming and risky. That’s why most IP owners stick with their payment vendors for five, ten, and even twenty years.

Payment vendors have decades of experience optimizing agreements in their favor – putting IP owners at a disadvantage when a change happens.

We’re leveling the financial playing field, so this white paper will show you how to take control of the cost side of your agreement.

Your IP Maintenance Cost Levers

PTO service fees – Fees charged by governments are non-negotiable and not included in contract discussions.

Agent Fees – Fees charged by international (legal) associates.

Service Provider Fees – Fees charged by an administrative payment service.

Currency Exchange Fees – Fees incurred converting currency.

The Shell Game

Vendors love to change pricing models and bundle fees together to make it difficult to monitor cost details.

If your vendor is proposing a non-traditional pricing model, that isn’t necessarily bad but is worth a deep dive.

If you receive a really low fee in one area, it is almost always being made up for in another area.

A Reality Check

Vendors are increasingly adjusting their pricing plans towards more sustainable, transparent models.

Lower, transparent FX rates are being paired with double, sometimes triple the service fees that were common ten years ago.

While it is important to negotiate service fees, their impact is minimal compared to currency and agent costs.

Controlling IP Maintenance Currency Costs

IP Maintenance Currency

Every vendor is going to charge you (one way or another) for currency conversion.

There is no standard FX rate across the industry, but most clients can negotiate a currency markup between 3% and 6% depending on volume.

Currency costs are the largest variable cost in your invoice. Failure to include currency controls in your agreement will add 10% to 20% to your total costs.

Your Currency Checklist

Make sure you have the following in your agreement:

  • The amount of currency markup –
    • Usually expressed as a percentage
  • The date of the currency conversion –
    • Usually the invoice date
  • The source of the conversion rate –
    • Bloomberg, OANDA, etc.
  • A currency control/audit mechanism –
    • A quarterly report of FX rates used or FX rates in each invoice line is good. 

 

Note: Invoices that show agent fees, PTO fees, and service fees are helpful, but do little to help with currency control. 

Check Back Next Week For Part II

We’ll show you how to take control of your agent costs and also service fee strategies. Have a great weekend, and see you next week!

This content is strictly informational and is not intended to be, and should not be relied upon as legal advice. Please consult a qualified attorney for specific advice regarding contracts and intellectual property matters.

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