Patent Annuity Vendor Selection Best Practices

Annuity-Vendor-Checklist

We’re working with a number of companies who are switching or preparing to switch patent annuity providers, so this weekend,  we thought we’d compile our top 5 recommendations for any organization preparing for this journey. 

1. Make sure you understand today's patent annuity commercial models

annuity vendor financial models

A lot has changed in the patent annuity industry in the last ten years. Today’s vendors offer a variety of currency, agent, and service fee options – it’s essential to understand the differences in the various models to identify what is best for your organization. 

Comparatively high service fees coupled with low currency costs are almost always cheaper than low service fee/higher currency cost approaches, but monitoring compliance for any model can be challenging. 

2. Be strategic when doing vendor portfolio comparisons

patent annuity strategy

Most organizations simply package a quarter’s patent annuity payments and distribute the list to vendors for a quote. While there is nothing wrong with this, a more focused, strategic approach can yield additional benefits. 

The portfolio review provides an excellent opportunity to evaluate the two major cost elements for patent annuities: currency costs and agent fees. Therefore, you should make sure that your sample portfolio supports this.  You will want to include a patent for every jurisdiction where you expect to incur currency costs and/or agent fees.  This means that you may need to include patents from other quarters.

This may sound like a lot of work, but the good news is that there are a lot of patents that you can leave out of your cost comparison. For example, if there is no currency conversion, you don’t need to include it – if you pay your annuities in USD, there is limited benefit in looking at the costs of US patents.

You also don’t need multiples of the same type of patent. The agent fee and currency cost for one Chinese patent will likely be the same as for the other similar Chinese patents in your portfolio. 

3. Get your patent annuity contract terms ready - early

patent annuity contract terms

It’s important to play offense with the contract, not defense. To do this, you need to know what you want in the agreement and provide your contract terms to all the vendors during the RFI or RFP process. Before initiating any RFP, please ensure you are prepared with any liability requirements, currency cost caps, agent fees, and other compliance requirements. 

Why is this important? The data is clear:  If you don’t get a currency cap in your contract, you’ll pay 10% more than you would otherwise.  

4. Patent annuity costs are important, but don't be stupid

patent annuity stupidity

Patent annuities can be a significant part of a company’s legal budget, so cost control is essential but only part of the puzzle. If a payment is missed, millions in licensing revenue can go out the door, and that 20k you saved doesn’t seem that significant any longer. 

Understanding your potential vendors’ onboarding processes and risk management strategies is essential, as is understanding the actual payment workflow with your potential vendor. 

If their service doesn’t integrate tightly with your IP Management solution, you may save some money but put an extra burden on your IP team to manage the flow of data back and forth – a potentially risky and time-consuming proposition. 

5. Trust but verify

patent annuity trust but verify

Invoice management and compliance reviews are nothing new to legal, but the complexities of  IP and the lack of transparency by some of the vendors have made compliance monitoring difficult. 

The good news is that times are changing. Most vendors will provide detailed invoices and it is getting easier and easier to monitor invoices for excess costs. 

The bad news is that you have to actually look at your invoices every once in a while. There are a variety of free and paid options to check your patent annuity invoices for excessive costs, but they only work if you use them. 

Don’t squander all of the gains you have made – a simple, free compliance monitoring process will make sure you aren’t having this discussion in two or three years. 

Want to check your annuity invoice currency costs?

Check out our free patent annuity self-audit tool

Need to Look up Exchange Rates?

We recommend OANDA

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