Patent Annuity Service Fees
Don't Expect Something For Nothing
This week, we wrap up February’s deep dive into patent maintenance costs and discuss patent annuity service fees. On the surface, these are pretty straightforward – but there is often more to them than meets the eye.
What Are Patent Annuity Service Fees?
IP owners are charged a service fee when they leverage a third party to make annuity payments. For a small portfolio, the fee can be several hundred Dollars/Euros per payment, but larger portfolios are usually only charged a few Dollars/Euros per payment.
Twenty years ago, any discussion about service fees usually only involved discussing the traditional model above. These days, there are several different service fee models, some of which include currency locks, agent fees, and even official fees – but the traditional model is still dominant.
When Is a Low Fee a Red Flag?
Over the years, there has been a race to the bottom with patent annuity service fees. At first, this sounds like a win for customers, but, as mentioned above, there is more to the story. The reality is that most vendors can’t cover their costs with low service fees, so other, less-obvious, and sometimes less ethical costs go up.
Some vendors use annuity payments as a “Loss Leader” to land higher-margin software or services work. This is increasingly common as industry consolidation has created vendors that can offer a bundle of IP software and services.
It gets murky when vendors increase currency costs or add additional country fees to generate revenue without disclosing this to you. Invoices are generally difficult to decode, so it can be difficult to know if you are being charged a lot for currency or agent costs, but one clue is the amount of your service fee. If you are paying a low single-digit fee, there is a good chance you are paying more than normal for currency and/or agent fees.
What You Need To Do - Now!
Service fees are normally in your agreement, so they are easy to locate and understand, but they are only one piece of the puzzle. Here are three tips to ensure you aren’t being charged more than expected.
- Require that your annuity vendor break out service fees, official fees, agent fees, and currency costs separately
- If your service fee is in the single digits, spot check payments for hidden costs
- Revisit your annuity agreement annually and adjust language and fees to ensure transparency
Disclaimer
This post 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 any intellectual property matters.
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