Patent Maintenance Fees: The Good, The Bad, & The Ugly

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Published on 8 March 2018

In Intellectual Property lingo, a patent maintenance fee is an official fee paid at prescribed intervals to a National Patent Office over the lifecycle of a patent application or a granted patent, in order to keep the patent application or the granted patent in force in that particular jurisdiction. It is payable by an applicant or a patent owner (an assignee or a patentee, as the case may be).

Patent maintenance fees are an integral part of the patenting process and may also be referred to as patent annuities, patent renewal fees, or patent annual fees. Failure to pay a patent maintenance fee could have serious and far-reaching consequences, including the patent application or the granted patent being treated as lapsed or withdrawn or abandoned.

When Are Patent Maintenance Fees Due?

Usually, the patent maintenance fee in respect of a particular year is to be paid in advance, at the end of the preceding year. Alternately, it may also be paid after the expiry of the preceding year within a prescribed "grace period", with or without a surcharge. Depending on the jurisdiction, the due date may be calculated based on the date of filing the patent application or the date on which the patent was granted.

What Are the Types of Patent Maintenance Fees?

Patent maintenance fees can be categorized into two types: 1) maintenance fees that are payable before the grant of a patent (i.e. pre-grant maintenance fees); and 2) maintenance fees that are payable after the grant of a patent (i.e. post-grant maintenance fees). While a pre-grant maintenance fee is required to keep a patent application in force, a post-grant maintenance fee is required to keep a granted patent in force.

Further, there is a special type of pre-grant maintenance fees known as "accumulated maintenance fees" or "back taxes", which refer to the maintenance fees for a pending patent application that are retrospectively payable at the time of grant, along with the patent grant or registration or issue fees (where applicable). The main advantage of a patent system with back taxes is its friendliness on an applicant's pocket; the maintenance fees need to be paid only if and when a patent is granted.

Why Should Patent Maintenance Fees Be Estimated Beforehand?

There are several reasons why patent maintenance fees should be estimated beforehand. First, the patent maintenance fees differ from one jurisdiction to another not only in terms of the amount to be paid, but also the timing and frequency of payment. The quantum to be paid, in turn, depends on several factors, such as the type of applicant and whether the applicant intends to license the patent to a willing third party. While some jurisdictions requiring pre-grant maintenance fees may require the payment of a maintenance fee from the first year onwards, the application fee may include the maintenance fees for a limited number of years in some other jurisdictions. Second, the estimation of accumulated pre-grant maintenance fees could be challenging as the fees depend on the time taken to grant, which, in turn, varies substantially from one jurisdiction to another. Cheryl L. Huseman (Senior IP Counsel, Chevron Phillips Chemical Company LP), alluded to this in her talk on "IP Budgets Gone Wild: Best Practices for Managing Global IP Budgets" at the Marcus Evans IP Law Summit in September 2016. Further, even within a particular jurisdiction, the time taken to grant is generally dependent on the complexity of the invention and the clarity with which it has been drafted.

Last, but not least, firms that specialize in providing patent renewal services may utilize opaque billing practices to systematically overcharge their clients, necessitating the accurate estimation of costs for a patent portfolio beforehand, in order to identify any discrepancies in an invoice.

Costs of Patent Annuities by Country

Let us now study the patent annuities by country in the top five patent jurisdictions: China, Germany, Japan, South Korea, and the United States. We shall consider the costs involved in maintaining a patent for the first ten years, based on the World Intellectual Property Indicators 2017 report published by the World Intellectual Property Organization, in which it was found that "between 40% and 43% of patents granted remained in force for at least 6 to 10 years after the filing date." Typically, there are two categories of costs involved: official fees and attorney charges.

For the purposes of this article, we shall consider a patent specification with 15 claims and three independent claims, which is to be filed by a company (i.e. large entity) in each of the five jurisdictions. Further, we shall assume that the applicant does not intend to license the patent. The total estimated maintenance fees that are payable from January 2018 through December 2027 range from approximately $1,350 in Japan to $6,000 in the U.S (Table 1). The estimates are inclusive of Value Added Tax in China, which has been added to the attorney charges.

Patent Maintenance Fees in China

Patent maintenance fees in China begin at the grant stage; the first patent maintenance fee is to be paid along with the official grant fee in respect of the year in which the patent has been granted, with the deadline for the subsequent maintenance fees being the anniversary of the date of filing each year. The estimate shown above is for a patent that will be granted in 2022.

Patent Maintenance Fees in Germany

The first pre-grant patent maintenance fee in Germany is to be paid in the second year from the date of filing in respect of the third year, with the deadline for the subsequent maintenance fees being calculated from the date of filing (the last day of the month corresponding to the month in which the application was filed).

Patent Maintenance Fees in Japan and South Korea

In Japan and South Korea, an accumulated patent maintenance fee in respect of the first three years from grant is to be paid at the grant stage, with the deadline for the subsequent maintenance fees being the anniversary of the date of grant each year (starting from the third anniversary of the grant date). The estimate shown above is for a patent that will be granted in 2021 in South Korea and in 2022 in Japan. Further, an interesting aspect of the patent maintenance fees in Japan and South Korea is that the fees depend on the number of claims in the granted specification.

Patent Maintenance Fees in the United States

Unlike the other four jurisdictions, the patent maintenance fees for a U.S. patent are not payable on an annual basis. The first patent maintenance fee is to be paid at 3 to 3.5 years after the date of issue, with another subsequent maintenance fee to be paid at 7 to 7.5 years after the date of issue. The estimate shown above is for a patent that will be issued in 2020.

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Venkatesh Viswanath (Senior Analyst, Quantify IP) contributed to this article.
Exchange Rates Used: 1 US Dollar = 6.39 Chinese Renminbi; 0.81 Euros; 109.95 Japanese Yen; and 1069.16 Korean Won