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Thursday, 21 May 2015

EPO revises proposals for renewal fees for Unitary Patents -- but does it really make any difference?

A couple of months ago Merpel reported on the first proposal presented by the President of the European Patent Office to the Select Committee of the Administrative Council concerning the level of renewal fees for the Unitary Patent.

This proposal was criticised by some, since in the first 10 years the level of renewal fees was determined by reference to the EPO's internal renewal fees that are payable to the EPO during the pendency of a European patent application before grant, rather than by reference to the (much lower) level of renewal fees payable to national patent offices in respect of a granted patent over the same period. Only after year 10 (by which time the fees, which get higher year-on-year, were themselves much higher) was the level of fees pegged to what would be payable in respect of either 4 or 5 of the top validation countries for European patents currently. 

In response to this, the IPKat has learned that the EPO has now proposed a revised level of renewal fees, which is actually along the lines suggested by the critics of the earlier proposal.  The proposal has been published, but not on the website of the EPO, rather on the website of the law firm Fish & Richardson.  (In the meantime, the IPKat has noticed that the original proposal document from March is available on the website of the law firm Allen & Overy).  

The IPKat is hugely grateful to Bernard McDonald, technical assisant at Gill, Jennings & Every, who not only alerted him to the issuance of the revised propsoal, but also prepared a note about it, which is reproduced below with enormous thanks and a hearty Katpat.  Over to Bernie:

Following discussion of its previous proposals for renewal fee levels by the Select Committee of the Administrative Council in March 2015, the EPO has submitted a set of revised proposals for further consideration.  The proposal document (SC/18/15 e) was submitted on 7 May 2015.

The EPO revisions include reduced fee levels for patent years 2 to 9 and a more comprehensive economic analysis to support the chosen fee structures.

The revised proposals
The revisions address concerns raised over the application of the EPO internal renewal fee level for the early years of patent protection and over the low unitary patent take-up rates used in calculating potential renewal fee income.  The resulting proposals provide “true TOP4” and “true TOP5” levels that include national renewal fees from year 2 onwards, and the previous proposals for a 25% fee reduction for SMEs and a 15% fee reduction where licences of right are available have been retained.

The revised proposals address specific concerns that the initial cost of unitary patents may prove too high and deter otherwise enthusiastic patent proprietors from using the new system.  The revised fees provide a theoretical saving of €2,440 (trueTOP4), €1,660 (true TOP5) or €2,843.75 (SME) compared to their counterparts in the original EPO proposal.  However, while this fee burden reduction is to be welcomed the numbers do merit further scrutiny.

Years 2-5
The lion’s share of further fee savings offered to patentees by the revised proposals are to be realised in patent years 2 to 5.  The “true TOP4” proposal provides 65.8% of further savings in this period, while the “trueTOP5” and “SME” proposals provide 75% and 52.2% in the same time frame.  This clear incentive to select unitary patent protection must be evaluated in light of length of time a patent application is likely to remain pending at the EPO before grant.

The most recently published EPO statistics for 2014 indicate that the median time to grant is 26.2 months, this period being calculated from the check of the request for examination. The period for requesting examination is 6 months from publication of the search report, which takes approximately 5.2 months according to the same EPO statistics.  These data provide a median time to grant of 31.4 months after receipt of an application by the EPO, during which time the proposed savings for years 2 and 3 will be lost.  Any additional delay in search or examination at the EPO would further erode the savings available to the patentee, and it is unlikely that any savings will be available in this time period for applications entering the EPO using the PCT route.

It is possible to accelerate the grant proceedings by paying the examination fee early, eg on filing.  Other steps that are available are a) to waive the right to the option to amend the claims early, b) to waive the obligation to confirm examination should go ahead after the search report is issues, c) to request accelerated processing (PACE) and d) to make use of the patent prosecution highway (PPH).  Waiver b) risks loss of the opportunity to receive a refund of the early paid examination fee on withdrawal after issuance of the search report, and option d) has some administrative burden.

It is clear therefore that the further saving suggested by the EPO in the revised proposals are likely to benefit those applicants who file applications directly in the EPO and who are flexible in adopting procedural approaches to speed up grant of their patents.

Years 6-9
The remainder of further fee savings offered to patentees by the revised proposals are spread over patent years 6 to 9.  These amount to €835 and €415 for “true TOP4” and “true  TOP5” proposals respectively, while the “SME” proposal offers a further saving of €1358.75 in the same period.  Clearly the incentives in the revised proposals are only slightly improved for patentees other than those that qualify for the SME fee reduction, but these may prove substantial if combined with savings in years 2 to 5.

Years 10-20
The revised proposals are unchanged with respect to the original EPO proposals for years 10 to 20.

Economic impact
The EPO’s economic analysis is repeated in the revised proposals to include unitary patent take-up rates identified as “upper+” and “BUSINESSEUROPE”.  The upper+ take-up rate is significantly higher than the EPO’s upper rate, and not surprisingly it yielded a positive forecast for the revised proposals.  The BUSINESSEUROPE rate is slightly below the upper rate used previously by the EPO, and it provides for a positive financial outcome for each of the revised proposals.

Inclusion of these new take-up rates builds a case for the adoption of a renewal fee schedule based on a TOP4 level instead of the higher TOP5 level that many commentators believe will prove too high to stimulate widespread use of unitary patents.

The Select Committee must choose between the TOP4 and TOP5 levels as the basis for the new renewal fee level, and it is likely that its decision will ultimately rest upon the take-up rates it expects to see once unitary patents become available.

The numbers indicate a clear saving for unitary patentees under these revised proposals as compared to the original EPO fee levels.  However, the amount of such savings will be determined by the filing route chosen and the efficiency of the EPO.  Significant savings will be available to innovators who file applications directly at the EPO and this should provide a clear benefit to European applicants.

In addition to the matters pointed out by Bernie, this Kat notes that the reduced fee proposals apply disproportionately in the early years, and so benefit in particular industries with short product lifecycles where patents are less likely to be maintained after, say, the first ten years.  Is this a sign of effective lobbying by those groups?  As usual, dear readers, over to you.


Anonymous said...

When will you people finally realise that renewal fees have to be set at a "healthy" level so that BB can finance his "investigations" with the assistance of the Control Risks Group?

SOSforepostaff said...

Have you seen the latest documents on SUEPO available on which report that staff reps and unionist are currently being investigated by an external company ?????

Meldrew said...

The Select Committee must choose between the TOP4 and TOP5 levels as the basis for the new renewal fee level,

No they don't. They must choose a fee schedule in accordance with the regulation.

It is by no means clear that Top 4 meets that requirement, and indeed such a level could provide the EPO with a windfall as a large number of those who currently validate in DE+FR+GB find the cost of filing a translation a reasonable price for broader territorial protection at roughly equivalent value for money in renewal fees. See CIPA PatCom tweet..

Old Man said...

If one looks at the origin of applications in the European system, one will realise that in the last few years, the applications of European origin when down from 50% to 35%. Even if for the time being, the proportion of granted EP patents is still 50/50 European origin/outside Europe origin, it will eventually follow the same trend.
How many of those patents actually stem from SMEs, universities etc.. which should obtain a fee reduction?
When politicians consider that the UPC will promote innovation in Europe, either they are not correctly informed, or they do not know what they are taking about, and simply want to look good in front of their audiences. In all honesty, they cannot believe in such bla....
The UPC will make it easier for foreign nations to enforce their IP rights in Europe, but it is difficult to see how Europe will thereby promote innovation. But then it will be too late.
In any case, what is happening with the renewal fee is a further example of the egoism of the member states. Yes it should be cheaper, but I do not want to see my income in renewal fees reduced. And the EPO does not want to loose on income....

Anonymous said...

Of course "true" TOP4 and TOP5 is EPO double-speak for only those countries participating in the UP - i.e. excluding Spain and Italy which are validated more often than NL and SE.

However Renewal fees in NL and SE are higher than in ES or IT. So the costs comparison between the current system and the UP system above are significantly flawed for real users who will probably still continue to validate in ES and IT. Will they want to pay for another 4 or 5 fees on top i.e. a total of 6 or 7 renewal fee equivalents?

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