By Ben Langlotz | June 1, 2022 | Intellectual Property Advice, Patent | 0 Comments
As an inventor myself, I know the enthusiastic feeling that your invention is going to be an incredible success, and wouldn’t it be a tragedy if you had only the US market protected and the rest of the world was knocking off your invention willy-nilly without paying you a penny. Unthinkable, right?
But good business decisions are about costs and benefits, and in most cases there’s a big difference between the US patent decision and the International “upgrade” decision. Compared to the still-significant investment to get a US patent, the international investment can be far greater, and the rewards are usually much less.
The firearms market intensifies this distinction because the US civilian market dwarfs that of the rest of the world. Sure, you could sell your invention to foreign agencies and militaries, but good luck suing the Shanghai police department for infringing your patent rights! Key point: There’s no point in investing in a foreign patent that you can’t enforce.
Every business investment is like a wager at the craps table. Either subconsciously based on your gut, or analytically based on spreadsheet calculations, you usually have some idea about the potential payoff for the investment. Even with all the uncertainties, your gut tells you to make the investment when there’s maybe 10-to-1 (in your favor) or better payoff, and to look for better investments when it’s only 2-to-1 or less, because the uncertainties and your over-enthusiasm probably erase the limited favorability of those apparent odds. For patent protection in the firearms industry (and many others) a US patent decision can often have that 10-to-1 enthusiastic feeling, while foreign rarely rises above 2-to-1. It goes from “no-brainer” to “Hmm, should I?”
On top of this, you probably have much better information and certainty about important market issues in the US, compared to foreign countries. That means that not only are the odds probably a lot less favorable, but you also have more uncertainty about the odds in foreign countries. Will the product be a hit there? Will you be successful in their patent system? Are there other economic factors that might throw you off? A bet that’s a guaranteed 10% payoff might be a no-brainer, but a bet that’s uncertain and could either be a big loss or a somewhat larger win is a poor bet because you aren’t even sure whether it’s a good bet. Foreign patent questions are far more uncertain than those on your home turf.
So, my first piece of advice is not to think of it as a loss or surrender not to pursue foreign protection. It is sometimes the right business decision simply to let it go. In fact, it’s almost always the right business decision to skip it. Read on to learn whether you’re in the rare situation when it might be the right business decision to “go foreign” and venture abroad.
A US Patent Alone Does More Than You Think.
You don’t need a Chinese patent to keep Chinese knock-offs out of the US. A US patent prevents others from making, or using, or selling the patented invention in the US. You can use the customs process to enforce your patent rights, but there’s a much more common way.
If an item infringing your US appears on the shelves of any retailer (say, Cabela’s) the process is simple. After we conclude it’s an infringement, we simply send a short letter to Cabela’s stating that they’re infringing the patent by selling the knock-off. Unlike a competing manufacturer who will hire a patent attorney to pick apart your patent or find reasons their client doesn’t infringe, Cabela’s will probably send an apologetic reply advising that the item has already been pulled from the shelves and removed from the website. I assume they send also their supplier a letter saying: “Take your stuff back, and we’ll sell it only if you can resolve this with a settlement or victory in a lawsuit.” And you’ll never even need to track down their supplier.
There are even simpler procedures for retailers like Amazon and eBay, who will take down infringing goods by the assertion of a patent if you follow their standard procedures – we can handle this, or help you manage the cases if you have a staffer who can develop the expertise. One cool secret is that if you have a shady Amazon seller who fails to reply to an inexpensive first complaint in a lawsuit, you win a default judgment that awards monetary damages. You’d probably think that wasn’t worth anything because it’s hard to find these fraudsters to collect, but here’s the neat thing: Amazon will shut down the payouts of all revenues for all products (even legitimate ones) for that seller until they satisfy your judgment. They will be getting out the checkbook fast to write a check for the full amount you alleged as damages to get their Amazon payments flowing again.
There’s one more way that a US patent reaches beyond our shores. By locking up the US market, you probably make it much less profitable for any foreign infringer to tool up to produce a knock-off because they don’t have access to the biggest firearms market on the planet. Their potential sales volume will be severely constrained, and in many cases, your US patent will stop a foreign infringer from even starting up.
A variant on this is that many well-funded overseas customers (perhaps your best ones) will prefer your world-leading patented product over a knock-off that avoids your patent by manufacturing and sale outside the US. If the Singapore Police Department were looking to buy laser aiming devices for their duty pistols (years ago before the Crimson Trace patent expired) they’re still likely to buy the premium-priced patented product from a US supplier then a half-price knock-off from China, even if no patent applies. Your US patent can make you the rightly perceived preferred product, even if you have no legal power to stop knock-offs.
When to Seriously Consider Foreign Protection
What about an “International Patent”?
You’re not alone if you’re wondering about getting an “international patent”, and the cost. You’ll be disappointed to know that there’s no such thing. Every nation has its own patent system and courts for enforcement. Yes, there’s an international process that makes things easier, and it’s based on the “Patent Cooperation Treaty” (the “PCT”).
Most nations, including the US, are part of the Treaty. This means that applicants from participating countries (“member nations”) get benefits in all the other participating countries.
The first benefit of the PCT process is time. It buys you a year before making the big investments. Any PCT application and all the eventual foreign patents it spawns are treated as if filed (the legal “priority date”) when your first US patent application was filed. That means your own publications can’t be used to reject your application, and you have an advantage on the worldwide “first-to-file” system. BUT… this is based on your first application, which may be a provisional application. So you buy yourself a year, but it’s the same year as you’re using before making the investment in a full US patent application. That often means that the big investment decisions come all at once, I’m sorry to say. But remember that if you’re a typical smart but cash-strapped startup (which means you’re doing it right) it’s very unlikely that foreign protection will be a smart investment.
The big benefit of the PCT process is that it defers the big investments beyond that first year. Each nation has filing fees, translation costs, administrative charges, and lawyer charges to edit the application to optimize it for that nation. These get pushed out by 18 months from the PCT filing date, and that buys you a lot of time to decide which nations in which to invest.
Another benefit is that the PCT process gets your patent application examined, and a favorable result makes it much more likely that your application will be smoothly and more affordably granted in member nations.
But remember that the PCT doesn’t grant patents, it simply examines them to assist member nations. To get a patent in a nation, you’ll still go through that nation’s process.
I recall reading long ago that the cost to obtain and maintain patents in a good number of industrialized nations on a single invention was over $250,000. That number likely hasn’t declined in the decades since, but it’s probably exaggerated because you’re unlikely to need protection in a hundred nations. Or even a dozen. But prepare for a total investment that’s potentially much larger than your US patent investment, even just for a smallish sample of key nations.
The PCT process costs are usually less than the US costs you’re more accustomed to, but they’re just buying time. Therefore, if you know which single foreign nation in which you need protection it usually makes sense to file an application directly in that nation for overall savings. That still needs to happen within a year of your first US filing.
When you get to the “National Phase” (I should replace the S with a dollar sign) you’ll be spending thousands of dollars per nation, and not just a couple thousand. If you hit the decision point on which nations to invest in, and you’re on the fence you might first rule out nations requiring translation because these will cost substantially more. On the other hand, Canada, Australia, New Zealand, and the UK might well be decent markets, and will cost significantly less because they do business in English. Beyond the translation cost keep in mind that when translations are needed, you’ll be trusting our foreign counsel because you (and we) are unable to verify whether the documents filed make sense because we won’t be able to read them. Which takes us back to my advice that you’ll probably want to skip nations where you don’t have a good partner to watch or lead the process. That might not be as important in Canada, but it probably matters more in China or Turkey.
Opportunity Cost – What Else Could You Do with the Money?
Smart economists and investors will remind us that the question is not whether something is a “good” investment having some net payoff or profit. It’s whether your scarce resources are best allocated to that “good” investment or whether there’s an even better investment you can make. Compared to foreign patent applications, your better investment might well be a big CNC machine, or a talented new hire, or a marketing campaign. I’d like to think that it might well be a US patent application on your next great invention. Or maybe even a more aggressive US strategy to protect other aspects of the primary invention that has you thinking about foreign protection.
Every case is an individual one, and I’m always happy to confer with you when you reach the decision point for your own invention. Call me any time.