Unitary patent fees: true top 4 fee schedule

The EPO has now answered this question with an announcement on 24 June 2015 that unitary patent renewal fees will be set using the so-called 'Top 4' fee schedule. This schedule matches existing EPO renewal fees in the early years, before tracking the renewal costs of four of the most frequently validated EP states in later years.

EPO President Benoît Battistelli commented:

I am confident that [this] strikes a positive balance, ensuring that the fees represent a real cost saving to the user and also providing a healthy operating budget for the EPO and the participating member states. This is another major step in achieving truly uniform patent protection in Europe.

[See note 1 below].

In this article we investigate whether this really does represent a cost saving to the user, and if so whether this is sufficiently compelling to adopt the unitary patent over the current bundle of European patent rights.

Current renewal fee scheme

The EPO levies annual renewal fees starting with the third year after filing an EP application. The fees are paid directly to the EPO while the application is pending, and are paid to the national patent offices of validated states after grant (with 50% of these renewal fees then returning to the EPO).

These national fees increase annually, but a proprietor can manage their renewal costs by successively dropping those states where costs exceed perceived benefits. Consequently it is commonplace for patents to be widely validated at grant, but to geographically narrow to a small number of high GDP or strategically important states over time. As a result, a proprietor has considerable control over the renewal costs of their portfolio.

Unitary patent renewal fee scheme

The EPO will again levy annual renewal fees starting with the third year after filing an EP application, based on the 'Top 4' fee scheme shown in the table below. The EPO will retain 50% of the fee and share the remainder between the member states of the unitary patent scheme, most likely on a pro rata basis reflecting the current rate of validations. Unlike the current scheme, a proprietor cannot reduce fee payments by dropping states over time; the unitary patent is all-in or all-out. However it is important to note that both the current scheme and the unitary patent scheme will co-exist (not least to service non-members of the unitary patent scheme), and entry into the unitary patent scheme has to be actively requested within one month of grant.

Comparison of the schemes

Under the current scheme, the top three validating states are the UK, France and Germany, with each of Austria, Belgium, the Netherlands, Spain, Sweden, and Switzerland making a creditable claim to be 4th. [See note 2 below]. However since neither Spain nor Switzerland will participate in the unitary patent scheme, we will limit ourselves to a consideration of these four remaining states.

Taking the average of the four-state scenarios, the unitary patent renewal scheme is significantly more expensive until around year seven, but then tracks the average fairly faithfully from around year ten. However, it's worth noting that the EPO's average pendency to grant is five years [see note 5 below]; consequently an applicant will typically pay EPO renewal fees up to the fifth or sixth year anyway. Consequently in practice the comparative difference in renewal fees between the 'Top 4' scheme and national fees in the early years has less impact than the raw figures in this table would suggest.

The 'Top 4' UP scheme, compared with common combinations of validated states.

Hence for those who typically file in three or four European states covered by the unitary patent scheme, the 'Top 4' fee schedule is likely to represent good value as an alternative to national renewal fees, whilst for those who validate widely, clearly there are significant savings to be made.

Translation and administrative costs

Currently for the top three states of DE, FR and GB, no translation costs are incurred beyond the mandatory translation of the claims into the three EPO languages at grant, which applies regardless of the states being validated. With respect to the fourth state in our example, if the patent was in German, Austria has no translation requirements, whilst if the patent was in English, the Netherlands and Sweden have no translation requirements.

By contrast, in addition to the mandatory claims translations at grant, the unitary patent requires a translation of the full text of the patent into English (if prosecuted in French or German) or, if prosecuted in English, a translation into an official EU language of the applicant's choice (which can be selected, for example, to be relevant to a competitor or to the seat of the relevant central unified patent court for the subject matter of the patent). Whilst this could represent a sizeable increase in cost at grant for those applicants only filing in three or four states, it again represents a considerable saving for those who validate more widely, and particularly in states outside the London Agreement.

There is an assumption that the official fees at grant will not change, because the decision to use the unitary patent option can be taken up to one month after grant; however in these circumstances the additional translation of the application is likely to incur a separate page fee, raising the possibility for a supplementary grant fee to also be levied.

Meanwhile, the administrative costs of renewal in four states is comparatively small in relation to the fees themselves; it remains to be seen at what level service providers will set the administrative cost of paying a unitary patent renewal fee, but it is likely to be higher than that of a single state renewal to reflect the greater liability of the service provider in the event of error, and their financial exposure in paying a larger single fee. Again, those who validate more widely may see a more significant saving.

The future

The proposed 'Top 4' fee schedule comes with one very important caveat – it is subject to review in four years' time. This is significant for the simple reason that the unitary patent can come into effect only once twelve states have ratified the agreement – meaning that initially 50% of the renewal fee will be divided between twelve national offices. However, as additional states join the scheme, this same fee may eventually be shared between twice as many countries. As a result, it seems sensible to assume that the fee schedule will increase ahead of inflation over the next decade and may eventually increase by 50% or more in real terms.

Conclusions

For those who typically file in three or four states covered by the unitary patent scheme, the 'Top 4' fee schedule represents good value, providing coverage in a significant number of additional states for significantly less than the cost of one additional state under the current system, although it should be recognised that the renewal fees may increase in four years' time. Nevertheless, it seems reasonable to consider a portfolio comprising a mixture of conventional bundled European patent and unitary patents in complementary subject areas, to balance geographical coverage with resilience to risk.

Meanwhile for those who typically file in many states (for example ten or more), the renewal and translation savings will be large. For these proprietors, the potential savings suggest that it may be worth considering a patent review process to identify 'tier 1' and 'tier 2' patents at grant where possible, and use the unitary patent scheme as a cost-effective warehousing option for lower value/risk cases.

We have reviewed the unitary patent renewal fee solely on the basis of cost; the changes in risk associated with the unitary patent – which need to be weighed against these costs – will be the subject of a further article [see note 6 below].

Notes

1. dycip.com/epoupfees
2. Notably, this doesn't reflect the GDP of EP member states, since Italy and Turkey both have GDPs greater than Austria, Belgium, Sweden, Switzerland and the Netherlands; however the top validated states typically have a strategic value, for example in terms of Austria's close relationship with Germany, or the significant volume of imports into the EU through the Netherlands.
3. Only France charges a renewal fee for the second year.
4. France and Germany only; the UK starts charging with the fifth year.
5. See dycip.com/iptstats13, page 68, footnote 43; average pendency to grant is 36 months after allocation to an examiner, in turn typically six months after publication of the search report. For some technology areas, the pendency is notably longer.
6. The main risk is of unitary revocation of the patent, compared to per-state revocation for national rights. A related risk arises from the (possibly unwanted) broader geographical scope triggering more searches and oppositions of granted patents. A further perceived risk is the associated commitment to the as-yet untested unified patent court.