Managing external patent agencies. Donal O’Connell

Donal O’Connell, Nokia
October 2008

The management of external patent agencies is, in many ways, very similar to the management of in-house resource. It is all about fact-based management and values-based leadership. This article takes a closer look at this management task, written from the perspective of a company or organization involved in patent creation activities. The content is drawn from Donal O’Connell’s book ‘Inside the Patent Factory’.

The successful management and leadership of a patent-producing organization (patent factory) involves providing clear direction and meaningful vision to all parts of an organization, and deploying and then controlling resources, be that people, money, physical and intangible assets. ‘Inside the Patent Factory’ provides advice about how best to arrange the human resources available to optimize the effectiveness and efficiency of the organization. It then looks at which tasks are best conducted internally (as opposed to outsourcing) and which organization structures and formats work best to meet the challenges of setting up a successful patent factory.

Who are the external patent agencies and what services do they provide?
When we examine the various ways in which patent creation activities may be organized by a company or organization, there are many models that involve doing some of the work outside. In fact, a few of the models suggest outsourcing all, or almost all, of the activities.

There are indeed intellectual property or patent-specific companies capable of handling some or all of the tasks on your behalf. Their capabilities range from analysis of the novelty and patentability of an idea through to actual drafting of cases, filing the appropriate paperwork with the Patent Offices, prosecution of cases, including handling office actions and taking care of translation work. Also included would be filing foreign cases with the appropriate Patent Offices, conducting detailed searches and examinations, and all tasks right up until the grant stage. There are also external companies who will manage the payment of annuity fees on your behalf.

Why subcontract?
Involving an external patent agency into your patent creation operation basically means buying certain work results from third parties. Subcontract work is normally based on your specifications and requirements but you, the customer, and the external patent agency may also compile specifications together. This is a better approach as it enables the external patent agency to contribute based on their skills, competencies and knowledge.

There are many reasons to subcontract work to an external patent agency. Outsourcing may increase your flexibility in terms of resourcing, leading to faster response times and wider overall opportunities when your competence and capacity pool is expanded. You may wish to focus your limited resources on what you consider to be core activities, critical cases or key competence areas.

What work can be subcontracted?
Some or all of the tasks of a typical patent creation factory can be subcontracted to external patent agencies. The capabilities and duties of the external agent will range from analysis of the invention idea for novelty and patentability through to actual drafting of cases. This can include filing paperwork with the Patent Offices, prosecution of cases, handling office actions, translation work, filing foreign cases with the appropriate Patent Offices and conducting detailed searches and examinations. All these tasks fall under the umbrella of ‘Patent Creation’ right up until the grant stage. Once you have your granted patents, there are also external companies who will manage the payment of annuity fees on your behalf.

Challenges in sub-contracting
Subcontracting to an external company is not always easy. There are a number of potential challenges to take into consideration, so the contract between you and the external patent agency is of paramount importance. Even if there is an agreement already in place it may be out of date, poorly written or not comprehensive enough to meet your needs. You must also ensure that your practices and those of the External Patent Agency are in line with the agreement.

A common understanding on pricing is critical and should be defined in detail. You also need to consider the additional costs relating to the management of external patent agencies, as this is often ignored.

The long term goal is to have an optimized number of carefully selected external patent agencies that are managed in a unified way, and with whom the relationship is constantly developing. The workflow between you and the external patent agencies also needs management, and cost and quality controls need to be put in place.

Key principles regarding agreements with external patent agencies
Written agreements will help clarify the division of responsibilities with the agency, and also serve as a risk management tool. Such formal agreements may govern the entire relationship or be case-specific. The choice is probably influenced by the volume of work involved, including whether the assignments will be regular or irregular, the criticality of the external patent agency in terms of their geographical location, and their technical capabilities or capacity.

The agreement content should be fairly generic and adaptable to work for many companies and organizations with ease. For many external patent agencies the most problematic sections of the agreement tend to be with quality requirements, remedies and liabilities/indemnification

Example of a pricing model for external patent agency work
It is worthwhile to give some consideration to establishing some key pricing principles when you are outsourcing work to external patent agencies. Do you wish to keep your pricing structure as simple as possible and to have a similar pricing model that will apply across all your external patent agencies? It would be most useful if your actual costs followed your budget for each phase of the patenting process.

Managing the external patent agencies
Having formal agreements and pricing models in place with your external agencies is really only setting the foundations of your working relationship. Much more is needed to truly manage and build long term mutually beneficial professional working relationships.

You will need to gain a good understanding of both the intellectual property and technical skills and competencies of the external patent agencies, and especially of those individuals who are actually handling your cases.

Capacity planning is another important element in the management of your external agencies. You need to know how much work the agency is willing and able to do for you in the foreseeable future, and most importantly if there are any resource issues on the horizon.

To help ensure consistency across your patent portfolio it is worthwhile creating a requirement specification or quality guidelines document for use by all of the Patent Agents and Attorneys who will be drafting, filing and prosecuting patents on your behalf. This will help provide some level of consistency in the drafting, filing and prosecution of your cases.

Regular auditing of your external patent agencies should form part of your management program. Respectful but direct feedback on non-performance is important and this example should be set very early in the relationship. If commitments are not being met by your Agents, then you must call on them immediately, as this will set the rules and expectations immediately.

What is expected from you?
The responsibility for ensuring a good professional working relationship with an external agency does not rest alone with them. There are also responsibilities for you, the customer, which include management and development of the relationship. If your relationship is likely to be big volume it is recommended that you nominate a relationship manager to, amongst other responsibilities, ensure the invoicing system and payment process is working efficiently.

Associations for external patent agencies
External patent agency societies, associations and bodies exist to regulate the conduct of their members. For example in the UK the Chartered Institute of Patent Attorneys (CIPA) is the professional and examining body for Patent Attorneys (also known as Patent Agents). In the USA, there is AIPLA, the American Intellectual Property Law Association. There is also an association in China called the All China Patent Agents Association or ACPAA.

All members of such societies, associations or bodies must agree to abide by their rules of professional conduct. These are written to ensure that clients will receive accurate and impartial advice that puts the interests of the client foremost.

Outsourcing the management of the payment of Annuity Fees
Once the patent has been granted, there are still annuity fees to be paid in order to keep the patent alive. You must weigh up whether the decision to use an external company, for example Thomson IP Management Services, for the management and payment of such fees will make sense for your company.

What can go wrong?
With any external suppliers, generally things can go wrong when you are unsure what you actually want to purchase. You must be clear on what you expect of your external patent agency, what the work results should be, and how they should communicate with you. Simply setting up agreements and a pricing structure is not enough, and in the case of fault or non-performance you must utilize the remedies and sanctions provided in the agreement.

The decision on whether to allocate tasks internally or externally is a difficult one. There is no ‘right’ way, and the right decision varies between companies and situations, as there are many factors to take into consideration. This can be compared to a pendulum swinging from internal to external and back again and never quite remaining at either end.

Almost every single activity can be treated as a commodity, meaning that you can obtain quotations for any activity you are intending to outsource.

About the author
Donal O’Connell is Director of IPR, Nokia. His book, ‘Inside the Patent Factory’ was published by Wiley & Sons in April 2008

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