Tech Transfer Central

Cutting out expensive law firms TTOs looking to deal directly with patent annuity management firms

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In the classic tune “Accentuate the Positive,” composer Harold Arlen advises the listener, “Don’t mess with mister in-between.” It seems that some TTOs have taken that advice to heart when it comes to managing patent annuities.

While some TTOs still use their law firms to manage renewals, or to access and monitor third-party companies that handle the mechanics of annuity forms and fees, others have opted to deal with these companies directly, thus eliminating the “mark-ups” they must pay the law firms.

“We took over patent annuity management effective with payments due 6/1/15,” wrote Janet Kisinger, JD, University of Arizona senior intellectual property manager, in response to a query posed on an AUTM listserv. “Prior to that, when law firms were paying the fees, we had seen add-on fees of up to $400 per payment. Now it has been only $10-$20 per payment (based on our volume of cases.)”

Responding to a similar query from another AUTM member, Gregg Banninger, the patent coordinator at the University of Illinois-Urbana-Champaign, said that a leading patent renewal firm, CPA Global, has fees that average about $200 per payment, but law firms imposed $300 to $400 plus charges when they send out renewal reminders. On top of that, “it can be $80-$100 for their paralegals” for each payment, he noted.

“I would say there are three different approaches, and there can be hybrids of each of them,” adds Mark Kesslen, chair of the IP section of the Technology Group at the Lowenstein Sandler law firm in New York City. “You can use a law firm to do it; they can work either directly with a particular country or use the service themselves. The client may do it themselves, or they may outsource directly to one of the payment services.”

Kesslen says he sees a trend — “assuming the party is sophisticated and understands what to do” — of TTOs moving to the direct sourcing model. “You have to know what you’re getting from the Patent Office, whether to pay or not to pay, and to keep the patent or not as opposed to a knee-jerk payment,” he explains. “What you want the law firm for is to help make that decision because keeping a patent portfolio alive is very expensive.”

Making the decision

Clearly, finances are a critical part of decisions to work directly with annuity management providers. “[The change] allowed us to avoid the extra fee on each annuity or maintenance fee paid that the law firm would charge to handle annuities,” Kisinger tells TTT.

There are a number of providers from which TTOs can choose, including Computer Packages Inc. (CPI), CPA Global, Clarivate Analytics (formerly Thomson Reuters IP), MaxVal Group, Dennenmeyer & Co., and Olcott International. Kisinger and Banninger both say they prefer CPI, although Banninger uses both.

“We’ve used both [the services] and law firms, and only recently started to move mostly to CPI,” Banninger tells TTT. “State law says you can’t use too much money with a vendor without having a contract bid — I think limit is $58,000. But now [CPI] only includes a service fee, not a maintenance fee, so we started changing more to CPI.”

“We went with CPI and their customer service has been great,” says Kisinger. “We have an account representative, so we can always reach them with questions. We were able to do a lot of database clean-up as part of the transition, so I feel it has been very worthwhile.”

Banninger says he was a little less reluctant to make the switch than he would have been if the office did not have dedicated patent professionals on staff. “It’s riskier without having a law firm,” he explains. “They have so many checks in place to avoid missing deadlines. I know with CPI and CPA they auto-pay, so if we miss it they pay it.”

“I prefer CPI over CPA, although I have some issues with both,” Banninger posted on the listserv. “CPA charges $200 per payment, CPI charges $60 to 80, and I think CPI is better to use. The website for providing instructions is better.”

Choices yield results

“Caution” has been the watchword for both Kisinger and Banninger since they have “gone solo” with their patent service firms. “We select the automatic pay so, absent instructions, CPI will pay,” says Banninger. “There have been some issues with their invoices not being very descriptive; having to pay for annuities upfront can be problematic, thanks to overbearing state laws. If there is a mix up with invoices and ones have gone unpaid, they can be annoying hounding you for payment.”

Banninger says his office uses Wellspring’s “Sophia” to docket his due dates, and in-house patent managers handle patent-related matters for the technology managers. “The docketing dates back four months from the actual due date, so we can get answers way in advance,” he explains. “Also, we do get reminders from CPI.”

“It has been a learning experience, but it has saved us and our licensees a significant amount,” adds Kisinger. “We did not add staff when this change occurred. Our IP Docket Clerk is the main interface with CPI. We put all fees into Inteum [IP management software] and track them as we do other patent docket matters. We also tracked annuities when the law firms handled them, but I think we have better visibility and consistency in docketing now.”

She adds that her office is “extra cautious” — for example, in verifying entity status prior to U.S. maintenance fee due dates and adding new patent applications to the portfolio — but that it is beginning to establish a real flow to the work required. “To make sure we do not run into a time crunch, when we file new foreign apps, we ask the attorney to cover any fees due within the first year after filing,” she notes. “That way we have time to make sure our portfolio with CPI is up to date.” In summary, she says, “I think the benefits outweigh the costs.”

Banninger agrees, noting that while he has not done a hard check, he estimates savings of about $300 for each transaction.

Is it a no-brainer?

With such significant savings to be had, why don’t all TTOs simply deal directly with these firms? “I would think it’s because not all of them have [dedicated] patent people,” says Banninger. “All we do is deal with patent stuff. If you’re a tech manager, you just want to license, and you can get bogged down; things can slip through the cracks.”

Those “things,” says Kesslen, include not only the “keep or kill” decision, but whether, for example, the patent and claims give you the coverage and protection you need to keep them alive, “as opposed to just paying the annuity to keep the lights on.” Such decisions, he says, represent “the biggest risk” of eliminating legal counsel from the equation.

And what about those legal fees of $250 to $500 per payment? Are they justified over and above the service company fee? “Somebody has to open the record, make a decision, issue an instruction, close it in their docketing system when paid, track it, and so on, and the increments add up quickly,” says Kesslen.

Is there any threshold, in his opinion, concerning which TTOs should retain legal services? “The more sophisticated an organization is the less they need a law firm,” he says. “If you are less sophisticated it usually means a smaller portfolio, so asking ‘why pay these fees?’ may seem to make more sense. But if you have a smaller portfolio, $1,000 may keep it alive; it may be small, but you do not know what you’re doing.”

Kesslen says his firm represents “some of the largest, most iconic Silicon Valley firms,” and they manage patent annuities on their own. “We advise them a bit, but once they take over they do it directly,” he says. “If they do it, I can’t understand why others do not.”

In fact, adds Peter Rouse, director at Patent Annuity Costs Limited, based in the Southwest of England, the liability associated with managing annuities makes the task an unwanted one for many law firms. “More commonly many law firms are willingly offloading [annuity payments] — the risks are enormous,” says Rouse, referring to the potential for missing a payment and losing a valuable patent.

(The “enormity” of the risks referred to by Rouse are underscored by a recent lawsuit involving CPA Global and alleged overcharging. See the sidebar below.)

Contact Banninger at 217-244-7301 or; Kesslen at 646-414-6793 or; Kisinger at 520-626-4611 or; and Rouse at +44 7737 128174 or

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