Coping with cost pressure in Intellectual Property

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When dealing with our clients and talking to people in the IP industry, we acknowledge that costs are always an important issue, even more so in times of crisis. However, maintaining a balanced budget while keeping up a high level of IP protection can be quite challenging. Fortunately, this is not a case of "you cannot have your cake and eat it too." With appropriate and correct saving measures in place, IP cost challenges can be met, and the quality of your IP work can even be improved.

Reasons for urgent cost pressure

Greater cost pressure usually arises in times of crisis or change. The most obvious reason for a business crisis right now is, of course, the Covid-19 pandemic and the uncertainty of its adverse economic effects. Additionally, a change in company management or ownership is another typical situation that often comes with a review of the company’s cost base, and consequently puts the IP department under urgent cost pressure. Another common reason for cutting back on IP costs is to free up funds from protecting outdated technologies and reallocating them for new developments.

However, a change always offers opportunities for further advancement. Business models can be rethought and transformed, and the same goes for products and technology. The IP strategy needs to align with these developments and contribute through continuous optimization of the cost base.

How to identify cost-saving potential

We identified six major IP management areas that hold significant cost-saving potential:

1. IP portfolio
2. Filing strategy
3. IP services (administrative and law firm services)
4. Software tools
5. Processes
6. Staff

Some of these areas hold more potential than others, and while in some areas, "quick wins" are possible, in others, cost-saving measures may impact mid- to long-term prospects. Nevertheless, it would be best if you were never satisfied with quick situational savings but rather strive for long-term cost excellence. The ultimate goal is to find the right answer to the following and even more pressing questions:

Where can we eliminate irrelevant IPR?

A typical task for all portfolio managers is to regularly check if there are patents to be abandoned. But how strong is the basis for decision-making? Does the assessment consider all relevant parameters beyond just the legal status, including technology, product and business aspects? To make the right decision on this critical question, it is essential to have a comprehensive assessment and straightforward scoring system that enable you to drop patents without threatening the protection of your business success.

Do we use the right criteria for our filing decisions?

Some inventions and their accompanying patents are not worth the paper they are written on. While the paper does cost money, so do filing, prosecution and inventor remuneration. Just like the assessment of the current portfolio, a strong foundation is needed to decide whether it is worth filing an application for IP. A weak start will never result in a strong patent.

Are we sure our providers do not overcharge and that we receive the best value for our money?

Most companies with a specific portfolio size employ outside parties for IP administrative and legal services. In collaboration with these service providers, trust is an essential asset upon which long-term relationships are built. Therefore, these IP services are often precisely where saving potentials can be realized quickly. A regular review of consultancy costs is justified to determine if their services meet your expectations, and it is strongly recommended that it be conducted via a neutral, third-party assessment.

In addition to IP services, the above question is also relevant regarding software tools, which can also be significant cost drivers. Yet, it can be stated unequivocally that it will always be more expensive for companies of a certain size "not" to use professional IP software. The challenge is to find the right tool(s) that properly support and provide for a company-specific, streamlined workflow to save time and money. Such tools' requirements should be clearly defined and money should only be spent on necessary licenses and functionalities.

How can we optimize our processes to be more time and cost-efficient?

If the internal processes, as well as the processes with external stakeholders, like R&D and law firms, are laborious and time-consuming, they will result in unwanted costs. As mentioned above, the right utilization of software tools can support streamlining workflows. But there are numerous factors, including:

• Clearly defined roles and responsibilities
• Structured hierarchies and decision-making processes
• Quick and flawless transfer of information
• Transparent communication
• Clearly defined, but at the same time, flexible workflows

Also, it is important to note that every organization works and thinks differently. Overcoming resistance to change can be a great challenge and an independent, outside perspective on long-established processes can provide the right impetus for implementing vital changes.

Where does it make sense to in- or outsource?

When it comes to headcount and staff, this is always a sensitive topic: people are involved, and sometimes decisions can get emotional. Surprisingly, though, it is not always more cost-effective to reduce internal headcount — quite the opposite. There are situations where it can make more sense to insource work under cost aspects, so there is no general best practice to recommend. Moreover, the question of whether to in- or outsource must be addressed based on the actual situation and challenges that the IP department is facing.

So, whatever cost-saving measures you implement, always ensure that you retain the highest quality IP work. If you do not and simply cut costs for it, you will likely pay the price later. And that bill will be higher and cost more than everything you may have saved before!