Benefits of an In-house Patent Department March 6, 2004 Background Introduction Motivation for developing an in-house program Current status of in-house patent department Introduction
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March 6, 2004
The development of an in-house patent department, specifically having in-house attorneys draft and prosecute patent applications, has been one of the UVA Patent Foundation’s most successful programs.
The benefits have been substantial. These benefits include reduced patent costs, enhanced portfolio management, improved client service, and more personal attorney-inventor relationships.
In 1997, the new director, a patent attorney himself, saw that patent costs were overburdening the organization’s limited resources. It was also noted that there were no high-tech patent attorneys in the region, meaning that few inventors ever met their patent counsel.
Virtually all technology-driven companies of significant size have in-house patent counsel.
Believing that all of those companies couldn’t be wrong, a detailed financial analysis was performed. Concluding that the benefits would be considerable, we started an in-house patent department in 1999.
3. Can counsel cover the waterfront?
The patent department sends an invoice for hourly fees and costs to the business office, on an invention-by-invention basis, just like outside counsel does.
When the invention is licensed, these costs are reimbursed by the licensee, just like outside counsel costs are.
Initially, we were unsure our licensees would be willing to reimburse such costs, but the opposite proved to be true – licensees were sometimes disappointed when licensed applications were transferred to outside counsel, as costs increased.
In-house counsel’s efforts are completely dedicated to patent preparation and prosecution.
Nobody would reimburse in-house counsel’s time for transaction work or other matters, and licensing associates are considerably less expensive than lawyers.
A “bright line” between departments forces patent counsel and licensing staff to depend on one another, while avoiding territorial jockeying.
A highly skilled patent attorney is capable of prosecuting applications for a broad range of inventions – but you have to hire the best, which means you must pay competitive salaries.
Although the range may appear quite broad at universities, there are really a collection of “hot spots.” Familiarity with leading inventors and their research efforts over time limits such concerns.
Most patent applications get transferred to outside counsel after licensing, and you can send them to the same attorneys you would have used had the initial applications been prepared by outside counsel.
The billing of a typical private practice associate attorney consists of about 1/3 salary, 1/3 overhead, and 1/3 partner profits.
Costs of in-house counsel exclude partner profits, and theoretically should be 1/3 less. Actual results are even better.
Due to lower billing rates, in-house counsel allows us to more economically file and prosecute applications on unlicensed inventions.
If one is using strictly accounting terms, perhaps the term "cost center" is accurate [in describing in-house counsel]. But in business terms, the more appropriate term should be “savings center.”
Columbus Business First – 12/12/03
Our prosecution costs for in-house counsel and for
3 firms we used in FY2003
Entity Hourly Cost Attorney Experience
Firm A $285/hr 4 yrs
Firm B $270/hr 4 yrs
Firm C $275/hr 3 yrs
UVA Pat. Fnd. $162/hr * 9 yrs
* all costs, including salary, benefits, overhead, secretarial support, and malpractice insurance
Average hourly savings: ~$115/hr, plus we get more experienced attorneys
In-house attorneys weigh recommendations of outside counsel against cost, and ensure that invoices are accurate and prosecution is not unnecessarily aggressive.
In-house counsel’s management of outside attorneys provides our licensing staff with more time to focus on evaluating, marketing and licensing efforts.
In-house counsel can save UVA start-up companies precious resources by prosecuting licensed patents in-house at a lower hourly rate.