IP strategy during COVID-19: Deferral of expenses

The ongoing COVID-19 crisis has exacted a terrible toll on the world as a whole and on Canada. Many have suffered during this time. Many have lost their loved ones. Others are fighting for their lives, or have loved ones fighting for their lives. Medical personnel and essential services workers worldwide are bravely going forward every day to help society cope with and fight this disease.

Along with the personal toll, many others have been affected financially. Across the world people have lost jobs, lost income and lost their livelihoods as a result. This has led to financial uncertainty across the planet. It may be months or years before we return to some semblance of normality.

This difficult and deeply trying environment has impacted startups and small and medium enterprises (SMEs) as well. Revenue and funding have dried up for many startups and SMEs, leading to staff layoffs. Many are struggling and trying to work out what to do in these difficult times.

With all this going on, many are asking themselves the following question: What should we do with regard to our intellectual property (IP)? In this series of posts, I’m going to detail some useful strategies for startups

As I have said previously, IP strategy is tied to corporate strategy. A first step for the C-level executives in a startup or SME is for you to figure out what your corporate strategy is. Once you have figured out your corporate strategy, you can devise an IP strategy to fit with your corporate strategy. For example, are you looking to cut costs? Are you looking to grow your business during these times?

A good second step is to prioritize your IP portfolio, that is, assign a priority to IP assets based on which ones are vital to preserving or growing your core business. This involves determining the relevance and importance of the IP asset to your core business.

Once you have completed prioritization, then you can identify the necessary actions to take with respect to the IP portfolio. You may also need to identify constraints to taking these actions.

A major constraint during these times for many startups and SMEs is cash flow. If cash flow is an issue, you may want to consider the following steps:

•         Deferring cash outflows to the future;
•          Looking for discounts or reductions in costs of protecting IP assets;
•          Selling or licensing out lower priority IP assets to improve your cash position; and
•          Abandoning IP assets to reduce cash outflows.

In this blog post, I’m going to talk about deferral. There are various ways to defer IP-based cash outflows to the future. For example, instead of filing a full patent application, you can file a US provisional patent application. The filing fees are lower, and it gives you 12 months to decide whether to go ahead with filing and incurring the costs of a full patent application. It also allows you to add more material in a low-cost manner when you decide to go ahead with the full application.

Similarly, if you are interested in filing in several countries and these countries are Patent Cooperation Treaty (PCT) signatories, then you can file a PCT application first. This can give you at least 18 months of breathing space in most jurisdictions of importance. It also enables you to add more countries before the PCT application expires if you want to.

Certain countries also allow applicants to defer examination as necessary. For example, Canada allows a patent applicant to defer examination of a filed patent application for up to 4 years from the date of filing the Canadian application. This helps push the costs of responding to the Canadian IP Office (CIPO) well into the future. Similarly, Japan, China and South Korea also allow applicants to defer examination of their filed applications.

Some countries also allow you to extend the deadline to respond to an office action, and may charge an extension fee to do so. This is advantageous if, for example, you feel that there may be a delay in receiving cash flows.