What Are The Break-Even Points For PCT And EPO Applications Versus Paris Convention Applications?

By Michael R. Hull - June 30, 2014

Patent rights end at the border. Thus, a U.S. patent provides protection in the U.S. only. However, under a treaty known as the Paris Convention, a patent applicant may file a patent application in their home country and then wait up to one year from this “priority date” to file the application in other countries of interest.

As a result, the Paris Convention permits applicants to defer foreign filing costs for up to a year from the priority date. However, applicants in need of foreign patent protection must decide how to file the application in the countries of interest. There are two primary ways: direct filing through the Paris Convention (“direct filing”); and filing an international application through another treaty, known at the Patent Cooperation Treaty, or the PCT. A third approach involves inventions that are of interest in Europe. The applicant may choose between direct filing in separate European countries of interest or filing a single application in the European Patent Office (EPO).

Direct filing through the Paris Convention (“direct filing”) is exactly what it sounds like. The applicant files a single application in the patent office of each country of interest, claiming priority back to the priority date. If there are multiple countries where patent protection is needed, direct filing through the Paris Convention can be expensive because the applicant must pay filing fees, translation fees, foreign associate fees, etc. for each country, all of which accrue at the one-year anniversary of the priority date. While the Paris Convention permits the applicant to defer these costs for a year, if the applicant files in multiple countries, the cumulative foreign filing costs can be very high.

In contrast, a PCT application is an international patent application that provides the option of filing in any of the 143 PCT member states within 30 months (31 months for many countries) of the priority date. A PCT application may be the priority application or a PCT application may be filed under the Paris Convention up to one year after the priority date. Thus, the PCT permits the applicant to defer most foreign filing costs up to 30 months after the priority date, instead of the 12 months provided by the Paris Convention.

Both strategies, direct filing or PCT filing, have distinct advantages. Advantages of a Paris Convention filing include faster allowances compared to those filed through the PCT. This can be important for technologies that have a short shelf life and need patent protection quickly. One disadvantage of direct filing is conducting separate prosecutions in each foreign patent office.

In contrast, a PCT application is an easy way to obtain protection in a multiple countries. An applicant may file a PCT application in the applicant’s home country and in the applicant’s native language. The 30-month filing deadline (or 31 months, in some cases) allows the applicant to refine the invention and research its acceptance in the marketplace. If the applicant is not certain where patent protection is needed, the PCT gives the applicant more time to decide. PCT applications are searched and a search report and a non-binding opinion is issued. Therefore, if the invention is clearly not patentable, the PCT application can be abandoned and the applicant has not paid for multiple foreign filings for an unpatentable invention. One disadvantage of a PCT application is its high filing fee (~$3,000). Further, after the 30 month time period, filing fees for each country where the application is filed must be paid. Hence, the applicant is paying a substantial filing fee in exchange for the additional 18 months of cost and decision-making deferral.

A European patent application is similar to a PCT application, but it only covers countries of the European Union. Thus, a client deciding to file an application in Europe can file applications in the European countries of interest directly, or file a single EPO application. Further, an EPO application can be filed off of a PCT application. In contrast to the PCT, the EPO not only searches the application, but also conducts a single, binding prosecution of the application with the applicant and either allows (grants) or rejects the application. One advantage of an EPO application is the single prosecution in the EPO, as opposed to the separate prosecutions in each country of interest. One disadvantage is the relatively high filing and examination fees (>$3,000). A granted EPO application must then be ratified in each country of interest, which involves additional fees and translations.

So how does one decide—direct filing or PCT? Direct filing or EPO? Fortunately, from a financial standpoint, there is breakeven point of three or four countries. Need to file in three or more countries? The PCT becomes more cost effective than direct filing. Need to file in three or less countries? Direct filing is more cost effective. The same is true when considering the filing of an EPO application or direct filing in the European countries of interest. The break-even point between direct filing and filing an EPO application is also three to four countries. For either scenario, if the foreign countries of interest total three, we generate a more accurate cost estimate to help you with you filing decision.

Miller, Matthias & Hull has extensive experience in advising clients about their foreign filing needs and we have a solid network of associates in foreign countries that effectively and efficiently prosecute applications on behalf of our clients. Please contact us for more information.