Increasing Your IP Budget by Utilizing Other Company Budget Sources

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Convincing senior management to increase an IP department’s budget can be one of the biggest challenges for in-house counsel butshifting budget requirements to other sources can offer IP department’s the flexibility they need to get more bang for their buck.

When a large tech company in Silicon Valley was recently nearing its IPO announcement, the Director of Intellectual Property knew from experience that he was going to face challenges. He had made a number of requests for an increased IP budget over the last year, and while many of them were approved, management made clear no more budget increases would be approved prior to their IPO, (as is typical as IPO announcements near). From experience, he knew the announcement was sure to put a target on their back, especially given litigious incumbents in his company’s technology space and their likely reaction to the IPO. A recent 2018 study from the University of Amsterdam published in SSRN found “that firms become targets of excessive patent lawsuits starting just one quarter before the IPO, and the intensity of such lawsuits persists in the post-IPO period.”(For additional examples, see text box for a recent history in patent threats for companies nearing IPO.) After the Director called to express his concerns, we strategized how he could increase the budget available to him without having to actually increase his IP budget at all.

During a review of their department’s current expenses, he identified items that could be shifted outside of the Intellectual Property department. They were currently managing the intake of IP from two recent acquisitions and the burden ofanalysis, cataloging, and maintenance of the patents and trade secrets was theirs. The Director’s team quickly made the necessary internal moves to have these expenditures shifted to existing budgets set aside for company acquisitions. By acting quickly, they were afforded some budget relief.

Next, they reviewed patent costs both early and late in the patent life-cycle. Expenses early in the invention process were being paid for by the Intellectual Property Department, so the Director created some budget flexibility by getting approval to allocate the initial patenting process to the engineering and R&D budget, specifically initial invention disclosure and the first review of whether to pursue a patent. In addition, the employee incentive program for participating in the generation of patents was moved into the R&D budget as well.

The Director was then able to create even more budget flexibility by shifting a portion of his expenses to a litigation budget that had been set aside. As the number of inbound patent licensing requests increased, so did the cost to assess and neutralize these threats. He was able to allocate these costs to the legal budget as litigation deterrence, thereby removing another upcoming expense from his budget.

All of these strategies to reallocate budget expenses may not be available to every Director and General Counsel, but we have found in-house counsel can often find budget relief by utilizing other sources of funds for discrete tasks they must undertake. Being creative with budgetary constraints can provide relief in unexpected places.

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