The document discusses an IP Budget Optimizer tool created by Kenneth Horton to help companies better budget for intellectual property portfolio management costs. The tool allows users to estimate yearly costs by inputting numbers of expected actions like patent filings, payments, and litigation. It then calculates a total estimated yearly cost and suggested monthly retainer amount. The tool is meant to help companies accurately budget costs that can fluctuate month to month and negotiate fixed monthly payments with outside counsel. However, the tool has limitations like imperfect cost forecasting and not including income from the IP portfolio.

1. Kenneth Horton Main: (801) 832‐2600
Associate Professor, Intellectual Property Law & Strategy Cell: (801) 809‐0310
MBA Technology Management Program Direct: (801) 212‐2056
Gore School of Business, Westminster College Khorton@Westminstercollege.edu
1840 South 1300 East http://www.linkedin.com/in/HortonIP
Salt Lake City, UT 84105
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Last quarter, I outlined a process for managing an IP portfolio using a budgeting process. That process included the steps
of (i) reviewing historical costs, (ii) forecasting the needs of the portfolio, (iii) establishing the budget, (iv) implementing
the budget, and (v) following the budget.
In the second and third steps of this process, I presented simple cost estimation tool. I emphasized that it was a simple
tool because it only considered the costs of obtaining the IP assets. Unfortunately, managing a moderate to large IP
portfolio involves much more than just obtaining the IP assets. It also includes managing post‐grant procedures,
enforcement, licensing, annuities, opinions, etc. And each of these activities has an associated cost that should be
considered when budgeting for the portfolio.
So for moderate to large portfolios, a more detailed and realistic budgeting tool is needed. I recently created such a
tool—the IP Budget OptimizerTM
—for a potential client and wanted to share it with this audience.
IP Budget OptimizerTM
Actions/Year Variable Projected Cost Total
design applications filed A 5000 5000
provisional applications filed B 4000 4000
Patentability searches C 1500 1500
utility patent applications filed D 12,000 12000
appeals E 6,000 6000
pending utility applications (<12 months pendency) F 3000 3000
pending utility applications (12‐24 months pendency) G 8000 8000
pending utility applications (>24 months pendency) H 10,000 10000
1st MF payments J 2,000 2000
2nd MF payments K 4,000 4000
3rd MF payments L 8000 8000
Infringement opinions M 12,500 12500
licenses N 10,000 10000
reissues, reexaminations, and other PTAB proceedings O 50,000 50000
active litigations P 200,000 200000
foreign applications field in year Q 5,000 5000
foreign pending applications R 10,000 10000
issued foreign patents S 4,000 4000
foreign post issuance proceedings T 25,000 25000
Estimated Yearly Cost 437000
Estimated Monthly Retainer 36416.67

2. This tool has two inputs: the number of actions/years (i.e., the variables A, B, C, etc. in the second column) and the
projected cost (in the third column). For the first input, I assumed that each variable is 1. In other words, this tool
assumes that just 1one of each of these actions is being undertaken during the year. This assumption is very unrealistic
for most portfolios. It is easy, however, to adjust each variable as needed for your portfolio.
For the second input, the projected costs listed in the tool are my estimates of what the yearly costs would be. Again,
these can be adjusted given your historical and/or expected costs. But it is important that these projected costs not only
include the attorney fees, but also any foreign law firm fees and any patent office costs. This keeps the tool as accurate
as possible.
I created this tool because this potential client was frustrated with how the costs could change from month to month.
This potential client wanted to ideally pay the same amount each month to the outside counsel (OC). So I created this
tool which—hopefully—considers all of the major costs in the patent portfolio. In an ideal world, this tool could be used
to estimate the yearly costs of managing the portfolio and then pro‐rated to create a monthly IP budget and negotiate a
fixed monthly payment schedule with the OC.
This tool, however, has several limits. First, forecasting the number of each specific action taken in a year can be an
imperfect process. So it is likely that you and the OC will have to monitor the inputs into the tool, adjust those amounts
as the needs of the portfolio change, and then modify the fixed monthly retainer.
Second, this tool focuses on the patent side of the portfolio. It is easy, however, to modify the tool to include costs for
trademarks and copyrights. But this tool focuses on patents because it is usually the larger expense in the IP portfolio.
Third, this tool only list expenses. It could be improved, however, if it also included income from the IP portfolio. But
income is a topic for another newsletter.