It’s somewhat shocking, but we regularly encounter IP owners without IP currency controls in their agreements. For many organizations, getting currency controls in every agreement could be a massive project, so we recommend getting started with patent annuity and trademark renewal agreements and going from there. Why is this important? Our data shows that without IP currency controls, you’ll pay at least 5% to 10% more than your peers with controls.
Don’t have them and don’t know where to start? Here are the three currency-related elements that should be in any agreement.
1. An Explicit Currency Cap
This is usually expressed as a percentage and refers to the cost or “markup” that you will be charged for converting foreign currency into your invoice currency. The actual cap you can get from your vendor will vary on several factors, but caps around 5% aren’t unusual. One caution – be prepared to pay a higher service fee for lower currency caps. Even with a higher service fee you will still save money and have better control over costs.
2. A Date for The Currency Conversion
Since currencies fluctuate regularly, it’s important to have an agreed-upon date that you can use to monitor the date of the currency conversion. For most organizations, this is the date of the invoice. Without this date, it can be difficult, if not impossible to monitor a currency cap.
3. A Currency Source
This is less important than the first two elements but can greatly simplify the monitoring process for currency costs. Different vendors use different sources, but as long as they are publicly available, the actual source shouldn’t matter. There are usually only minor variances between sources, so it isn’t the end of the world to use OANDA to check an invoice calculated using Bloomberg rates, but the more closely aligned everything is, the fewer headaches for you.
Wrap Up
Get these three items into your agreement and you will be on your way to savings – but you will need to occasionally spot-check invoices to ensure compliance. You can do this in 5 minutes (we have several posts on the topic), so it is easy to do. In our experience, vendors adhere to agreed-upon currency caps, but in the words of Ronald Reagan, “Trust, but verify”.
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