Definition
A patent is a legal form of intellectual property protection that grants the creator of an invention exclusive rights to make, use, sell, and import the invention for a certain period of time, typically 20 years from the filing date. It is meant to encourage innovation by providing inventors temporary monopolies for their creations in exchange for public disclosure of the invention. In financial terms, patents can increase a company’s value through their potential to generate future revenue streams and by offering a competitive advantage.
Phonetic
The phonetics of the keyword ‘Patent’ in the International Phonetic Alphabet (IPA) are: /ˈpeɪtənt/
Key Takeaways
- Definition and Purpose: A patent is an exclusive legal right granted to an inventor or assignee by a government, providing them with temporary monopoly over their invention or discovery. It protects new and innovative ideas, giving the patent holder the exclusive right to produce, use, sell, or license their invention for a specified period.
- Types of Patents: There are three primary types of patents – utility patents, design patents, and plant patents. Utility patents protect the functional aspects of an invention, design patents protect the unique appearance or aesthetic of an invention, and plant patents protect new and distinct varieties of plants reproduced asexually.
- Patent Process: Obtaining a patent can be a complex and time-consuming process. It typically involves conducting a thorough search to ensure the invention is novel, filing a patent application with the appropriate patent office, responding to any objections or rejections, and potentially negotiating with the patent examiner. Once granted, the patent holder is responsible for enforcing their patent and paying maintenance fees to keep it in force.
Importance
The term “patent” is important in the realms of business and finance because it signifies intellectual property rights granted by the government to the inventor, providing them exclusive rights to make, use, or sell their unique invention for a specific period of time. This not only encourages innovation by safeguarding inventors’ creations from being copied or misused, but it also adds value to their businesses and helps attract potential investors. Moreover, a well-protected patent portfolio can act as a competitive advantage, enabling businesses to potentially generate revenue through licensing agreements or foster strategic partnerships in their respective industries.
Explanation
A patent serves as a legally recognized and enforceable tool that seeks to promote innovation and creativity by granting exclusive rights to inventors, thus providing them with the opportunity to protect their inventions from unauthorized reproduction, sale or commercial exploitation for a specified period of time. This intellectual property protection encourages individuals and entities to invest time and resources into research and development, knowing that their inventions will be safeguarded from unwanted appropriation and competitors. Patents allow inventors to secure a competitive advantage in the market and reap financial rewards for the duration of their patent term, which varies from country to country, but typically lasts for 20 years from the date of filing.
Patents not only protect the individual and financial interests of inventors but also serve as a mechanism for fostering knowledge-sharing, economic progress, and technological advancement. By requiring the detailed public disclosure of the invention’s concept, design, and functionality, patents ensure that valuable information enters the public domain, thereby stimulating further research, improvisations, and potential partnerships or licensing agreements. Companies and businesses across various industries widely rely on patents as an integral component of their value creation strategy, strengthening brand reputation, attracting investments and cooperation opportunities, and safeguarding their market position as innovators.
Overall, the purpose of patents extends beyond safeguarding individual interests and plays a crucial role in driving growth and innovation on a global scale.
Examples
1. Apple Inc.’s Slide-to-Unlock Patent: One well-known example of a patent in the business/finance world is Apple Inc.’s slide-to-unlock patent. This patent, filed in 2005, helps protect the distinctive touchscreen-based unlocking mechanism featured in Apple’s iPhones and iPads. The patent has granted Apple intellectual property rights over this technology, and the company has used the patent protection to assert legal claims against competitors, like Samsung, for implementing similar unlocking features in their devices.
2. Pfizer’s Viagra Patent: The pharmaceutical industry is another area where patents hold significant financial importance. The US-based pharmaceutical company Pfizer developed and patented the drug Viagra (Sildenafil), which treats erectile dysfunction. The patent, first filed in 1996, has granted Pfizer exclusive rights to manufacture and market the drug – leading to billions of dollars in revenue. However, when the patent expired in 2018, other companies were allowed to produce generic versions of the drug, leading to increased competition in the market.
3. Amazon’s One-Click Shopping Patent: Another example from the tech world is Amazon’s one-click shopping patent, which was filed in 1997 and granted in 1999. The patent covered technology that allowed customers to make online purchases with a single click, rather than having to input their information each time. This simplified shopping process became popular and attracted more customers to the platform. Additionally, Amazon licensed the patent to other companies like Apple, further increasing its earnings from the technology. The patent expired in 2017, which allowed competitors to incorporate one-click shopping to their websites without the need for a license.
Frequently Asked Questions(FAQ)
What is a patent?
A patent is a form of intellectual property protection granted by a government to an inventor, granting them exclusive rights to make, use, sell or import an invention for a specified period of time. It serves as a legal recognition for the novelty and originality of an invention, typically for a duration of 20 years from the filing date.
Why is obtaining a patent important for businesses?
Securing a patent is essential for businesses because it helps protect their innovations from being replicated or utilized by competitors without permission. Patents can also serve as assets for businesses, which can be leveraged in negotiations, sold, or licensed to generate revenue.
How does one apply for a patent?
To apply for a patent, the inventor must file a patent application with the national or regional patent office, depending on the jurisdiction. The application should include a detailed description of the invention, claims that define the scope of protection sought, and any drawings necessary to understand the invention. The patent office will review the application and determine whether the invention meets the criteria for patentability.
What are the requirements for an invention to be patentable?
In general, an invention must meet three main criteria to be eligible for a patent. It should be novel (new), non-obvious (inventive), and have a practical application (industrially applicable or useful). The invention must not be publicly disclosed or known prior to filing the patent application.
Can one obtain a worldwide patent?
There is no single “worldwide patent,” but inventors can apply for patent protection in multiple jurisdictions through mechanisms like the Patent Cooperation Treaty (PCT), which simplifies the process by allowing applicants to file a single international application. However, the actual patent rights must still be granted by the individual countries where protection is sought.
How long does it take to receive a patent?
The timeline for obtaining a patent depends on various factors such as the complexity of the invention, backlog at the patent office, and the specific patent office handling the application. Generally, the application process can take anywhere from 2 to 5 years.
What is the difference between a patent and other intellectual property protections?
Intellectual property protections can be broadly classified into four categories: patents, trademarks, copyrights, and trade secrets. Patents protect inventions, while trademarks protect brand names, logos, and other elements of a business’s branding. Copyrights protect original works of authorship, such as literary, artistic, and musical works. Trade secrets protect confidential business information that provides a competitive advantage.
Can a patent be challenged or invalidated?
Yes, patents can be challenged or invalidated based on various grounds, such as the lack of novelty, obviousness, or insufficient disclosure of the invention. Third parties can initiate legal proceedings at the patent office or the courts, arguing that the patent should not have been granted or that its scope should be altered.
Related Finance Terms
- Intellectual Property
- Invention Disclosure
- Patent Application
- Patent Examination
- Patent Licensing
