What Is a Patent?

Patents are granted to inventors to give them exclusive rights to produce and sell their ideas for a certain duration of time. During this time period, the inventor will be protected from other persons or companies selling or producing their product. The inventor will not only have exclusive rights to produce it, but they will also have the right to license the idea to other companies to allow them to produce the product under a licensing agreement.

The patent holder is given the right to control how their invention will need to be made, used, or sold in exchange for disclosing the details of their product to the public.

Advantages and Disadvantages of Patents

Patents are exclusive legal rights given to an inventor that prevent other individuals or businesses from profiting from the inventor's creation(s). Having a patent means that only the inventor can decide how their creation is used. They can license the invention for use by third parties or manufacture and sell it themselves. While this is generally positive, there are advantages and disadvantages to patents.

Inventors must make the details of their invention available to the government and the general public in order to receive a patent. Applying for a patent can be challenging, with obstacles such as regional restrictions and cost. Patents are critical to some established businesses since they can profit from obtaining the exclusive legal rights to their products, designs, and ideals.

But for small businesses, start-ups, and sole proprietorships, the cost and complexity of obtaining a patent can be more trouble than it's worth. Inventors must carefully consider all the pros and cons of seeking a patent before embarking on the application process.

Types of Patents

Two types of patents are issued by the U.S. Patent and Trademark Office: utility patents, which protect the way an invention works, and design patents, which protect an invention's appearance. A utility patent lasts for 20 years and covers five categories of inventions:

  • A process, such as a computer algorithm.
  • A machine used to make something.
  • The specific item being manufactured.
  • Improvement of an existing idea.
  • Composition of matter; a recipe for a creation.

A utility patent must be for an invention that serves a practical purpose or use. The inventor must pay a maintenance fee.

A design patent is granted for an original design that is purely decorative and created to embellish a product. However, a design patent cannot be granted for a purely two-dimensional design or for a design that has been sold before the patent application was submitted.

Design patents, which last for 14 years, cannot be used for functional items. Because they are granted for the design of an object and not the object itself, many large companies patent distinctive designs to develop a competitive advantage.

Pros and Cons of Patents

Inventors must weigh the costs of applying to patent their creations against the risks of not doing so. One drawback is that the process can be challenging for those who are new to patents. Many people fail to patent their ideas because they don't have support from loved ones, they are turned off by the costs, or they have misconceptions about what a patent means.

Understanding the pros and cons of seeking a patent can help inventors make an informed decision about whether patenting the creation is the right path.

Advantages of Patents

  • When an inventor or startup is seeking capital for an idea, they may disclose their invention to potential investors and licensees. It is important to patent the idea before taking this step to prevent someone else from stealing the idea and filing a patent application first. If a patent is granted, the USPTO (United States Patent and Trademark Office) will consider the person who filed first the owner of the patent.
  • Filing a patent gives the inventor a legal monopoly on selling, using, making, distributing, importing, or exporting their creation for a specified time period. This keeps others out of the market for the invention, which can be extremely profitable and beneficial. When the patent expires, others will be able to use the new invention as they see fit.
  • If an inventor has an idea that infringes on a competitor's patent, they may seek a patent anyway to prevent the competitor from improving the product. For example, if one company has a patent for a jar, another company can file a patent for a special jar lid. The first company would then not be allowed to make any jars with that type of lid, thus restricting competition. This strategy can be a valuable bargaining tool when negotiating a licensing agreement.
  • A patent holder can typically charge a premium for an invention because of the restricted competition. No one else is making a similar product.
  • A patent holder can exclude the competition from recreating their product or service. This allows them to sell the product or service at a higher profit margin.
  • Ae inventor can profit from selling licenses or selling the patent outright. Though royalties are often only 5 percent or less, they can be a better option for many inventors who may be unable to foot the expense of bringing the idea to market themselves.
  • Patenting an idea can also help to restrict the competition. A properly filed patent can limit the competition's ability to produce the product and even allow the inventor to demand that they cease production if they are producing the item as well and have never patented it.
  • Patents can be extremely valuable for small businesses that may be able to find investors willing to invest merely for rights to a patent.
  • Patents can help businesses of all sizes to expand their market share. When filing a patent, an inventory may have the ability to file it in other states where they plan to sell, thus increasing their territory and the company's share of the market.
  • A patent can provide increased credibility to an inventor and their company.

Disadvantages of Patents

While there are many advantages to filing for a patent, there are some disadvantages as well.

  • Details of the invention are publicly disclosed. To file for a patent application, the inventor is required to make public the technical information about the invention. Depending on the invention, some inventors choose to not disclose this information and keep the details of their product or service a trade secret.
  • The application process can be lengthy and time-consuming. It can take three to four years for a patent application to be completed and granted. There is also the risk that the market could change significantly over time or that technology could advance.
  • A patent can be an expensive process even if it unsuccessful. With patent fees, attorney fees, and the cost of creating drawings, a patent can run anywhere from $2,000 to $5,000, depending on its complexity.
  • A patent has to be maintained, and there are costs associated with that. Once a patent has been granted, it must be extended three times throughout its life. Failure to pay maintenance costs can result in the inventor losing their rights of protection under the patent.
  • While a patent provides protection from competition, it does not mean that the competition will not try to make the product. If this occurs, the inventor must be able to defend the patent. This involves hiring an attorney who can file cease and desist letters and provide other help with a claim.
  • A patent is only good for the country it is issued in. Patent protection will only extend to the country in which the patent is filed. If an inventor plans to produce, market, or sell their product or service in a different country, they will be required to file a patent application in each country to gain the afforded protection.
  • The protection will only be as good as the claims patented. If a patent is too narrow or too broad, it can leave room for wealthy competitors to replicate the invention, making it just different enough so that it might possibly not be considered a violation.
  • They eventually expire. Patent protection typically only lasts 14 to 20 years, though in certain situations, they can be reissued. This means that a company will need to go to market quickly to be able to take advantage of the protected period before the patent expires and competitors begin to flood the market.
  • They bring the risk of lawsuits. When an inventor tries to patent an idea, competitors may file suit in an attempt to invalidate the patent if they feel it can provide them with benefits. Others may claim the patent infringes on their own patent, and they may try to sue the inventor for an injunction or damages.

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