Classified patents are protected under a secrecy order which prevents the award of a patent, puts restrictions on filing for a foreign patent, and mandates that an invention be kept secret. Additionally, classified patents follow specific procedures in order to prevent any disclosure of ideas detailed in an application.

Secret Patents

In 2017, the United States Patent and Trademark Office (USPTO) reported statistics that there were over 5,700 classified patents held by the United States government. These inventions are highly guarded under sensitive secrecy orders. The public may never know more about these classified inventions, but some once-secret patents included a laser-tracking system, a stronger net, and a warhead-production method.

Invention secrecy dates back to the 1930s, but exploded in the 1940s when nuclear weapon development became a highly classified topic. Under the Invention Secrecy Act of 1951, federal law prevented the disclosure of new technologies and inventions that may present a national security threat to the United States.

Under this act, the commissioner of the USPTO was permitted to flag patent applications for review by American government defense agencies in order to keep certain inventions classified. This invention secrecy could even apply to ideas and products developed by private citizens. Patents that qualified for a secrecy order were made available only to defense agencies, were restricted from being exported, and were deemed classified.

A secrecy order can be appealed by a patent holder. However, the power to rescind the order lies in the hand of the agency that made the request. Typically, those that would make that decision would include the following agencies:

  • Air Force.
  • Army.
  • Department of Energy.
  • NASA.
  • National Security Agency.
  • Navy.
  • Justice Department.

Kinds of Inventions That Are Included in Secret Patents

It is believed that most classified inventions include technological advances utilized in weapons systems for United States military services because most requests for classified patents appear to be quickly granted. Many of these patents originate from military contract work, but not all of them do. Generally, most investors do not object to secrecy orders, however some have requested and received financial compensation due to claimed losses from previous secrecy orders.

Where Are Patents Classified on the Balance Sheet?

A patent gives a patent holder exclusive rights to use a design, process, invention, or any other intellectual property. It is the responsibility of the USPTO to review all patent applications and grant patents. This provides companies and individuals monopoly rights for an established number of years. On a classified balance sheet, patents are placed in the intangible assets subsection.

Intangible assets are a part of the long-term assets subsection. Intangibles include the following:

  • Copyrights.
  • Patents.
  • Trademarks.
  • Franchise licenses.
  • Goodwill items.
  • Other nonphysical items that do not have a set market value.

Companies often use intangible assets in order to encourage long-term economic benefits. This is because intangible assets are frequently used for extended periods of time and they are not easily converted into cash. Patents have a similar accounting process as other fixed assets. Businesses must amortize or allocate the costs for the life of the patent. Costs affiliated with patents include documentation, registration, and any legal fees in the event of unauthorized use.

Typically, research and development expenses are not associated with the cost of a patent. Instead, they fall under operating expenses. It is recommended that businesses utilize the straight-line approach to amortize intangible assets when the amortization cost is the same every year. To clarify, if a business obtains a 10-year patent at a cost of one million dollars, the yearly straight-line amortization expense is about $100,000.

Examples of Secret Patents in the U.S.

A secrecy order is applied to a patent if the USPTO staff and their military advisers consider the idea a potential threat to national security. A patent will not be published until the technology is considered to no longer pose a threat.

Inventions related to uranium enrichment, cryptography, and chemical and biological weapons are typically made secret. Additionally, harmless inventions that could be considered to be “dual-use” could fall under a classified patent. A good example is an airborne crop duster which could be used to spread biological weapons.

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