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Text Box: Patent Pros & Cons

Trying to decide whether or not to file a patent on an idea can be overwhelming for those unfamiliar with patents and the process.  Often, good ideas go unpatented because of lack of enthusiasm from friends, misconceptions about patents, or intimidation about the cost.  This page should help dispel some of the mystery surrounding patents and allow you to make a better informed decision on whether or not to apply for a patent.  We’ll start with the supportive arguments:

Pros

Keep others out of the market

Restrict competitors

Revenue from licenses or sale

Retain the right to practice the invention

Give your product credibility

Market yourself

Keep others out of the market – First and foremost, a U.S. patent allows its owner to exclude others from making, using, selling, offering for sale, importing, or exporting an invention included in the patent’s claims for a definite amount of time in the United States.  This is basically a government-granted monopoly, rewarding an inventor for disclosing to the public his or her idea.  Patents are intended to better society in the long run by motivating companies and individuals to innovate; after the patent expires, society will have free access to it technology.  Depending on the market, excluding competitors from direct competition with you can be extremely valuable.

Restrict competitors – In some cases an inventor not be able to practice his invention even if he were to get a patent granted because the idea, although patentable, would infringe competitor’s patent.  But obtaining the patent anyway may restrict that competitor to his ideas and prevent him from practicing ideas that were unforseen by him.

For example, let’s say that Company A has a patent on any form of a jar and that Company B surprisingly discovers any grip on the jar’s lid allows people with weak hands to easily open the jar.  If Company B applies for and receives a patent on a jar with a gripped lid, they still would not be able to make its invention because Company A has the right to exclude Company B from making a jar.  This does not mean, however, that Company B should not apply for a patent on a jar with a gripped lid.  If Company B obtains a patent on the jar with the gripped lid, Company A would then not be allowed to make a jar with a gripped lid.  Company B now has a bargaining tool to negotiate a license with Company A. 

In another scenario, Company A’s patent may expire in 5 years, which would allow Company B to make jars.  Although Company B may not be able to practice its patent for a few years, it may still gain a significant amount of value in the remaining life of the patent. 

Revenue from licenses or sale – As described earlier, a common way to make money from patents is to license the technology to others.  Typically a licensee will pay an up front license fee plus a royalty.  Royalties are often 5 percent or less, but can be any amount and depends on the deal made between the licensee and the licensor.  Often the royalties exceed the up front fee.

Another option is to sell a patent instead of licensing it.  Since no one can foresee the future, this option should be considered.  Unforeseen to the patent owner and buyer, the patented technology may become obsolete in a few years or the economy may go into a recession .  These or other factors could reduce a patent owner’s expected royalties.  Typically, license royalties are not included when a patent is sold and the patent owner may get more money up front although make less in the long run.

It is important to remember that a patent is an intangible asset and that its value is included in the value of a company.  The value of the patent is important when selling or merging companies and may also affect a company’s stock price. 

Retain the right to practice the invention – Although there are other ways to legally ensure an inventor has the right to practice his invention without applying for a patent, applying for a patent may be the best way to accomplish this.  To stop someone else from filing a patent on a new idea, an inventor may publicly disclose the technology such as by publishing it on a  website or in a magazine.  This disclosure may prevent others from obtaining patents on that idea, which others may come up with independently.  But if your business depends on this idea, a patent may be a safer option to prevent other from obtaining patents on it, even if the patent owner has no intent to enforce it. 

The patent office generally does not grant a patent when the technology is disclosed in a reference that pre-dates the patent application.  However,   when examining a patent application, the patent office tends to be more familiar with patent references and less familiar with non-patent references.  If the patent examiner is aware of a non-patent publication, a later filed patent application claiming the subject matter of the non-patent publication will probably be rejected by the patent office.  However, since the office may not be aware of the non-patent publication, the later filed patent application may be granted, although the patent office would not have done so had they known about the non-patent reference.  If the non-patent publication discloses the invention that is now covered in the granted patent, the patent may be considered invalid.  However, it usually takes a law suit to prove this and it would have been cheaper to have applied for the patent instead of simply trying to disclose it in a non-patent reference.  Also, the non-patent publication may not clearly show the publication date (which may be the case with certain websites), and the courts may not be able to rely on the non-patent publication to prove invalidity.

Give your product credibility – How many times have you heard a salesman or an advertisement rave about their “patented” product?  Simply having a patent on something doesn’t mean that the product is any better than anyone else’s, but that doesn’t mean it won’t give the salesman an edge.

Market yourself – Everyone has to market themselves.  A patent may impress a future employer.  A patent may be a way for an engineer to market himself.

Cons

Cost

Liability

Costs – Patents are not cheap, but a good idea may be worth it.  According to the 2006 Fee Schedule posted on the U.S. Patent Office website, the filing fee for a patent application is $500.00 for a small business or independent inventor (small entity) or $1,000.00 for large businesses (large entity).  (See small entity in the Patent Glossary.)

Once the patent application is allowed, the patent office will charge an additional issue fee of $700.00 for a small entity and $1,400.00 for a large entity. 

To keep a patent valid over the life of the patent, a patent owner will need to pay maintenance fees which are due before the 4th, 8th and 12th years after a patent has been issued.  Again, the fees are less for a small entity.  The fee due before the 4th year is $450.00 for a small entity and $900.00 for a large entity.  The fee due before the 8th year is $1,150.00 for a small entity and $2,300.00 for a large entity.  Finally, the fee due before the 12th year is $1,900.00 for a small entity and $3,800.00 for a large entity. 

These are the bare minimum fees to get a patent granted and to keep it alive.  If any of these fees aren’t paid, the patent application will never grant or the issued patent will expire.  Other fees may be charged during the application process depending on the size of a patent application and if communications with the patent office are late. 

Liability – Another drawback to owning a patent is the lawsuits that may be associated with the patents.  A competitor may try to invalidate your patent if the price is right.  The patent owner is responsible for enforcing his own patents, so if the owner wants to stop another from infringing the patent he must do so at a cost.  Although the patent office takes great care to avoid it, there is a chance that a patent will grant that technically isn’t valid.  If such is the case, the patent owner could be sued for having an unlawful monopoly.  Again, consulting with a patent attorney about liabilities that may arise from a patent is recommended.

As noted above, simply owning a patent (even a really good one) does not mean automatic revenue or fame.  Every potential patent owner should ask himself, “Is this patent going to gain me more value than the cost of preparing and filing it?”  If the answer is “yes,” determining the patentability of your idea is the next step.

 

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