Today we will take a 30,000-ft flyby tour of the wonderful world of patents. First, let's start by clearly defining what a patent actually is: A patent is a set of exclusive rights granted by a sovereign state to an inventor or assignee for a limited period of time in exchange for detailed public disclosure of an invention. An invention is a solution to a specific technological problem and is a product or a process. Patents are a form of intellectual property.
Good, glad we got that out of the way.
Once your patent application is approved, you get a patent. It shows up in the mail and looks like this (I know because I have a few):
What's important to know ahead of time, is the government is a bureaucratic entity and grossly inefficient. The patent application process is cumbersome, redundant, slow and expensive. Its good to embrace this expectation now so you don't turn back mid-flight.
It's not the government's fault entirely—volume surely plays a part too. For example, in 2014 there were 615,243 patent applications. That's a lot of applications to sift through (about 1,685 per day) each with the requisite formwork. Interested? Here is where you can find all the forms needed to file your very own patent application.
Not sure if you want to go all in? You have a quicker, less-expensive option: behold, the provisional patent. Have you ever seen "patent pending" on a doohickey? You guessed it: the doohickey's inventor used a provisional patent to temporarily protect his or her idea to 1) lock in the filing date, and 2) allow more time to file a non-provisional patent in parallel.
Provisional patents are, as far as patent law goes, interesting. It's important to know their history:
Since June 8, 1995, the United States Patent and Trademark Office (USPTO) has offered inventors the option of filing a provisional application for patent which was designed to provide a lower-cost first patent filing in the United States and to give U.S. applicants parity with foreign applicants under the GATT Uruguay Round Agreements [you don't need to know this].
A provisional application for patent (provisional application) is a U.S. national application filed in the USPTO under 35 U.S.C. §111(b). A provisional application is not required to have a formal patent claim or an oath or declaration. Provisional applications also should not include any information disclosure (prior art) statement since provisional applications are not examined. A provisional application provides the means to establish an early effective filing date in a later filed nonprovisional patent application filed under 35 U.S.C. §111(a). It also allows the term "Patent Pending" to be applied in connection with the description of the invention.
See the part I put in italics? That's the part you should know. In short, a provisional patent is a cost-effective way to start the patent clock ticking and give yourself 12 months to file a non-provisional patent (if you decide to). Your invention could, after all, suck. And who wants to go through a lengthy patent application process for a sucky invention? No one.
To be complete, a provisional application must also include the filing fee as set forth in 37 CFR 1.16(d) and a cover sheet* identifying:
the application as a provisional application for patent;
the name(s) of all inventors;
inventor residence(s);
title of the invention;
name and registration number of attorney or agent and docket number (if applicable);
correspondence address; and
any U.S. Government agency that has a property interest in the application.
A cover sheet, form PTO/SB/16, pages 1 and 2, is available at www.uspto.gov/forms/index.jsp.
Enough boring forms already.
Allow me to share the story of the most valuable patent in history:
Lipitor, a cholesterol-lowering drug used to help reduce heart attack and stroke risk, represents the most value patent in history. It actually expired on June 28, 2011. We'll get to that later.
Pfizer filed a patent application for Lipitor on 2/26/91, which issued on 12/28/93. The product was launched in the market in 1997, with revenues peaking at $12.6 billion in 2006. By the end of 2009, total revenue was greater than $105 billion. Yes, you read that correctly. $105 billion. It became the most profitable patent ever produced, making it more valuable than most companies in the S&P 500. However, when it expired in 2011, the patent became worthless.
Based on this information, why would a company use patents?
Patents provide protection in a variety of ways. They give the owner the exclusive right to exclude someone from practicing the invention in the market. They protect something functional or utilized (e.g., new engine design, drug compound). They allow for abnormal market profits inherent in the monopolistic nature of a patent, and patent owners can price skim if patent utility presents a strong value proposition. Furthermore, patents can command treble damages for willful infringement.
While advantages exist with patents, several disadvantages must also be considered:
Patents are expensive. One patent can cost anywhere from $10,000 to $50,000. An international patent can cost upwards of $250,000!
Patents have short useful lives, with the typical statutory life of 20 years or less.
Patents require full disclosure, revealing specific design information to competitors.
Patents lose value every day on a present value basis.
Lastly, patents are expensive to defend. A typical patent lawsuit in the United States costs $3 million or more.
The team at DBT Ventures hopes you found this patent flyby helpful and/or interesting. Comments welcome!