Patent Attorney and Founder
We hear it pretty often whether it’s from start-up companies, in the academic setting, from real investors, pitch-competitions, entrepreneurs, and even TV shows like Shark Tank™:
“Great product, but do you have a patent on it?”
There is an amazing amount of interest to “get a patent” on an invention, but aside from the strong belief that the inventor “needs one” – the inventor usually doesn’t really know what it means, let alone what the advantages of a patent really are.
Besides the definition, I feel it’s important to lay out the top 3 advantages of patents for you.
I spend a lot of time talking about the details of the patent process…but it’s equally important to tell you about why patents are a good thing, to begin with!
Harkening WAY back, as I LOVE to do…let’s take a look at Article 1 of the United States Constitution:
“To promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”
Indeed! The founding fathers knew that in order to continue the trend (which became the industrial revolution) of technology improvement, we would need to incentivize inventors to share what they came up with so that we could all become smarter. To do this, the government agrees to “secure” and help enforce an inventor’s rights for a “limited time”.
The quid pro quo (I know this is in the news a lot lately) is that inventors give up and share their invention with the world, and the US government will give inventors up to 20 years of exclusive rights to it.
Patents are a very good thing…but how good?
Top Advantages of Patents
#1 Advantage of Patents: 20 Years of Exclusivity
For utility patents (if you want to see more about patent types check out our other blog article What is a Patent? to get the full scoop) a patent owner gets 20 years of protection from the filing date.
Design Patents give you 15 years after issuance.
In general terms, a “utility patent” protects the way an article is used and works (35 U.S.C. 101), while a “design patent” protects the way an article looks (35 U.S.C. 171). – Blog Article: Utility Patent vs. Design Patent (everything you need to know…)
The “filing date” means the date of priority for the nonprovisional filing (for a great breakdown between provisional and nonprovisional – check out Step 8 in our blog article How to Patent an Idea).
Even if you file a provisional before a nonprovisional, that earlier filing date, while it will help to have an earlier date to make a claim to, the 20 years is not from the provisional date, it’s from the nonprovisional filing date.
This is a phenomenal right and privilege. It will allow you and your company to price your product/service with plenty of margin for profit, as there will literally be no competition. There will still be market forces, and customers may be finding they are served by a non-infringing alternative.
But, in general, there is plenty of money to be made here!
So, this 20 years of “exclusivity” or “protection”…what does that mean?
It means that no one else in the US can make, use, sell, or import without permission from the patent owner.
This means you get to just relax, and the patent office will keep all the infringers from selling their products, right?
Wrong.
The USPTO does not act as police and they do not enforce your patent rights for you. That’s up to you to do. So, really – 20 years of exclusivity means 20 years of hard work.
A truly valuable invention is one in which there is market demand for it. Without fail, market demand usually means there will be infringers that try to make a quick buck on the consumer demand and ability to capture big margins because of its inherent novelty.
Therefore, a patent owner that is seeking to capitalize on their patent to the greatest extent has to constantly be monitoring the market for which they have patent rights in to see if any potential infringers are out there.
While patent owners could do this monitoring on their own, it’s worthwhile to outsource this work, and then once a suspected infringer has been identified, to get with a Patent Attorney to make a determination on infringement.
From there, a demand letter (also called cease and desist letter) can be sent if there is activity suspected that infringes the rights of the patent holder. Note, there are all types of infringers out there: direct, contributory, and induced.
Demand letters usually point out the specific claims of the underlying patent and how the product infringes each element of one or more claims. Here’s an example:
The letters then go on to describe the infringement in some more detail and then provide some not-so-nice choices for the alleged infringer.
Lastly, in order to enjoy a full 20 years of protection, maintenance fees are due at 3.5, 7.5 and 11.5 years in order to keep the patent enforceable.
These fees are paid not to the Attorneys, but to the USPTO to offset some of their costs.
Depending on the size of the applicant, fees (as of the writing of this article) are shown below:
#2 Advantage of Patents: Transfer, License, or Sell Your Patent
Many inventors and patent owners enjoy a HUGE advantage of being able to transact with their technology by transferring, licensing or selling their patent rights to companies and individuals with the means and desire to bring about action in the market.
This licensing/selling option is a great boon for those inventors who just don’t want to stand guard and monitor the market for 20 years and allows them to do what they do best… invent the next new technology.
Here is a video with more details about patent licensing.
Much like any other piece of real property, there is what’s called a bundle of rights associated with it. Intellectual property, in the form of a patent is no different. Thus, you can gift it to somebody or bequeath the rights as part of your estate by will or living trust after your death.
As the patent owner, you have the right to prevent anyone else from making, using, selling, or importing into the country.
Therefore, you can license out those discrete rights to one or more individuals or companies.
I found an interesting exclusive patent license template that I’ll be using as an example on this section.
When you license a patent grant, the following are the most important aspects to be negotiated:
- Exclusive or Non-Exclusive
- Geographic scope
- Timeframe
- Royalty
Exclusivity: When a patent owner grants exclusive rights to a manufacturer, they are saying that they are the only manufacturing company in the world that is able to make this.
There are special considerations that need to be made, but it puts certain burdens on the licensee to perform, and even to help enforce the patent rights with the patent owner.
Geographic Scope: It’s important to consider that inventions can be protected in multiple countries and therefore multiple markets.
This is a very important part of the negotiated license as far as where the manufacturer (for example) can make the patented products. Below, they left this template completely up for negotiation.
Timeframe: This is critical for licensees and licensors to negotiate on this point – especially if there is only speculation as far as how well the patented item will do in the market.
The licensee may only want to agree to pay a certain royalty for a certain period of time 3-5 years, and then renegotiate.
Royalty: Of course, top of mind for the inventor/patent owner. This is the negotiated amount of money and disbursement frequency that is paid from the licensee to the licensor.
Many different structures exist for this such as per unity royalty, flat-fee, or a combination of those.
Licensing is a big topic that could fill up a major article all on its own, so I’ll save the long-winded explanation for that.
Here is a great video overview:
- Basics
- Monetization
- Upfront payments
- Royalties based on sales
- Enforcing payment terms
- Royalties after patent expiration
- Negotiating royalty rates
Selling a patent can be fairly straightforward, and there is a lot less negotiation involved and less maintaining.
As with a license agreement, both sides will need to monitor to assure there are no breaches.
With a sale, it is usually very clean cut, but comes with some considerations. The high-level consideration is that a patent sale is going to be at a bit of a discount in terms of the overall monetary compensation one might get for a full-term license.
#3 Advantage of Patents: You Don’t Have to Keep it Secret!
Trade secrets are one way to keep valuable information within a company.
There are more risks associated with trade secrets because you have to constantly monitor the employees within your company to make sure information does not leak out. Whereas with patents, once it is filed and issued, it’s public!
Identifying, classifying, and enforcing trade secrets within a company is arduous work. While every state has different employment laws, this is state-specific in terms of the requirements for contracting with employees. The larger the organization, the more difficult it is to keep trade secrets a secret.
Trade secrets have their place though. One should really think twice about seeking patent protection for products that once sold cannot be reverse engineered. I use the classic example of Coca-Cola.
When Coca-Cola was first created, they could have sought a patent on the actual composition of matter or the method for its making, but no one could figure out how they achieved that flavor from the end product alone. Reverse-engineering did no good, and hence is why Coca-Cola STILL has solid protection over their beverage.
For more on trade secrets, check out these videos:
- Why do trade secrets matter?
- Initial Assessment
- Enforcement of Trade Secrets
- Managing Trade Secrets
- Value of Trade Secrets.
When you have a patent, it is part of the public record and it is intended to be shared with everyone in the industry – so purposefully not confidential.
The founding fathers wanted to make sure that before they would grant a 20-year monopoly, that the inventor was going to show everyone how to make and use this new invention.
Other Advantages of Patents…
One of the other major advantages that patents have is that they help promote further discovery in your field and thus increase their value as time elapses.
Sparks Innovation
The patent system was not intended to attract inventors who only have earth-shattering, first-of-its-kind, groundbreaking technology. No, it was actually meant for inventors to IMPROVE the way we do things and stand on the shoulders of the innovators that came before them. The founding fathers knew that innovation is a movement, an interactive process, and one that is never finished.
Did you know that the entire patent application with the specification, drawings, and all pending claims is PUBLISHED for the entire public to see before the patent is issued? Current US patent law requires that patent application be published no later than 18 months from the priority date.
Lastly, I do think that many individuals and companies (while not all) still run on competitiveness…and sometimes it’s the sheer number of patents that you have, or sometimes it’s the strength of your portfolio… but if the “other guy got a patent”… you better bet that sparks a little fire inside that pushes you to innovate and push barriers and find a way to create something new and useful, which is another of the advantages of patents.
Say your invention is a groundbreaking discovery that opens up a whole assortment of new inventions; however, each new invention still implements your underlying invention, thus they would still have to have your permission.
Patents Can Be An Asset
Having an actual patent granted from the USPTO is an asset! Yes, just like the deed to your car, or house, or bank account – it’s a tangible, descendible, inheritable, transactional asset. And “permission” means a license agreement whereby you as the patent owner get paid for every one of those new innovations that use your technology!
A patent also is a very useful tool when looking for inventors, partners, or clients and the more patents you have the more value and worth your brand and company has when negotiating a merger, public/private offering, or sale.
Consequences of Not Having A Patent
Another way to realize the benefits/advantages of a patent is to look at the consequences for not pursuing a patent:
- Without patent protection, you will only be able to sell your brand name and good will to third parties and not the actual invention because you do not have exclusive right to it.
- Third parties (often times it’s the well-known companies with deep pockets and large distribution/supply-chains) knowing this will begin to develop their own similar inventions or outright copy your invention, and can usually undercut your pricing.
- In a worst case scenario, you might not only have your invention copied but also might lose rights to your invention all together and become an infringer!
- If you invent a product and another person on the other side of the country comes up with the same invention or something similar after you but files a patent application before you, that person will have superior rights to your invention. This means that this invention would be used against you if you were to go to market with it.
How you decide to use your invention will depend on your own personal situation, but it is well worth pursuing a patent and finding out from a patent attorney or agent what is in your best interest.
The Disadvantages of Patents
But as with anything, there can also be downsides to patents. Potential disadvantages of patents include:
- Difficult to Acquire
- Dealing with Infringers
- Limited Time
Patent Disadvantage #1: Difficult to Acquire
Getting a patent is no small feat, which is one of the biggest disadvantages of patents. There is a ton of work required to be at the cutting edge of technology in a single discipline, and it can take even more effort to come up with a solution or to add something new to a gigantic (and growing) body of knowledge. Invention usually comes when trying to solve a problem. And while it may sound strange, sometimes the hardest thing to do is to define what the problem is – then all you have to do is solve it.
This enablement rule is in place to assure that when a patent is granted, the rest of the industry/world will be able to benefit from your knowledge and learn something new.
After you’ve got your idea to the invention stage, you’re ready to start the formal patent process (See below). Now you’ve actually got to do more research and homework in your industry to confirm that what you’ve contributed is actually novel (new) and non-obvious above and beyond the prior art (anything ever published in the same technology).
At Bold Patents, we recommend a 3-step approach to the first phase (of two) – you’ll see the Application (phase 1) of overcoming these patent disadvantages below:
There is an entire second phase of the patent process which oftentimes is overlooked by inventors when planning for their time being patent pending. While I won’t belabor you with the nuances (it can be a very long and windy path from when a patent application is filed) to when it is allowed and eventually issued/granted.
We have outlined in the graphic (for our firm) when we charge hourly fees, flat fees, and when a USPTO fee can be expected to be paid for each step in the patent prosecution process flowchart.
As of the writing of this article, the current pendency (duration of time that a patent application is patent-pending prior to it either being granted or abandoned) is:
You can see the current statistics here.
Yes, you read that correctly. For un-expedited patent applications, it takes on average 15 months to hear anything back, and almost two years to either get the patent granted or the application goes abandoned, making the timeframe another of the disadvantages of patents.
Patent Disadvantage #2: Dealing with Infringers
For most inventors, the very thought of infringement is their biggest fear. Someone ripping them off and making it big can seem like a nightmare. This fear can be a big motivator for an inventor to seek patent protection, but does getting a patent mean that no one will steal your invention?
Unfortunately, no, which is another of the significant patent disadvantages. Bad actors will steal no matter what, but guess what arrow you have in the quiver now that you’ve got a patent? You can ENFORCE your patent rights against them in federal court, the ITC, or PTAB.
Enforcing patent rights – while a necessary part of the process – is the least fun. You’ve got to shell out a lot of money to pay attorneys and soak up your attention with a lawsuit (or at least threatening a lawsuit by sending a cease and desist letter) instead of focusing on your core business or on innovating the next solution/invention.
The most valuable patents that are issued today are the ones that get infringed. This is well known… if no one is infringing your patent, it can actually be seen as a bad thing. This means there is no market demand for your product and/or its too far ahead of its time – which can drastically diminish the present day value.
The effort in dealing with infringers is really only half of the work. The other half of the work comes in before you identify infringement. Meaning, it’s your job to monitor the markets in the jurisdictions you have patent rights to watch out for infrigers. You cannot sit back and hope that everyone competing with you is going to follow the rules. You have to be the one to enforce your rights, and stand guard. One of the major disadvantages of patents is that there are NO PATENT POLICE!
Want to learn more about patent litigation? Check out the in-depth article I wrote!
Therefore, it can be seen as a disadvantage to patents to have to pool the resources, capital, and attention to face would be infringers and enforce your patents against them.
Just know that even if you as the inventor cannot face the likes of Google with your litigation pursuits, your invention becomes MORE valuable. Plus, the chances of you being able to strike a deal with another big player that wants to take on Google increase dramatically. There are also options to seek an insurance policy on your invention. This allows the insurance company to foot the legal bill to defend against infringers. A great resource for this is www.ipisc.com
Patent Disadvantage #3: Limited Time
Yes, patents DO expire… sad but true! This is part of that quid-pro-quo I mentioned at the top of the article. The government is willing to reward innovators with exclusive rights to their invention, but only for limited times.
For design patents, it is 15 years of protection for articles of manufacture that protect the shape/ornamental qualities. For utility patents (including plant patents), 20 years of protection is granted from the date the utility/non-provisional patent application was filed.
Now, something important to understand is that not all patents make it to their end of life. It is actually pretty expensive to maintain the patents’ enforceability. This is true for utility patents only as design patents do NOT have to pay any additional maintenance fees after the patent is granted.
Here is a quick snapshot of the maintenance fees that you will have to pay to keep your patent alive the entire 20 years:
Don’t be too bummed about this – remember, you have CONTRIBUTED TO THE WORLD’S KNOWLEDGE! Now inventors are using your patent to leap from, and find new and better ways to do things.
In Conclusion
While there are pros and cons to most anything you do, hopefully this article was able to give you a keen sense as to what’s possible with patent protection, while also being aware of some of the drawbacks, and things to be careful of. Understanding the advantages and disadvantages of patents is only the first step. Bold Patents can help you navigate the entire legal process and reach the most successful outcome for you so you can enjoy all the advantages of patent rights for your idea.
To recap, the top 3 advantages of patents are:
- Exclusive Rights for 20 Years
- Transfer, License, or Sell Your Patent
- You Don’t Have to Keep It Secret
And the top 3 disadvantages of patents are:
- Difficult acquisition
- Dealing with infringement
- Limited time
As always, if you have any questions that still remain about the advantages and disadvantages of patents, please comment below, email into [email protected], or simply give us a call at our main line: 800-849-1913. Legal Note: This blog article does not constitute as legal advice. Although the article was written by a licensed USPTO patent attorney there are many factors and complexities that come into patenting an idea. We recommend you consult a lawyer if you want legal advice for your particular situation. No attorney-client or confidential relationship exists by simply reading and applying the steps stated in this blog article.