Definition of 'Patent Cliff'
A colloquialism to denote the potential sharp decline in revenues upon patent expiry of one or more leading products of a firm. A patent cliff is when a firm's revenues could "fall off a cliff" when one or more established products go off-patent, since these products can be replicated and sold at much cheaper prices by competitors. While it is applicable to any industry, in recent years the term "patent cliff" has come to be associated almost exclusively with the pharmaceutical industry.
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