Patent

What is a 'Patent'

A patent is a government license that gives the holder exclusive rights to a process, design or new invention for a designated period of time. Applications for patents are usually handled by a government agency. In the United States, the U.S. Patent and Trademark Office handles application and documentation.

Learn more patents and competition by reading Who are Apple's (AAPL) main competitors in the tech industry?

BREAKING DOWN 'Patent'

Most patents are valid for 20 years in America. By granting the right to produce a new product without fear of competition, patents provide incentive for companies or individuals to continue developing innovative new products or services. As an example, pharmaceutical companies spend large sums on research and development, and patents are essential to earning a profit.

The U.S. Patent and Trademark Office oversees three types of patent applications: utility, design and plant patents. Utility patents cover anyone who invents a new and useful process, machine, article of manufacture or a composition of matter. A design patent includes an original and ornamental design for a manufactured product. Plant patents go to anyone who produces, discovers and invents a new kind of plant capable of reproduction.

How to Apply for a Patent

Before making a formal application, you should research the Patent & Trademark Office's database to see if another person has claimed a patent similar to yours. Your invention must be different from or an improvement upon a previous design to be considered for a patent. Maintain careful records of the design process and the steps you took to create your invention. Enforcing the patent is up to the person or entity that applied for the patent.

To apply for a patent, you must submit documents and a filing fee, both of which occur through electronic means. Written documentation includes drawings, descriptions and claims of the item to be patented. You must also submit an oath or declaration stating that you invented the item or improved on an existing item in a substantial way. You must also pay the filing, search and examination fee. Once the government approves the patent, making money is up to the person who owns the legal right to market the invention.

Patent Statistics

In 2016, the U.S. Patent & Trademark Office received more than 629,000 applications for patents. The agency granted nearly 326,000 of those applications. Most of the grants, or more than 298,000, were for utility patents.

In 2015, more than 40,000 utility patents came from the state of California, which is more than any other state. The next-closest state was Texas with more than 9,900 applications. New York was third with more than 8,400 utility patents granted.

By comparison, in 1963 the U.S. Patent & Trademark Office received nearly 91,000 applications and granted more than 48,000 patents.

RELATED TERMS
  1. Medical Patent

    A legal protection against market competition that a government ...
  2. Design Patent

    A patent protecting the unique visual qualities of a manufactured ...
  3. Patent Agent

    A professional licensed by the United States Patent and Trademark ...
  4. Utility Patent

    A patent that covers the creation of a new or improved – and ...
  5. Field Of Use

    Restrictions that are placed on a license granted for the use ...
  6. Patent Share

    The percentage share of a universe of patents owned or created ...
Related Articles
  1. Investing Basics

    Patents Are Assets, So Learn How To Value Them

    Innovation is the key to staying on top. Find out how companies protect their ideas and how to figure out how much they're worth.
  2. Investing

    Protecting Your Idea: Should You Patent It?

    At what stage of development should you patent an idea – and which ideas can you patent? Here's how to decide and what to do next.
  3. Investing

    Filing A Patent

    Want to patent your invention or design? Here's a complete step-by-step guide to the process.
  4. Investing

    Hiring A Really Competent Patent Attorney

    Use this guide to find a well-qualified attorney to guide your application through the complex patenting process at the best possible price.
  5. Investing

    What's The Cost To File A Patent?

    When filing a patent, be ready to pay attorney fees, filing fees and other related expenses. Usually the total bill is a few thousand dollars.
  6. Investing

    Patents, Trademarks and Copyrights: The Basics

    The decision to pursue a patent, trademark or copyright depends on the type of intellectual property you’re trying to shield.
  7. Fundamental Analysis

    How Patent Trolls Hurt Competition

    Patent trolls are known to have a negative impact on the overall business ecosystem. Investopedia explores how.
  8. Professionals

    From Idea To Product: 4 Steps To Success

    These steps will help you bring your million-dollar invention to life, without breaking the bank.
  9. Investing News

    Apple Loses To VirnetX In Patent Case

    Apple, Inc. loses a patent case to VirnetX Holding Corporation and needs to cough up $625 million.
  10. Entrepreneurship

    Protecting Your Idea From Angel Investors

    If you need outside financing to grow your business, be careful about whom you decide to talk to and what information you offer them.
RELATED FAQS
  1. Can you realize capital gains on intangible property?

    Learn more about capital gains and losses and how they may apply to intangible assets. Find examples of intangible assets ... Read Answer >>
  2. What are typical examples of capitalized costs within a company?

    Learn examples of capitalized costs such as expenses incurred to put fixed assets to use as well as software development ... Read Answer >>
  3. What are the major barriers to entry for new companies in the drugs sector?

    Find out why barriers to entry for U.S. drug companies are so high and how the Food and Drug Administration, or FDA, inhibits ... Read Answer >>
  4. What do high economic profits in a given industry suggest about that industry?

    Learn how certain industries have high economic profits and what it says about those industries; the key is the industry ... Read Answer >>
  5. What are some common examples of noncurrent assets?

    Learn more about noncurrent assets and examples of noncurrent assets, such as tangible fixed assets, intangible fixed assets ... Read Answer >>
  6. What is the drugs sector?

    Learn more about the drug industry and how new drugs are brought to market. Find out about how drug research is financed ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center