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.
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.