What is a 'Patent'

A patent is the grant of a property right by a sovereign authority to an inventor.  This grant provides the inventor exclusive rights to the patented process, design, or invention for a designated period in exchange for a comprehensive disclosure of the invention. Government agencies typically handle and approve applications for patents. In the United States, the U.S. Patent and Trademark Office handles applications and approvals.

BREAKING DOWN 'Patent'

In the United States, most patents are valid for 20 years from the date the application was filed with the U.S. Patent and Trademark Office.  U.S. patents are only valid in the United States.  Patents provide an incentive for companies or individuals to continue developing innovative products or services without the fear of infringement.  For example, large pharmaceutical companies can spend millions of dollars on research and development.  Without patents, their medicines can be easily duplicated and sold by companies that issue no outlays for R&D.

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, an applicant should research the Patent & Trademark Office's database to see if another person or institution has claimed a patent for a similar invention. The invention must be different from or an improvement upon a previous design to be considered for a patent. It is important for applicants to maintain careful records of the design process and the steps taken to create the invention. Enforcing the patent is up to the person or entity that applied for the patent.

To apply for a patent in the United States, the applicant submits specific documents and pays associated fees. Written documentation includes drawings, descriptions, and claims of the item to be patented. A formal oath or declaration confirming the authenticity of the invention or improvement of an existing invention must be signed and submitted by the inventor. After fee payment, the application is reviewed and either approved or denied.

Patent Statistics

In 2015, the U.S. Patent & Trademark Office received more than 629,000 applications for patents, of which 326,000 were granted. Most of the grants (~298,000) were for utility patents.  In 2015, more than 40,000 utility patents came from the state of California, which was the most for any state. Second was Texas with more than 9,900 applications and third was New York 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.  Learn more patents and competition by reading Who are Apple's (AAPL) main competitors in the tech industry?

RELATED TERMS
  1. Patent Agent

    A patent agent is a professional licensed by the United States ...
  2. Patent Attorney

    A patent attorney is a lawyer with expertise in intellectual ...
  3. Patent Cliff

    Patent cliff is a colloquialism to denote the potential sharp ...
  4. Expiration Date

    Expiration date is the date after which a consumable product ...
  5. Government Grant

    A government grant is a financial award given by the federal, ...
  6. Property

    Property is anything tangible or intangible over which a person ...
Related Articles
  1. Investing

    Patents are assets, so learn how to value them

    Learn how companies protect their innovative ideas with different types of patents and figure out how much these assets are worth to the overall value of a business.
  2. Small Business

    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.
  3. Small Business

    Patents, Trademarks and Copyrights: The Basics

    In this article learn the basics and differences about patents, trademark and copyrights that can help protect you from legal problems down the road.
  4. Small Business

    How Patent Trolls Hurt Competition

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

    These 5 Drug Patents Will Expire in 2017

    Investopedia looks at the top drug patents about to expire in 2017
  6. Investing

    SteadyMed Wins Patent Challenge Vs United Therapeutics

    SteadyMed secured a favorable ruling in a patent dispute against rival United Therapeutics.
  7. Investing

    Boston Scientific Hit With Patent Lawsuit (BSX, NVRO)

    Nevro filed a patent infringement lawsuit against Boston Scientific over patents related to its Senza and HF10 therapies.
  8. Managing Wealth

    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.
  9. Investing

    BioDelivery Sciences Secures Two Patents

    The new patents extend the expiry period by seven years for three BioDelivery drugs.
  10. Insights

    Gilead’s Hep C Bestseller Faces Patent Dispute (GILD)

    Sovaldi is facing another patent challenge case in Europe by two international organizations
RELATED FAQS
  1. 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 >>
  2. Biotech vs Pharmaceutical company

    Though biotech and pharmaceutical companies share similar business features, there also have differences. Here, we'll distinguish ... Read Answer >>
  3. What is an economic moat?

    An economic moat refers to a company's ability to maintain competitive advantages to protect its long-term profits and market ... Read Answer >>
Trading Center