Patents and Their Role - Essay Example

? PATENTS AND THEIR ROLE Submitted By 3 Introduction 3 Intellectual Property Rights 4 Patent types 4 Features of Patent 5 Patent System 5 Need for Patent 7 Role and benefits of Patent Rights 8 Effectiveness of Patent Rights in Global Economy 9 Conclusion 10 References 11 Abstract Patent provides the exclusive right of usage, making and sale to the person who files first for patent. It has to an innovative non-obvious and useful product, service, invention or artistic work. Government along with the help of other regulatory bodies grant patent. Patent plays an active and positive role in encouraging innovation and economic health of the organization. Introduction Writers, inventors, artist, scientists transform their idea into tangible products or property which is reflective of all the research and effort done in achieving that final product. When this property is protected under the law it is called intellectual property rights (IP). Patents, copyrights, trademarks and trade secrets are all examples of intellectual property rights. Inventions, innovations, discoveries and artistic work etc. are as old as human history then why patents are required now. With the onset of globalization and communication mediums such as internet etc. information and knowledge transfers very easily at a very high speed. Patent rights prevent others from copying, making, using or selling the property. Patent is basically a reward to the inventor. This paper aims at studying in detail what exactly patent rights are? What was the need of their development and implementation? Some research related to rules and regulations of the patent law will also be conducted. The paper will also discuss the importance and benefits of patents. Intellectual Property Rights Intellectual property can be defined as the product of human intellect which have commercial value and that is protected by law. Intellectual property generally includes creative works, products, processes, imagery, inventions and services. These intellectual properties are protected through patents, copyrights and trademarks. Intellectual property rights along with other regulations and court decisions secure the rights through following activities. Firstly it includes restriction on selling or licensing of intellectual properties. Secondly, resolution of conflict between companies over intellectual properties and services. Lastly it involves administrative procedures such as registration and administration of intellectual property rights. There are three types of intellectual property rights patent law, copy right law and trademark law. Patent types Patent law is further divided into three categories according to the type of the product. The three categories are utility, design and plant. The most common type of patent right is utility patent. Utility patent is usually reserved for the invention of a new yet non-obvious product. The inventor of this innovative product is granted the exclusive right of selling, using and making of this product for a period of about 17-18 years. The patent granted for new but nonfunctional design is for the period of 14 years. The expiry date of the patent of plant is the longest it lasts for twenty years (Stim). Utility patents as described above are reserved for new, non-obvious, innovative and useful discoveries. These discoveries are further categorized into five types namely processes, machines, manufacturers, compositions of matter or improvement into any of these types. Design pattern is granted for an article of manufacturer (Law). Features of Patent A patent is not just a legal document but it is a technical publication and it even serves the purpose of a sales brochure. It is called a technical document because it must contain sufficient information about the product which is useful for person interested in making and using the patent. Such a document is a source of technical information for the public which is not available otherwise. It also serves the purpose of a sales brochure because it explains in detail the situation and pertinent deficiencies prior to this invention which is referred as “prior art”. It also explains the benefits and improvements in the patent. Patent document emphasize on the subject matter of the patent and not just single invention. Patent document has unique features which are not found in the technical articles and trade journals. It provides a complete, accurate and thorough analysis in quick and fluid manner. Patent office divides the whole information into classes and subclasses. Patent document may contain information which might not be part of the invention but is very useful for researches. It gives information about the ideal. This ideal collection although old but still can provide useful information such as new usages of old product or even development of a new product with some improvements. (Carr) Patent System Patent system in its current form has evolved gradually over a number of years. It has resulted from changes in laws, international treaties. It will not be wrong to state that till present they are still evolving. The patent system includes the following The patent subject matter Restrictions for authorized ownership Duration Fees Procedure which involves prior examination and opposition Inventive step Disclosure Limitations and restrictions regarding use of patents The patentable subject matter has already been discussed. It has some major exclusion like scientific discoveries, artistic masterpieces and some business and mental methods. Definition of technology is however controversial and recently there has been debate over the borderline cases. There are variations in this law from country to country. The main purpose of exclusion of scientific discoveries is to encourage innovation and invention whereas some limitations are put to satisfy the basic human needs. Some regulations on patent are pertinent to government’s choice to access other countries technologies at low cost. Most of the international treaties are directed towards mitigating this third from of patent. In the past there have been various legislations over the ownership of patent but now there is international agreement on the ownership of patent. The first to file is considered the legitimate owner of patent irrespective of his nationality or country of origin. Legitimate duration for exclusive rights of patent also varies from country. Duration of the three major types of patent has already been discussed. It usually varies from 14 to 20 years depending on the type of patent and the country in question. A patentee has to pay a fee to the government for exclusive rights of patent. Initially the patent fee was very high to exclude and avoid minor variations in products which is routine business practice besides patent fee is a form of tax. But now with well defined mechanism the general rule of patent is established that it should not restrict the “existing trade” which is routine and minor variations. The difficulty in this respect is that it is mainly the practice and application of law at large than mere definition and notion. Hence its implementation is not straightforward. In early days of patent either disclosure was absent or it was very narrow and restricted. But these days it is considered an important component of patent system. Patent disclosure is considered the social request from the patentee in exchange of exclusive patent rights. Patent office ensures the patent publication and its quality. Earlier the restrictions on patent rights were strong but gradually over time it has weakened under the international pressures. The basic purpose of these restrictions on the use of patent is to make it more useful and less detrimental in fact beneficial for the society. Limitations and restrictions regarding the use of patent include working requirement, compulsory license and trading rights (Dominique Guellec). Need for Patent Patent rights are often considered as protection however this is a misconception. Patent right is an offensive weapon which a patent right owner can use against any infringer who attempts to use, make or sell without proper authorization. A patent can successfully indulge in law suit or threaten to use one against any trespasser of those exclusive patent rights. Against any infringement or trespassing the patent can claim damages and can earn reasonable compensation. The amount of compensation is usually a reasonable percentage e.g. 5 % of the royalty of sales of the infringer. The process of obtaining the patent right is more or less the same in all countries (David Pressman). The need for patent rights for a particular company depends on many factors such as market size, market growth, importance of technology for the business and to what extent patent assets can be used as a strategic tool for achieving the strategic goals of the organizations. These patents should be aligned with the overall strategic position of the company. Patents are expensive to obtain and maintain hence the company must do the cost benefit analysis before deciding to obtain it. The size of the market and growth should be such that the benefit of obtaining the patent outweighs its cost. The larger the market size the easier it is to recover the cost of filing the patent protection. Technology is another important determinant for seeking patent protection. In markets where technology is an important and crucial source of competitive advantage patent protection becomes very important. In short company’s research and development should not only be aligned with intellectual property rights but also with the overall organizational context as well (Wijk). Role and benefits of Patent Rights The role of patent rights and licensing is very important in technology driven market. It acts as an instrument to support the financial cost of innovations. The arguments in support of the role of patent vary from traditional theoretical arguments to a well defined patent system. The classical argument restricts the role of patent to financial constraints, cost of capital and pecking orders. This classical approach believes that since investment in research and development (R&D) is intangible as compared to capital investment which is tangible and hence is susceptible to varying cash flows. It advocates curtailment of investment in patent rights. The recent and newer theory believes in using patent as financial tool. The exclusive patented products not only improve sales and profits but the sale of patent right can also be a source of finance. Patents can also be utilized to the extent of attracting external equity. In the beginning of the business the patent excludes competitors hence can act as an attraction for investors and be a source of external equity (David Audretsch). Patents have an important role to play in the invention. It not only secures property rights in inventions but also exclude others from the use of invention for a limited period of time. Patent also helps company financially through royalties and sale of patent right which pave the way for further invention as well. Patents play an important role in exploiting inventions in three ways namely through protecting an exclusive market, sharing a present market by licensing and future markets. Effectiveness of Patent Rights in Global Economy Patent rights do play an important role in promoting economic growth and innovation but its role is still quite restricted and limited compared to the role property rights usually play in promoting economic growth. Economic growth is ultimately influenced by property rights. A study of world economy revealed that patent rights although have been beneficial for some countries and some investors did reap financial benefits from their inventions but its role in innovation is quite limited. It was found that countries with no patent rights were as innovative as countries with patent rights. Patent rights do play a somewhat indirect role in the growth of the economy. Some correlation was also found among R&D and patent rights in developed countries but is yet not clear whether R&D leads to patent or patent encourages R&D. Case studies also suggest that patent do play an active and effective role for the R&D of the pharmaceutical business however its role in other industries was not as impressive. In other industries patent does not act as an effective barrier for imitation and firma have to resort to other measures such as lead time advantage and trade secrecy to gain advantage of their R&D efforts. Yet patents do play a positive role in promoting innovation and economic growth (James Bessen). Conclusion I would conclude my paper based on the research conducted that patents do play an active and effective role in promoting innovation and propagating economic growth. Patent gives the exclusive rights of use, sale and making to the innovator who first files the case for a limited period of time. It is beneficial for the organization in addition to the competitive advantage and exclusion of competitors that patent provides for a certain period of time, the financial benefits the organization can reap through royalty, sale of patent rights and attracting external equity. However obtaining and maintain patent is costly hence cost benefit analysis must be done before obtaining patent rights. References Carr, Fred K. Patents Handbook: A Guide for Investors and Researchers to Searching Patents. North Carolina: McFarland, 2009. David Audretsch, Oliver Falck, Stephan Heblich, Adam Lederer. Handbook of Research on Innovation and Entrepreneurship. Massachusetts: Edward Elgar, 2011. David Pressman, Richard Stim. Nolo's Patens for Beginners. California: Nolo, 2009. Dominique Guellec, Bruno Bruno Bruno Van Pottelsberghe de la Potterie. The Economics of the European Patent System:IP Policy for Innovation and Competition. New York: Oxford University Press, 2007. James Bessen, Michael J Muerer. Patent Failure: How Judges, Beaurucrats and Lawers Put Innovators at Risk. Princeton university press, 2008. Law, American Bar Association: Section of Intellectual Property. What is Patent. Chicago: ABA publishing, 2010. Stim, Richard. Patent, copyright and trademark. USA: NOLO, 2010. Wijk, Lex Van. There may be trouble ahead: A practical guide to effective patent asset management. Oxford: ScareCrow Press, 2005. Read More