Cash, receivables, inventory, and equipment are some of the most common business assets. However, this list overlooks one of the most valuable assets your business can own: a really good idea.
Although it’s an intangible asset, there’s an entire body of law devoted to ensuring that people and businesses are able to protect and profit from their ideas. Intellectual property law includes an array of legal protections, including copyright and trademark, as well as patents. In this article, we’ll dig into patents and how you might use them in your business.
What is a patent?
A patent is a property right a government grants to protect the use of an invention for a period of time. In the United States, the US Patent and Trademark Office, or USPTO, a federal agency, grants patent rights. With patents, the USPTO gives the patent owner the right to prevent others from making, using, selling, importing, or otherwise profiting from the patented invention for up to 20 years from the date of the application filing.
“To get a US patent, you have to be able to tell the world, with the grant of a 20-year monopoly, what your particular invention is, and how it works,” says Karan Jhurani, an Atlanta-based patent attorney with the intellectual property law firm Fish & Richardson. “You don’t necessarily need a prototype. As long as you can verbalize the requirements, that’s really all you need.”
Patent requirements
Federal law stipulates four main requirements for whether an idea is patentable. They are:
Subject-matter eligibility
A patent can only cover patentable subject matter such as a process, a method, a machine, or an article of manufacture. That’s a pretty broad category, and “sometimes it’s easier to talk about what isn’t patentable than what is,” Karan says. Things that a patent cannot protect include:
- Laws of nature, such as concepts like gravity or photosynthesis
- Living things that breed ordinarily, like dogs or horses (more on what living things you can patent below)
- Abstract ideas
- Anything that has entered the public domain
Public domain ideas are any that have been “publicly disclosed for more than a year,” Karan explains. For example, DENSO Wave, a subsidiary of Toyota, invented QR codes in 1994. However, DENSO didn’t exercise its patent rights over the QR code, and consequently, the invention became widely known and freely distributed to the public.
Novelty
A patentable invention must be new or original. To be considered novel, a claimed invention cannot have been:
- Previously patented
- Described in a publication
- Already on sale
- In use by the public
- Otherwise available to the public before the inventor files an application
Inventions that exist in the public domain before an application filing are known as “prior art,” and you can’t patent them. Patent attorneys can conduct a preliminary search to ensure your invention is sufficiently novel before completing the application.
Usefulness
Patent authorities have interpreted the usefulness (or utility) requirement to mean the invention must have a real, immediate use the inventor can demonstrate or at least describe with specificity. The patent application cannot be based on a speculative use or a possible future use. This is one of the easier requirements for a patent application to meet. While it must describe how the invention will achieve one or more goals, the invention doesn’t necessarily have to achieve that goal on its own.
For example, the goal of a new car part might be to make a vehicle run more efficiently. Obviously, the car part alone isn’t the only thing that makes a vehicle run. It’s one part in a big, intricate system. But the USPTO won’t reject a patent for the specific part on the basis that it can’t achieve its goal alone, so long as the inventor shows it contributes in some useful way to vehicle efficiency.
Non-obviousness
Non-obviousness is considered one of the more difficult elements to prove in a patent application, especially if it concerns an invention based on, or is iterative of, an earlier invention. To obtain a patent, an invention must be totally original. If it is based in some way on an existing invention, it must be such an extensive and complex modification or improvement thereof that someone of ordinary skill could not easily replicate it. For example, replacing the plastic covering on a bicycle helmet with a more durable kind of plastic would be an obvious improvement on an existing product and not patentable.
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3 types of patents
The various patent types the USPTO grants are:
1. Utility patent
The utility patent is the most common type of patent in the US. It covers machines, processes, systems, and manufactured goods and materials.
Examples of inventions utility patents cover include:
- A piece of exercise equipment
- A drug
- A synthetic fabric blend
- A chemical compound
- A chemical composition
- A software program
The patent term for a utility patent is the maximum available: 20 years from the application filing date.
It’s worth noting that patents for software and cloud-based technological products are getting increased scrutiny from the USPTO.
“The concern is, did you just take something basic and automate it,” Karan says, “and now you’re claiming a patent on something that’s only slightly improved, or a process made a little more efficient.”
2. Design patent
Design patents offer legal protection for the ornamental design of a physical item. For example, a design patent could protect the ergonomic shape of a plastic bottle of dish soap or the design of a ski jacket.
“User interfaces also qualify,” Karan says. “You can actually get a design patent on what the user sees when they go to a website or open an app.”
It’s important to note that while a design patent protects an item’s appearance, the item itself and the design must be inseparable. So, for example, a patent would not protect a simple graphic pattern you apply to t-shirts or bumper stickers (though it might be protectable in copyright or trademark).
It’s also important to note that design patents only protect ornamental designs—a utility patent must protect structural and functional features separately. Unlike other patents, the term for a design patent is 15 years.
3. Plant patent
Most living things, such as a new breed of dog, are not protectable by patent. An exception is any distinct and new variety of plant life. To obtain a plant patent, a few additional requirements apply:
- The plant can’t be a tuber-propagated plant. This includes plants you can grow by separating and replanting a plant’s enlarged root structure, like a potato or an artichoke.
- The plant cannot be present in an uncultivated state, meaning if you can find the plant in the wild. In such case, it’s a natural phenomenon and is not patentable.
- The plant can be asexually reproduced. Asexually reproduced plant varieties refer to cultivation grafting or cutting a plant and replanting the cut portions (as opposed to cultivation by seed).
The term for a plant patent is, like a utility patent, 20 years. However, owners of plant patents must pay periodic maintenance fees to keep them in force, at the end of the third, seventh, and 11th years of the term.
What are combination patents?
Combination patents aren’t a specific type of patent: Instead, they apply when a single invention needs protection with more than one type of patent, particularly if both unique ornamental and structural design elements are combined. Karan recalls working with one client selling a device that projected an image of the night sky on walls and ceilings.
“We got a utility patent on the actual device, the hardware elements; and we also got a patent on the exterior of the device,” he says. “It was very distinct in how it was shaped and the stand it sat on.”
Benefits of filing a patent
Patents obviously protect inventions; but why do inventions need patent protection in the first place? Holding a patent can be essential to your business’s success and its bottom line. Here are four benefits:
Patents encourage innovation
Patents play an important role in economic development: If others could freely use your inventions, it would undermine the incentive to create and innovate. By providing 15 to 20 years of exclusive rights, patents give you time to recoup your development costs and the security to pour additional money into new research and inventions without having to worry about direct competitors.
Patents generate revenue
Patent holders receive premium prices for protected inventions because no other competitor can move in and undercut them during the patent term. It’s also possible to license (essentially rent) patents, giving patent owners a stream of licensing fees. Patent holders can also sell their patents, often for sizable sums.
Patents are assets
You can and should list patents among your business’s assets. Valuable patent holdings can boost a company’s net worth, serve as collateral for loans, provide leverage in mergers and other large-scale transactions, and attract outside investors.
Patents protect your brand and reputation
Inventors have exclusive ownership rights over inventions protected by patents. This means patent holders have a powerful tool at their disposal. The patent serves to discourage competitors from releasing low-quality copycat products that confuse and frustrate customers, thereby hurting your brand’s reputation.
What is a provisional patent application?
A product or other piece of intellectual property still in development and not yet ready for market might qualify for a provisional patent. People file provisional patent applications with the USPTO to establish an early filing date for inventions still in the works.
Although this is often a first step in obtaining a patent, it’s not a functioning patent in and of itself. So long as you file a formal patent application for the provisionally protected invention within one year, the USPTO will backdate the patent filing date to the date you submitted the provisional application.
This is an important paper trail for proving early formulation of an idea. Once the provisional application is on file, the invention receives a “patent pending” status, but if the patent applicant doesn’t file the corresponding non-provisional application within a year, they lose the initial filing date.
Types of patents FAQ
What are the three types of patents?
The three types of patents are utility, design, and plant—and in some cases, these patents may be combined.
What are the four legal requirements of a patent?
A patent must cover a statutorily eligible invention (a new and useful process, a method, a machine, or an article of manufacture), and it must be new, useful, and non-obvious.
What disqualifies a patent?
Laws of nature, natural phenomena (other than eligible plant life), abstract ideas, or inventions that are already patented or exist in the public domain—known legally as prior art—are disqualified from patentability.
