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Jan 55 min read

Understanding the Basics of Patents: What You Need to Know

Chris Emerson

This article was developed by the Kentucky Bar Association (KBA) Intellectual Property (IP) Section. To learn more about the KBA IP Section, visit https://www.kybar.org/page/intellectualproperty.


What is a patent?

In plain English, a patent may be considered a temporary legal monopoly[1] granted for an invention (e.g., a product or a process) that, in general, provides a new way of doing something, or offers a new technical solution to a problem.[2]  That is a general rule for most countries.[3]  To avoid discussing international considerations and caveats, this article will focus on United States’ (US) patent law.

 

From a legal perspective, a US patent is thought of by many as granting a “negative right”, e.g., a right to exclude other from doing something, as opposed to the affirmative right to make something.[4]  Accordingly, the value of a patent is primarily derived from these exclusionary rights.[5]  A patent owner (person, corporation, etc.) may prevent competition in the market, monopolize a product and/or service for themselves, and/or license a patent right to another.


What is necessary for a patent?

The starting point for a patent is innovation.

 

As a general rule, an entity that at least creates something novel[6], non-obvious[7], and useful[8], and enables[9] replication of that thing, may be granted a patent.  Thus, an entity must at least:

  1. innovate something substantially different over what is known to the public,

  2. demonstrate a use for the innovation by showing how it accomplishes something, and

  3. disclose the innovation in a patent application with enough detail that a person having ordinary skill in the art (e.g., a “PHOSITA”) could replicate the innovation without undue experimentation.[10]

 

Moreover – on a less innovative and more legislative note - a patent application must be directed to patent eligible subject matter[11], which includes many caveats, but generally excludes mathematical equations, methods of organizing human activity, mental processes – and the like - from being patented.


How do you get a patent?

At this point something has been innovated – you believe it may satisfy the necessary requirements for a patent discussed above – and you’d like to file a patent application with the United States Patent and Trademark Office (USPTO) to begin the patenting process. 

 

  1. Filing an application can be done by a patent attorney or pro se by an inventor.[12]  Because patent applications are extremely dense legal documents requiring many hours of drawing, writing, researching, citing, and head-scratching before being completed, many inventors choose to hire a patent attorney to prosecute their patent application.[13] 

  2. However you end up filing, the USPTO will eventually assign an examiner to review your application.  An Examiner’s role is to basically look for reasons not to grant a patent - and if everything looks good – to grant a patent.[14]  An Examiner will – at a bare minimum – determine whether the patent requirements discussed above are met. 

  3. After an Examiner reviews your application, there is usually some back and forth (e.g., negotiating) between the attorney and the Examiner regarding fun patent law things.  The back and forth usually results in one of two outcomes occurring: allowance and abandonment.[15] 

    1. Abandonment frequently occurs when an applicant decides not to respond to a notification from the USPTO.  This is usually a result of significant pushback on patentability from the USPTO by way of application rejections.

      1. Abandonment of an application almost always results in the application not developing into a patent.

    2. Allowance usually occurs when an applicant is given a positive indication of patentability after receiving a notification from the USPTO.

      1. Allowance of an application frequently results in the application developing into a patent.


What can you do with a patent?

At this point a patent has been granted and someone holds rights in the patent. 

 

If you developed something on your own time, by yourself, with your own resources, then you probably own all or some of the rights.  If you developed something on company time, or with a friend, or on contract for someone else, then another entity may own all or some of the rights.

 

And frankly - in more than a few situations - this is the end of the line. 

At the end of the day, a patent is as valuable as someone considers it to be, and a patent covering an innovation that is never sought to be produced or sold may have little monetary value.  For example, Forbes has indicated that “[a]round 97% of all patents never recoup[ed] the cost of filing them”.[16]

 

However, I might suggest that the value of a patent is not adequately measured by the mere monetary value (or lack thereof in some instances), but by the friends and stories made along the way.

 

That being said, many entities (people, corporations, etc.) have become very – very – monetarily wealthy from patents.[17]  For instance, Forbes has also indicated that in 2012 “Microsoft acquired 800 patents from AOL for more than $1 billion, only to turn around and sell 70% of them to Facebook for $550 million in cash.”[18]  E.g., $1 billion divided by 800 patents averages out to around $1.25 million per patent in that original bundle – and that’s ignoring that the remaining 30% (240 patents) of that original bundle was proportionally acquired for $450 million, averaging out to around $1.875 million per patent in the remaining 30% – and that was in 2012 (e.g. not accounting for inflation).


Conclusion

To summarize, patents are dense legal documents with stringent requirements and examination proceedings necessitated in view of the literal temporary monopoly that they give to right’s holders.  Patents are not a one-size-fits-all form of intellectual property protection, and while many patents have been issued with little-to-no monetary value, more than a few have been issued that have been appraised at extraordinary monetary values. 

 

If you have questions about patent prosecution, litigation, and/or portfolio management, please consider reaching out to a local patent practitioner.  Kentucky residents have access to a host of unique resources and assistance in their state.[19]  Additionally, the USPTO offers a ton of resources and help for pro se applicants[20].


 

[1]David R. Henderson, Patents, Library of Economics and Liberty, https://www.econlib.org/library/Enc1/Patents.html.

[3]Id.

[4]Richard H. Shear & Thomas E. Kelley. A researcher's guide to patents. Plant physiology, 132(3): 1127–1130. (2003). https://doi.org/10.1104/pp.103.022301.

[5]Alexander Ljungqvist, What Is a Patent Worth? Evidence from the U.S. Patent “Lottery”, CATO Institute, https://www.cato.org/research-briefs-economic-policy/what-patent-worth-evidence-us-patent-lottery#.

[6]35 U.S. Code § 102 - Conditions for patentability; novelty.

[7] 35 U.S. Code § 103 - Conditions for patentability; non-obvious subject matter.

[8]35 U.S. Code § 101 - Inventions patentable.

[9]35 U.S. Code § 112 – Specification.

[10]Gordon K. Hill and A. John (Jack) Pate, Avoiding Confusion of PHOSITA, AIPLA, https://www.aipla.org/list/innovate-articles/avoiding-confusion-of-phosita.

[11]MPEP 2106 (e9 r10. 2019).

[13]Dennis Crouch, Grant Rate by Size and Representation, Patentlyo, https://patentlyo.com/patent/2021/04/grant-rate-by-size-and-representation.html.  “[O]ver 99% of patent applicants were represented by a US patent practitioner.”

[15]Patent Process Overview: Step 3, USPTO.

[17]The high value of U.S. patents, ShareAmerica, https://share.america.gov/high-value-of-us-patents/.  “PatentVector has found 65 inventors are responsible for patents worth at least $1 billion.”

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