Patents

Definition

Patents are exclusive rights granted by a government to an inventor or assignee for a limited period, typically 20 years, allowing them to exclude others from making, using, or selling the patented invention without permission. This legal protection encourages innovation by providing inventors with the opportunity to recover their research and development costs while fostering a competitive market environment.

5 Must Know Facts For Your Next Test

1. Patents are divided into three main types: utility patents for new inventions or processes, design patents for new ornamental designs, and plant patents for new varieties of plants.
2. To obtain a patent, the invention must be novel, non-obvious, and useful, meaning it must provide some utility or advantage.
3. The patent application process involves submitting a detailed description of the invention to the patent office, which will then evaluate the application for patentability.
4. Once granted, a patent provides the holder with the right to enforce their patent against unauthorized use or infringement by others.
5. Amortization of patents occurs over their useful life, allowing businesses to deduct the cost of acquiring the patent as an expense on their financial statements.

Review Questions

• How does obtaining a patent influence an inventor's decision-making regarding their invention?
  • Obtaining a patent significantly impacts an inventor's decision-making by providing them exclusive rights to their invention for a specified time. This exclusivity allows inventors to invest in further development and marketing without fear of competitors copying their work. Additionally, knowing they have legal protection encourages inventors to share their ideas with potential investors or partners, fostering innovation and collaboration.
• What are the main criteria that an invention must meet to qualify for a patent?
  • For an invention to qualify for a patent, it must meet three primary criteria: novelty, non-obviousness, and usefulness. Novelty means that the invention must be new and not previously disclosed to the public. Non-obviousness requires that the invention is not an obvious improvement on existing technology to someone skilled in that field. Lastly, usefulness indicates that the invention must have some practical utility or application that benefits society.
• Evaluate how the amortization of patents impacts a company's financial statements and long-term strategy.
  • The amortization of patents impacts a company's financial statements by allowing it to gradually expense the cost of the patent over its useful life. This systematic allocation of costs helps present a more accurate picture of profitability over time and can influence investment decisions. From a long-term strategy perspective, effective management of patents through amortization can enhance cash flow planning and reflect the value of intellectual property on balance sheets, guiding strategic investments in innovation.

Related terms

intellectual property: A category of property that includes intangible creations of the human intellect, such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce.

trademark: A symbol, word, or words legally registered or established by use as representing a company or product, protecting brand identity and consumer recognition.

copyright: A legal right that grants the creator of original works exclusive control over their use and distribution for a specified period, typically protecting artistic and literary works.