What is a patent?

Patents have a long history in the United States, dating all the way back to the drafting of the Constitution. The U.S. Constitution allows Congress to grant patent protection in Article I, Section 8: “The Congress shall have power… to promote the progress of science and useful arts, by securing for limited times to …inventors the exclusive right to their discoveries.”

Translated into today’s legalese, patents are a form of personal property that provide the owner with the right to exclude others from making, using, selling, offering for sale, or importing into the United States the invention described in the patent claims, for a period of 20 years from the date of filing. Patent laws are codified in Title 35 of the United States Code.

The Official Stuff in Translation

Those two definitions are impressive-sounding, but what do they really mean? A patent is essentially a government-sponsored right to a monopoly, designed to reward the inventor by providing him with incentive to risk time, effort, and money in developing new technologies. “The right to exclude others” gives the inventor the right to stop others from entering a marketplace with his invention, in theory giving a first-to-market advantage in developing his product. Interestingly, patents only give the right to exclude people from practicing an invention, not a right to practice it. Whether an inventor can make, use or sell an invention depends on whether someone else already has a patent on a broader invention. For example, an inventor with a patent on a new kind of bicycle wheel wouldn’t be able to use it if someone else had a patent on the bicycle.

Patents are applied for with and granted by the U.S. Patent and Trademark Office. Unlike other types of intellectual property, patents are only granted to inventions that fulfill exacting standards. The must-have qualities to be worthy of patent protection are novelty, usefulness, and nonobviousness.

The Double-Edged Sword: Of Monopolies and Men

Theoretically, the granting of a patent can be viewed as allowing for a legal monopoly. Hold on! you say. Aren’t monopolies the root of all evil in the marketplace? Here’s how the courts view it, as stated in Ashcroft v. PaperMate Mfg. Co. (1970):

The history of the American patent system is replete with the continuing tension between a strong public policy against monopoly and a desire to encourage inventions which will benefit the public. This tension has been resolved by the courts setting a high and exacting standard for patent validity.

So, yes, monopolies are generally bad things that squelch competition and drive up prices, but that’s for industries and products already in existence. New inventions often need to be sheltered from competition in order to thrive. The old saying is that ideas are like newborns – easy to kill. Inventions need shelter from competition. Otherwise, an inventor wouldn’t expend the time and energy needed to develop his invention into a strong, healthy product. But if he’s protected from competition, the chances that he’ll be able to see the development through and reap its rewards are radically improved.

Licensing: the Other Face of Patents

Still worried about the monopoly question? There’s another facet of patents that inventors often take great advantage of: licensing. The practice of licensing, in which competitors pay a licensing fee to a patent-holder and gain permission to produce or sell the patented invention, is a commonplace way for inventors to benefit from their patents that actually serves to introduce competition into the marketplace. In fact, according to James Gleick, in his article “Patently Absurd” “much of the value of the patent system lies in the disclosure of technologies that might otherwise be hoarded as trade secrets.” And of course, it is unusual that a patented product is so breathtakingly novel that there are no other available alternatives.

One such rare example is that of the first xerographic copier. Chester Carlton, the inventor of the photocopy machine, spent years trying to sell his invention to many large companies, hoping that they might undertake its commercial development. He had no luck. The big companies (including the mother of all big companies, IBM) all told him that while his gizmo was interesting and everything, it had no real market potential. Carlton persevered, however, and finally two small companies, the Batelle Memorial Institute and the Haloid Corporation (later to become the Xerox Corporation) agreed to license the technology and manufacture the copier. Once it was shown to be commercially viable, the two companies were willing to risk investing the millions of dollars needed to develop the industry – but only because of the assurance, provided by the patent system, that their efforts would be financially rewarded. Without that protection, the very companies that had at first rejected the invention as unmarketable could have easily appropriated it once its commercial promise was demonstrated. Competition was stifled, perhaps, but the exclusionary right was crucial in allowing the initial formation and development of the industry. Plus, once the patent on the initial invention expired, a flood of competitors (such as Sharp, Kodak, and Canon) rushed onto the scene. It’s thanks to the patent system, though, that “photocopy” and “Xerox” are practically the same word.