According to the World Intellectual Property Organization, a patent is „an exclusive right granted for an invention – a product or a process that provides a new way of doing something, or that offers a new technical solution to a problem.”
This exclusive right is granted for a limited time, which is typically 20 years for patents. With a patent, the owner decides who is allowed to use the invention for the time period with exclusivity. This means that patents are basically knowledge turned into a commodity that the owner decides what to do with. The patent owner may keep the patent to himself, sell it to someone else or just license the technology, if he wishes to keep ownership of the patent. When the patent expires, the owner no longer has exclusive rights to the technology and thus it becomes freely available to the public.
Since patents are only granted for inventions, it is necessary to understand how the Patents Act defines an invention. Despite that each national patent office has their own Patent Act; there is a high similarity in the Patent Acts. The streamlined rule set across borders is due to the World Trade Organization, where each member country is required to agree to the minimum standards for IP that has been set forth by the international agreement known as TRIPS (Agreement on Trade Related Aspects of Intellectual Property Rights). The below definition comes from the Danish Patents Act. Instead of describing what an invention is, it states that the following is not an invention:
“discoveries, scientific theories and mathematical methods, aesthetic creations, schemes, rules or methods for performing mental acts, playing games or doing business or programs for computers, presentations of information.”
– The Ministry of Business and Growth (2012)
The Patents Act continues to mention a list of specific inventions that cannot be patented, such as inventions that encourage immoral or offensive behaviour and plant or animal varieties. This means that anything else not mentioned in the Patents Act is regarded an invention, such as machines, methods, processes, chemical compounds, compositions, articles, products and apparatuses.
Since a patent gives the owner exclusive commercial rights over their invention, it creates an incentive for researchers and inventors to develop new products, by giving them the opportunity to profit from their invention. This encouragement helps push technology that can lead to better human life. Many of the things we surround ourselves with today would most likely not exist, at least not in their current form, if it was not for patents. If there was no potential financial reward, in the form of time limited exclusivity and thus monopoly for the invention, it would be much riskier to invest in research and development. This is because the only way of ensuring exclusivity of the invention would be to keep the knowledge secret from the public, and even then it would be possible for competitors to backwards engineer the technology.
Apart from protecting inventors, patents also help the public by making the knowledge about the invention publically available, as it is only the commercial rights to the invention that is exclusive to the inventor. The word patent which comes from the French letter patente that means open letter (Danmarks Statistik, 2007). This is one of the key elements of a patent, because when it is filed, it must be with a description of the invention that is then made public. By requiring patents to be made public when they are filed, the knowledge is turned into a public good, which can inspire inventors to improve on the current invention, as well as making sure that the invention is actually freely available when the patent expires. This creates a two-sided benefit of patents, where both the inventor as well as the public benefit from patents. There is however a downside for the inventors that they have to make their invention public to be granted exclusivity and the exclusivity is only for a limited time. Some companies choose not to patent their inventions, and instead hide them as a trade secret, ensuring their knowledge is not made public. An example of such a trade secret is Coca Cola and their recipe, which has been attempted to be copied by some of their competitors like PepsiCo. But ultimately the recipe still remains a secret that, if it had been patented, would long ago have been available to the public and possibly not remained Coca Cola’s cash cow.
The process starts with a patent application that is sent to the patent office(s) covering the region(s) that the applicant is interested in having the invention protected in. The application contains information about the invention such as title, summary, detailed description and claims. The claims specify exactly what is protected in this invention. These claims are important, as too broad claims will make the patent too broad to be valid in court, whereas too specific claims will make the patent so narrow that it would be possible for a competitor to copy the invention and legally market it if there is just made small alterations to their product.
There are both national and regional patent offices such as the European Patent Office (EPO). By filing a patent at the EPO, it is possible to have a patent for the whole European region without having to apply to every individual country. It is up to the given patent office to examine the application to see if can be granted as a patent. During the examination of the application the patent office checks for several things. It must fit into the beforehand mentioned criteria for being an invention and it must be something new. For the application to have an element of novelty, it is checked up against the existing knowledge, which is known as prior art. If the application shows to be a step forward from the prior art and fits into the requirements for being an invention, the patent can be granted to the applicant.
Methods and Figures
Forward citation: Forward citations are an important figure according to the discussed theory. The total amount of forward citations can be compared to the industry average to determine how dominant the company is. Another measure is calculating the ratio between total forward citations and the company’s total patent applications published. This can be used to give an indication of the quality of their patents. A high ratio of forward citations compared to patent applications published, shows an ability to produce many high value patents – this number can also be compared to the industry average.
By looking at the issue date for the top patents (by forward citations), it is possible to see the immediacy of some of the high value patents within the company. If the immediacy is low it can be a sign that the company is falling behind and that their top patents either will expire soon and/or their ability to continuously innovate trend setting technologies are fading away.
A forward citation basically means that the patent covers a fundamental technology in the area, where further development is made upon the technology that the patent covers. There are two types of forward citations, internal and external. When the patent is cited by the same assignee, it is an internal forward citation, which shows that the company is internalising their knowledge and assumingly has a strong position in the given technology area. External forward citations are when the patent is cited by another assignee, this can be a sign of the patent being accepted as a fundamental technology by the competitors.
This means that the amount of forward citations can indicate a company’s position within a technology area. Many forward citations, both internal and external, show a strong competitive position and help to get a picture of the company’s intangible assets.
When a backward citation is made, the cited patent receives a forward citation. A forward citation shows the citations received by newer patents.