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economic role of patents



A patent is a statutory grant by a government, which confers on the proprietor the right for a limited period of time to exclude others from using the invention. This exclusive monopoly is given in return for the inventor making the details of the invention public. The purpose of a patent is thus to encourage research and development and innovation, to allow the inventor to recoup his costs for inventing, developing, producing and commercializing the product, to encourage the dissemination of technology and know-how, to provide an incentive for future investment in research.

A patents confers upon its owner the exclusive right to use the invention commercially. The monopoly is limited to 20 years maximum and applies only in those states in which the patent has been obtained. The owner of a patent thus enjoys an advantage on the market since he can prohibit use of a new technology by his competitors or demand payment for such use.

This monopoly can prove lucrative. Some tranquillisers protected by patents are sold at a price 600 times their manufacturing cost. The producer can thus recoup the often considerable development costs.




A company that regularly files patents also proves its innovator potential to its clients and shareholders. Financial analysts are aware of this and more and more often take into account data relative to patents before deciding to invest in a company.

Applying for a patent will also ensure protection against claims made by competitors. A well-furnished patent portfolio constitutes in this respect an effective means of dissuasion. Applying for a patent will allow the applicant to indicate “Patent Pending” on his invention, which may dissuade others from copying the product for fear of infringing a patent. If the corresponding product is launched at an early stage, the potential rivals will not know the details of the invention for about 18 months, which will allow the applicant sufficient time to establish the product on the marketplace and gain a substantial economic advantage.




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