A patent is a set of exclusive rights granted by a state to an inventor or his assignee for a fixed period of time in exchange for a disclosure of an invention.
The procedure for granting patents, the requirements placed on the patentee and the extent of the exclusive rights vary widely between countries according to national laws and international agreements. Typically, however, a patent application must include one or more claims defining the invention which must be new, inventive, and useful or industrially applicable. In many countries, certain subject areas are excluded from patents, such as business methods and mental acts. The exclusive right granted to a patentee in most countries is the right to prevent or exclude others from making, using, selling, offering to sell or importing the invention.
The term patent usually refers to a right granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof. The additional qualification utility patents is used in countries such as the United States to distinguish them from other types of patents but should not be confused with utility models granted by other countries. Examples of particular species of patents for inventions include biological patents, business method patents, chemical patents and software patents.
Some other types of intellectual property rights are referred to as patents in some jurisdictions: industrial design rights are called design patents in some jurisdictions (they protect the visual design of objects that are not purely utilitarian), plant breeders' rights are sometimes called plant patents, and utility models or Gebrauchsmuster are sometimes called petty patents or innovation patents. This article relates primarily to the patent for an invention, although so-called petty patents and utility models may also be granted for inventions.
Certain grants made by the monarch in pursuance of the royal prerogative were sometimes called letters patent, which was a government notice to the public of a grant of an exclusive right to ownership and possession. These were often grants of a patent-like monopoly and predate the modern British origins of the patent system. For other uses of the term patent see Land patents, which were land grants by early state governments in the USA. This reflects the original meaning of letters patent that had a broader scope than current usage.
There are four primary incentives embodied in the patent system: to invent in the first place; to disclose the invention once made; to invest the sums necessary to experiment, produce and market the invention; and to design around and improve upon earlier patents.
1. Patents provide incentives for economically efficient research and development (R&D). Many large modern corporations have annual R&D budgets of hundreds of millions or even billions of dollars. Without patents, R&D spending would be significantly less or eliminated altogether, limiting the possibility of technological advances or breakthroughs. Corporations would be much more conservative about the R&D investments they made, as third parties would be free to exploit any developments. This second justification is closely related to the basic ideas underlying traditional property rights.
2. In accordance with the original definition of the term "patent," patents facilitate and encourage disclosure of innovations into the public domain for the common good. If inventors did not have the legal protection of patents, in many cases, they would prefer or tend to keep their inventions secret. Awarding patents generally makes the details of new technology publicly available, for exploitation by anyone after the patent expires, or for further improvement by other inventors. Furthermore, when a patent's term has expired, the public record ensures that the patentee's idea is not lost to humanity.
3. In many industries (especially those with high fixed costs and either low marginal costs or low reverse engineering costs — computer processors, software, and pharmaceuticals for example), once an invention exists, the cost of commercialization (testing, tooling up a factory, developing a market, etc.) is far more than the initial conception cost. (For example, the internal "rule of thumb" at several computer companies in the 1980s was that post-R&D costs were 7-to-1). Unless there is some way to prevent copies from competing at the marginal cost of production, companies will not make that productization investment.
One effect of modern patent usage is that a small-time inventor can use the exclusive right status to become a licensor. This allows the inventor to accumulate capital from licensing the invention and may allow innovation to occur because he or she may choose to not manage a manufacturing buildup for the invention. Thus the inventor's time and energy can be spent on pure innovation, allowing others to concentrate on manufacturability.