What is the purpose of a patent?
The reason civil societies set up patent systems is to encourage research and promote development and diffusion of innovations, giving inventors (or companies) a temporary and transferable right to protect their inventions from imitation.
In exchange for this, the inventor must make his invention public, disclosing it in a sufficiently clear way so that the technical information can be useful to support new knowledge and so that the invention can be reproduced by any interested party upon the expiry of the patent.
Companies do not patent only to prevent imitation (which is still the main purpose) but to:
● safeguard the freedom to operate (and therefore avoid being blocked by a competitor in the marketing of the product and/or service);
● hinder competitors;
● obtain greater negotiating power (in the licensing and cross-licensing phase);
● improve the reputation and corporate image in the eyes of customers and investors;
● incentivize researchers with a remuneration system (not only economic);
● facilitate research and development collaborations with other partners (“open innovation”);
● attract financing (institutional investors and venture capitalists). [1]
The use of industrial property rights is not the only protection strategy available to innovators.
The alternative to patent protection is to keep a ‘trade secret’. This protection, however, is limited in that it does not guarantee freedom of operation but only an advantage of direct appropriability [2], cannot be invoked erga omnes unless towards those who have obtained this information in an illegal way.
Furthermore, anyone who legitimately obtains the same (technical) information, can patent it, leaving the owner of the trade secret a right of pre-use.
The trade secret protection is useful for protecting what is not patentable (not only for lack of patentability requirements) and also for all inventions of minimal scope which can be easily re-designed.
Secret information must not be easily accessible, must have an economic value and must be kept confidential by means of legal (e.g. confidentiality agreements) and technical means (IT security systems).
Compared to trade secret and defensive publication, the patent is the best tool in terms of advantage of appropriability and freedom of operation.
If the invention is difficult to copy, the sale of the product will be profitable for the innovator without need for any particular safeguards but if the product is easily copied, then access to industrial property rights are essential to guarantee economic returns.
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Capturing the value of an innovation depends on a number of factors, such as:
● the type of innovation (product, procedure, service): patents are more effective in protecting products than procedures;
● the type of business (multinational, SMEs, start-ups): multinationals benefit from patents more than SMEs;
● the industrial sector: e.g. in the telecommunications field, patenting essential inventions that will eventually become standards is fundamental, as in the pharmaceutical sector;
● technological complexity;
● IP legislation (strong, weak);
● the structure of the market.
A company must manage its patent portfolio to maximize value, i.e. deciding which inventions to patent and which to keep secret, which patents to hold or limit in each geographical area, which to abandon, sell or license (in an exclusive or non-exclusive way): in this way costs are minimized and profits increased. [3]
There are also companies that decide to freely grant their patents [4], trying to create a sustainable innovative ecosystem.
They do this mainly for the following reasons:
- economic (limit expenses and maintain annual patent fees);
- technical (sharing knowledge to improve the quality and applicability of technologies, accelerate innovative processes, and make a profit thanks to network effects);
- social (donations to non-profit entities and creation of non-commercial patent pools on technologies with a high environmental, nutritional or medical impact);
- tax (tax reduction).
Bibliographic references
[1] M. Holgersson, O. Grandstrand, “Patenting motives, technology strategies, and open innovation”, Management Decision, Vol. 55, №6, 2017, pp 1265–1284.
[2] M. Holgersson, M. W. Wallin, “The patent management trichotomy: patenting, publishing, and secrecy”, Management Decision, Vol. 55, №6, 2017, pp 1087–1099.
[3] L. Agostini, A. Nosella, M. B. Teshome, “Towards the development of scales to measure patent management”, World Patent Information, 58, 2019, pp 1–12
[4] N. Ziegler, O. Gassmann, S. Friesike, “Why do firms give away their patents for free?”, World Patent Information, 37, 2014, pp 19–25
