Federal tax topic: Patent
A patent is a right given to a person who invented a new product by the federal government through the patent and trademark office. It protects the invention made from being made, sold, or imported by another person. The right covers the product for a specific time, usually 20 years (Pressman et al. 10). Therefore, a patent protects inventions from being copied, allowing the inventor to enjoy a monopoly. As a result, it ensures high profitability in inventions, hence encourages citizens to be creative and invent new products.
A patent is transferable. The owner of the patent can sell the patent to another company just like a property according to the US code 1235 that states that a transfer of rights to a patent shall be considered sale or exchange of the asset for more than one year regardless of payment of or productivity (Pressman et al. 10). The owner can also retain the patent, but allowing another company to make and sell the invented product that was patented. However, the company allowed to enjoy the product is supposed to pay the original company. This different from selling the patent; this is called licensing of a patent. From the statements above, we can conclude that a patent is just like any other property; the owner has the right of ownership and can transfer total ownership to another company through selling or even just licensing another company.
Novelty and non-obviousness
Not all products invented are patentable. Only novel and non-obvious products are patentable (Pressman et al. 13). A novel product is one that has unique features compared to other similar inventions. In contrast, a non-obvious product is the one that is rendered different by people who will be using the product. In summary, patents are issued to new inventions to encourage more inventions due to the benefits enjoyed after a patent is issued.
Some inventions can be novel and non-obvious, but the government cannot patent them. Scientific phenomena are one of the examples of these inventions. Giving a patent to a scientific will not promote inventions in science and art since they apply scientific phenomena to develop inventions. Therefore, giving a patent to a scientific phenomenon would not promote inventions but hinder it. However, mental processes cannot be patented because no one can control what someone should think (Pressman et al. 15). Others include mathematical concepts, intangible inventions, and tax avoidance schemes.
DNA concepts were considered a patentable inventory. However, in 2013, the Association of Molecular Pathology presented a case against Myriad Genetics in the Southern District Court of New York (Offit 2723). The case was against the gene patent issued to Myriad Genetics. The proponents argued that the gene patent issue would hinder genetic research. However, the court ruled in favor of Myriad Genetics, which led to the appeal of the case to the United States Court of Appeals for Federal Circuit. The case there still supported that isolated DNA that does not exist alone in nature can be patented. As s result, the case was appealed to the Supreme Court, where the gene patent was removed, and the court stated that DNA isolates concepts should not be patented (Aboy et al. 824).
Types of patent
There are three different types of patents. Patents are classified depending on the type of product that the patent will protect. They include utility, design, and plant patents (Pressman et al. 10-12).
A utility patent covers completely new inventions. A new drug invented to cure a new strain of virus (COVID-19), fungi, or bacteria is an example of an invention that falls under a utility patent. COVID -19 is a new virus that causes a respiratory condition that can cause spontaneous death, was first discovered in China in 2019. The new virus did not respond to other antivirals. Therefore, scientists are still in the laboratory, making a new vaccine, probable medication for the virus. Invented drugs for COVID-19 approved by the Food Drug Administration (FDA) can get a utility patent since the drug will be new.
Design patents are granted for products that have been included new features making them unique. A new Samsung smartphone model with unique features compared to the old model is protected by a design patent. Uniqueness can be observable, such as the smartphone’s size, including the length, width, and thickness of the phone, weight, and number of cameras. Uniqueness can also be internal such as battery power, characteristic of the processor, storage space, and camera resolution.
Lastly, plant patents cover invented plants. Invented plants that are patentable include hybrid and new distinct asexually reproducing plants. Sexually reproducing plants do not fall under plant patents but utility patents. A newly invented rose plant with no thrones and its rose petals of a single rose with different colors, cream and yellow, is an example of an asexually reproducing plant that the inventor got a plant patent for it.
Therefore, an investor must consider the type of product developed before applying for a patent.
Advantages and disadvantages of patents
The protection of intellectual property is the main aim of patents ISe, sold, or even imported by any other party apart from the inventor of the product who has the right to do so (Pressman et al. 17). By doing so, the inventor enjoys profit alone in the market. Is because a patent causes a form of monopoly of the invented product. The inventor gets no market competition on the same product since the inventor is the product’s sole producer. Therefore, the inventor enjoys maximum profit. In addition to that, the inventor gets to license the invention to other companies. The licensed company is allowed to make and sell the invented product in the market in exchange for royalties. in this case, the investor can opt to license a company and earn through the collection of royalties (Pressman et al. 17). These advantages of patents that the inventor enjoys causes a higher need for inventors to patent their inventions to enjoy them.
After inventing an invention, the inventor needs to apply for a patent and trademark office patent. The application process takes 2 to 4 years, which is s long period (Pressman et al. 15). There could be an invention of a more useful product making the invention out of the market when it acquires the patent. The process of application involves disclosing all the information concerning the invention. The disclosed information to the office is made publicly available. Therefore, this means that the invention has no right to privacy. As a result, there is a risking of the invention secret. The application process also requires payment of fees. The fee is directly proportional to the type of invention. New drugs, for example, have the highest application fee, making it costly. In addition to that, the fee paid is refundable when the application was turned down. Apart from the application fee, there is an annual fee that needs to be paid; failure of payment leads to immediate termination of the patent for patents making patent ownership costly. Patent ownership is more costly for inventions that do not earn money for the inventor.
Lastly, patent ownership is meant to keep away others from using the invention; however, there are patent infringement cases. In such cases, the patent owner needs to defend the court’s invention; the patent does not defend the case (Pressman et al. 15). Therefore, before applying for a patent, the inventor needs to analyze the patent owner’s risks and benefits to the invention. Inventions with no monetary value in the market make it costly and unrealistic for the inventor to apply for a patent.
Patent application process
Patent application occurs in the US Patent and Trademark Office (USPTO). The inventor is the one that files a provisional patent application (PPA). The document contains information concerning the invention. However, patent applications should not be more than one year after the product’s invention (Pressman et al. 15). An application for an invention blocks another application on the same invention. Therefore, inventors need to apply as fast as possible and prevent disclosure of their invention’s information before applying for a patent.
There are different fees required to be paid in the application process for a patent. The provisional filing fee is paid for filling a PPA, whereas the regular fee is paid for a non-provisional patent application (Pressman et al. 15). Payment of fees is required in the application process for a patent. The amount of fee paid is dependent on the type of invention and the size of the company applying for the patent. Inventions like new drugs require a high amount of fees to pay.
On the other hand, big companies pay a high fee compared to small companies. After PTO has gone through the files presented by the inventor, they conclude on whether to approve or deny the application. The approved patent then requires payment of the issue fee for the issuing of the patent. Therefore, for a patent application, the inventor should be financially stable to settle the payments.
After the application process, issuing of the patent, the patent owner enjoys the patent rights. However, there is a need to be payment of maintenance fee, failure to make that causes loss of the patent rights. The maintenance fee is paid yearly until the patent expires.
Expiry of the patent
Should the patent owner enjoy a monopoly for a lifetime? The USPTO has an expiry date for all the patents. Utility and plant patents take 20 years before they expire, whereas design utility takes five years less (Pressman et al. 15). However, time can be added time in cases of delays made by the USPTO during the patent application process. Delays could be in issuing the patent after the issue fee has been paid or delaying examination of the application up to 14 months.
Premature expiry can also occur, making the inventor lose patent rights before the expiry. Failure to payment of maintenance fees is one of the causes of premature expiry of a patent. In addition to that, when the patent owner engages in illegal activity, USPTO takes away the patent rights enjoyed by the owner. Failure to disclose important information during application also causes loss of the patent rights once the USPTO gets aware of it. All in all, rules are rules and need to be followed to avoid the consequences of not abiding by them.
Work cited
Aboy, M., Liddicoat, J., Liddell, K., Jordan, M., & Crespo, C. (2017). After Myriad, what makes a gene patent claim’markedly different’from nature?. Nature biotechnology, 35(9), 820-825.
Offit, Kenneth, et al. “Gene patents and personalized cancer care: impact of the Myriad case on clinical oncology.” Journal of clinical oncology 31.21 (2013): 2743.
Pressman, David, and David E. Blau. Patent it yourself: Your step-by-step guide to filing at the US patent office. Nolo, 2020.