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Why bother with patents?
A patent gives its owner an absolute monopoly over an
invention for what is usually a twenty-year period. Except
in certain limited circumstances, anyone who uses the invention
during the period of the patent will be an infringer, unless
they have permission from the owner. The owner and any exclusive
licensees may sue infringers and claim damages or an account
of profits. Patenting requires investment, which can be significant
in some cases, but it can provide considerable benefits.
It is usually unnecessary for the owner to sue infringers.
The mere fact that he may do so is often enough to discourage
infringement, enabling the owner to make money from working
the patent. He can do this in various ways, principally by
manufacturing or by licensing, depending on his resources
and business model.
A patent is an intellectual property right, so it is an asset
that may be transferred. More importantly, as a patent is
registered, there are independent means of verifying ownership.
Registers are only as good as the information that is given
to the registrar, but at least there is an official third
party that can be involved in transactions. Registration also
allows patent owners to grant more effective security. So
registration can give potential purchasers and lenders greater
confidence in the property.
The advantages of the patent system become more apparent
if you consider the alternative, which is protecting inventions
as confidential information. Acquiring or establishing rights
in confidential information is cheap, as there are no registry
and no significant professional fees, it arises automatically,
or by contract, and can last indefinitely. But there are significant
disadvantages.
Confidential information must remain secret, or it ceases
to be protectable and therefore loses value. Unless a piece
of information is a real trade secret it may not qualify for
protection, particularly in circumstances where former employees
try to use it. Unlike a patent confidential information does
not provide a monopoly; anybody can have the same idea and
use it independently.
Confidential information is not recognised as property in
the same way as a patent. Furthermore, there is no register,
so there is no way of checking who owns it, and it is not
possible to use it as security for a loan. It is much harder
to attribute value to it in your balance sheet. If information
is sold in the context of a business, or if it is used with
intellectual property as part of a franchising scheme, this
will be less of a problem, but nonetheless the owner's options
are more limited.
Proving a breach of confidence can be exceedingly difficult
in practice. You may never see the brown envelope changing
hands in a car park, and are even less likely to be able to
prove what was inside it. In contrast, a patent owner just
has to show that the infringer is doing something that comes
within the scope of his monopoly.
The final problem with confidential information lies in the
fact that even if you succeed in keeping it secret somebody
else may be granted a patent for the same invention. In that
case it is still possible to carry on using the information
in the UK, but it may not be possible to do so everywhere,
especially if the confidential information has not previously
been used in the country concerned.
As you may appreciate, we have had to simplify some of the
material that we have set out above, so you need to obtain
professional advice to suit your individual circumstances.
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