What Is Patentable?

A patent is a government-granted monopoly that precludes others from using an invention for 20 years (for utility patents) in return for the inventor’s disclosure about how the invention operates. Patents are based on a fundamental trade-off. As compensation for showing others how an invention works, and thereby advancing the level of technical knowledge in a country, inventors receive monopoly rights to their invention for a specific period of time.

Patents have a complex set of effects on technological innovation. On the one hand, they provide people with an incentive to innovate. In the absence of the monopoly right provided by patents, inventors often would be unable to capture the value coming from their inventions and, therefore, be unwilling to develop or exploit them. Moreover, the disclosure that patents require makes it possible for other parties to learn from inventions and make further advances, which would not be possible if the inventors kept the inventions secret.

On the other hand, patents can deter technological innovation by making it difficult for others to reap commercial value from undertaking further developments in an area, given the inventor’s property rights. For example, some observers believe that patents on genes deter follow-on innovation because they give the patent holder too much protection, thus deterring others from developing genetic tests based on the initial inventor’s discovery.

Patenting is an old, and established, form of intellectual property protection. The first uses of patents go back centuries; patents were important mechanisms to protect basic inventions of the industrial revolution, such as the steam engine. The patent system is so important that in the United States the patent system is enshrined in Article I of the Constitution, and has existed since the birth of the nation.

Despite being around a long time, patenting appears to be increasing in importance. Since 1983, the number of patents granted by the U.S. Patent and Trademark Office (USPTO) has increased by approximately 5.7% annually.¹ Currently, each year approximately 350,000 patent applications are made to the USPTO, 200,000 patents are awarded, and inventors spend in excess of $5 billion to obtain U.S. patents to protect their inventions.²

What Can Be Patented?

Many brilliant business concepts cannot be protected with patents because only the mechanisms for exploiting ideas can be patented, not the ideas themselves.³ For example, you cannot patent the idea of a fast-food restaurant drive-through window. All you can do is patent a mechanism for exploiting the idea, such as the window itself.

Because they are not embodied in physical form, most services are difficult to patent.⁴ So you cannot patent courteous service, even if it provides your business with a competitive edge. The best that you can do is to patent the process by which that service is created, as would be the case if you developed a robotic employee that could be programmed to be courteous all of the time, even if it were having a bad day.

You also cannot patent laws of nature or any substances that appear naturally,⁵ such as chemical elements, because the government thinks of nature, not the person discovering them, as the inventor. The best that you can do to protect a discovery of a natural substance is to patent the mechanisms for obtaining it, such as the process of leaching iron from rock.⁶

You can get a utility patent, which is given for new or improved products and processes, for one of four things: a process (such as a chemical reaction), a machine (such as a laser), an article of manufacture (such as a diskette), or a composition of matter (such as a genetically altered bacterium).⁷

Novel, Nonobvious, and Useful

Patents are only granted for inventions that the patent office determines are novel, nonobvious, and useful. The USPTO defines an invention as “novel” if it has not been previously invented.⁸

The patent office deems an invention to be “obvious” if it is a clear next step in technological development to a person of ordinary skill in the field of the purported invention (for example, an electrical engineer would be considered to have ordinary skill and knowledge with respect to electrical circuits) or if the elements of the invention all were present in existing patents and it would be obvious to combine those elements.⁹ For example, J. M. Smucker Co. was denied a patent on its method of applying filling to its “Uncrustables” sandwich product because the patent examiner assigned to the case believed that the concept of applying peanut butter on one slice of bread and applying jelly on another would be “obvious” to anyone trained in the art of making a sandwich.¹⁰

For the USPTO to view an invention as “useful,” it has to work, have a use, and be functional.¹¹ So you cannot patent something that is not functional, such as a piece of music. However, being “useful” does not mean that an invention has to have commercial value; in fact, most patented inventions generate no financial returns. Take, for example, U.S. patent 5,023,850, for a dog watch that moves at 7 times the rate of a normal watch.¹² While this device works, is functional, and has a purpose, it has no commercial value. Perhaps the number of dogs who can tell time and have disposable income is too small.

First to Invent

The U.S. patent system differs from the patent systems in most other countries because the United States awards patents to the first party to invent something, not to the first inventor to file for a patent. The importance of the first-to-invent rule can be seen in the case of the rotational wheel interface in Apple Computer Inc.’s iPod. Microsoft was the first company to file for a patent on this technology, which is currently the subject of a patent dispute between Apple and Microsoft. For Apple to prevail in this dispute, it has to file a declaration to the U.S. Patent and Trademark Office (USPTO), which states that it invented the device before Microsoft, and the USPTO has to determine, as a result of an investigation of the declaration and Apple’s records, that Apple’s invention predated Microsoft’s patent application.¹³

Nondisclosure

In the United States, patents are only awarded for inventions that have not been offered for sale and have not been publicly disclosed, either in an open forum or in print, more than one year earlier.¹⁴ While experimental testing of your invention is not considered public use, you cannot advertise the invention, issue a press release about it, present it in a seminar, or even offer a description of it at a trade show.¹⁵ In fact, in some cases, even showing an invention to your friends might constitute a public disclosure of the invention. So, to keep your invention secret, you need to have anyone who looks at the invention before you file for a patent sign a nondisclosure agreement.¹⁶

Expansion of What Is Patentable

Over time, the U.S. government has steadily expanded the types of things that can be protected by a patent, leading to a rise in the number of patents issued. Since 1980, patents can be obtained on genetically engineered organisms, such as mice; genetically altered substances, such as yeast; and human genetic sequences.¹⁷

In addition, while mathematical formulas are considered to be natural phenomena and cannot be patented,¹⁸ those formulas that are applied to a structure or process (as occurs in software) have been patentable since 1981.¹⁹ As a result, patents now protect a wide range of computer software—from training tools to investment and insurance systems to e-commerce payment mechanisms.²⁰ Furthermore, since 1998, business methods can be protected by patents.²¹

The expansion of what is patentable has raised a number of important issues for technology strategy:

1. The increase in the volume of patent applications has created backlogs in the patent office, making the process of getting a patent less efficient than it used to be.
2. The growth in the patent “thicket” has resulted in a lot of cumulative and overlapping patents, increasing the rate at which firms license their patents to each other (cross-licensing).
3. The expansion into business method patents, which tend to be broader and more obvious than other patents, has raised questions about the degree to which innovation is being hindered by property rights.
4. The expansion into genetically engineered organisms has raised questions about whether they block follow-on research and are making it difficult to come up with new medical and pharmaceutical innovations.

Design and Plant Patents

There are two types of patents other than utility patents, which we have been discussing: design patents and plant patents. Design patents are given for the appearance of products.²² For example, U.S. patent number D339456 protects an ornamental design for a shoe sole. Design patents differ from utility patents because they have only one claim and protect a piece of intellectual property for only 14 years.²³

Plant patents are given only for engineered plants that are reproduced asexually.²⁴ An example is Tropicana’s patent for varieties of oranges used in its Pure Premium orange juice. Like utility patents, plant patents protect a piece of intellectual property for 20 years and have multiple claims.