The Pros and Cons of Patents
Is a patent the gateway to smooth sailing and high profits in the marketplace, or a condemnation of two decades of red tape and little protection?
If there were no patents, then people would not invent,” says Dimitri Kanevsky, a gray-haired, Soviet-born researcher who works in Yorktown Heights. If anyone would know about patents (the government-granted legal right to exclusively make, sell, or use a product you invent for 20 years), it’s Kanevsky.
Since age three, he has been deaf, but thanks to exceptional math and engineering skills, he’s spent his adult life inventing—and receiving patents on—products that help him, and others who are hearing-impaired, communicate. These patents have made him quite a success, and have driven his inventing further: They helped him find prestigious research postings all over the world (including at the Institute for Advanced Study in Princeton, New Jersey, Albert Einstein’s long-time employer) and receive awards such as the Champions of Change citation he was granted by President Obama in May. Since 1986, he has been working within our own borders—at IBM’s Speech and Language Algorithms Department—and today he has more than 155 patents to his name.
But are patents as much of a boon to everyone? In theory, yes. You can potentially patent almost anything—the case for a cellular phone, the shape of a conference table, icons that you see on a computer screen, or even a new art-deco stapler—and the protection you receive, says David Leason, managing partner of Leason Ellis LLP, an intellectual property firm based in White Plains, is tantamount to a monopoly, a legal barring of all competitors from taking a part of your market. But it can also take three to five years to get a patent and cost up to $25,000, and, in the end, the government’s stamp of approval may still do little to protect your company and product.
So is it really worth it to spend all that money, time, and energy getting a patent? A cost-benefit analysis is in order.
The opportunity to own a market
This is the biggie. Yes, America already offers an encouraging environment for inventors: We have a mostly free market, in which new products can be bought and sold at will (unless, of course, they are illegal). But, according to Leason, perhaps even more important is our government’s willingness to grant patents. Many of the Founders, he says, “recognized that there are limited circumstances when you want to award a monopoly to individuals because of their contribution to promoting the progress of science and the useful arts.” They even wrote it into Article I of the United States Constitution.
So, once you prove to the US Patent and Trademark Office (USPTO) that your invention is something really new and sophisticated, your invention is protected for 20 years (by a utility patent, which applies to machines, tools, and methods; design patents, awarded for ornamental innovation, are valid for 14 years from the date you file the application), which ostensibly means that nobody can sell anything that falls under the descriptions in the patent filings without your permission.
Therefore, having a patent allows you to own the market. Knowing that, many larger companies, including those in fast-growing sectors like pharmaceuticals and technology, have in-house teams to patent their ideas and services. They then use those patents to either punish people who infringe on their territory or to make people pay for the use of their ideas, through issuing licenses and royalties. MasterCard, which is headquartered in Purchase and has patented processes involving online transactions, uses patents this way; so does Tarrytown-based Regeneron Pharmaceuticals, Inc., which has invented a number of medicines and healthcare procedures. In April of this year, for example, it released initial findings on a new colon-cancer drug called Zaltrap. The drug is patented.
Patents also scare off potential competitors from the get-go. Because the penalty for patent violation is so high, many companies will stay far away from your territory, just in case, and those who don’t may well pay. Sometimes the offending party must pay three times the profit it received from the illegal activities, and in a recent headline-grabbing judgment against Samsung, Apple won more than $1 billion in damages for what a jury decided was Samsung’s infringement on smartphone patents. The value of that deterrent is immeasurable, Leason points out. You never actually know how many companies would have tried to compete with you if you hadn’t owned the rights.
Hawthorne-based Allstar Products Group, which makes the famous Snuggie, knows this reality all too well. It couldn’t secure a patent because the design wasn’t original enough. It is, after all, just a blanket with sleeves. Numerous Snuggie clones saturated an already-limited market, and Allstar lost out on a lot of money.
Attracting Investors and Funding
“Why would the capitalist invest money in your research if he does not expect a return on your invention?” asks Kanevsky, rhetorically. He believes it is no surprise that he has found many companies and organizations willing to sponsor his work. (In addition to IBM and the Institute for Advanced Study, he has also worked at the Weizmann Institute of Science in Israel and as an associate of the Max Planck Society in Germany.) He says organizations are willing to give him time, space, and financial resources because he is skilled at both inventing products that are patentable and persuading authorities to grant him exclusive rights to his goods. And his patents, in turn, make money for the company.
When he was 23, he invented a device that translates audio signals into vibrations, which he could use to help him lip-read. Decades later, he built a real-time transcription service, which he and I used while we spoke over the telephone. (The system transcribed our conversation as we spoke. With Kanevsky’s thick Russian accent and tendency to slur his speech, this came in as handy for me as it did for him with his hearing impairments.)
According to John Zaccaria, a partner at the intellectual property law firm Notaro, Michalos & Zaccaria P.C. of New York City and Orangeburg, New York, the attractiveness of a patent is even more important to companies less established than IBM. Startups, he says, have a better chance of attracting venture capitalists if they already have patents for their ideas.
And then there are individuals who secure patents to bolster their own credentials or egos. “I suppose if I were a scientist I might say a Nobel Prize was the ultimate honor, but certainly a patent is significant and an important milestone,” says Manny Schecter, IBM’s chief patent counsel. At his company, securing patents can lead to promotions, bonuses, and higher salaries, as well as bragging rights. “Sometimes you see scientists bragging about that—not just in the company, but you’ll see it at conferences,” he says. The problem is that while bragging rights are certainly fun and appealing, they may not outweigh the high costs of securing a patent.
The complexity of the system
All patent applications go to the federal US Patent and Trademark Office. And it’s not an easy process. First, the invention, regardless of what it is, has to meet certain criteria. Your invention has to be new and unobvious. Once you submit it, the patent examiner will probably get back to you (maybe in a year or so), and propose arguments for why your idea is not novel or “unobvious.” And “you need to learn how you negotiate and talk to the lawyers in the United States office,” says Kanevsky. “Usually, their first reaction is always to reject the claims in the patent. Then you have to have the strength to argue with them.”
A bulk of the patent cost consists of fees for intellectual property lawyers, which can cost more than $1,000 an hour for a “corporate guy in the City,” and who, says Schecter, are essential to help you navigate the process. “My biggest piece of advice for an individual inventor would be to seek at least some sort of counsel,” Schecter says. “The patent system is a pretty complex system, and it’s easy for someone who doesn’t get any advice to stumble along.”
There is also the cost of filing and maintaining the application, for which the US Patent and Trademark Office lays out in a seemingly unending list of expenses: $125 for a provisional application, $625 to submit the actual application, $870 to issue the patent, and then maintenance fees ($565, $1,425, and $2,365) at regular intervals until the patent runs out 20 years later.
There are things you can do to lower the actual cost of achieving the patent. The first thing, says Leason, is to spend time on the federal website, researching whether or not anybody’s invention has come close to yours or whether somebody has published your idea first. “Smart companies ask us if they can or whether they need to make any changes when they’re thinking about making a product,“ says Leason. “That’s an excellent way of entering the marketplace because it’s not the Wild West. You can’t just see something and say, ‘hey, I can sell that—I’ll make that myself.’”
The unending process of protecting your patent
According to federal law, the patent holder is responsible for protecting his or her patent and approaching wrongdoers. Sometimes, says Leason, people just apologize for using your idea without consent and either abandon it and pay you a royalty for using it, or request a license to continue doing so. Other times, though, it is not so easy. “If they say, ‘We came up with it on our own; it’s different than your idea,’” he says, “there will be a fight.”
Part of the reason for this is that there is a good possibility that you got a patent that was too narrow to do much good. Many patents are awarded for products or methods that are entirely new. However, other times patents are awarded for a tweak to an existing product. For example, if you invent the first hairbrush that has bristles that lean to the side, rather than straight up, you can patent that. The problem is that competitors can easily make a hairbrush with different bristles that doesn’t violate your rights but appeals to the same buyers.
Rules about what constitutes infringement can be labyrinthine, and, if there’s debate over whether there’s been infringement, the case goes to court. That apparently happens quite a lot, and it will cost you. “Patent lawsuits go to the federal court. You may need experts to testify to the issue, and you can easily spend more than the damages you will get,” Zaccaria says. And each time somebody infringes on your patent, you have to start the process over again.
Only you can decide if your idea or invention is worth the time and effort it takes to protect it. For his part, Kanevsky is certain on the issue. Are patents worth it?
“Yes!” he says. “People have to have funding for these unique inventions. When I was getting my first patents, it was a big event for me. I was very proud, very happy.”
And look where he is today.