Define: Patents

Business, Legal & Accounting Glossary

Definition: Patents


Full Definition of Patents

Rights, granted to inventors by the federal government, pursuant to its power under Article I, Section 8, Clause 8, of the U.S. Constitution, that permit them to exclude others from making, using, or selling an invention for a definite, or restricted, period of time.

The U.S. patent system is designed to encourage inventions that are useful to society by granting inventors the absolute right to exclude all others from using or profiting from their invention for a limited time, in exchange for disclosing the details of the invention to the public. Once a patent has expired, the public then has the right to make, use, or sell the invention.

Once a patent is granted, it is regarded as the personal property of the inventor. An inventor’s property rights in an invention itself are freely transferable and assignable. Often employees who invent something in the course and scope of their employment transfer and assign their property rights in the invention to their employer. In addition, a patent holder, or patentee, can grant a license to another to use the invention in exchange for payment, or a royalty.

Inventors are not required to participate in the patent system and they can elect instead to try to keep their invention atrade secret. However, if the inventor begins to sell his or her invention or allows the public to use it, others can study the invention and create impostor products. If this happens, the original inventor has no protection because he or she did not obtain a patent.

There are three types of patents: (1) design patents, (2) plant patents, and (3) utility patents. Design patents are granted to protect a unique appearance or design of an article of manufacture, whether it be surface ornamentation or the overall configuration of an object. Plant patents are granted for the invention and asexual reproduction of a new and distinct variety of plant, including mutants and hybrids. Utility patents are perhaps the most familiar, applying to machines, chemicals, and processes.

Governing Laws

Patent law in the United States is based upon statutes located in title 35 of the U.S. Code, including the Patent Act of 1952. The rules of the Patent and Trademark Office, found in title 37 of the Code of Federal Regulations, provide secondary authority. In addition, the General Agreement on Tariffs and Trade (GATT) has led to significant changes in U.S. patent law that are designed to bring some aspects of U.S. law into conformity with those of the country’s trading partners. The GATT Implementation Act was signed into law in 1994, and its provisions that impact U.S. patent law began to take effect in 1995.

Patent Duration

One important change in U.S. patent law resulting from GATT is the duration of U.S. patents. Patents were originally given fourteen-year terms from the date of issue, until that was changed in 1861. From 1861 until the implementation of GATT, the term of a patent was seventeen years from the date of issue. Under GATT, all patents issued after June 7, 1995, now have a term of twenty years from the effective filing date. GATT contained a retroactive component which provided that all patents that had been issued, but not yet expired, as of June 7, 1995, would have a term that is the longer of twenty years from its effective filing date or seventeen years from the date of issue. The effective filing date is the date on which the earliest U.S. application is filed under which priority is claimed. In the United States, patent rights begin when the patent is issued.

Upon expiration of the term, the invention becomes public property and is freely available for use, reproduction, or sale. Patents can be extended for up to five years under limited circumstances, including interference proceedings (proceedings to determine the priority of an invention), secrecy orders, and appellate review.

Patentable Inventions

The Patent Act provides a broad definition of what can be patented: any new or useful process, machine, manufacture, composition of matter, or any new and useful improvement thereof. Although these categories of patentable subject matter are broad, they are also exclusive, and any item that does not fall into one of them is not patentable.

As defined by the Patent Act, a process is a method of treating certain material to produce a specific physical change in the character or quality of that material. A machine is a device that uses energy to get work done. The term manufacture refers to a process whereby an article is made by the art or industry of people. A composition of matter is a compound produced from the combination of two or more specific ingredients that has properties different from, or in addition to, those separately possessed by each ingredient.

An improvement is any addition to, or alteration in, a known process, machine, manufacture, or composition that produces a useful result. The right to a patent of an improvement is restricted to the improvement itself and does not include the process, machine, or article improved.

Naturally occurring substances, such as a type of bacteria or an element, are not patentable. But a genetically engineered bacterium is patentable. The law of gravity and other laws of nature are not patentable. Other abstract principles, fundamental truths, calculation methods, mathematical algorithms, computer programs, and bookkeeping systems are not patentable. Ideas, mental theories, or plans of action alone, without concrete means to implement them, are not patentable, irrespective of how revolutionary and useful to humanity they might be.

However, a process that uses a natural law, fundamental principle, or mathematical equation can be patented. For example, in the 1981 decision of Diamond v. Diehr, 450 U.S. 175, 101 S. Ct. 1048, 67 L. Ed. 2d 155, the U.S. Supreme Court decided that an industrial process could be patented in spite of the fact that it depended upon a mathematical equation and involved the use of a computer program.

The Diamond ruling upheld a patent to two inventors for an improved process for molding rubber articles. A patent examiner had previously ruled against the inventors, finding that they sought patent protection for a computer program, which the Supreme Court had expressly said could not be patented. The process in question, which was patented, was developed to calculate with greater accuracy the amount of time required to obtain uniform curves in synthetic rubber molds.

As a further requirement for an invention to be patentable, it must meet three criteria: (1) novelty (does not conflict with a prior pending patent application or a previously issued patent); (2) utility (virtually any amount of usefulness suffices); and (3) nonobviousness (to a person of ordinary skill in the art to which the invention pertains).

It is not always easy to determine what is an “ordinary level of skill” or what is “obvious” in deciding whether an invention meets the criterion of nonobviousness. The U.S. Supreme Court decision in Graham v. John Deere Co., 383 U.S. 1, 86 S. Ct. 684, 15 L. Ed. 2d 545, 148 U.S.P.Q. 459 (1966), provides the analytical framework in which to decide whether an invention is nonobvious. Just because all the parts of an invention may be found in a prior art does not necessarily make the invention obvious.

Patents may be rejected for nonutility where their only use is a violation of public morals, such as a tool that can only be used to commit a crime.

Individuals Entitled to Patents

To be entitled to a patent, an inventor must be the first and original inventor. Joint inventors can obtain a patent for a joint invention, but none of them can obtain a valid patent as a sole inventor.

U.S. law requires that patent applications be filed in the name of and signed by the actual inventor or inventors. If one of the actual inventors is deceased, then the patent application may proceed in the names of the other inventors, but the application must still properly identify all inventors. If all of the inventors, or the sole inventor, are deceased, another person may file a patent application in their place, but only if the filing individual has a legal right to file (such as through descent of the inventors’ personal property) and the inventors are still properly identified.

In the United States, the initial right to file for a patent rests with the actual inventor, even if that is an employee who creates the invention in the course and scope of his or her employment using employer resources. However, it is a regular practice for employees engaged in research leading to patentable inventions to sign written contracts that specify that they will assign to their employer the exclusive rights under any patent obtained during the course of the employment. The employee may receive a certain percentage of the profits earned by the invention in exchange for the assignment of the patent.

Government employees, other than those employed in the Patent and Trademark Office, are entitled to obtain patents for their inventions or discoveries. During the period of employment and for one year thereafter, anyone who is employed in the Patent and Trademark Office is ineligible to acquire or take directly or indirectly, except by inheritance or bequest, any rights in a patent that is issued or to be issued by the office.

Procedure for Obtaining a Patent

To obtain a valid patent, an inventor must make an application to the Patent and Trademark Office. Before making an application, inventors generally make a preliminary patentability search, a relatively low-cost search of all of the patents issued in the United States, to determine if it is feasible to proceed with an application. Often professional searchers perform these searches and give the results to a patent attorney who provides an opinion as to whether the invention is patentable. Although the preliminary search is not required by law, if it is performed, the inventor is required to provide all information obtained through that search to the Patent and Trademark Office if she ultimately files a patent application.

The application must include specifications and drawings of the proposed invention, an oath signed by the inventor, and the requisite fee. The Patent and Trademark Office keeps patent applications confidential until the patent is granted. The term letters patent refers to the document that contains the grant of a patent right.


A specification is a written description of the invention that includes the manner and process of creating, constructing, compounding, and using it. It should also state the practical limits of the operation of the invention. The description must be in complete, clear, concise, and precise terms to make the limits of the patent known, to protect the inventor, and to encourage the inventiveness of others by informing the public of what is still available for patent. Total disclosure of the invention is mandated to allow the public to freely use the invention once the patent has expired. No patent will be granted if the description purposely omits the complete truth about the invention to deceive the public.

The specification concludes with the claims, which explicitly describe both the structure of the invention and what it does. By regulation and time-honored tradition, the patent claims are written in the form of a continuous run-on sentence. The claims give the Patent and Trademark Office and the courts the opportunity to determine whether the subject matter is patentable or whether it has been anticipated by a previous invention. A claim can be either rejected by the Patent and Trademark Office or deemed invalid if it is vague, indefinite, or incomplete. The claim should cover only the actual invention. It can also be rejected if it is so broad as to include what is old and known information in addition to what is new. Each claim must contain only one single and distinct invention, but more than one claim can be included in a single application. The inventor also must disclose in the specification what she considers to be the optimum way of practicing or using the invention.


Drawings must be included in a patent application only when they are necessary to understand the subject for which a patent is sought. If drawings are omitted, the commissioner of patents can require that they be submitted within two months from the time that the inventor receives notice. Drawings that are submitted after that time cannot be used with the application, and a patent can be denied due to the inadequacy of the specification.

The commissioner can require that the inventor provide a model of the invention. In addition, when the invention involves a composition of matter, the applicant might have to furnish a specimen of it for inspection or experimentation.

Oath and Fee

The application for a patent is accompanied by an oath that the inventor believes herself to be the first and original inventor. The patent laws of the United States do not discriminate on the basis of the citizenship of the inventor. An inventor from another country may apply for a patent on the same basis as a U.S. citizen.

An application for an original patent must be accompanied by a filing fee payable to the Patent and Trademark Office. Fees vary depending upon the type of application and the size of the entity applying for the patent. Small entities pay lower fees. When a patent is issued, the patentee must pay an additional fee. These fees also vary based on the size of the entity to whom the patent is issued. Additional fees are charged for maintaining a patent, which likewise vary with the size of the entity involved in the maintenance of the patent.

Patent and Trademark Office Proceedings

Upon receipt of an application for a patent, the commissioner must examine it to determine whether the applicant is entitled to a patent. The Patent and Trademark Office is not restricted to the use of technical evidence in reviewing applications but can act upon anything that establishes the facts with reasonable certainty.

A patent application can be rejected for substantial and reasonable grounds, such as when the alleged invention lacks usefulness or when the invention has been publicly used or sold previously. If the patent is rejected, the commissioner must notify the applicant of the rejection and the grounds for the rejection. An applicant can request a reexamination of the application and submit evidence to rebut the reasons for rejection. Failure to request a review is considered a waiver of the right to challenge the rejection.

A pending application may be amended until the Patent and Trademark Office ultimately decides the matter, either by issuing the patent or rejecting the patent application. New and enlarged claims can be added by amendment only when they are fairly within the scope of the original claim. An amendment that involves a material departure from the invention described in the original specification or enlarges the scope of the original application is invalid. When made within a reasonable time, amendments relate back to the original date of the application and are treated as if they were included in the original application. This is significant because time determines who will be entitled to the patent when two inventors claim essentially the same invention.

Loss or Denial of a Patent

An individual who has invented or discovered a process or object is entitled to a patent if the item or process falls within the specific categories of patentable matter and possesses the necessary attributes of invention, novelty, and utility.


A patent will be denied in the event that anticipation occurs, which means that the complete invention was disclosed before the applicant’s invention or discovery. This situation might arise when substantially similar elements that produce, or are capable of producing, the same results are found in previously invented machines that are known and commercially used. However, if the two similar inventions accomplish substantially different results or perform totally different functions, they are not deemed to be anticipated, and the second invention will be patentable even if it is essentially identical structurally to the first invention.

For a prior patent to anticipate a later invention, it must disclose the complete and operative invention in such full, clear, and exact terms as to enable a skilled individual involved in the art to practice the invention without the exercise of his or her own inventive skill. A process or instrument used for one purpose might anticipate an invention that uses essentially the same method for a new use if the latter is so comparable to the original invention that it would be apparent to a person experienced in the field. An invention is not anticipated if it has been produced previously due to an accident but is incapable of being repeated because the necessary knowledge to do so is lacking. If the results could be reproduced, however, the invention is considered anticipated.

Previous experimental efforts that are abandoned before the invention achieves actual results do not anticipate the invention. The invention is anticipated, however, if the experiment proves successful.

Statutory Bar

Section 102(b) of 35 U.S.C.A. provides a statutory bar to some otherwise meritorious inventions. Under this rule, an inventor is not issued a patent if her invention was described in a book, catalog, magazine article, thesis, or trade publication in the United States or any other country before she invented it or more than a year before she filed the patent application. This statutory bar applies regardless of who made the invention discussed in the prior publication. Thus, if an inventor publishes a description of an invention or places the invention for sale or for public use, a statutory bar can result. Once an invention is placed for sale in the United States, the inventor has just one year in which to file a patent application or the right to patent that invention is forever lost. The clock begins when the invention is placed for sale, even if it is never actually sold. This rule is intended to guarantee that an inventor cannot expand the period of patent protection for the commercial exploitation of her monopoly.

Abandonment and Forfeiture

An inventor can lose the right to obtain a patent through abandonment. An invention is regarded as abandoned when it is subject to free and unrestricted public use.

A recognized exception to this general rule, called the “experimental use exception,” is when an invention must be placed in the public use to determine its operability. However this exception is very narrow, and the inventor must be careful to document the invention to support a later claim of experimental use.

An inventor forfeits the right to a patent when she delays making a claim or hides the invention for an extensive period of time because such conduct unduly postpones the time that the public would be entitled to the subsequent free use of the invention. Delay in applying for a patent does not constitute abandonment if the inventor can demonstrate that she never intended to abandon the invention.


When two or more inventors discover or invent the same thing, patent priority can deny a patent to one of the inventors. Patents are generally issued to the first inventor, as determined by certain guidelines. The Patent and Trademark Office commences an interference proceeding to determine the priority of invention between two or more inventors who are claiming substantially the same patentable invention and who each appear to be entitled to the patent, but for the other’s application. Such a proceeding examines the dates of conception and reduction to practice and also considers the diligence exercised by the individual who conceived of the invention first but did not reduce it to practice until after the other inventor had done so. The date of conception is the date when the idea, encompassing all the basic and necessary components of the invention, becomes so clearly defined in the mind of the inventor as to be capable of physical expression. Reduction to practice occurs when the way in which the invention works is readily demonstrable.

An inventor who is the first to conceive of an invention and reduce it to practice is entitled to a patent. When an inventor who first conceives of an invention exercises reasonable diligence in reducing it to practice, she will receive a patent, even if the inventor who was second to conceive of the idea was faster in reducing it to practice.

Another general rule is that an individual who actually reduces an invention to practice has priority over one who constructively reduces it to practice. Actual reduction takes place when the invention is put into practical form, whereas constructive reduction occurs when a patent application is filed with the Patent and Trademark Office.

Former U.S. patent law only allowed inventive activity that actually took place within the borders of the country to establish a date of invention. GATT has changed this to allow foreign inventors to prove inventive activity that took place in another country to show a date of invention. Because the United States has a “first to invent” patent system, whereas most other countries have a “first to file” system, the United States had effectively discriminated against foreign inventors because it gave patents to the first inventor to actually make the invention in the United States. GATT addressed this issue that for many years was a disadvantage for U.S. trading partners.


Applicants for a patent, or for the reissue of a patent, whose claims have twice been rejected can bring an appeal from the final decision of the primary examiner to the Patent Office Board of Appeals and Interferences. An applicant who is dissatisfied with the decision of the board of appeals can appeal to the U.S. Court of Appeals for the Federal Circuit or start a civil action against the commissioner in U.S. District Court for the District of Columbia within a specified period of time after the board issues its decision. The applicant is not permitted, however, to institute both a civil lawsuit and an appeal to the U.S. Court of Appeals for the Federal Circuit.

Reissue and Disclaimer

A reissued patent is the grant of a new patent that modifies the original invention by the addition of new elements. A reissued patent is essentially an amendment of the original patent effected to rectify some defect or insufficiency in it.

A disclaimer is the voluntary abandonment of some portion of a patent claim that would render it invalid for lack of novelty. It limits the claim to what is new and thereby saves the patentability of the item by circumventing the invalidity that would otherwise defeat the entire claim. An inventor who knows that a patent contains invalid claims should immediately file a disclaimer, because the failure to do so could result in the rejection of the patent.

Assignment and Lease

An assignment is a transfer either of the entire patent, encompassing the exclusive right to make, use, and sell the invention, or a specified part thereof, in the United States. The assignment must be in writing and should be recorded in the Patent and Trademark Office. In the event that a patent is assigned but the assignment is not recorded, a later purchaser of the patent can use the purchased patent as if it had never been assigned.

An assignment is different from a license because a license merely provides the licensee with a temporary right to use the patent as agreed. A license need not be in writing. Whether a transfer is an assignment or a license is determined by reference to the contract between the parties. A patent license is personal to the licensee and cannot be transferred unless specifically indicated in the agreement. The licensor, the individual who issued the license to another, ordinarily requires the payment of a royalty for the use of the patent.

Marking Patented Items

A patentee or any authorized party who makes or sells any patented item must provide notice to the public that the article is patented by placing the word patent and the number given to the patent on the article. If the nature of the article prohibits such a designation, a label that contains the same information should be enclosed in, or marked on, its package. This marking requirement is not applicable to a patent for a process.

Inventors can mark their inventions with the words patent pending if they have a patent application on file and pending with the Patent and Trademark Office at the time the products are marked.

Federal law imposes a penalty for various forms of false marking, including marking an unpatented article with the word patent, or any term that implies that the article is patented, for the purpose of deceiving the public. If a patent holder fails to mark the patented product as required, he or she may not recover damages for any patent infringement that may take place as a result.


Infringement is the unauthorized making, using, or selling for practical use or for profit an invention covered by a patent. Effective 1996, GATT also made the offer to sell a patented invention without the permission of the patentee a direct infringement violation.

Although no infringement can occur before a patent is issued, infringement can occur even if the infringer does not have any actual knowledge of the existence of a patent. A direct infringer is one who makes, uses, or sells the patented invention without permission from the patentee. An indirect infringer is one who actively encourages another to make, use, or sell a patented invention without permission. A contributory infringer is one who knowingly sells or supplies a part or component of the patented invention to another, unless the component is a staple article of commerce and is suitable for a substantial noninfringing use.

The definition of an infringement, provided in 35 U.S.C.A. section 271, has been greatly expanded in the late 1980s and 1990s. For example, it is an infringement to apply for federal Food and Drug Administration approval of a patented drug if the purpose is to obtain approval to manufacture, use, or sell the drug before its patent expires. It is also an infringement to provide a substantial portion of the components of a patented invention to someone outside of the United States so that the components can be assembled outside of the reaches of U.S. patent law. Similarly, it is an infringement to import into the United States a product made by a process covered by a U.S. patent although it was produced outside of the United States.


The Patent Act provides for several remedies in the event of an infringement, including injunctive relief, compensable damages, treble damages when appropriate to punish the infringer, payment of attorneys’ fees in cases involving knowing infringement, and payment of the costs incurred in bringing the infringement claim in court.

The owner of a patent has a right of action for the unlawful invasion of patent rights by an infringement that has arisen within six years from the date when the lawsuit is initiated.


Courts frequently grant injunctions to protect property rights in patents. An injunction is a court decree that orders an infringer to stop illegally making, using, or selling the patented article. An injunction is only granted when an award of monetary damages will not adequately remedy the situation—for example, when an infringer plans to continue the unlawful acts. If an individual disobeys an injunction and continues to make use of an invention without permission, she will be guilty of contempt and subject to a fine or imprisonment or both.


In an action for infringement of a patent, compensation for prior infringements can be awarded; however, compensation will be denied for use of the invention before the date the patent was issued. Where there is an infringement, the court will award the patentee actual damages adequate to compensate for the loss in an amount that is equal to a reasonable royalty for the infringing use, together with interest or costs set by the court. If the jury in a trial does not determine the amount of damages, the court will. In either case, the court, under the authority of statute, can increase the damages awarded by the jury up to three times the amount determined, called treble damages. Treble damages are punitive and awarded only in certain instances, such as where the infringer intentionally, in bad faith, infringed the patent.


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Definition Sources

Definitions for Patents are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 18th March, 2020