In many countries, intellectual property rights accrue in three classes of patents – utility patents, design patents, and plant patents. The discussion here focuses on utility patents. Appropriate subject matter for utility patents include methods and processes, machines, compositions of matter, and manufactured articles. For a limited period of time, typically 20 years, a patent gives the inventor the right to prevent others from manufacturing, utilizing or selling the invention. It therefore gives the inventor the exclusive right to commercialize the invention for the duration of the term of the patent. To qualify for a patent, the invention must meet three very specific criteria.

  1. It must be novel, as in new, unknown to the public.
  2. It must have utility, meaning it must serve a useful purpose and must be functional.
  3. It must be non-obvious to a person of ordinary skill in the relevant field of the invention.

In applying for the patent, the inventor or owner of the invention must disclose the details of the invention such that it can be created by a “person skilled in the art.” The disclosures made in the patent application becomes a public document, readily accessible. The rationale is that, in exchange for a limited term of protection, during which the inventor can prevent others from exploiting the invention, the public can get access to technical knowledge and hopefully spur further innovation. Excluding the patent application, the inventor must be careful not to disclose too much about the invention elsewhere so that the disclosures enter into the public domain.

Applying for a patent can be a lengthy and expensive process, particularly for a new business. The 20 year patent term of protection starts from the filing date of the patent, so in reality the actual term of protection once the patent is granted will be less than 20 years. Accordingly, before deciding to seek a patent, the business should consider the market for the invention, and if such a market will still be around when the patent expires. The business should also consider if the detailed disclosure in the patent application will reveal critical information that will negate the business’ competitive advantage or allow its competitors to reverse engineer the invention. Depending on the answers, it may be more strategic to forego obtaining a patent on the invention, and instead treat it as a trade secret.

Consider the sport of car racing and Formula 1 in particular. There is a tremendous amount of innovation that occurs in Formula 1. The sport represents the pinnacle of automobile research, design and engineering. But Formula 1 teams generally do not pursue patents for their innovations, in comparison to mass market consumer car manufacturers. Formula 1 teams go to great lengths to shield their technologies from competing teams and prefer to treat innovations as trade secrets. And the pace of innovation in F1 is such that the 20 year patent terms would long outlive the utility of their inventions, as applied to car racing.