Is Patent a Financial Asset?

A patent is a license granted by the Government or any other governing authority for the sole right to manufacture, use, or sell a particular invention. It is essentially a right to exclude others from the invention, which could be a physical object or a process of some sort.

The fact that patents can be bought and sold often leads to the incorrect assumption that they are financial assets. It is important to know what a financial asset is to understand why this is wrong.

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What is a Financial Asset?

A financial asset is a liquid asset that gets its value from a claim of ownership or a right obtained through a contract.

• A “Liquid asset” is something that can be bought or sold in the immediate future in exchange for cash. 

• Examples of liquid assets include stocks, bonds, mutual funds, and bank deposits. 

• Although the asset may seem intangible, with only a hypothetical value, their value is derived from a contract that assigns them a real value.

• Share certificates, for instance, derive their value from the fact that the company officially distributed them, and they have a contractual obligation to recognize their value.

In this way, financial assets have values that may not be apparent at first glance. An important qualification for an asset to be a financial asset is that its value does not depend on the asset itself but on a separate instrument, such as the contract, that gives it its value.

The point of a contract in relation to a patent is to establish ownership. The existence of a contract does not make a patent a financial asset as the contract does not assign the patent a value.

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Are Patents Financial Assets?

Patents are essentially licenses given by a governing authority to have the sole claim over the manufacture, use, or sale of a particular invention or process. The value of a patent in a transaction depends on its application and not the existence of the patent itself. As the value is not derived from a contract, patents cannot be classified as financial assets.

Then what is a patent? While it is not a financial asset, there is another form of asset that a patent is similar to. The characteristics of an intangible asset are as follows:

• An intangible asset is one that is not physical. Its value comes from its application and utility in further business processes.

• Goodwill and brand recognition are notable examples of intangible assets. They do not take a physical form, but their existence helps companies in their business ventures.

• This is very different from financial assets, as those necessarily exist and their application in future cases is generally not considered when determining their value.

• A patent is not physical in nature, as it is a right to exclusivity granted by a governing authority. Its value comes from how the process or invention that it protects can be used in future situations. 

• Therefore, patents and similar instruments such as copyrights and trademarks are intangible assets used in conducting business.

Despite not being financial assets, patents are very important when starting a business that relies on a particular product or process that must be protected from replication. Acquiring a patent can boost product differentiation, which can help in growing your business.

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How to get a Patent in India

The patenting process in India is governed by the Patents Act of 1970. The provisions for getting a patent are as follows:

• The inventor of the thing being patented, an assignee, or a legal heir of the inventor (if the inventor is deceased) can apply for a patent.

• Depending on the applicant’s jurisdiction, the application must be submitted to the Indian Patent Office’s head office or one of its many branches.

• The invention being patented must be novel and unique. Improvements to current technology cannot be patented in most situations.

• The invention must be useful in some manner. An invention with no utility cannot be patented.

The process for getting a patent is:

1. Invention disclosure – Talk to a professional lawyer about your invention under a non-disclosure agreement. 

2. Patentability determination – The lawyer will check whether the invention has the potential to be patentable by analyzing it against the threshold for patentability.

3. Filing the patent – The lawyer will then file the patent in your name, and pay the relevant government fees.

4. Request for examination – Now, you must request that the Indian Patent Office examine your invention. A representative will assess its potential for patenting.

5. Responding to objections – If the Indian Patent Office raises objections, they must be addressed and acknowledged before the process can continue.

6. Grant of patent – If all other steps have gone through without a hitch, then your patent will be granted. Patents are usually valid for a period of 20 years.
7. Patent renewal – After the period of validity ends, which is usually around 20 years, the patent must be renewed for a nominal fee.

Despite not being financial assets, patents present many benefits for the inventor. They prevent the theft, copying or replication of your invention. They ensure that you are the only person deriving financial benefits from your invention. Novel inventions are more conducive to marketing, which helps in building a brand. 

In this way, while they are not financial assets, patents are an important part of a business that relies on a unique invention.

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Conclusion

While patents are not financial assets, they constitute an integral part of any business. Registering either a patent or a trademark is a long and drawn-out process that can take months, or even years, to complete. 

It is important to have a lawyer experienced in Intellectual Property Rights (IPR) to resolve any issues related to the patenting process. Patent or trademark objections require elaborate responses to justify the use of any given trademark, and only a lawyer with the requisite experience can guide you through this process.

Frequently Asked Questions

Q1. What is a Patent?

Ans1. A patent is a government-issued right granting exclusive rights to make, use, or sell an invention for a specific period.

Q2. What is a Financial Asset?

Ans2. A financial asset is a liquid asset with its value derived from a contractual claim of ownership (e.g., stocks, bonds, mutual funds).

Q3. Why aren’t Patents considered Financial Assets?

Ans3. Patents don’t have a contract defining their value. Their worth depends on how the invention can be applied, not the patent itself.

Q4. How are Patents classified if not Financial Assets?

Ans4. Patents are considered intangible assets. Like financial assets, they are non-physical, but unlike financial assets, their value comes from their future use and potential applications.

Q5. Can you financially benefit from a Patent?

Ans5. Yes, even though they aren’t financial assets themselves, patents can lead to financial gain by granting exclusive rights to the invention, allowing you to:

• License the invention to others for royalties
• Sell the patent outright
• Gain a competitive advantage in the market

Q6. What are the key characteristics of a patentable invention?

Ans6. In India, to be patentable, an invention must be:

• Novel (new and not publicly known)
• Non-obvious (not something an ordinary person in the field would find obvious)
• Industrially applicable (capable of being produced or used in an industry)

Q7. What is the difference between a Patent and a Trademark?

Ans7. A patent protects an invention (process, machine, etc.), while a trademark protects a distinctive sign or symbol used to identify a product or service.

Q8. Is it necessary to hire a lawyer to get a Patent?

Ans8. While not mandatory, consulting a lawyer experienced in Intellectual Property Rights (IPR) is highly recommended. They can help with:

• Assessing patentability
• Drafting the patent application
• Navigating the legal complexities of the process
• Responding to objections from the patent office

Q9. How long does the Patent process typically take?

Ans9. The patent process in India can take anywhere from months to years, depending on the complexity of the invention and potential objections.

Q10. What happens after a Patent is granted?

Ans10. Once granted, the patent is valid for 20 years. However, it’s important to maintain the patent by paying renewal fees to keep it in force.