The Patent System Eliminates Monopolies

Every Word in a Patent Hurts You – So Be Careful

The patent system is a quid pro quo – an exchange – where you give away trade secrets and you get back some patent rights. 

This system has been around since well before the founding of the US and has been codified and refined quite literally for centuries.

The sole purpose of the patent system is to eliminate monopolies, not create them.

This may seem the exact opposite of the “conventional wisdom” about patents.  Even the United States Supreme Court uses the term “monopoly” as a shorthand when referring to patents, so how can I say this?

Patents destroy monopolies, not create them. 

Patents work by opening trade secrets to your competitors, and you only get a limited right in exchange.  Yes, you get the right to exclude others from your invention, but you are limited to 20 years to exploit that invention.  After the patent expires, it is dedicated to the public.

The patent system is supposed to “promote the progress of science and the useful arts.”  How can patents “promote the progress” if they are a monopoly?

The key to understand what a patent is – and is not – is that you must give away trade secrets in exchange for the patent.

You must explain to a regular person how to make and use your invention.  This is the real cost of getting a patent, and a serious tradeoff for any entrepreneur.

Think about the most famous trade secret of all: the formula for Coca-Cola.  Coke has had a monopoly on their specific beverage for over 100 years – because they keep the formula a secret.

What if Coke got a patent way back when it was created?  Their monopoly on their formula would have been given away because their trade secret would have been documented for all competitors, and after 20 years, any competitor would be able to produce Coke without having a license.

Consider the monopoly that Google enjoys in search.  Google’s algorithm is one of the most closely guarded secrets, and they keep changing it to keep people from figuring it out.  There are countless Search Engine Optimization (SEO) “experts” whose stock in trade is guessing how Google’s system works.

Google’s monopoly is fortified by the secrecy.  If Google were to get patents on their search technology, the patents would undermine their advantage.

The patent system entices companies to bring their trade secrets out into the open – in exchange for the patent rights.  Companies often lose in this bargain.

What We Give Away – and What We Get with Patents

One of the most misunderstood aspect of patents is the confusion about what we give away and what we get when we file a patent.

Every word in a patent hurts you.

Everything we give away is called the “specification.”  This is the written description, the figures, the summary, the background section, etc.: everything that describes the invention.

What we get back is called the “claims.”

The claims are what the examiner and the patent attorney argue about.

The claims are the most important part of the patent – at least for the applicant.

The claims are what you get to enforce – they define the “right” that you get with your patent.  The claims are the reward in exchange for your trade secret.

The claims should be your focus as an inventor/entrepreneur.  They should be the focus as an angel investor/advisor to companies.  The claims are the only focus if you are asserting/licensing your patent as well.[1]

[1] Almost always, inventors will review the patent specification and ignore the claims.  CEOs, investors, bloggers, news “analysts,” and everybody else does the same.

This is because the claims are very, very difficult to understand, but it is much easier to flip through the patent illustrations and read the abstract to figure out what is in the specification.  This leads to over-hyped, breathless blog posts that declare that Amazon just patented the Internet and other ridiculous headlines.