Submitted by: Dauphin Sharma

Roll No 1683067; BA LLB 2016 Batch

Importance of Patent in Business and Commercial Transactions

Patent is an intellectual property in the form of a legal document issued by government for
granted statuary rights to an individual (usually the inventor) for limited validity period (usually
20 years) that excludes others from making using, selling or importing patented products or
process without consent of patent holder who have legal rights to create or sell his invention. In
India, patent protection is granted under the Patents Act of 1970, amended in 1999, 2002 and
2005 giving the patent holder the exclusive right to the product or process within India.
Based on invention, there are three kinds of patents. These are:
1. Utility Patents: Patents that cover inventions resulting in usefulness. However,
India does not have system of Utility patents.
2. Design Patents: Patents that cover the shape or surface of a physical object
3. Plant Patents: Patents that cover asexually reproducing plants

Importance of Patent in business and Commercial Transactions are:-

1. Patents provide exclusive rights which allow the inventor to exclude others from using
the invention. Particularly, for 20 years from the date of filing the patent application. The
inventor has obtained the exclusive right to the invention; the inventor can exercise this
right by preventing others from commercially using the patented invention thereby
reducing the competition and thus establishing a place in the commercial market. Having
invested a considerable amount of time and money in developing the invention, under the
umbrella of exclusive rights, the inventor could bring in the invention to the commercial
market and thus obtain higher returns on the investment and this depends on the
economic utility of the patent. For this reason, the inventor must ensure the commercial
viability of the patent before investing in a patent. Sometimes, the inventor might not
want to exploit the invention himself. In such cases, the inventor can sell or license the
rights to commercialize it to another enterprise. This would result to bring royalty and
revenue to the inventor.
2. Patent right provide the monopoly to the patentee over the manufacture, sell and import
of the products. In the absence of such right to the patentees, the infringement of the same
will not be penalized and their work will not be awarded, but there are certain conditions
when the government by compulsory licensing can forcefully take away the rights of the
patentee and give it to the third party for the sale and manufacture of the same.
3. Patents give individuals recognition for their innovation, and possibly a material reward.
4. A patent gives the statuary right to individual (Patent holder) for pre-determined period
of validity (usually 20 years) to stop others from copying, manufacturing, selling or
importing the patented invention without permission from patent holder thereby
competitors can be kept at bay.
5. The patent can be used to prevent others from copying the product or service. This poses
difficulties for competitors
6. The patent law prevents the use of the invention not just by imitators but also by
independent devisors. This means that no other party can use the same idea or invention
as the individual patenting it, for a specific duration of time. However, the patent holder
can choose to sell his idea/invention or license it or utilize it to enhance his business and
commercial prospects.
7. Alternatively, patentee can issue license of patent to others for use it or patentee can claso
sell it. This can provide an important source of revenue for business. Indeed, some
 businesses exist solely to collect the royalties from a patent they have licensed - perhaps
in combination with a registered design and trade mark.
8. By obtaining patent companies engaged in transforming their Business and Commercial
transaction ideas into intellectual property. When companies register their ideas and
technologies to secure ownership, the results of a company’s intellectual efforts gain
tangible value.

9. Companies started to make money from Patent rights. For example, patent licensing
became a major industry for pharmaceutical companies. Patent became a critical success
factor. Intellectual property now makes up a large proportion of a companies' market
value, and IP management can no longer be left to technology or legal departments alone.
10. Patent are valuable assets for a business possibly among the most important ones it
possesses. The protection by Patent can set a business apart from the competitors. It can
be sold or licensed, providing an important revenue stream, offer customers something
new and different and form an essential part of the marketing or branding.
11. Intellectual Property protection as Patenting has become more and more important
nowadays. Highly featuring scientific and technological improvement and establishing an
efficient Intellectual Property system have caused the difference between developed and
underdeveloped countries. The Intellectual Property protection by means of patenting is
mainly formed to prevent infringement of patented invention from others
12. Rapid growth in commercial income resulting from intellectual and artistic works made a
profitable sector. Now, production of computer software, Machinery, Mechanical
inventions etc. are major industries.
13. The bosses of the major software giants like Google and Microsoft have become the
richest men of the world in a very short period of time through their patented intellectual
assets”.
14. One who is not able to protect intellectual rights by means of patenting their inventions in
Business or commercial transactions thereof may face enormous financial loss.
15. Developed states execute International Treaties to protect inventions, original designs,
trademarks, software, cinema and musical works, scientific and literature works that are
subject of Intellectual Property in an International manner.
16. Failure on adequate protection of by Parenting the innovative inventions slows down
innovation and progress.
17. The goal of Intellectual Property as well as Patent law is to encourage intellectual
production and to enable Business and commercial transactions more profitable
18. An effective Intellectual Property protection is essential in order to promote R&D
investments, appeal to foreign capital and encourage innovation.
19. A patent is important because it can help safeguard your invention. It can protect any
product, design or process that meets certain specifications according to its originality,
practicality, suitability, and utility. In most cases, a patent can protect an invention for up
to 20 years
20. A patent provides a right to an inventor(s) to exclude others from exploiting
the patented invention. Therefore, other than the inventor cannot use, make or sell the
patented invention without permission from the inventor. This is often referred to as the
exclusive right of the invention. The inventor can capitalize on this exclusive right and
make his patent commercially viable

Compulsory License:
 Compulsory License as a mechanism is allowed by the Agreement on Trade Related
Aspects of Intellectual Property Rights (TRIPS) – the international agreement which
establishes intellectual property rights, including patent rights.
  Patent protection can be overcome through the use of Compulsory Licenses, which
enables other companies to produce a patented product without the permission of
the patent holder
 A compulsory license creates an exception to the monopoly created by patent
protection and acts as a legal counterweight to combat the adverse effects of
patents.
 TRIPS empowers the state to make use of compulsory license according to its own
discretion. Thus, the state can rightfully resort to the use of compulsory license in
order to meet health requirements of the country’s population.1
 Compulsory licensing and government use of a patent without the authorization of
its owner can only be done under a number of conditions aimed at protecting the
legitimate interests of the patent holder [4].
 the system of compulsory licensing for patents, in India can be found in chapter XVI
of the Patents Act 1970, under the sections 82 to 94

References
[1] Truman, V.; Sheshadri, R. Compulsory License- A Tool to Enable Availability of
Affordable Medicines. Access.2014, 4, 1-8.
[4] Fact sheet: trips and pharmaceutical patents: Obligations and exceptions. (Cited
on Jan 27, 2016). Available from: https://www.
wto.org/english/tratop_e/trips_e/factsheet_pharm02_e.htm.
grant of compulsory licensing, introduced in India with the case of Natco Pharma.
Ltd. v Bayer Corporation, its effect and the present scenario.