Is Patent a Financial Asset?

by  Adv. Umapathi Natarajan  




1 mins


financial asset

A patent is a licence 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 concerned invention. This 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 patents are financial assets. To understand why this is wrong, it is important to know what a financial asset is.

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.

  • “Liquid asset” refers to 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 recognise 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 for the value to 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 licences 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 an asset that is not physical in nature. The value of an intangible asset comes from its application and its 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. 

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 jurisdiction of the applicant, the application must be submitted to the head office of the Indian Patent Office or one of its many branches.
  • The invention being patented must be novel and unique. Improvements of current technology, in most situations, cannot be patented.
  • 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. 
  1. Patentability determination – The lawyer will check whether the invention has the potential to be patentable by analysing it against the threshold for patentability.
  1. Filing the patent – The lawyer will then file the patent in your name, and pay the relevant government fees.
  1. Request for examination – Now, you must request an examination of your invention by the Indian Patent Office. A representative will examine your invention to assess its potential for being patented.
  1. Responding to objections – If there are any objections from the Indian Patent Office, they must be addressed and acknowledged before the process can continue.
  1. 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.
  2. 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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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, or 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.

It is important to have a lawyer experienced in Intellectual Property Rights, or IPR, to resolve any issues related to the trademark status.

Adv. Umapathi Natarajan

Adv. Umapathi Natarajan


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With 24 years of independent practice, Advocate Umapathi Natarajan has gained extensive experience in handling legal cases while providing legal consultancy and advisory services with a focus on achieving results in an ethical and professional manner. Advocate Umapathi Natarajan, who can speak English, Tamil, and Telugu, possesses excellent communication skills that enable him to articulate arguments persuasively in both written and verbal forms.

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