What Happens When a Patent Expires?

If you are wondering what happens to your invention after a patent expires, read this article to find out the different ways in which it can be affected. If your invention has a patent, the lifespan of the patent protection is 20 years if it is a utility patent and 15 years if it a design patent. However after 20 years, your utility patent protection is no longer available, and anyone can use your invention for commercial purposes.

In this article, we’ll explain how expiration affects marketing, innovation, and business. If you’ve ever been the subject of a patent dispute, you’ll know that a lack of patent protection can be devastating for your business.

Term Of A Patent

Under US Law, the term of patent is 20 years. The term of a patent starts the day you file the patent application at the Patent Office. It does not begin until it is approved, but it usually begins on the day that you file your first application. This is a good thing, because it discourages people from using your invention while your patent is being reviewed. The logic behind having a limited term is because patent holders can market their inventions and make money via royalties or licensing arrangements. In this way they can then recoup their investment in the invention. However, allowing patent protection to last too long could limit others who wish to improve the invention and would  also limit free trade. Patent law stipulates that patents expire and become part of the public domain when they are no longer needed. This is to balance competing concerns.

20 years

There are several factors to consider when determining the patent duration. The type of patent application and filing date are both significant. Additionally, there are maintenance deadlines.

Generally, the term of a patent starts from the date of filing the application. A patent granted on the US national stage application will last for 20 years from the date of filing the international application. However, patents issued through provisional patent applications do not count towards the twenty-year period. This means that a patent pending application can extend its period of time for a year without counting against the patent’s validity.

15 years

The duration of a patent varies. The term of a design patent is 15 years from the date of grant. Utility patents, on the other hand, last for 20 years from the date of filing. There are several factors to consider in determining how long a patent will last. Patent duration is also affected by appeals and secrecy orders. If you’re unsure, we suggest you consult with an intellectual property attorney.

One common reason a patent can expire is the failure of an inventor to pay the maintenance fees. Maintenance fees must be paid every three and a half years, seven and a half years, and eleven years. Failure to pay maintenance fees is a good reason to drop the project. However, failure to comply with maintenance fees is not necessarily a bad idea – the inventor may simply want to move on to other projects.

Impact of patent expiration on marketing

When a patent expires, a brand’s sales plummet. However, a focused effort can save the brand and help it retain meaningful value. Moreover, economists at Harvard University discovered that there is a positive correlation between Loss Of Exclusivity (LOE) and generic products. For example, the LOE of Lilly’s drug Cymbalta led to more than 10 companies manufacturing generic versions of the brand.

Pharmaceutical industries’ performance depends on their marketing strategies and capacity to penetrate the market. During the patent period, innovator pharmaceutical MNCs have exclusive rights to exploit the market capacity. But after patent expiration, the market dynamics change dramatically. This shift in the competitive landscape provides the multinational company with time to recover its investment. Moreover, by aggressively promoting its products, the multinational company has developed a close relationship with their customers.

Despite the potential for generic competition, branded pharmaceutical companies have developed powerful strategies to prevent the loss of profits. First, branded drug manufacturers have the ability to change their marketing strategies around the expiry date. These companies can shift their focus to marketing generic versions of their drugs, or even launch an OTC version of their medications.

The second strategy is to launch a generic version of their products. In a systematic review, a standardized method was used to estimate the price of generic medicines in the Dutch market. The impact of patent expiration on the price of generics was a comparatively small factor in the study. The researchers used two national databases and studied 250 drugs with expired patents. The median price ratio was 0.59 four years after the initial generic entry. The price reduction varied according to the year of patent expiration and prior revenue. Overall, generics decreased prices by 2.3% per year.

The results of the study suggest that patented drugs must lose their exclusive rights to generic companies in order for the generics to compete in the market.  This helps guarantee the desired level of growth for a brand’s products at the time of patent expiration.

The effects of patent expiration on innovation are reflected in the performance of innovator pharmaceutical MNCs. While innovator pharmaceutical MNCs are given exclusive rights to exploit the market capacity during their patent period, the dynamics of the market change significantly once the patent expires. Increased generic production, price changes, and competition result in a dramatic shift in the dynamics of the market. On the other hand, product line extension can lead to increased sales, differentiation, and new formulations.

Impact of patent expiration on innovation

The effects of patent expiration include the production of generic products by rival companies, price changes, and increased competition among companies. These effects are a complex combination of factors that impact a company’s performance. The market dynamics change drastically once the patent period ends, including increased generic production, price changes, and increased competition for branded products.

However, the overall impact of patent expiration does not fully reflect the difference between valuable and worthless patents. The removal of valuable patents would lead to greater research interest in the technologies covered by those patents than in the technology unprotected by these patents. In addition, citation levels for abandoned patents are expected to remain virtually unchanged whether the patents were protected or not.

Abandonment of patented innovations upon expiration is a positive force for technology development, as they act as jumping-off points for later designs. In addition, abandoned patents reveal new analytic insights that may be useful for later innovators. Some of these patented technologies may prove to be positive leads in the development of new products and services. This effect on innovation is often overlooked by technologists, but it is worth noting for now.

Impact of patent expiration on business

In the last few years, patent expirations have caused a series of dramatic mergers in the pharmaceutical industry and several pharmaceutical companies will face a large wave of patent expirations over the next several years.

A study conducted in Kenya investigated the impact of patent expiration on the sales volumes and profitability of eight multinational pharmaceutical companies in Kenya. While the findings were mixed, the study did find a significant impact of patent expiration on generic production, and showed that the performance of multinational innovator companies in the pharmaceutical industry declined as their patents expired. The study recommended that innovator companies in low-income countries leverage generic production and collaborate with generic companies to share revenues.

Another significant impact of patent expiration on the pharmaceutical industry is that it takes years for a product to reach the market and generate returns. In this context, an innovator pharmaceutical MNC may lose its entire core business portfolio if its patent is not renewed. The impending patent cliff threatens to erode that $100 billion market share and create a huge financial vacuum for the companies affected. Despite the fact that pharmaceutical companies are better prepared for this second wave of patent expiration than for the first, the impending patent cliff left its mark on many pharmaceutical companies.

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Strategies to use when Your Product patent protection expires

While you can continue to manufacture your patented product even after the patent expires, you should be prepared for competition from others. Once a patent has expired, anyone can simply buy and sell an exact replica of your invention. This is one reason why the government limits the duration of a patent to twenty years. Ultimately, allowing it to last for an infinite time period would stifle competition. Because of this, revenue differences can amount to hundreds of millions of dollars due to how quickly brand share falls after patent expiration. What strategy can companies use to stay afloat?

#1 Rely on Trademark Branding to Drive Customers to the Patent-Expiring Brand

Trademark registration can be used to protect the brand that is burned into doctor’s mind over twenty year life.  However, the intermediaries such as the pharmacy can substitute generics if the cost is lower.  As such you still have to factor in price with the major drug distributors.

#2 Understanding which factors influence share retention

Market share retention following drug patent expiration can be affected by individual product attributes as well as drug class attributes. Complexity of dosage administration is one example of product attributes. An innovative or novel drug delivery system is more likely to be a preferred choice than generic alternatives. Generics that are already available in one drug class will not have an impact on the prices of others. Share losses due to drug patent expiration will be higher if a new therapeutic category is introduced to the market. These dynamics are essential to manage a drug’s post expiration strategy.

#3 To drop prices or not?

It might make sense for brands to preventively drop prices in order to maintain market share. However, this doesn’t always work. To maintain margins on sales, some brands will choose to increase or maintain the price of shares as they fall. Sometimes, it is a good idea to preventively lower the price of brand-name prescription drugs. If the manufacturer lowers prices in order to be more competitive with generics, then products with high price retention characteristics are more likely to retain more market share. However, there are exceptions so it is important to have a good understanding of the market.

#4 Work with Authorized Generics Manufacturer

Authorized generics can be used to protect a brand that is facing patent expiration.  This is the classic co-opetition game. There won’t be a flood of generics if you enter into an agreement before the patent expires. This means that the erosion of brand name prices is slower.  Multiple generics are possible and a strong partner can be licensed to make the generic. Brand names could experience rapid price erosion if they don’t have a well-researched strategy to deal with the expiration of drug patents. Prices will drop quickly after patent expiration depending on many factors, including the amount of competition and drug class as well as the complexity of drug administration. Price changes can occur as patent expiration approaches. Authorized generic deals may be used in certain cases to reduce the impact of drug patent expiration.

#5 Make improvements to the original patented formula

Using new advances, the company can improve the original formulation to enusre it is still a cutting edge product depsite facig stiff competition.