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Vivian Nguyen

on 7 November 2013

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Transcript of Patents

what is a patent ?
A property right for an invention granted by a government to the inventor. A patent gives inventors the right “to exclude others from making, using, offering for sale, or selling their invention throughout the country or importing their invention into the country” for a limited time.
amortization of intangible asset
Amortization for a patent is really similar to tangible assets
The patent’s useful life, the amortization base (cost less estimated residual value), and the appropriate allocation method need to be determined
It is similar to depreciating tangible assets
Debit the patent’s total cost to the patent account in a journal entry in your accounting records when you acquire the patent.

The cost includes the purchase price plus any legal or other fees necessary to use the patent.
Subtract the residual value you expect the patent to have at the end of its useful life from its cost.
A patent’s life can last up to its legal expiration, but can sometimes be shorter.
Divide your result by the patent’s useful life to determine its amortization expense each period. The useful life is the number of years or other periods that you expect the patent will generate an economic benefit to your small business.
To determine the amortization for a patent, take the capitalized cost less any estimated residual value to periods in which the asset is expected to contribute to the company’s revenue-generating activities
GAAP allows only patents acquired from third parties to be recorded on your balance sheet and amortized.
For example,

Patent $ 52,000

Cash $ 52,000


Amortization Expense $7,500

Patents $7,500
Debit the amortization expense to the amortization expense account in a new journal entry at the end of each accounting period of the patent’s useful life.
$52,000 - $2,000 = $50,000
In this example, assume you estimate that the patent will be worth $2,000 at the end of its useful life.
$50,000 / 10 = $5,000 annual amortization expense
In this example, assume the patent’s useful life is 10 years.
In this example, debit $5,000 to the amortization expense account at the end of each of the next 10 years.
Amortization Expense $5,000

Patent $5,000
pros & cons
market yourself
Everyone has to market themselves. A patent may impress a future employer.
restrict competitors
An inventor may not be able to practice his invention even if he were to get a patent granted because the idea, although patentable, would overstep competitor’s patent.

Obtaining the patent anyway may restrict that competitor to his ideas and prevent him from practicing ideas that were unanticipated by him.
revenue from licenses or sale
When licensing the technology to others, typically a licensee will pay an upfront license fee plus a royalty. Royalties are often 5% or less, depends on the deal made between the licensee and the licensor. Often the royalties exceed the upfront fee.
gives your product credibility
Simply having a patent on something doesn’t mean that the product is any better than anyone else’s, but that doesn’t mean it won’t give you an edge.
keep others out of the market
Patents allow its owner to exclude others from making, using, selling, offering for sale, importing, or exporting an invention included in the patent’s claims for a definite amount of time.
This is basically a government-granted monopoly, rewarding an inventor for releasing to the public his or her idea.
Patents are intended to better society in the long run by motivating companies and individuals to innovate; after the patent expires, society will have free access to it technology.
Another option is to sell a patent instead of licensing it as well.
The filing fee for a patent application is $500.00 for a small business or $1,000.00 for large businesses.
A drawback to owning a patent is the lawsuits that may be associated with the patents. A competitor may try to undermine your patent.
The patent owner is responsible for enforcing his own patents, so if the owner wants to stop another from overstepping the patent he must do so at a cost.

Although the patent office tries to avoid it, there is a chance that a patent will grant that technically isn’t valid. If this is the case, the patent owner could be sued for having an unlawful monopoly.
If the application is allowed, the patent office will charge an additional issue fee of $700.00 for a small entity and $1,400.00 for a large entity.
To keep a patent valid over the life of the patent, a patent owner will need to pay maintenance fees. The fee for a small entity is roughly around $3,500.00 and $7,000.00 for a larger entity.
Apple Inc.
Samsung Violated Apple Patents
Apple owns that patent and Samsung violated this one with 12 of its phones.
Utility Patent 163: Enlarging documents by tapping the screen
Double tapping text that is too small and it enlarges or when you double tap and the text centers
Utility Patent 381: 'Bounce-back' feature when scrolling beyond the edge of a page (rubber band patent)

When you scroll to the bottom of an app and it bounces you are using one of Apple's patents. Samsung violated this patent with 21 phone models.
Article # 1
WiLan Is Benefiting From Communications Patent Wars
WiLAN (WILN) is a Canadian intellectual property firm that offers new opportunities for both value and growth investors.

Among the recent developments, the firm has started 5 new litigation claims of patent infringement, insiders have been buying the stock throughout last year, and WiLAN has signed two new licensed deals.
Pro because gaining more than one patent can help a business dominate in a specific market
Article # 2
Google, Samsung and others sued by Rockstar consortium over Nortel patents
After losing an auction for Nortel's cache of patents in 2011, Google is being sued by the Rockstar consortium, of which Apple is a major member, for infringing those same properties.

Due to Google's allegedly willful infringement of the seven patents, the consortium is also looking for additional damages including attorneys' fees and costs associated with the suit.

Con because it allows companies to sue other companies on infringes of the patent
where to learn more
Government Websites
Investor Websites
Full transcript