In patent law, the “right to exclude” is often misunderstood as the “right to make.” While patents grant significant power to inventors, they do not automatically grant a monopoly on making or selling the patented invention. Instead, patents provide a more nuanced set of rights that affect competition and business strategies.
What Is the Right to Exclude?
At the heart of a patent is the “right to exclude.” This is the primary right granted to patent holders. It gives the owner the ability to prevent others from making, using, selling, offering to sell, or importing the patented invention within the jurisdiction of the patent. In this way, the right to exclude can be likened to a form of monopoly, but it is not a “true monopoly” in the traditional sense.
A true monopoly would mean that the patent holder has both the exclusive right to exclude others and the exclusive right to make and sell the invention. In reality, a patent does not always grant the right to make or use the invention—only the power to prevent others from doing so.
What Is the Right to Make?
The “right to make” refers to the ability to manufacture, use, or sell a product with authorization from the government. Unlike the right to exclude, a patent does not give the inventor the right to make their own invention. This is because other existing patents may cover various aspects or components of the invention, requiring the inventor to seek permission or licenses from other patent holders before they can manufacture or sell their product.
If an inventor had the exclusive right to make the product and was the only supplier in the market, that would create a true monopoly—something governments are generally opposed to. Antitrust laws exist to prevent such monopolies from harming consumers by artificially reducing supply and driving up prices.
For example, public utilities like electricity, water, and gas providers operate as true monopolies. These services require significant infrastructure investments, which make it inefficient for multiple competitors to build duplicate systems. Because of this, governments often regulate these industries and grant a single company the exclusive right to provide the service in a particular region. In exchange, these monopolies are heavily regulated to prevent price gouging or reduced service quality.
Having a Patent Doesn’t Mean You Can’t Be Sued for Patent Infringement
A common misconception is that once you have a patent, you are free to make, sell, or use your invention without the risk of patent infringement. However, this is not always the case. Even with a granted patent, you could still be sued for patent infringement if your invention incorporates features or elements covered by another active patent.
For example, imagine that your patent is for an improvement on an existing technology. While your patent gives you the right to exclude others from making your improved version, you might still need a license from the original patent holder because they have the right to exclude you from making the underlying technology. Without this license, you could be infringing on their patent, even though you have a patent of your own.
Right to exclude is very powerful even if it’s not a right to make
Patent holders leverage the right to exclude in several ways to maintain a competitive advantage in the marketplace:
- Stopping Competition: Patents create a barrier to entry for your competitors. By preventing competitors from making or selling the same product, a patent holder can effectively decrease the supply of a particular product in the market. This scarcity often allows the patent holder to charge higher prices for their invention, capitalizing on their exclusive rights.
- Licensing: Many patent holders choose to monetize their right to exclude through licensing agreements. Rather than manufacturing and selling the product themselves, they can grant permission to others to make or sell the invention in exchange for royalties. This can be a profitable way to exploit patent rights without the costs of production and distribution.
How the Right to Exclude Helps Small Companies
Patents are the most important arsenal you might have against a large more well funded company. Give the right circumstances, you should seek a patent on your invention.
The right to exclude allows startups and small businesses to protect their innovations from being exploited by larger competitors and can create significant leverage in negotiations, lawsuits, or licensing agreements. Below are several real-world examples of how small companies have used the right to exclude to their advantage against larger corporations:
1. NTP vs. BlackBerry (Research In Motion)
NTP, a small patent-holding company, successfully used its right to exclude in a lawsuit against BlackBerry’s parent company, Research In Motion (RIM), in the early 2000s. NTP held patents on wireless email technology that RIM was using in its BlackBerry devices. Despite being a small company, NTP’s patents gave it the power to prevent BlackBerry from using its technology without permission. The case resulted in a $612.5 million settlement in NTP’s favor, illustrating how even a small company can leverage its patents to force a settlement with a much larger firm.
2. VirnetX vs. Apple
VirnetX, a small company specializing in internet security, owned patents related to secure communication technologies. When Apple incorporated similar technology into its FaceTime and iMessage services, VirnetX used its right to exclude to sue Apple for patent infringement. Despite Apple’s vast financial resources, VirnetX won multiple court rulings, including a $502 million judgment. This case shows how a small company can leverage its patent rights to win substantial financial compensation from even the largest corporations.
3. i4i vs. Microsoft
i4i, a small Canadian software company, successfully sued Microsoft for patent infringement in 2007 over XML editing technology used in Microsoft Word. Although Microsoft was a tech giant with significant resources, i4i used its right to exclude to stop Microsoft from using its technology without permission. The result was a $290 million judgment in i4i’s favor, showing that even small companies can successfully challenge industry giants with the right to exclude.
Conclusion
The right to exclude is a powerful tool in patent law, especially for smaller companies. It allows patent holders to protect their innovations from being copied or exploited by larger competitors and provides leverage in negotiations, lawsuits, and licensing agreements. By understanding and using this right, small companies can defend their intellectual property and create significant value, even in industries dominated by much larger players.