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Why are patents important to investors?
Developing innovative drugs is a risky, time-consuming and expensive process; therefore, companies seek the protection of a patent to ensure that competitors will not immediately copy a product they have researched and developed.
The right that a patent confers to exclude competitors temporarily means that a technically innovative product is more likely to capture a good market and so earn a good rate of return for people who have invested in the company's research. This in turn means the company will be able to conduct further research and advance the state of the art.
Profitability and Patents
A patent does not guarantee that a product will be economically viable and produce any return to investors. Nevertheless, by preventing others from copying a development and thereby undercutting the innovator on price, a patent makes it possible for an innovator to secure a market without having to keep details of its product a trade secret (see "What is the purpose of a patent?"). This makes individual investments more dependable, and it advances technology in general.
On March 14, 2000, stock prices of many biotechnology companies fell sharply after President Bill Clinton and British Prime Minister Tony Blair issued a joint statement that some observers misinterpreted as signaling a change in patent policies. Investors feared that the two countries intended to restrict patents covering gene-based inventions and consequently lowered their valuations of companies that obtain patents on such inventions. In fact, the two leaders' statement signaled no change in patent policies, a point the PTO confirmed later.
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