Patents are particularly common in life sciences, semiconductors, and software industries.
A patent gives a product developer a monopoly market position for several years. Patents are critical to profitability, product renewal and growth. In addition, patents allow a manufacturer to recoup its R&D, production- and sales investments to bring a new product to market.
Once the patent expires, competitors are free to enter the market with, what are known as, generic products. Consequently, this can cause a severe and immediate drop in the market share and revenues of the branded product. In the life sciences industry this is known as the ‘patent cliff’.