Patent is a type of intellectual property right that provides protection over novel inventions and, gives the innovator an exclusive right to sell, use, create and manufacture the patented product. Any invention which is new, involves an inventive step, and has industrial applicability qualifies to be patentable. In the pharmaceutical industry, the term for a drug patent is 20 years from the filing date, however, is extendable up to 25 years in certain geographies. Upon the expiry of the drug patent, the generics start to flood the market.

The pharmaceutical sector is an area in which innovation impacts the bottom line of the drug manufacturers who focus on research and development of a new drug and incur huge costs in doing so, where there is neither a guarantee nor an assurance that their research product shall survive various testing stages and will commercially thrive if released in the market. So, patents provide a way to monetize the invention and boost innovations.

There are new and improved drugs being introduced every year in the market, and so, drug or pharmaceutical patents have become particularly important as these drugs help to generate a significant amount of revenue for their commercial benefits. As patents are a fundamental incentive to pharmaceutical and biotechnology innovations, the innovators must safeguard their patent rights from any kind of infringement by timely filing an infringement suit and claiming monetary damages as compensation for any harm caused due to the infringement.

Patenting also provides an advantage to small businesses which lack the capability to manufacture their patented products. Licensing out their patents to bigger players helps them to utilize existing manufacturing facilities without significant upfront investment of their own, and it enables them to concentrate on what they do best while letting the specialized manufacturers do the production. Moreover, licensing helps them to reach the market more quickly, expand their market, and share the risks with the manufacturers.

In exchange for full disclosure of the invention, patents give the innovators a monopoly for a defined period of 20 years. However, there are some countries which allow extending the monopoly right beyond 20 years when long clinical trials or long patent examination process cause a delay of the branded drugs coming into the market. Sometimes, the pharmaceutical companies abuse this additional extension of patent term.

In addition to making drugs expensive, and providing incentives to misrepresent the safety and effectiveness of drugs, patent monopolies can also slow the development process itself. The abuse of the patent rights is also done in other forms such as meeting the demand of providing the patented articles only by importation, refusing to grant any kind of license, imposing unreasonable terms on licensees, and imposing restrictive conditions on the use, sale, or lease of the patented articles, filing secondary patents which are effective to keep generics off the market leading to evergreening of patents thereby prolonging the patent monopoly rights. Striking a balance between innovation incentives and preventing abuses remains a challenge in the industry.