Most Valuable Patent in History Expires
Lipitor, a cholesterol-lowering drug used to help reduce heart attack and stroke risk, represents the most value patent in history. It expired on June 28, 2011. What does this mean for Pfizer, the inventor?
Pfizer filed a patent application for Lipitor on 2/26/91, which issued on 12/28/93. The product was launched in the market in 1997, with revenues peaking at $12.6 billion in 2006. By the end of 2009, total revenue was greater than $105 billion. It became the most profitable patent ever produced, making it more valuable than most companies in the S&P 500. However, with its recent expiration, the patent is now worthless.
Based on this information, why would a company use patents? Patents provide protection in a variety of ways. They give the owner the exclusive right to exclude someone from practicing the invention in the market. They protect something functional or utilized (e.g., new engine design, drug compound). They allow for abnormal market profits inherent in the monopolistic nature of a patent, and patent owners can price skim if patent utility presents a strong value proposition. Furthermore, patents can command treble damages for willful infringement.
While advantages exist with patents, several disadvantages must also be considered. Patents are expensive. One patent can cost anywhere from $10,000 to $50,000. An international patent can cost upwards of $250,000! Patents have short useful lives, with the typical statutory life of 20 years or less. Patents require full disclosure, revealing specific design information to competitors. Patents lose value every day on a present value basis. Finally, patents are expensive to defend. A typical patent lawsuit in the United States costs $3 million or more.
While the Lipitor patent has become worthless, the flip side is that Lipitor may not have been as successful at all if it didn’t have the patent to protect it. Some companies are beginning to shy away from patents and rely on trade secrets instead. However, risks also exist with trade secrets. Once a trade secret is revealed, the trade secret immediately becomes worthless. No protection exists to stop a competitor from using that information and filing for a patent. With all intellectual property, pros and cons exist. Companies have to consider those pros and cons and determine the best approach to use.