Innovation is the backbone of scientific advancement, driving the development of lifesaving treatments, more sustainable food systems and exciting new technologies across industries. Intellectual property protections, such as patents, incentivize this innovation by offering temporary protection and ownership of new technologies, products and processes that require significant investment and risk to develop. But patents only provide protection for all that effort for a limited period. When unreasonable delays in examining and granting patents cut into that time, patent term adjustment comes in to play.

What is patent term adjustment?

Patents protect an inventor’s innovation for a finite period, generally 20 years from the filing date of the application. Patent office delays and/or examination backlogs reduce the term of a patent period. Patent Term Adjustment (PTA) provides compensation for the period of protection lost because of undue delays. PTA works by restoring a portion of the lost patent term. While PTA sometimes fails to fully compensate innovators, it helps innovators to recoup some lost profits and bring them closer to the position in which they would have been if there had not been delays.

How does PTA work around the world?

Some examples of how PTA is applied:

• United States: The U.S. Patent and Trademark Office (USPTO) automatically calculates and restores the portion of the patent term lost due to unreasonable delays. Following a PTA calculation, an adjusted patent expiration date is indicated for the issued patent.
• Korea: In Korea, a patent holder may seek adjustment from the Korean Intellectual Property Office (KIPO) within three months of the patent being granted, if they believe their patent has been unduly delayed. If a patent is granted more than four years after the filing of the patent application and more than three years after a request for examination (whichever is later), the patent is eligible for PTA.
• Chile: Chile’s PTA mechanism is similar to Korea’s with two key differences. Eligibility occurs five years after the patent application was filed or more than three years after a request for examination (whichever is later), and the patent holder must submit the request within six months of the patent being granted.

What are the benefits of addressing backlogs and utilizing PTA when backlogs cannot be avoided?

London Economics estimated that combined losses from patent backlogs cost the global economy over $10 billion a year. Patent backlogs are particularly harmful for small start-up firms. According to a USPTO Economic Working Paper, for every year an ultimately-approved patent application is delayed, a start-up firm’s employment growth decreases by 21 percent and its sales growth decreases by 28 percent on average over the following five years. Each year a patent application is delayed, the average number of subsequent patents granted decreases by 14 percent. As such, there are wide-ranging benefits to innovators and broader society from reducing patent review backlogs and applying PTA policies in markets.

Further, addressing backlogs means more innovations are shared sooner as part of the patent disclosure process, empowering potential competitors to build on those inventions. In a sector like biopharmaceuticals, such competition can mean more medicines in the same therapeutic class, more options for patients overall and lower prices. It also helps deliver innovations to people who need them more quickly.

Clear PTA policies give inventors the confidence to take risks and invest in developing new technologies. PTA simply serves to adjust for regulatory delays, providing a partial restoration of the time and value lost during the patent examination process (and specifically does not extend the full 20-year patent term). Such incentives are vital to supporting a strong innovation ecosystem responsible for remarkable progress – now and for generations to come.