Evergreening

A patent is a time-limited right: whoever invents something may sell it exclusively for a certain period. In many countries this is 20 years. After that, other companies are allowed to replicate the same product, and the price usually drops sharply. This is exactly what some companies want to prevent. Shortly before expiry, they file a new application for a slightly modified version of the same thing and are granted protection again. This extension through minor tweaks is called evergreening, derived from the word for something that stays green all year round.

What evergreening means for prices and competition

Protecting a new product makes economic sense. Research costs a lot of money, and without the prospect of profit, no one would invest. The deal is therefore: a temporary monopoly in exchange for disclosure of the invention. Evergreening breaks this deal unilaterally. The monopoly remains, even though the actual invention has long since been paid for.

The consequences are concretely measurable. For medications, a generic product often costs only a fraction of the original, sometimes under ten percent. If a company delays this competition by five years, health insurers and patients pay billions more. That is why authorities and courts worldwide argue over the question of when a change actually constitutes a new invention.

An important distinction must be made: not every further development is evergreening. A genuine improvement may and should be protected. The accusation only applies to cases where the benefit to the customer is minor and the main purpose is clearly to extend the monopoly. This boundary is blurry, and that is precisely why it is contested in court.

The typical tricks behind the extension

The classic approach is a small technical variation. A medication is no longer offered as a tablet but as a capsule with delayed release. Or the chemical salt form of the active ingredient is changed without any noticeable difference in effect. This variant receives a new patent, and the company simply discontinues the old version. Doctors then automatically prescribe the new one, for which there is not yet any cheap competition.

A second method is the patent thicket. Instead of a single protection right, a company files dozens or hundreds of small patents around a product: manufacturing processes, packaging, dosing schedules. A competitor would have to challenge each of these individually. This takes years and costs so much that many don’t even attempt it.

In the software world this works differently, but follows the same pattern. Here it is less the patent than the lock-in to an ecosystem. A provider ends support for an old version and forces customers into a new subscription model. Data formats that only the provider’s own software can read also act as an extension of market power without any real technical progress.

Evergreening in pharma news and in the tech industry

The term is most often encountered in reports on drug prices. Well-known cases involve insulin, cancer drugs, and rheumatism medications, where manufacturers delayed market access for generics for years. India therefore tightened its patent law in 2005: a new form of a known substance is only patentable there if it can be proven to work better. The Novartis vs. India case received worldwide attention.

In tech and AI coverage, evergreening increasingly appears in connection with licenses and training data. A provider releases a model that appears to be open, but slightly alters the terms of use with each new version. Anyone wanting to stay current must repeatedly accept new conditions. Critics see the same logic at work as with patents: control persists even though the basis should long since have become free.

For investors, the term serves as a warning sign in financial reports. When a blockbuster patent expires at a pharmaceutical company, this is referred to as the patent cliff, i.e. an impending drop in revenue. Evergreening strategies are meant to cushion this fall. Whether this succeeds depends on courts and antitrust authorities, and that is precisely why such rulings regularly move stock prices.