Altho' I was tempted to chime in with "Patches?! We don't need no stinking patches!", I am actually genunely interested to hear if there are any 'real' reasons for the wearing of patches on gi. Is it a TKD development or an American 'thing'?
Because MJER is a koryu art, not only do we not have patches on our clothing but we wear no signs of rank either. Back in my Lau days too, we just wore black gi and our belts. Same for all the karate schools I have seen over here (with the proviso of 'at that time').