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How Do We Achieve Patent Reform?

We all want patent reform, but what does it mean to reform our patent system?

Does it mean passing laws to make it harder to leverage the litigation system to monetize patent assets?

Even if current-legislative efforts could be perfectly targeted to make it harder for “trolls” to monetize patents, litigation would will still remain our primary mechanism for monetization.

Is it useful to continue having the litigation system as the primary vehicle to monetize patents?

No. American businesses spend billions of dollars a year and leverage their limited resources to engage in patent-infringement lawsuits. Even if the suits are meritorious, litigation is wholly inefficient and draining on all of us.

No. Litigation entirely divorces commercialization from monetization–patent monetizers are incentivized to avoid commercializing products to foreclose the possibility of patent countersuit, and companies that successfully produce and penetrate the market with goods and services are penalized with greater patent-lawsuit exposure.

And No. A litigation-based monetization system will always incentivize the filing of nuisance-value lawsuits, because attorney billable rates make them so expensive to defend–even if a defendant believes it can win and perhaps be awarded fees, there will always be an amount in which a defendant will be compelled to pay to avoid resource expenditure, expenses, and risk.

If it isn’t useful, why don’t we direct patent reform to create a better monetization system?

Great, why not?

But how do we create something better? Where do we begin?

Let’s consider the socially-beneficial goals for a patent system and then assess whether our current-day patent system meets these goals.

What should our goals be for a patent system?

What did our Founding Fathers intend by adding the Patent Clause to the Constitution of the United States?

1. To promote scientific and technological advancement and the creation of products and services that leverage those advances.

— This is what we refer to as “commercialization” or “creation” on patented ideas.

2. To promote public- and private -sector investments that provide the foundation for technological and entrepreneurial advancement.

— This is enabled by the “right to exclude”-concept found in our real and intellectual property legal-precedent. To illustrate: an entrepreneur believes enough in an idea to file for a patent and seek investment capital–an investor will only invest (1) if it has some assurance that competition will be limited for a period and (2) they will be left with tangible patent assets if the business venture fails.

Any patent system that achieves the above goals would be aligned with the Founding Fathers’ intent behind the Constitution’s Patent Clause. And any patent system that doesn’t achieve each of the above goals fails as a matter of Constitutional principle and must be reformed to achieve the above goals.

Does our current-day patent system achieve these goals?

By leveraging litigation as our only means for patent monetization, our current-day patent system not only fails to achieve these collective goals for our patent system, but leaves us with our present “trolling” problem.

To explain, our current-day patent system is like a sledgehammer–it uses litigation as the one-and-only means to achieve all goals for our patent system, including patent monetization.

Litigation certainly has its place. As an example, litigation is a great way to (2) promote public- and private-sector investments that provide the foundation for technological and entrepreneurial advancem ent. Litigation is the perfect vehicle to enforce a patent holder’s “right to exclude,” particularly when the patent holder makes good-faith efforts to bring a product to market.

But limiting our patent-monetization system to one that relies on litigation actually detracts from the Constitutional goal of (1) promoting creation and commercialization on scientific and techn ological advances.

To illustrate, companies targeted for monetization purposes are those providing goods and services, because these companies generate the revenue that establishes the damages base to support patent lawsuits.

Therefore, the more you produce, sell, profit, etc., the more likely you are to get sued and the greater your expos ure to patent damages.

Hence, our litigation-centered patent-monetization system is one that penalizes companies that produce socially-useful goods and services. This contravenes the Constitutional goal of (1) promoting creation and commercialization on scientific and technological advances and, therefore, must be overhauled.

So where do we start?

Let’s consider socially-beneficial goals for a patent-monetization system and then consider a monetization model that can meet those goals.

What should a patent monetization system achieve?

1. It should enable a very simple, transactional-based method of monetizing patent assets, one that does not rely on judicial resources.

2. It should provide a straightfor ward and accessible vehicle for anyone to invest into technology.

3. It should incentivize the creation and commercialization of technological advances, the creation of market-driven real, tangible things.

4. It should not detract from a litigation-based method of enforcing a patent holder’s “right to exclude,” which provides the teeth behind patent protection and the foundation for public- and private-sector investments into technological and entrepreneurial advancement.

If a patent monetization system achieves each of the above, then it is also aligned with our overall Constitutional goals for a patent system.

Instead of a litigation system, consider a patent monetization system that relies on a stock-exchange model: a patent exchange.

What-is-Patent-Exchange

 

Why-A-Patent-Exchange

 

Why a stock-exchange model? It’s a proven model and is already used as a basis for trading on numerous other asset classes (e.g., stocks, bonds, commodities). Why not patent assets?

A patent exchange achieves the necessary goals for a monetization system and, more generally, our overall patent system:

1. A patent exchange enables a very simple, transactional-based method of monetizing patent assets, one that relies on market and statistical analytics rather than the judicial system
2. A patent exchange provides a straightforward and accessible vehicle to invest into technology–investors can invest into a technology sector by simply purchasing listed shares of technology-classified patent assets.
3. A patent exchange incentivizes the creation and commercialization of technological advances, because share value of patent assets increase as patented products and services achieve commercial success. This supports the creation of market-driven real, tangible things.
4. A patent exchange can work in conjunction patent litigation, so patents traded on the exchange would continue to remain enforceable through the court system to uphold a patent holder’s right to exclude–this protects investments into technological and entrepreneurial advancement.

And best of all, a patent exchange will create a new technology class-of-assets in which investors can invest–this will open patent monetization to the general investment community.

Just imagine being able to invest in technology itself.

Would you put your money into semiconductor technology?  Sustainable-energy research?  Plant hybridization techniques?

The sky’s the limit.

Can you envision such a reformed patent system? Would you appreciate the opportunity to invest in technology?

If yes, then join us. We’ll make this system work.

Join us today