The patent exchange furthers the Founding Fathers’ intent. In the following posts, I would like to demonstrate that (1) the Founding Fathers’ intended for the Patent Clause (Article 1, Section 8, Clause 8) to promote creation on inventions; (2) creation on inventions adds the most value to society; (3) traditional monetization means does not promote creation on inventions; and (4) the patent exchange will promote creation and, hence, further the Founding Fathers’ vision of the Patent Clause.
In this post, I will be discussing (3) how traditional monetization means does not promote creation on inventions.
If the goal of a patent system should be to promote creation, does today’s patent system do so?
YES and NO.
YES, because the patent system provides a means for inventors to protect their ideas, to prevent others from misappropriating and commercializing on their ideas. This protection enables, as an example, inventors to seek funding and galvanize a team to create on the patented idea.
This is the story with most startup companies—this aspect of the patent system certainly promotes creation.
But NO when it comes to monetization—those looking to monetize their patent assets are actually disincentivized from creating on their assets.
If you both create and monetize on a patent, you will be (1) subject to stringent marking requirements, which can only serve to potentially undercut your damages base, should you fail to meet your marking obligations, and (2) subject to countersuit, because you are likely infringing on some patent, somewhere.
While there are a number of operating companies that are successfully monetizing their assets, there are many more that do not attempt to monetize their assets, because of the above reasons.
And if you take a survey of the most successful monetization companies, the vast majority of them do not create on their patent assets—hence, the popularity of the term non-practicing entity (NPE).
But if society benefits most from a patent system that promotes creation on patented inventions, are we best served by a monetization scheme that does not promote creation?
No—the monetization scheme behind the patent system should also incentivize and promote creation.
As of today, we don’t have a monetization scheme that promotes creation—we need to create one.