For a patent exchange to exist, there would need to be a number of patent holders that supply patent assets to the trading market. A number of questions naturally arise: (1) Who would be the parties to supply the patent exchange? (2) What are incentives to supplying the market, taking into account (i) disadvantages of traditional monetization means and (ii) advantages of a patent trading market? (3) What are the logistics of placing a portfolio on the market, taking into account (i) mechanisms to generate revenue for patent suppliers, (ii) patent portfolio groupings, and (iii) how would patent holder enforce its publically-traded patent against a competitor, if it needed to?
In this post, I’ll be discussing (2)(ii) incentives to supplying the market, taking into account advantages of a patent exchange.
A patent exchange would offer a much-needed alternative to traditional monetization companies.
1. Larger number of monetizable assets
While approximately 1% of patent assets are monetizable through traditional monetization means, there is no such limit to the number of monetizable assets through a patent exchange. Any patent asset capable of being bought and sold can generate revenue.
Moreover, patent applications may be placed on the exchange as well, thereby enabling returns on assets not monetizable through traditional means.
For Cisco, it could place the entirety (or maybe the 99% not monetizable through traditional means) of its portfolio into the patent exchange. This would increase its number of monetizable patents by two orders of magnitude.
If all 10,000 of its patent assets are monetizable through a patent exchange, this means Cisco would need to make an average of US $46K per patent asset to break even, rather than US $4.6 M per patent for the 1% of monetizable assets through traditional means.
2. Avoiding retaliation from other companies
A patent exchange offers no retaliatory threats, as there would be for traditional means of monetization. Instead of retaliation, a patent exchange could even offer avenues for companies to collaborate, by pooling portfolios together to place onto the exchange.
This could create unique and creative ways for companies to collaborate.
3. No delay in monetization
On average, it takes about 10 years for an asset to be monetizable through traditional means, because it takes that long for a patented technology to be adopted and penetrate the market.
A patent exchange, on the other hand, offers an immediate means for monetization. There would be no need to wait for a patent to experience market adoption. Instead patent assets, including patent applications, may be placed and traded immediately on the exchange.