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 (3)(i) logistics of placing a portfolio on the market, taking into account mechanisms to generate revenue for patent suppliers.
There are potentially numerous ways for a patent supplier to generate revenue through the patent exchange. One example would be making a % commission on each trade. Every time an investor trades on a patent asset, the patent supplier would make a % of the money exchanged in a given trade.
Hence, the more trades and the higher value per trade, the more a patent supplier would make on its portfolio.
Taking a step back, recall that in traditional monetization means patent monetization potential is directly tied to market adoption. Applying this to the patent exchange, if a patent trader perceives a high potential for market adoption for a given patent portfolio, it will be incentivized to trade on the asset (I will discuss the patent trader perspective in a subsequent series of posts).
As a natural corollary, a patent supplier is incentived to commercialize and promote market adoption of the patents it supplies to the exchange. The more buzz behind a patented invention’s market adoption, the more monetization potential, and the more traders will be incentived to trade on the asset.
This incentivization structure creates a tremendous leap over traditional monetization means—it actually incentivizes commercialization and market adoption; something the traditional monetization model fails to achieve.
I will be discussing the cross section between the patent exchange and commercialization in future posts. The important point here is that a patent supplier can make money based on % commission of trades, which provides a direct, immediate means of revenue generation off of the patent exchange.