Patent Exchange—Wasting Asset Dilemma

Patents are inherently wasting assets—they expire after approximately 20 years, after which they become dedicated to the public.  And once dedicated to the public (and after any statutory damages period lapses—currently six years), they are non-monetizable.

If patents are inherently wasting assets, then why would an investor purchase shares of a patent?  Namely, if the investor sits on them, they will become worthless.  And if the investor owns shares that will expire in six months, then how can the investor sell them for full value?

The answer lies in the classification of the investment vehicle—it is the underlying technology, not just the underlying patents.

To illustrate, if Cloud X, Inc. puts its cloud computing portfolio on the exchange, investors would invest in the clouding-computing technology class.  If Cloud X continually invents and files patents to add to the technology class, then the technology class will remain active, and investors are incentivized to invest in companies that invest in their own IP.  But if Cloud X neglects to actively invent and file in the technology class, then the technology class would be wasting and investors would be disincentivized to invest.

By properly designating the investment class as the underlying technology as opposed to the patents themselves, this (1) overcomes the wasting-asset issue, and (2) creates an incentive for patent owners to continually invent and file patent applications in technology classes placed on the exchange.


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