zondag 15 mei 2011

Patent traders

It is fascinating to see how the ratio of intangible assets versus tangible assets has virtually flipped the last 35 years [1]:

Although the graph represents listed US S&P 500 companies, the very same effect occurs throughout the world, with in developing economies at an even far more rapid pace. It means that within these companies, intellectual property, e.g. know how, patents, breeders rights, software, copy rights, models and designs is nowadays far more valuable than land, buildings and machines.
In relation to the surge of importance of intellectual property, amazingly, the patent and patent revenue distribution appears extremely imbalanced and revenue is predominantly concentrated with large industries [2]:

This might indicate that patents of small entities, individuals and research institutions are of an appalling commercial quality. Expressed in revenue value, they perform about a factor 150 less than those of large corporations. Though their patents maybe less valuable, 150 times less valuable appears highly unlikely.
More likely, the patents of small entities, individuals and research institutions hardly find their way to a profitable exploitation when compared with large corporations. Common sense would indicate, when the left and right pie charts were more similar, a fairer distribution of plain reward for inventive effort would have been provided for.
This very reward for inventive effort is the true pith and marrow of our national, international and global patent systems. The basic thought of our patent systems is a reward for the effort of the inventor, in exchange for the full disclosure of the technological progress made by him. Yet, this system proves to function suboptimal. 
Apparently large corporations are more successful in converting intellectual property into money, whereas small entities, individuals and research institutions own more intellectual property. Thus, a huge potential for trade of intellectual property has emerged.  
This potential has not been left unnoticed and relative new companies are now stepping in this potentially very profitable trade. However, especially the larger producing entities are predominantly negative about this evolution, which is very accurately described by J.F. McDonough III [3]. The above presented charts clearly support his view that patent trade potential is progressing and that traders, often denounced trolls, may function as essential market intermediaries, for the benefit of enhancement of the efficiency in the patent exchange economy. Thus, in an evolving market, when traders start to open up the market, the trade in patents will grow and flourish in the decades to come. This development will finally balance the left and right pie charts, inevitable leading to a fairer rewarding of inventors.   
Most contradictory to what is now seen as trolls, being the evil abusers of our patent systems, these companies actually act in favour of the very philosophy of these patent systems. The fact that governments are considering amending patent law to prevent this evolution from happening would be directly against the ideas behind the patent system and might in the end even threathen the progress of technology. On the contrary, governments should encourage trade in patents, for the benefit of more and better rewarded innovation, development and progress.   
Consequently, patent traders are the much welcomed and needed pioneers in breaking the barriers for a more fair distribution of invention reward and definitively deserve more respect than the troll pejoratives.

1: Ocean Tomo: http://www.oceantomo.com/media/newsreleases/Intangible-Asset-Market-Value-Study
2: Acacia Research Corporation: http://www.acaciaresearchgroup.com/2011ACTGIRPRESENTATION.pdf
3: James F. McDonough III, 'The Myth of the Patent Troll: an Alternative View of the Function of Patent Dealers in an Idea Economy', Emory Law Journal, 56 (2007), p.189-228.

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