Unfortunately much of the book value of companies is the value assigned to their patents - so if a startup generates new technology but is not big enough to afford a large sales network, its value is in its IP (as embodied by the patents) and not in its turnover. When a larger company buys the startup, or the startup tries to float, then the company valuation is likely to be based on the IP and not the realised turnover (although both will be taken into account). If the patent life gets slashed on sale, then the valuations will also be slahed, and this would likely cause many startups to never happen at all.
This would lead to a reduction in innovation - not a growth, I believe.
I think more emphasis on proof of reduction to practise would be most beneficial. The removal of that requirement while a good housekeeping move, to prevent the patent office being filled with boxes and other junk, has a downside.
One of the problems with the present system is a small inventor can think up some marginal idea get a patent without providing any proof that it works or is practical. They can then set about conning VCs or threatening large companies who will sign licensing deals, sometimes with down payments, especially if the latter have in-house work underway in the same area. Even sell the patent on to others.
To implement this just keep in touch with the technical literature and wrap your patent in the latest buzz words and you can have a company with revenue based on licensing. The way round this is to get two witnesses who under oath have to swear they have seen the claimed invention reduced to practise.
The reason why the patent system was started was to protect inventions from being misued or copied by others without giving the inventors their due. Also it helps others in the field to understand the state of art to foster innovations. We should look at all the patent transactions from that angle.
The question asked can be then replied in this way. Will the orignial inventor be protected by selling the invention to a NPE: the answer is more complicated. Remember we have to protect the innovators. This will include the engineers/scientists and the company or individual who funds the innovation. So if the intent of the company that created the patent sells the patents with the intention of just causing disruption in the field then it is not very ethical to sell the patent. But if a innovator sells the patent to raise capital for furthering his innovations then it may be acceptable provided he has some assurance that the NPE may not abuse the enforcement of the patent. Now I understand that this assurance is hard to quantify, hard to get and harder to enforce. So this is a more complex issue.
What I am concerned here is that the NPE which are not in the field where the patent is being granted (this is the reason why Brian Bailey was consulted in the first place) will sue companies who are bringing in products in the market whereas these trolls and the companies that do not use these patents do not provide any service in the marketplace. They will then ask for unreasonable fees which will make the product unviable or in some cases shut the product and company down. This I think unfair trade practices and in some cases similar to what the arguments are in Anti Trust. Only thing is that the aggressor does not have a market share but does not want any one else to establish a market in the first place.
We need some reform here to protect innovations and innovators and ways to protect the entities that bring meaningful products to consumers.
There is no moral angle to the legal systems in place. It just relies and rightly so that our society by large will remain moral enough to keep the business going and that immoral ones will get ultimately weeded out in the long term.
But overhauling the Patent system is a much needed endeavor and should be done by a committee of engineers sponsored by leading companies and lawyers who know how to plug the loopholes so that its a win-win for both inventor and public.
Brian said "I would also add that if the inventing company is not producing product that uses it after, let's say 3 years, the patent becomes public domain."
I have long felt that the 20 year monopoly given to a patent -- a monopoly that follows the patent from one assignee to the next -- is one of the biggest problems with the system.
Instead, how about a system in which transfer of assignment of a patent immediately reduces the remaining life of the monopoly? The original inventor or assignee (usually the inventor's employer) gets the full 20 years, but upon sale of the rights, the new assignee gets either 3 years or the remaining life on the original 20 years, whichever is less -- unless the new assignee is a NPE, then instead of 3 years, make it 1 year.
This scheme reflects a market value philosophy that some patents have great worth to their inventors or original assignees, especially when they are producing a product that implements the invention, but if after some time the inventor no longer values the invention, its value in the market should be reduced and it should move into the public domain much sooner. It further reflects a philosophy that if an invention has lost so much of its worth that not only does the inventor no longer wish to produce products based on it, but neither do others interested in buying the rights to it (NPEs), then it should move to the public domain even more quickly.
And I have seen some of the tricks people use to pull the wool over their eyes. We don't give them a fighting chance to begin with. Perhaps as an industry we should work out how much trolls cost the industry and donate that money to fund more examiners in the area.
Rick, you are so right about the work load at the Patent office! I can't imagine being responsible for the mass of submisions that come in every day. I had enough trouble working on my patent application and I had a lot of help from a few patent attorneys.
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