Most of us, even those of us who don’t work regularly with intellectual property, understand the value of intellectual property (IP) rights and, by the same token, the value of a legal patent system.
Put simply, a patent system protects an inventor’s intellectual rights on a particular invention or technology created by that party. The inventor creates a new technology, files an accepted patent on this technology, and following that, under most circumstances, no other third party can use that technology without consent or without engaging in some sort of licensing agreement with the inventor.
This leads to a conclusion: that there is inherent value in the patent itself. This, in turn, leads to a question: why can’t patents and the licensing of patents to other third parties be considered a market in and of itself?
The question may have already been answered. Indeed, a secondary market for patents has developed, based around the natural value of patents.
Earlier this month, in an article entitled Benefit of the Secondary Patent Market to Startups, Ken Stanwood, who serves as the CTO at Canadian patent monetization firm, WiLAN and who’s been an entrepreneur in the tech sector for more than a decade, made a fairly convincing argument in its simplicity. Stanwood commented that a secondary market for patents is no different than a secondary market for other traded goods, like homes, cars, and indeed an incredibly wide range of commercial goods.
Coming from the world of tech startups, Stanwood expanded on his argument, remarking on some of the overlooked benefits of a secondary market for patents. He explained that secondary markets can serve as a fall-back plan for startup companies in the sense that even if their startup fails, the patents they create will have value on a secondary market. That gives failed startups a greater opportunity to at least recoup some of their investment.
As the secondary market for patents has grown, so have firms like WiLAN, that have become experts in helping inventors and companies monetize their patented technology. Firms like WiLAN add another system of support for early-stage startups. After all, many startups do not have the resources, or oftentimes the expertise, to seek out and execute licensing agreements with third parties to use their technology. However, the emergence of patent monetization companies can help startups license their technology. That’s important, particularly in the frequent instances when new businesses need working capital.
Putting startups and talk of secondary markets aside, speaking about patents should return to a very basic idea: patents — and patents that are enforced — provide incentive and motivation for today’s inventors and entrepreneurs. Patents and funds earned from licensing deals also provide a significant financial resource for R&D efforts and for allowing inventors to pursue new ideas. Many inventors would see little reason to put their new technology or invention on the market, if there wasn’t financial incentive and a system that protects their legal and financial rights to their inventions.
This secondary market of patents only expands upon the financial incentive behind inventing and bringing new technology to market.